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As I pulled off my cowboy books and prepared to be sautéed in that human microwave now installed at the airport security circus, Mr. Glum Guard looked up and said, “So, should I invest in oil or gold?”

That was an easy answer. The world needs oil, I said. It does not need gold. Meanwhile my privates tingled a little as I looked at the full body scanner, manned by another giant uniformed dude decked out in blue latex gloves and a headset. It was pure intimidation. The least I could do as I stood on the yellow spots and raised my arms was give the machine two hand gestures that I’m sure by now are in my CSIS file. If this blog abruptly ends, you’ll know why.

The good news is my travels are ending. Almost. A little jaunt to the prairies in a couple of weeks. A talk in Toronto on November 9th. Then I am able to find more time to devote to other business interests, and my next book – which dives more into the reasons why people do what they do with their money, and how to profit from knowing that.

Interestingly, I was asked twice last night in Calgary – at two separate events – if the housing market was different there (and immune from nasty trends) in light of my call for $100-plus oil. Of course, it isn’t. With 90% of the population of Alberta not involved in the resource sector, there’s no reason to think oil inflation will end up increasing the salaries and wages of nurses, teachers, car dealers or the guys who work in Best Buy.

Meanwhile, whatever oil does, there’s no escaping the ravaging effects of record household debt, the last wheezing, sad years of the Boomers, a steady diet of higher taxes, tepid economy growth or creeping rates. A real estate salvation in Alberta (outside of Fort Mac) because of crude is akin to the rescue of Vancouver by those wealthy Asians or the stabilizing influence of the federal government in Ottawa – nothing by a blast of upskirt sunshine by the house pimps.

In fact, events of the last few days have me feeling more jaded than usual. Riots in France as the government tries to raise the retirement age from 60 to 62. Despair in Britain as the coalition leaders there slash half a million civil servant jobs, gut the navy and also bomb retirement benefits. Worry in the US as the foreclosure mess threatens banks and comes as mid-term elections are set to destabilize Washington. And reports like this from blog dogs around the planet:

“Garth: We live in Squamish and sold our house a year ago for $620K.  I track the prices of houses faithfully now.  A house that’s been on the market around the same time as ours (a year now), started at 649k, has dropped two times in listing price and is now sitting at 559k.  Two well established town home developments I’ve been tracking since last year – the one development: peak prices were 425K, I just saw one listed for 337K and the other development mid to high 300’s now sitting at 289k.  Doing the math, it appears to be a drop of between 13-17% just in the past year.  Yes, there are starting to be fewer listings – but that’s because people are pulling their homes off the market after no action.”

All of this – spending cuts, austerity measures, social unrest, indebted citizens, bank woes, political morass – is pulling us in the same direction, towards a deflationary swamp. It’s consistent with what central banker Mark Carney was warning about earlier this week – crappy growth for the next two years – and with the warning from TD economists that too many Canadians are one financial shock away from being seriously screwed. Families have precious little in the way of savings or reserves, 70% of us have no pensions and we just finished borrowing obscene amounts to buy houses which are declining in value.

How does this possibly end well?

So my advice remains: (1) Shift wealth from real estate to financial assets. Now. (2) Invest in things that pay you to own them (like bond interest, preferred dividends, REIT income and sector ETF capital gains). (3) Avoid taxes – legally. (4) Be balanced and diversified with a proper asset allocation. (5) Love liquidity.

Deflation will eventually lead to inflation. But real estate’s done for a generation. Everybody’s standard of living is at risk. Nine in ten people have absolutely no idea those pictures of turmoil in Europe or anguish in America give glimpses of our own potential future. The best path ahead is the one few will take.

BTW, if ever in Calgary, come and see me in detention.

122 comments ↓

#1 Devil"s Advocate on 10.22.10 at 2:04 am

If you’ve never failed you’ve never lived

http://www.youtube.com/watch?v=_tjYoKCBYag

#2 Hosehead on 10.22.10 at 2:07 am

Garth – is it fair to say your next book will be a shift from macro economics to micro economics?

As for why people do what they do with their money, I would say the #1 reason people put their money into housing is because it is socially entreched. Owning a house is like having an email or face book account, having a cell phone, having a car – these are things that everyone must have – “you can’t live without them” mentality. If you don’t have these things, (house, car, cell phone) you’re different. Decades of RE gains and parents who became millionaires over the last 30 years because of their house in the city has entreched the idea that home ownership is a no brainer. It will take a US style meltdown, or a return to 8% interest rates to change thinking in Canada. It will take $2 a litre gas to teach people a bike is better than a car. As for cell phones, email and facebook – not sure if those will ever be replaced… at least in a generation.

#3 Aaron - Melbourne on 10.22.10 at 2:13 am

Mr Turner, please don’t end your travels. Australia is a nation of greater fools that would benefit greatly from your teachings.

Equally I think there is a clear apetite for a contrarian view on real estate. The seething pulse of anger and frustration is palpable within every property blog posted to http://www.theage.com.au . You can be assured of a willing audience, even if they only come to indulge in a little schadenfraude directed toward the property speculators.

Oh and it is different here…nice weather. Drop on in.

#4 realpaul on 10.22.10 at 2:33 am

Couldn’t agree more Garth……bought a nice dividend paying stock last week ..NOK-NY at $10.38 ( USD) on news of a new product..the N8….and have watched it rise steadily to $11.28 (USD) as of the close today…..a nice 10.3 % gain in a week…and the kicker is it also pays a dividend of 4.69%. So….when ‘you’ get these little pops….. do you sell and grind back in or hold on when the news is still positive ( as well as the momentum of the issue) for a company?

And by the by…what do you think about the fate of the trusts when they die at the end of the year. Some like CFX.UN and RSI.UN have been good payers…..hate to see ’em go…..thanks ‘F’….for nothing.

Additionally the company had improved earnings on increased unit sales while also laying off another 1800 people to improve efficiency and I would suppose….profit margins.

#5 joseph on 10.22.10 at 2:42 am

Garth, please please please explain why if oil does not increase the average wages in Calgary then why does Calgary have the highest median household income of any major city in Canada… clost to $100,000?

You call yourself the financial guru, so what’s the answer? If its not oil than what on earth makes the average income so high here in Calgary?

#6 betamax on 10.22.10 at 3:14 am

Garth: “Nine in ten people have absolutely no idea those pictures of turmoil in Europe or anguish in America give glimpses of our own potential future.”

I’d hazard that nine in ten have no idea of the turmoil in Europe and little understanding of the anguish in America. Most seem to know more about the latest hockey game than what’s happening elsewhere, and the Canadian Pollyanna media does little to dispel their sugarplum dreams. Instead, we get self-congratulatory smirks and suggestions that we have the ‘real’ Goldilocks economy (remember that one?).

Unfortunately, people forget how Goldilocks ends: the bears come back. And they’re hungry.

#7 GNSS on 10.22.10 at 3:37 am

Thanks for sharing your thoughts last night in Calgary. I was pleased with your speech at Chapters. In fact, you were very polite to the audience.

#8 Popeye the sailor man on 10.22.10 at 4:17 am

Both Futureshop and bestbuy have laptops on a one day sale for 399 and 329 respectively. One had a desktop at a low price of $270, and in the last few weeks I saw a 60” 1080P plasma for $999. We got a nice new 9 piece bedroom set delivered with taxes for $2,200 a few weeks ago. A few days ago I saw an ad for a high end truck and I guessed over $15,000 to high. Car and truck prices seem weak lately or is it my imagination. I bought a bedroom set for my son on kijiji and the sellers had just got a 2 year old RV like one we have been pining for just under $11,000 at a dealer, about the same price I paid for a new tent trailer in late 2006. The city of spruce grove appraised our 2150sf two story home in 2007 for $530,000 and we bought it in Nov-Dec 2009 for $430,000 and the city appraised it this year for $425,000 and I’m sure it will dip under 400k at some point. Super low interest rates abound. DEFLATION is showing every ware on things that are wants and not needs. Things people can put off for some time and make due.

Yet my heating costs went up, my property taxes went up, my water and garbage fees went up, my fees for flying to work have gone up, gas is creeping up, cost of food is costing more, and we lost a big item during binding arbitration, so my pay and benefits have decreased modestly. INFLATION.

This is the (Deflation/Inflation) part that Garth talks about.

I think my job is OK because of my level of certification and the shortage we have now. But if UK austerity measures kicked in many people I know would be in big trouble. My employer could tie up ships and lay off casual and term employees that make up about 30+% of our work force. As it is they just announced out of the blue that they are retiring a major ship in the last week. So in a few months it will be tied up and that will be that. 50+ positions gone. They cut our ship operating budget by about 10% and we have to absorb the HST in that same budget when we were PST exempt before. So I see hints of austerity measures happening already.

#9 Fractional Reserve on 10.22.10 at 5:53 am

For yesterday’s commentators who wrestled on how to explain to their children why they don’t own a McMansion and live a frugal life. Refer your children to Warren Buffett and his home/lifestyle. Hey Garth, does Buffett qualify for having under 40% of his net worth in real estate? http://mtimages.cstv.com/postingup/WarrenBuffetHouse2.jpg

#10 Brian1 on 10.22.10 at 5:55 am

The Bank of Canada and government seem to be changing their tone almost weekly. I think people who bought a house should be able to get out of the deal based upon false advertising. Lawyers should be aware of this potential windfall.

#11 WINNIPEGER on 10.22.10 at 7:05 am

Likewise here in The Peg. Been tracking mid-higher end homes (here thats btw 350 & 650K) in the south and southwest of the city. During the past 3 months ZERO have sold.

But as Royal Le Page asserts the large influx of Manitoba Immigration will save us :-) —- right.

For years WPG was a place where real-estate was shelter only. Lately we have followed on the coat-tails of everyone else. I know real-estate is dictated by “local” conditions. Well we have bald prairie as far as the eye can see. A huge 40,000 unit development underway in the southwest know as “Waverley West”.
I think this will be a ghost town within 3 years. Home building was humming there last year and now has slowed to a trickle.

Given the huge debt we boomers are in $$$. What percentage % I wonder will work past 65? When will our Gov’t raise our retirement age to 67? Austerity measures here?

At my workplace we can retire after 25 years with half our salary as pension income. The last few years of retirements 1/2 have gone on to other fulltime jobs and 1/4 have taken on part-time and the rest fishing/golf.

We also have a large influx of boomers who have not taken early retirement and continue to work. Me being one of them. Boils down to what lifestyle your willing to have and whether you worship money or not.

#12 David B on 10.22.10 at 7:10 am

Yup ….. soon the eyes of march will roll across the hills of Norh America and soon the RNC will be in charge with it’s New North Wing King Steve at their calling follwing suit. What’s that mean? “Slash and Burn” for the middle class and the poor will fend for themselves.

Very few if any are talking about a recovery in the USA, and you can bet the RNC will not be doing anything in next two years to help other than what they have been doing to help the middle class ….”Nothing”

China …. moving on up fueled in part with Big American Business.

#13 Victor on 10.22.10 at 7:18 am

Hi Garth, given you’re suggesting problems for banks, do you still believe that investing in bank preferred shares makes sense or should investors be looking at preferred shares in other sectors for the time being?

#14 blase on 10.22.10 at 7:23 am

So aren’t you gonna tell us about your speeches in Nenshi-land? I ask because I don’t expect the Herald or Sun to write anything about it…

#15 allister on 10.22.10 at 7:25 am

I’m 57 and when I was youger I studied the effects of compond interest thoroughly. After that I lived by the pay no interest to anyone rule and the liquidity thingy. Although I own a paid for new home I’m not selling, as I plan to retire in it and then pass it to my children.

As for equities I have cashed out.

I’m thinking that with a fractured congress and house or reps after Nov 2nd, the Bush tax cuts will likely expire in Jan, due to legislature deadlock. I’m thinking that there may be a lot of equity selling very soon to lock in the capital gains of the last two years.

When the NYSE sells off, so does the TSE.

Any thoghts about that?

#16 Mark on 10.22.10 at 7:35 am

Very good points Garth, the Calgary economy over the past decade has only been minimally based on oil. Mostly on construction. Oil workers in Calgary are few and far between.

#17 Hiteclowtec on 10.22.10 at 7:38 am

“why people do what they do with their money”

For many years now it`s been all about what people have been doing with borrowed money. The illusion of wealth and prosperity. The future will be about payback austerity and debt slavery. A lot of unhappy frustrated jobless people wondering, what the hell happened, as they strive to survive in the new reality.

My plan is to lie low beneath the taxation radar. Live a simple life and read as many books as Garth cares to write.

#18 Poor Buffalo Farmer on 10.22.10 at 7:42 am

Garth

Are you keeping track of what is happening in the USA morgage issues.

This thing is huge.

The “smart” people that created MERS kinda left out some important details and documents.

They then boxed them up into securities that were sold…and they were sold to more than just one security.

So now we have homes with a 750,000 loan, worth 250,000 now and there could be numerous creditors for it.
Joe public is the least of the US worries…he will loose his home(maybe…still fighting about that with the robosigning issue).

But wait til the big guys try to figure out who really owns the 500,000 loss…it has the potential to be the biggest finacial screw-up ever.

And it will not be like the stock market crash of the thirties…gone and done….this thing is going to be a slow death that is going to drag on for years.

There are people that bought the securities that are totally wiped out and don’t even know it yet. Whole pension funds invested and all gone.

And the totally wild and crazy thing is that the mainstream media isn’t even whispering about it.

DEAD MAN WALKING!!!!!

#19 buyright on 10.22.10 at 7:45 am

Hey Garth
Thanks for all the useful info and Great humour.
To all those politically correct wing nuts, they should ask for a refund on their subscription and dont return PLEASE.
The majority here would like to discuss Real Estate , the Economy , and other IMPORTANT issues we face during these uncertain times.

#20 Kevin on 10.22.10 at 7:48 am

That is an interesting question.
Does the world need gold?

On the surface the answer would seem to be no because it is no longer used as money but deeper down it is not so clear.

All of the fiat money we currently use is actually loaned into existence. If all loans were paid off there would be no more money. In this sense our currency is both an asset and a liability. So where does gold come in. It is an asset without a liability. The ultimate extinguisher of debt for central banks. Countries know that when their paper money is no longer accepted by other countries they can always pay off their debts with gold (If they have any). Governments know that this can save their political hides.

#21 Toronto on 10.22.10 at 7:49 am

I too sold my house for 410,000 in April 2009 and have been renting ever since. Unlike the example used however, a similar house to mine is listed for 518,999.
I am disgusted by all this greed. I can’t wait for this housing boom to bust.
My wife and friends think I am a fool. I guess only time willl tell…I hope !

#22 Grandpa Grinch on 10.22.10 at 7:52 am

A CATSA employee asked what to invest in? With what? Pixie dust?

I came across an email that I thought fellow posters would enjoy:

There is an annual contest at the University of Arkansas calling for the most appropriate definition of a contemporary term.

This year’s term was: “Political Correctness.”

The winner wrote:

“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rabidly promoted by an unscrupulous mainstream media, which holds forth the proposition that it is entirely possible to pick up a piece of sh*t by the clean end. “

#23 T.O. Bubble Boy on 10.22.10 at 7:56 am

Those examples from Squamish are an indication of what is happening in many Canadian markets I think — no “average” priced houses are selling: it is the high-end and low-end homes that are moving.

So, for Toronto, that means a high number of $1M and $2M+ homes are hitting the market — and a few have sold, to skew the average price higher (the mid-month TREB data showed a +16% average price YOY for detached homes in the 416 area code). And, this also means that you still see the bizarre lineups to buy Mattamy and Daniels shacks in Milton, Stouffville, Brampton, and other burbs.

The condo market seems to be past the point of no return… slowing sales and price reductions are common, and a glut of new units hitting the market may be the nail in the coffin. There are only so many cashflow-negative condos that can be sold as income properties before people stop seeing condos as investments. Even those magical “rich asian buyers” can’t save the market. Yes, some Hong Kong and mainland buyers have been purchasing CityPlace units — but as more and more of these buyers can’t find tenants, and also have a hard time selling because there are 100’s of identical units on the market, the allure quickly goes away.

#24 Mark on 10.22.10 at 8:02 am

Thanks for the talk last night at Mnt Royal.

#25 Etobicokehead on 10.22.10 at 8:05 am

From my view here in tony Etobicoke, there’s no end to the line of greater fools. Tear downs sell in a few days only to have million dollar McMansions erected in their place. It may not be different here, but it’s still the same for now.

#26 AM on 10.22.10 at 8:22 am

There has been a lot of talk recently over personal debt load and it’s future affect on the economy. I wonder if the latest consumer confidence report is a reflection of the fact that people are starting to think about their critical indebtedness and know they will not be making too many future purchases on anything but the bare essentials.

http://finance.sympatico.ca/home/consumer_confidence_lowest_since_downturn_poll/75418e7c

#27 bruce corell on 10.22.10 at 8:27 am

Im sorry to say there are a lot of stupid people out there.
When the Bank of Canada says they are worried about household debt then some people should wake up and smell the coffee. Oct 19th Interest rate increases were halted because their are too many people out there in BIG TROUBLE. If prime goes to 3.00 you can kiss 10% of property owners goodbye….But please note these low interest rates will not help. 10% of Homeowners will experience debt increase every day as we speak…All the Banks know this bubble will burst any day…YES ANY DAY AND ANY HOUR NOW. And it will last a long long long time…..
Bruce Corell
Toronto Board of Trade Member

#28 bullion.bunny on 10.22.10 at 8:28 am

Meanwhile my privates tingled a little as I looked at the full body scanner.

Yes…nice, the scanner uses a high powered tera-hertz frequency to do the deep scan. Oh yes it changes your DNA every time you are exposed. Actually it’s worse than sitting in a Microwave. Soon your privates will do more than tingle…….they will fall off………..happy cancer.

#29 AndrewTO on 10.22.10 at 8:33 am

Garth,

Where do you think the best places in the world to invest in real estate will be in a couple years? Not everywhere can be in a bear market forever right…

US? China? Europe? Anything on your map.

#30 bullion.bunny on 10.22.10 at 8:39 am

That was an easy answer. The world needs oil, I said. It does not need gold

Sorry……wrong again. Oil will be traded in gold. Plus gold will see larger gains over the next year after this correction.

#31 confused on 10.22.10 at 8:49 am

Im still trying to understand…I just bought a condo in Etobicoke…My intrest rate was 3.55% and my payments are 1100 per month. With the tax and maint, i am paying 1550. I have also locked in my rate for 5 years so im worry free. The rental in the same building (as i do not want to live in an older building) is 1500. I also would like to make it my home and put some upgrades, make it nice etc… Like the other blogger said, i am not planning on moving in the next couple of years. So where am I going wrong. If i rent, I am at the mercy of the landlord. Even if the market goes down, its going to go up eventually so why not buy and still invest in the markets as well.

#32 TorontoBull on 10.22.10 at 8:53 am

I read with great interest the TD report. It is quite thorough…it seems to suppport Garth’s position of a RE correction rather than a collapse. Having said that there is no info about the speculator’s market. Depending on the size of this market an initial 5% drop in prices will put an enourmous pressure on ‘investors’. Anecdotally, I personally know 3 people flipping houses. They buy all the materials for the rennovations on their credit cards. So an inital 5% drop plus the cost of rennovation will make the investment unprofitable. This might lead to panic selling once everyone realizes that prices are not going up. On another nore I live in Western Mississauga and listings have been up the the last couple of weeks. The price drops also began two days ago..

#33 Hiteclowtec on 10.22.10 at 8:56 am

Deflationary swamp for the Big Smoke !

“Social assistance rates tell much of the story. Welfare numbers in the city of Toronto more than doubled in the recession, and continued to climb this year, to about 90,000 caseloads. Agencies are seeing a wave of people who were in the city’s middle or high-income category using their services for the first time.”

http://www.theglobeandmail.com/news/national/toronto/recession-over-not-in-toronto-area/article1768116/

#34 Nibs on 10.22.10 at 8:58 am

Consumer confidence, leading indicators both falling

http://financialinsights.wordpress.com/2010/10/22/consumer-confidence-leading-indicators-both-falling/

#35 Old_is_Gold on 10.22.10 at 9:10 am

#8 Popeye the sailor man on 10.22.10 at 4:17 am

____________________________________________

GOOD POST! Inflation in necessities such as food and energy are a given. Inflation in things considered necessary by governments, meaning TAXES is also a given.

Already for a greater percentage of people than most ‘Expert’ economists would dare number, necessities plus housing costs require more than what they earn, and this is after couples working 4 jobs between them just to keep their heads above water. There is no way out but for them to sink – tragic but true! The carnage is already here, not yet visible because it has just begun and not being reported by the MSM. But like Europe and the States the truth will out when sufficient numbers of people end up on the street – literally! Canada’s foreclosure catastrophe is just beginning and no amount of media / politico spin will be able to hide it by 2012.

2012 may indeed be the year the world literally ends for many Canadians; at least the world they foolishly thought was built on solid rock but turns out was actually built on powdery sands on the shores of the ocean (how much this parable applies to Vancouverites, they will find out sooner than they would have thought.)

#36 George on 10.22.10 at 9:11 am

bullion.bunny #28

Meanwhile my privates tingled a little as I looked at the full body scanner.

Yes…nice, the scanner uses a high powered tera-hertz frequency to do the deep scan. Oh yes it changes your DNA every time you are exposed. Actually it’s worse than sitting in a Microwave. Soon your privates will do more than tingle…….they will fall off………..happy cancer.
_____________________________________________

Do they have these Terrorist scanners in Canada? Does everyone have to expose themselves to this terrorist cancer causing machine or do we have an OPTION like people do in a FREE COUNTRY?

http://www.naturalnews.com/027913_full-body_scanners_DNA.html

Am I a prisoner in a free country if I don’t go throught this scanner?

#37 JM in London on 10.22.10 at 9:22 am

#202 Devil”s Advocate on 10.22.10 at 1:40 am

Wrote Yesterday:

“BTW CMHC does not pay off defaulted mortgages. CMHC pays out the shortfall between the balance owed and the proceeds of the sale. For example if the mortgage balance stands at $300,000 and the proceeds of the sale after expenses is just $280,000 the bank receives the net $280,000 proceeds of the sale after expenses and CMHC pays to the bank the remaining $20,000. Even then the bank must jump through very stringent hoops to prove that they did their very best to mitigate their loses all the way back to when they first approved the borrower. If CMHC can prove that the bank was negligent in granting the credit in the first place they can deny the claim – in the preceding simple example a claim of $20,000..

Now figure the costly premiums those borrowers paid to insure such loans and I think you would find that CMHC does not face such precarious financial liability as you think. CMHC insurance is not cheap – not at all considering the liability CMHC assumes. Trust me CMHC is doing just fine… and so too are the banks by the way.”

VERY well written explanation of how the CMHC functions in this capacity. Underwriters in Canada have required much documentation and requirements have tightened down even further as far as documentation/verification of self, income, etc…

While the 0/40 & 5/35 have a sub-prime like ring – There are structural differences to the whole Canadian market.

Does it change the fact that there are people out there with mortgages that shouldn’t? Can’t say that.

Change the fact that we’re overloaded with debt? Can’t say that either.

Can say that with all the political trumpeting of the “stability” of our big banks…if the boom falls and the banks come to the CMHC with hat in hand there has been some ground covered, yes?

What it does point to is that the CMHC is very likely not in as poor condition as Fannie and Freddie in the US.

#38 David on 10.22.10 at 9:30 am

Garth,

I can combine two things you love into one: Oil, and investments that pay dividends.

The international integrated oil producers have been trading flat for most of the last two years, with low PE’s, and high dividends.

Total pays a 4.4% Dividend (after the French Govt takes their cut), with a forward PE of 7, trailing of 8.

Chevron, Conoco, …all trading with 3% or higher div yields.

Now, if you don’t like the US dollar (or the Euro), than look at a Husky Energy, 4.8% Div yield, and near 52 week lows (yup, most of these are closer to 52 week lows than highs).

Worth a look for those who like oil, and like getting paid to own things.

#39 Tim on 10.22.10 at 9:39 am

Inflation rate remains low, interest rate remains near all time low for the forseable future unless we have a raging bull market and an dramatic upswing in the economy. Vancouver is predicted to lead in growth, so a massive correction is unlikely in the near term. People will just continue to pay their mortgages with near record low rates

#40 Contrarian on 10.22.10 at 9:46 am

>>Garth, please please please explain why if oil does not increase the average wages in Calgary then why does Calgary have the highest median household income of any major city in Canada… clost to $100,000?

From Wikipedia:
-While the oil and gas industry comprise an important part of the economy, the city has invested a great deal into other areas such as tourism and high-tech manufacturing.

-Other modern industries include light manufacturing, high-tech, film, e-commerce, transportation, and services.

-Calgary’s economy is less dominated by the oil and gas industry, although it is still the single largest contributor to the city’s GDP. In 2006, Calgary’s real GDP (in constant 1997 dollars) was C$52.386 billion, of which oil, gas and mining contributed 12%).

-In 2006 the unemployment rate was amongst the lowest of the major cities in Canada at 3.2%,

#41 Moneta on 10.22.10 at 9:55 am

Boils down to what lifestyle your willing to have and whether you worship money or not.
—————-
I think lifestyle is the key word.

Troughout history, there was no lifestyle option. It was all about surviving. For 6 billion people today, it’s still about survival.

I guess the question I have is whether or not it is logical to think that this lifestyle option will persist in the developed world. And if it does what percentage of the world’s population will be able to exercise it and how will it be distributed?

We are so entitled here in Canada that rare are the ones who seem to wonder where this wealth has come from and if they actually deserve it.

#42 Contrarian on 10.22.10 at 9:55 am

RE: #31 confused on 10.22.10 at 8:49 am

>>If i rent, I am at the mercy of the landlord.

If you have a mortgage, you are at the mercy of mortgage lenders. What happens in five years when you have to renew your mortgage? What if the BoC prime rate go back to a historical average rate of 5.8% (past 20 years) or higher? (the rate was over 20% in the late 70s, but that’s highly unlikely to happen again)

Also, the condo you purchased might drop in value a year from now. If the drop is a modest 5%, you could have saved $10,000. That doesn’t even include opportunity costs on if you had invested your money instead.

#43 Moneta on 10.22.10 at 9:57 am

There are people that bought the securities that are totally wiped out and don’t even know it yet. Whole pension funds invested and all gone.
———–
That’s why the fed is going to use QE and suck up every questionable MBS and CDO.

#44 Basil Fawlty on 10.22.10 at 10:01 am

“That was an easy answer. The world needs oil, I said. It does not need gold.”
Funny that an unneeded commodity has increased in price 4X. If gold was not needed, the price would have gone down. As soon as governments lose the ability to inflate the money supply and reduce interest rates below the rate of inflation, then gold will not be needed. Now, it has never been more necessary!
This is not to say that oil is a poor investment.

#45 Northern Dirt on 10.22.10 at 10:02 am

#9 Fractional Reserve

Not to be a jerk, and I applaud Buffets frugal tendencies..
But he also owns a $4 Million dollar home in Laguna beach…
Which is still less than 1/100th of one percent of his net worth.. ;)

#46 AxeHead on 10.22.10 at 10:11 am

Did you pick up a set of balls for the Hummer while visiting Cowtown?

#47 Old_is_Gold on 10.22.10 at 10:12 am

#11 WINNIPEGER on 10.22.10 at 7:05 am

For years WPG was a place where real-estate was shelter only. Lately we have followed on the coat-tails of everyone else. I know real-estate is dictated by “local” conditions. Well we have bald prairie as far as the eye can see. A huge 40,000 unit development underway in the southwest know as “Waverley West”.
I think this will be a ghost town within 3 years. Home building was humming there last year and now has slowed to a trickle.

______________________________________________
My parents and brother live in Waverley West, in the old part of it, which actually is not bad with some mature trees and bigger lots. The newer developments there remind me of the Siberian Gulag – depressing as heck! Winnipeg has to be the most poorly designed major city in North America. If you look up ‘URBAN SPRAWL’ in a dictionary, the meaning will be given as WINNIPEG. Corrupt politicians in the pockets of greedy developers have allowed over development in a modest size city that should be half in the size of area that it presently occupies. The geographic size of the city places an unmanageable stress on services and thus Peggers pay the highest property taxes in the country. They are being shafted because of municipal policies that go back to the late 80’s when the South and East ends first started being developed. The inner city is dying and suburbia keeps expanding like the Michelin tire man. The roads are a mess, city services keep getting cut, and user fees keep getting added. Photo radar and the traffic gestapo hand out tickets that are so huge that you can buy a used car for that amount. However the city cannot survive without these devious revenues that it generates under the guise of safety. From what I see happening from my frequent visits to the Peg is a city that is stretched to the breaking point, it may be first city in Canada to go belly up. And yes there is no shortage of greater fools here but mass delusion is a human condition that is not easily explained but is found everywhere.

#48 luketheduke on 10.22.10 at 10:15 am

so whats the deal Garth? On this blog you are the world’s biggest smartass,but when you show up in front of a crowd you are reserved and polite?
I forgot…they can pick up your books right after your presentation….

I treat people as they treat me and as I would wish to be treated. So, shove off. — Garth

#49 RKG in Burnaby on 10.22.10 at 10:17 am

#8 – We are experiencing inflation AND deflation….

Deflation in the things we own and want.
(houses, electronics, boats, RV’s, trucks etc.)

Inflation in the things we need and use.
(food, energy, services)

#50 BrianT on 10.22.10 at 10:17 am

#42Moneta-you couldn’t be more wrong about the Fed working for pension funds. Pension funds have been looted steadily in the US, to the point that most can never recover.

#51 Junius on 10.22.10 at 10:29 am

#38 JM in London,

You said, “What it does point to is that the CMHC is very likely not in as poor condition as Fannie and Freddie in the US.”

Lipstick on a pig.

The market is going to drop at least 25% nationwide over the next 3-7 years. Probably a lot more in the bubbliest areas.

In your example this would mean the price would drop around or below $200,000 and perhaps more. The CMHC would have to take over the house and resell it under its subrogation rights. That would mean it would pay out at least $100,000 and perhaps more considering legal fees, realtors fees, etc.

Multiply this nationwide and consider that the CMHC guarantees most (if not all) of the highest risk loans in the country. We are looking at billions of dollars in losses over multiple years. All of this will be happening at time of declining gov’t revenues, a tax strapped consumer and a housing market crushed by raising interest rates.

So what if it is not the trillions of dollars of Fannie Mae and Freddie Mac? Billions will be bad enough.

Lipstick on a pig. How do Harper and Flaherty look in drag?

#52 Nostradamus jr. on 10.22.10 at 10:29 am

Washington insures Fannie and Freddie
Washington has Armed Forces costing 25% of US GDP

Ottawa insures CMHC
Ottawa has no Armed Forces to speak of.

Get real Garth…you are a hypster, pimping yourself and your novels.

Nostradamus jr

#53 JSP on 10.22.10 at 10:34 am

I’ve got to ask this. I have following real estate for the past year and half, and I just can’t understand why Toronto appears to be the only immune place on earth to real estate corrections…I get listings everyday and there are a bunch of them with SC (sold conditionally). Is everyone this f…king stupid or what. I mean what the hell does Toronto even do or have?…everyone works for the City or an organization that gets funding from the government…I know because of the nature of the work that I’m in…My wife even refuses to want to live in these dung holes because the room sizes are like 9 x 9 feet and the lots are 20×100 feet with no parking and they need tons of work not to mention that these houses are going for between $700 – 900K. I had a conversation with someone who looked like she was on crack when contemplating buying a house. She said people were telling her she was wasting money renting and they were pressuring her daily. I asked her – was it your friends? She said no, it was the real estate agents…I mean come on, this is bull sh..t. This endless supply of cheap money has to stop as it is only hurting people in the long run but I guess because human beings are naturally short term thinkers that they aren’t thinking about 6 months or 1 year down the road…Housing is supposed to be a basic necessity and not something you speculate on. All that governments are doing around the world is legitimizing greed…

#54 Alberta Ed on 10.22.10 at 10:53 am

To Garth’s excellent advice I’d ad, find a good financial advisor. Ours has been invaluable.

#55 kitchener1 on 10.22.10 at 10:57 am

RE #36 JM in London and DA’s summary

So very true, CMHC only pays out the loss, if any and even then, the banks require proper documentation. Thats why in the past people needed 15% downpayment, to insulate the banks risk of a decline in the value of their security(your home).

#50 Junius

Yes, its not as good as it sounds, due mainly to the lower downpayments now required to buy a house. I think Garth mentined the average downpayment being 7%. That wont even cover RE agent fees and taxes.

In a nutshell, in Ontario anyway
Banks must try to sell the house for fair market value, which means they usually list it for 3 months, if no sale, at that point CMHC takes over and sells the property and pays the difference between mortgage and purchase price

Side note about Garths call for $100 oil, currently oil is $80. On average every $1 dollar increase usually equals 1 cent increase in price. so if it goes to $100 thats a .20 cent increase or 1.25 a litre (currently at 1.04). Think about the long term implications of that.

#56 Ottawa S. on 10.22.10 at 11:00 am

#31 confused
Im still trying to understand…I just bought a condo in Etobicoke…My intrest rate was 3.55% and my payments are 1100 per month. With the tax and maint, i am paying 1550. I have also locked in my rate for 5 years so im worry free. The rental in the same building (as i do not want to live in an older building) is 1500.

Don’t forget that your taxes and maintenance fees will likely go up at a higher rate than your rent would (since rent increases are controlled). Also as someone else mentioned, if the value of your condo goes down, you lose. And condo values have been and will continue to decline in the GTA.

#57 Benjamin on 10.22.10 at 11:03 am

Joseph, look at the numbers. Take the average cost of a house in Calgary and divide it by the average household income in Calgary and tell me what you get. It’s not a very nice number, now is it?

Did you look at the increase in wages and compare it to the increase of housing costs? Obviously not…

Yes, Alberta made a lot of money during the boom. How much extra money did the average worker make during the boom? Do you think that most of the financial rewards went into the pockets of big corporations and a few people at the top of the food chain? Or do you think that every Joe Welder and Sparky the Electrician cashed out with $10 million at the end of the boom? Oh wait… they had to put all of their income into their house, they had no money at the end of the boom!

#58 dark sad person on 10.22.10 at 11:07 am

Interestingly, I was asked twice last night in Calgary – at two separate events – if the housing market was different there (and immune from nasty trends) in light of my call for $100-plus oil.

**************************

Oil will hit $30 before it hits $100–

As all Counties slide further into Deflation and unemployment climbs and money supply drys up-
Demand by transport and personal consumption will have a negative effect on prices-at least in the short run
Barring a War of course–

***************

Demand has taken a turn for the worse, which is perhaps a good indication of how well the U.S. economic recovery is performing. Demand is now officially below last year’s levels, though it is still positive on a four-week rolling basis. Over the last four weeks, total petroleum demand is up 0.8%, gasoline demand is down 1.1%, and distillate demand is up by 8.8%

http://media.dailyfx.com/illustrations/2010/10/14/Crude_Oil_Inventory_Watch_Demand_Falls_Under_Last_Years_Levels_body_Picture_10.png

http://market-ticker.org/akcs-www?get_gallerynr=475

And-for those who don’t like music-
A tune from the hinterlands-

http://www.youtube.com/watch?v=ilWj3OEugTY&feature=related

#59 Prof ANON on 10.22.10 at 11:08 am

@ #5 Joseph

I can’t claim to know what Garth is thinking. However, here are two potential reason why oil/gas won’t save Calgary from economic and housing douldrums: unfavorable exchange rates and lower sales volume.

I know that the Loonie beating the crap out of the American dollar is a matter of pride, but it really isn’t a good thing for the Oil and Gas industry because these items are exports and they are priced in American dollars. Currently, this items are trading at much lower volumes and and (American)prices than they have in the recent past. Add on top of it that a stronger Loonie, and Oil/Gas compaines are getting a much weaker revenue streem then they were in the leadup to 2008.

I’m guessing average income in Calgary/Edmonton is in for a bit of an adjustment.

#60 Grandpa Grinch on 10.22.10 at 11:20 am

#54 Alberta Ed – Who would you recommend? I manage my own phenomenal returns currently, but don’t want to do it forever. Eventually I want to lay on the beach and have the girl in yesterday’s post rub suntan lotion everywhere.

#61 josephs horse on 10.22.10 at 11:26 am

>>Garth, please please please explain why if oil does not increase the average wages in Calgary then why does Calgary have the highest median household income of any major city in Canada… clost to $100,000?

You call yourself the financial guru, so what’s the answer? If its not oil than what on earth makes the average income so high here in Calgary?<<

What did i tell you last time. You gotta do your own look ups on the "googles" before spouting off. Other resources like Wikipedia, Stats Can, Local Economic Development Orgs, and think tank websites are invaluable to providing accurate data, research, explanations, and details to questions like "What drives Calgary's Economy" and "Why is water wet"

Also, you might want to look here for additional information on Calgary's Economy:

http://www.calgaryeconomicdevelopment.com/

They offer great answers to everyday questions. To your point regarding median income, I'd probably guess this has more to do with "Calgary has the largest concentration of company headquarters in Canada" then what you are trying to insinuate which is every second person works on the patch.

Try harder.

#62 april on 10.22.10 at 11:28 am

#53 Hoon.

Mr Smartypants Garth is not “fear-mongering”. He’s telling it like it is and he has written and spoken many times about the detrimental impact of loss of jobs on the economy.

#63 realpaul on 10.22.10 at 11:34 am

Biflation…..the reality of Chinese goods being marked up so outrageously beyond the cost of production and taxed beyond belief that prices can fall precipitously and China doesn’t blink….but…government revenues take a hit.

This is the game of ‘silly buggers’ the government is playing with you.

The nonsensical CPI is out

http://www.theglobeandmail.com/report-on-business/economy/inflation-rate-climbs-but-still-tame/article1768338/

and we see that everything that is made of Chinese paint and plastic is flat…everything you actually need has gone through the roof…but as ‘averaging’ is brought to bear..and ‘smoothing’ is applied…the Fed makes it look like your disability cheque or fixed income will go as far as it ever di…..what rubbish Mr Flaherty. What an insult it is to have a finance minister who plots against the people.

Firstly…for all the ‘wealth transfer’ and ‘sustainable development economics’ nuts….China is no longer in need of the wealth transfer we designed to uplift it’s economy. Lets get serious on the China/Canada manufacturing argument……..the idea that welfare states are as good as manufacturing economies is so…..Trudeau. The army of social workers and government workers has to be paid by someone…..unfortuneatley ..its the taxpayer….and we’re broke. This…sustainable development’ model doesn’t work for Canada anymore. I was surprised to see that the UK was holding on to its sacred cows of aid programs while at the same time beggaring its own people….this is what we’re doing here.

Lets get real about the economy…….when taxes hit 100% who’s going to give a crap about the phony numbers the government puts out.

#64 Moneta on 10.22.10 at 11:35 am

42Moneta-you couldn’t be more wrong about the Fed working for pension funds. Pension funds have been looted steadily in the US, to the point that most can never recover.
———
You couldn’t be more wrong.

The Fed can buy up all the MBS and CDOs it wants and this does not means pension funds won’t be looted.

#65 eaglebay on 10.22.10 at 11:40 am

# 89 Prof Anon

With the exception of the oilsands, Alberta production is 80% gas and 20% oil. The parity of the Canadian $ will affect the prices received for our oil and gas.
As far as gas is concerned in the next few years, sales of gas from Alberta will diminished as other large gas resources are being discovered almost every day in North America. New gas finds in BC, Quebec, Saskatchewan, Pennsylvania, New York, Louisiana, Texas…will certainly affec the price of gas and gas sales from Alberta as the new discoveries are much closer to market.
Alberta will be affected by reduce sales of gas and the sale of more expensive oil as it is getting much more expensive to produce.

#66 The Original Dave on 10.22.10 at 11:43 am

Garth,

Where do you think the best places in the world to invest in real estate will be in a couple years? Not everywhere can be in a bear market forever right…

US? China? Europe? Anything on your map

——————————————————–

even the bears are obsessed, haha. This guy NEEDS to get in. The real estate thing is so deeply embedded in people, that it’s scary. The fact is: when it is time to buy, you won’t even want to walk to the house next door that is listed for sale. You considering China and the half day flight that comes with it, means you’re too emotionally attached to real estate.

Tell you what, there’s a nice city I know. You just have to fly to Brazil, cross the Brazilian rainforest by foot and then you’ll get to the gold mine of real estate! They’re running out of land there too…..just like in Canada!

I’ll give you a tip on real estate. Find a country that doesn’t have mortgages or are very tight with mortgages. I think Argentina might be (I’m not being sarcastic like I was above). Properties everywhere rose in price because of lending. Hopefully you know that. By looking at countries that are tight with their mortgage lending, you eliminate the huge downside potential that comes with loose lending standards…which is the biggest reason for the run up and is the biggest reason for the drop.

High mortgage lending standards would be #1 on my list. Immigration numbers, incomes etc. would be 2nd on my list.

#67 brainsail on 10.22.10 at 11:45 am

#51 Nostradamus jr.

“Washington has Armed Forces costing 25% of US GDP”

BS

Try 4.3%

http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

#68 Ottawa S. on 10.22.10 at 11:46 am

Oil will hit $30 before it hits $100

For the sake of my resources-based mutual funds, I hope oil goes up.

For the sake of my gas-hungry RX-8, I hope oil goes down.

What a dilemma :)

#69 JM in London on 10.22.10 at 12:04 pm

#50 Junius on 10.22.10 at 10:29 am

That was DA’s example there but in essence it’s exactly how it works .

The CMHC isn’t responsible for the sale, the lender is.

My position on this is well known here. Yes I think we’re about to see a serious correction. Being a mortgage guy I’m on the front line. From my position, it’s a hell of an interesting place to watch this unfold from. Imagine sitting on a deck chair on the prow of the Titanic with night vision goggles. That’s how far the once hot pre-approval side is dropping…

What I’m pointing out is that there is a difference.

The question: Is the balance the CMHC holds sufficient to cover risks of default?

That’s a hard question but in most views, likely not…

How hard does the RE market fall?

How big do the defaults get?

All questions we’re seeking answers to. The picture isn’t entirely clear but it will be a hell of a ride and not a pretty one at that.

Lipstick on a pig? Yep! I agree…just not quite as nasty as down south.

I really am not trying to paint as rosy a picture as it first might sound. We’ve battened down at my place for a rough ride for sure.

My main point was to not be surprised if you see a bank exec or three crying the blues when the CMHC attempts to shut down claims just like insurance companies do with their customers.

F & H in drag? Now that might just be a big enough fund raising event to help the CMHC!

On second thought, has anyone got a dull spoon??

#70 DM in C on 10.22.10 at 12:06 pm

#46 – Old is Gold

Change Winnipeg to Calgary and you have the same story. Only difference is Winnipeg budgets for snow removal rather than waiting for a chinook.

Great talks last night, G.

“Winnipeg has to be the most poorly designed major city in North America. If you look up ‘URBAN SPRAWL’ in a dictionary, the meaning will be given as WINNIPEG. Corrupt politicians in the pockets of greedy developers have allowed over development in a modest size city that should be half in the size of area that it presently occupies. The geographic size of the city places an unmanageable stress on services and thus Peggers pay the highest property taxes in the country. They are being shafted because of municipal policies that go back to the late 80′s when the South and East ends first started being developed. The inner city is dying and suburbia keeps expanding like the Michelin tire man. The roads are a mess, city services keep getting cut, and user fees keep getting added. “

#71 JM in London on 10.22.10 at 12:09 pm

#55 kitchener1 on 10.22.10 at 10:57 am

&

Junius:

Sorry – K1 thanks – as he’s right:

In a nutshell, in Ontario anyway
Banks must try to sell the house for fair market value, which means they usually list it for 3 months, if no sale, at that point CMHC takes over and sells the property and pays the difference between mortgage and purchase price

#72 MKUltra on 10.22.10 at 12:35 pm

Garth – why did you go through the scanner at the airport? You have the RIGHT to decline this service and get the patdown instead. Sure, you may wait an extra 15-20 minutes in another line….but it sure beats having a NUDE digital photo of oneself stored in the digital world – forever. Don’t believe for a minute this data is deleted. It is zipped off airport premises the minute it is taken. None of those guards and their managers have any clue that this happens. It is child’s play to reconstitute the digital image with color and texture to have a fully nude Garth Turner….ready for a bus-stop poster near you (as a replacement to a Realtor poster). Next time take the manual route….unless the idea of a poster gives you a bit of a tingle ; )

#73 Brico on 10.22.10 at 12:40 pm

re: MRU Lecture

It is nice to know that you own at least one ounce of gold (Good thing you did not toss that 1 oz gold bar to me). There you have it gold bugs. Garth has 1 oz worth of Gold. He is an owner.

What impressed me is that your message strikes to the heart of what a Business Student identifies as success and reasons for attending college in the first place. The Boomer parent have drilled into the heads of the youth that the path of success is education and a good job. The main goals once you achieve it; is to “own” a house. Show all that you are successful. Over and over I hear that fellow students parents have told their graduating kids that home ownership is a wise decision and a measurement of their success and responsibility.

Your message creates confusion. Are my parents stupid? Why would they give me advice to ruin my life and suggest I carry a lifetime worth of debt? My parents are doing just fine! Look at all we have!

Conversation after the talk did revolve around how much their situation is unique (condo location etc) and how the Calgary RE market is different (oil). It is extremely hard to go against your trusted role models. I asked my fellow students: Would it be wise to leverage yourself the same way in business? The answer was no way. It’s stupid, of course not. Then why would you choose to do the same with your personal finances? The answer again was: It’s different. Calgary is RE different. Calgary RE will always go up.

If you made one person think and avoid the debt trap, then your journey to MRU was a success.

#74 Jocelan Tracey on 10.22.10 at 12:44 pm

..a great article in November’s Vanity Fair on how even the super rich are suffering in the global economy. Apparently the orders for uber-yachts has fallen off the face of the earth and models that were going for hundreds of millions last year are now going for tens of millions.
…on another front, just back from Hawaii, what a wacko place that is (Oahu). News is that while the Japanese are spending money like drunken sailors, 1,700 bankruptcies were filed in September. Keep in mind there are only 1.3 million people on the islands. Staggering.

#75 Devil's Advocate on 10.22.10 at 12:45 pm

“The market is going to drop at least 25% nationwide over the next 3-7 years. Probably a lot more in the bubbliest areas.” #50 Junius

That is pure speculation junius. I have an every bit equally a valid contention that we are already 2 years into a 7 to 10 year trough, peak to peak, which suggests that we are nearer bumping along bottom and will be well into recovery mode by that 3-7 years time from now. I will grant you that there will be “properties which drop at least 25%” but they will be pockets where greater fools bid recklessly to get into the market before rising prices blocked them out. It is those extremes which will be balanced by some ever stable areas that we achieve an “average” 10% drop in values. That drop will take place between now and this time next year in consequence and subsequent to volumes which have seen a 40% haircut these most recent months. Understand that a 40% drop in volumes does not lead to a 40% drop in prices as prices are sticky and will hold until an improving economy catches up.

My contention is backed more by historical trend peppered with some level headed optimism… yours is just gloom and doom hypothesizing…. No?

#76 Future Expatriate on 10.22.10 at 12:45 pm

Remember that Depression I kept talking about?

Just because the MSM won’t call it a Depression doesn’t mean it isn’t.

#77 UrbanCowboy on 10.22.10 at 12:48 pm

Garth thanks for the great presentation last night, I really enjoyed it, and the humor you add. However, i don’t see eye to eye with you on the gold thing. Inflation adjusted from gold’s peak in the 70’s, on par today would bring it to $2000+/oz. And the economy(s) are sicker today on a global scale than back then, so gold should be nowhere near a bubble.
As far as gold not being food or fuel, or anything usefull, how about taking depreciating cash and putting it into something that cannot be duplicated or reprinted and lose value like fiat. Million/billionaires can’t put that much in food that won’t spoil in a short time.
Also, the Comex is leverage to unbeleivable levels in terms of how much paper they issued vs how much gold they actually hold. If a run on the exchange happend and delivery of the actual gold was requested we’d see a short squeeze of epic proporations driving the price to the statosphere.

#78 Devil's Advocate on 10.22.10 at 1:00 pm

”so whats the deal Garth? On this blog you are the world’s biggest smartass,but when you show up in front of a crowd you are reserved and polite?” #47 luketheduke

It’s called Blog-rage. Actually I too was pleasantly surprised by Garth’s demeanor at one of his more recent talks in Kelowna. But really you can’t blame him for sometimes loosing his patience on these blogs… I think he does a better job being a Devil’s Advocate than I most times. I also do not believe he is so far entrenched in the Blog DAWGS own camp as they think.

Garth has a good message. It is not so extreme as this blog suggests. He makes a world of better sense in his personal presentations than here on these blogs. I don’t know what his motivations are here… maybe he is merely appealing to a different audience – that vocal minority thing.

#79 palebird on 10.22.10 at 1:03 pm

#18
My thoughts exactly, people are in for one huge wake up call.

#80 Alberta Ed on 10.22.10 at 1:19 pm

Grandpa Grinch — we have been with Investors Group for +20 years.

#81 Nostradamus Le Mad Vlad on 10.22.10 at 1:20 pm


“If this blog abruptly ends, you’ll know why.” — Same here. If I cease posting, than y’all know I will have broken on through to the other side, ROTFLMAO at the poor dudes / dudettes who still have to toil in misery here!

But that’s for a future life. Meanwhile, back at the ranch . . .

#8 Popeye the sailor man — “Deflation / Inflation” and #58 dark sad person — “. . . Deflation and unemployment climbs and money supply drys up-” — combined with —

#27 bruce corell — “Im sorry to say there are a lot of stupid people out there. Oct 19th Interest rate increases were halted because their are too many people out there in BIG TROUBLE. All the Banks know this bubble will burst any day…YES ANY DAY AND ANY HOUR NOW. And it will last a long long long time…..”

can be summed up in one sentence from . . .

#18 Poor Buffalo Farmer — “DEAD MAN WALKING!!!” (Change Man to Sheeple).

#33 Hiteclowtec — Good link. That’s what the elite want — North and Central America being in perpetual welfare and debt, then passing that debt on to their children so it is a never ending cycle.

However, all things run their course.
*
Dollar Dives Stimulus still doesn’t work.

The Bilderberg Group “The Intent was to Bankrupt the U.S. Treasury and Federal Reserve Banking Systems. It was to be “TOO FAR ALONG.”

Gold Derivatives Ignore the first part about the Freemasons. “Recently during the past several months, MORGAN-CHASE acknowledged “21 TRILLION DOLLARS IN GOLD DERIVATIVES-DEBENTURES.” This was also acknowledged in Reports filed with the U.S. Security Exchange Commission.”

Using Gold to avoid debt payments.

Think France is bad? Yep, this is certainly being co-ordinated by the grubby elite, the Rothschilds, Rockefellers and Ted Turners of the world. Plus France.

‘Quake causes and effects?

But as the dollar sank, coffee and sugar rose.

To distract sheeple from its economic demise, a new war must be created post-haste!

Forecasting the inevitable? That’s what HAARP is for!

Taxes Going up? Anyone could have seen this a mile away.

Gandhi Remember his mantra of non-violent revolution, and how the UK eventually got the boot from India? The west may have to consider this method.

Link in. One of the reasons why Americans are buying guns at record levels, and stockpiling ammo. May not be the best move, ‘tho.

Obama — Yes We Can (tax and screw you sheeples to hell!).

#82 Jon B on 10.22.10 at 1:33 pm

So my advice remains: (1) Shift wealth from real estate to financial assets.
What about shifting to US Real Estate?

#83 DALE on 10.22.10 at 1:33 pm

Economist: interactive overview of global house prices and rents

http://www.economist.com/blogs/freeexchange/10/global_house_prices

#84 dark sad person on 10.22.10 at 1:36 pm

CMHC–

Trust me CMHC is doing just fine… and so too are the banks by the way.”

VERY well written explanation of how the CMHC functions in this capacity. Underwriters in Canada have required much documentation and requirements have tightened down even further as far as documentation/verification of self, income, etc…

*****************

Well then surely-they will hand the 280 Billion back to us?
Wonder what that was all about-
C must have been way out on his calculations about coming writedowns and the cushion needed-
Banks are in great shape-borrowers are basically all in sound financial shape-because the “documents” say so–
So-let’s see the cash flowback from CMHC “back” onto the Fed balance sheet and we can shrink our debt to GDP and presto–no problems in Canada–

Seems the US has a problem-but we wont-

http://research.stlouisfed.org/fred2/series/HSN1F

http://research.stlouisfed.org/fred2/series/HOUST

http://research.stlouisfed.org/fred2/series/PERMIT

Wow-and i thought we were in trouble-wasn’t it G who only a few threads ago-described the horror of No Doc/liar loans and 35’s and that sales were drying up-which could very easily turn the debt to equity ratio to 100% on “any” of the foreclosed homes-because a house that wont sell-is worth zero-

#85 Ottawa S. on 10.22.10 at 1:36 pm

#52 JSP on 10.22.10 at 10:34 am

I’ve got to ask this. I have following real estate for the past year and half, and I just can’t understand why Toronto appears to be the only immune place on earth to real estate corrections…

Think Toronto is bad? Try Ottawa…

#86 Hell in a Hand Basket on 10.22.10 at 1:37 pm

“As I pulled off my cowboy books and prepared to be sautéed in that human microwave now installed at the airport security circus,”

How do you pull off cowboy books? Boots maybe?

#87 C on 10.22.10 at 1:45 pm

Interesting website on the US housing crash.

http://www.patrick.net

Grab a coffee and check it out. Interesting.

#88 dd on 10.22.10 at 1:51 pm

“So, should I invest in oil or gold?”

Must be a slow news day. Or need need to be abused again.

#89 RickOShea on 10.22.10 at 1:52 pm

Meanwhile my privates tingled a little as I looked at the full body scanner,

When I go thru the scanner, I take off my tinfoil hat and put it down the front of my shorts.

Priorities.

#90 Devore on 10.22.10 at 3:08 pm

#23 T.O. Bubble Boy

The condo market seems to be past the point of no return… slowing sales and price reductions are common, and a glut of new units hitting the market may be the nail in the coffin. There are only so many cashflow-negative condos that can be sold as income properties before people stop seeing condos as investments.

Condos int he major cities have been overbuilt to the point of absurdity. Who is buying them, and who is living in them?

The thing with so much new inventory, and inventory coming online in the next 1-2 years, is that vendors can cut their selling prices dramatically. In Vancouver, during the 2008 downturn, some builders were giving away 30% reductions. They did it after just a couple of months of declines, and they will do it again. They can’t have inventory sitting unsold for months. Smells like failure, drives away buyers.

What can someone who bought with 5% down + cashback do to compete against a brand new unit @ 30% off?

#91 Devore on 10.22.10 at 3:19 pm

#27 bruce corell

Im sorry to say there are a lot of stupid people out there.
When the Bank of Canada says they are worried about household debt then some people should wake up and smell the coffee.

Not just Bank of Canada is worried. So is TD, who rolled out a new mortgage product, and this will be the ONLY mortgage available to their customers.

How many people just go to their bank for their mortgage? How many will read the fine print? How many will understand it?

What’s TD trying to do? Lock people in for the lifetime of their mortgage, which will grow ever so easily, and remain at the mercy of their bank for the rest of their lives.

#92 Scalgary on 10.22.10 at 3:37 pm

#5Joseph,

Employment
 23 per cent of oil sands related employment is created outside of Alberta, which rises
to 28 per cent construction-related jobs.
 One in 14 jobs in Alberta is directly related to energy.

I got this info from Joseph horse’s link. This tells me that ~7 in 100 jobs are in energy sector.

Garth,

Can you please interfere before Joseph’s chicken/mouse comes here…

Thanks for your speech yesterday at The Chapters Calgary.

#93 jess on 10.22.10 at 3:41 pm

Brian T

Student wants his money back

http://blogs.findlaw.com/greedy_associates/2010/10/boston-college-law-3l-i-want-my-money-back.html#more
http://eagleionline.com/2010/10/15/open-letter-to-interim-dean-brown/

But, aren’t the cost too high already?

USA Today also notes that Senator Dick Durbin (D-Ill.) is taking a more cautious and probably more viable approach, seeking to reform the bankruptcy rules to allow private student loans to be dischargeable. Lenders have always argued that making it easier to include student loans in bankruptcy will ultimately drive loan costs higher, but of course one could say that about any kind of debt, and yet many debts are in fact still dischargeable. This plan may strike the right balance and offer some hope for the many who are already on the edge of bankruptcy.
http://www.forgivestudentloandebt.com/
Finally, according to the Guardian, in the UK, student-loan interest rates are being adjusted downward to 0%.

As I announced a few weeks ago, ForgiveStudentLoanDebt.com is planning to hold a sub-rally at Jon Stewart’s “Rally to Restore Sanity” on October 30, 2010 at the National Mall in D.C. More good news: We’re joining forces with StudentLoanJustice.org for this once-in-a-generation opportunity to rally on behalf of restoring sanity to the student lending industry!
http://www.teachforamerica.org/what-we-do/

#94 jess on 10.22.10 at 3:43 pm

how are they differrent?

China milk scare exposes scandal-for-hire industry
Joe McDonald
Beijing— The Associated Press
Published Friday, Oct. 22, 2010 8:26AM EDT
Last updated Friday, Oct. 22, 2010 8:46AM EDT

More Action in America from the Network of Billionaires
Submitted by Brendan Fischer on October 20, 2010 – 3:59pm. corporationsdemocracyElection 2010
http://www.prwatch.org/node/9537

#95 lonely limey on 10.22.10 at 3:58 pm

This is a prime example of how people think “it’s different here”

Varun Chaudhary bought two two-bedroom residences in the Burj for about $1.5 million in 2005 even before construction began. He saw the value leap from $762 per sq. ft. to $3,811 per sq. ft. at the heights of the boom. Today, those values hover just above his purchase price. But he says he isn’t worried about his investment………….

Full story here:

http://tinyurl.com/24o5xly

#96 Sail1 on 10.22.10 at 4:37 pm

21 Toronto

Quite a loss! I guess you got the wrong advise.

#97 Devore on 10.22.10 at 4:39 pm

#31 confused

If i rent, I am at the mercy of the landlord.

You are confused. You think you own, and are the boss, but really you are just renting from the bank, instead of a landlord. Did you give much thought to what may happen when it comes time to renew in 5 years?

Even if the market goes down, its going to go up eventually so why not buy and still invest in the markets as well.

So I assume you have a 35 year mortgage, with 5% down. With your payments of $1100, your place was bought for about $280,000. I don’t know how much that buys you in Toronto, but in Vancouver you won’t even get a closet for that. I assume it’s small, low quality, and in a not-so-stellar part of town.

Since you have such a long term outlook, I assume you will not be selling for at least 5 years, and probably 10 or 15, right? Long term and all. Do you think anyone in 10, or 15 years, will be willing to pay top dollar for your old and busted catbox that’s out of warranty and requires major repairs and maintenance? Have you looked at condos that are 15 years old, would you want to live in one? How much would you pay today? Have you looked around you, and how many more new buildings are coming up this year and in the next 1-2 years?

In 5 years you’ll have paid off less than 10% of your principle. Deduct 5% for realtor fees, some more for taxes and assorted transaction costs, moving, etc, if prices remain flat, how big of a check will you need to bring to the bank if you want to sell at the end of your mortgage term? Was it worth it to own a box in the sky?

At least you can sleep safe knowing there will be no $10k, $20k, $30k or higher special assessments on your unit, because it’s all new and stuff, and the condo association knows what they’re doing and will have a big contingency fund to pay for major repairs, right? Right?

#98 g dawg on 10.22.10 at 4:51 pm

Garth,you know CATSA is suppose to give you the option to have a physical search instead of the body scan,might take a bit of complaining, but no need for you or anyone else to be subjected to untested and unproven technology. Those body scanners are a scam sold to governments around the world on the heels of infidel who was really a unsuspecting drug induced salesman for the Chertoff Group

#99 JM in London on 10.22.10 at 4:51 pm

#79 dsp

some lame attempt at debate?

#100 Rickster-BC on 10.22.10 at 4:53 pm

@#21 – Toronto
Sorry but I can’t help but think you ARE being foolish. And maybe greedy too. You are speculating and you probably sold a year too soon. Fortunately, though, you have invested the money you got from your house and you have achieved a great return from it, no? House prices are going to be under pressure, for sure, but they may not come down to the level you want for a couple of years if they do at all. Life can be tough when you speculate with your family home. Better to speculate when you have enough money so that it doesn’t matter that much if you are wrong.

#101 betamax on 10.22.10 at 5:00 pm

#47 luketheduke: “so whats the deal Garth? On this blog you are the world’s biggest smartass,but when you show up in front of a crowd you are reserved and polite?”

So did you confront Garth with this observation in person? No you were reserved and polite, just like most people in person as opposed to online. It’s a common phenom and has nothing to do with selling books, though you obviously could benefit from reading some.

#102 HouseBuster on 10.22.10 at 5:10 pm

#30 bullion.bunny -…. Ummm…no.

#103 dark sad person on 10.22.10 at 5:22 pm

#88 jess on 10.22.10 at 3:41 pm

USA Today also notes that Senator Dick Durbin (D-Ill.) is taking a more cautious and probably more viable approach, seeking to reform the bankruptcy rules to allow private student loans to be dischargeable. Lenders have always argued that making it easier to include student loans in bankruptcy will ultimately drive loan costs higher, but of course one could say that about any kind of debt, and yet many debts are in fact still dischargeable. This plan may strike the right balance and offer some hope for the many who are already on the edge of bankruptcy

*****************
Is this only for those who are in arrears-or is it for all student loan debt?
Because-if it’s only for those who are in trouble-the next thing will be “all” student loans are unmanageable-

Why would anyone-even if they could pay-try to pay-when there’s and avenue like that to take-
Can’t see it happening–

#104 NFN_ on 10.22.10 at 5:43 pm

#37 David

Now, if you don’t like the US dollar (or the Euro), than look at a Husky Energy, 4.8% Div yield, and near 52 week lows (yup, most of these are closer to 52 week lows than highs).

——————————————–

I took a look and you are correct. I don’t care if Husky stays put for the time being if it yields >4% dividends. I’m only worried about it dropping (although I don’t see why it would).

Anyone else have any insight or experience w/ Husky Energy. I want to see if it really is a buy.

#105 Nostradamus Le Mad Vlad on 10.22.10 at 6:25 pm


Hank Paulson is trooly a macho man of epic proportions. “We put everything that’s important about your former TARP-loving Treasury Secretary into a 90-second comedy short. Take a look!” Somewhere in there is Carney.

Austerity If you think things are bad in Europe, wait ’til austerity arrives on these shores, esp. with so many jobs disappearing.

Then there is Zimbabwe Ben. He is also a laugh a minute! “It’s Nano-Crapmagic Money Printing for a dubious, devious, and desperate Fed Chairman!”

6:07 clip Grovelling 101 to the Bilderbergs, etc.

Inside Job — Not 9-11, another one.

Hmmm. “No, no, no, no, NO, dammit! Trees and plants are not the solution. Trees and plants are bad. Really BAD! You need a carbon tax. You want a carbon tax. You WILL HAVE A GOD-DAMMED @!#$%ING CARBON TAX IF IT IS THE LAST THING I EVER DO! … I’m okay. You can let go of me.” — Saint Al of the Gore” — wrh.com. Plus Pathetic.

New Taxes “Now that the mortgage-backed-security bubble has burst, and even before the public can recover from the financial clubbing they have been forced to endure, here comes the carbon-bubble!” wrh.com. That probably includes Nov. 30, when the WH / Pentagon may take down the US side of the ‘net.

Food Stamps A poster earlier mentioned things were getting bad in the Hawaiian Islands.

5:42 clip MERS explained by Leprechauns and Dobermans.

Bank Holding Companies “So, the Federal Reserve supervises all the bank holding companies which includes the banks that oversold the mortgages into multiple mortgage-backed securities. This means the Fed is neck deep in the fraud, which explains why some $9 trillion dollars (“Borrowed” and to be repaid by the taxpayers eventually) was handed out by the fed to buy back the bad paper without telling the public who the money went to.” wrh.com.

Hah! Chalk one up for the little guy (sheeples).

The Potato Famine Happened in Ireland (I think) in the 1800’s. Starvation via crop failures and increasing food prices = Depopulation.

6:50 clip “US had to get permission from Israel to sell weapons to Saudi Arabia.”

#106 your mom on 10.22.10 at 6:29 pm

Its different here, right? right?!?! RIGHT?!?!?!?!!!!!
http://tinyurl.com/24o5xly

#107 dark sad person on 10.22.10 at 7:18 pm

#99 JM in London on 10.22.10 at 4:51 pm

#79 dsp

some lame attempt at debate?

****************

No debate-just pointing out how narrow sighted you are-
You “assume” in your glowing analysis-that as soon as a write down occurs-CMHC can just put the foreclosed home in question on the market and-poof-sell it for whatever the market prices it at and can then take the “proceeds” from that sale and put it against the principle and the write down will be relatively minor-

I pointed out-with data-that it is very possible-according to what happened in the US was-there are relatively few sales and a “huge” amount of Inventory-not to mention all the shadow Inventory-so- the homes that are “not sold” are basically worth “zero”

If you apply “zero” to the principle-how much would you have-to put against the write down?

I bet even you-can figure that out-from the “front lines”

#108 GregW,Oakville on 10.22.10 at 7:24 pm

Hi Garth, Great blog!

Last Spring I flow to Chicago for the weekend and opted to not get my body irradiate at the Toronto airport. I did need to submit to a pat down to get through security. On the way back we only had metal detectors to go through. I hope we still have a choice?

‘The new, full-body security scanners being introduced at airports pose a greater skin cancer risk than governments have previously acknowledged and are especially dangerous to children and pregnant women, a new study has found.’
http://www.infowars.com/it%e2%80%99s-true-airport-body-scanners-could-give-you-cancer/

#109 X on 10.22.10 at 7:37 pm

Finally the media is starting to report on the changing RE market:

http://www.theglobeandmail.com/report-on-business/economy/housing/the-long-shadow-over-canadas-housing-market/article1769753/

#110 S.B. on 10.22.10 at 7:42 pm

8O :o

Dr. Sherry Cooper, BMO Financial Group’s executive vice president and chief economist, will receive this year’s Lawrence R. Klein Award for economic forecasting accuracy.

Cooper and her team correctly pinpointed key indicators at both the beginning of the recession and the beginning of the recovery.

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?id=55427&IdSection=9&cat=9&BImageCI=1

#111 Mister Obvious on 10.22.10 at 8:01 pm

#104 NFN

“I took a look and you are correct. I don’t care if Husky stays put for the time being if it yields >4% dividends. I’m only worried about it dropping (although I don’t see why it would).

Anyone else have any insight or experience w/ Husky Energy. I want to see if it really is a buy.”

I have held common shares in Husky Energy since about July 2007. I got in at about $40. Since then it went up to $50+ and then began its long descent, to finally arrive at the $25 or so we see today. From that point of view it is the poorest capital performing of all my long position equities. However it pays 1.20 per share and its been fairly steady at its current level for quite a while.

#112 blase on 10.22.10 at 8:16 pm

I’ve noticed that the median price on condos on calgary real estate board website hasn’t budged from 260,000 in last few days. It’s moved every day for the last several months. I smell a rat…

#113 Devil's Advocate on 10.22.10 at 8:45 pm

“I’ve noticed that the median price on condos on calgary real estate board website hasn’t budged from 260,000 in last few days. It’s moved every day for the last several months. I smell a rat…” #112 blase

Dang it all Mildrid I told ya ifin ya don’t change dem numbers around here and there from time ta time ta makes it look like normal we’s gonna git caught. Now look atcha gone an done. B’fore ya know’s it wez gonna have dat Anti-combines come down us agin.

#114 T.O. Bubble Boy on 10.22.10 at 8:47 pm

@ #55 kitchener1:

Oil already hit $140/barrel, and our dollar didn’t hit $1.40 US… so why would it hit $1.25 US when Oil hits $100/barrel?

You are assuming some sort of linear equation here, which obviously cannot hold true in the real world.

I agree that a high CDN$ will destroy a few more industries in Canada, but $1.25 US is highly unlikely in my opinion… keep in mind, the US is our largest trading partner for tons of other (non-oil) industries, and the economy is not 100% driven by oil exports.

#115 David_Ricardo on 10.22.10 at 8:58 pm

Simply a comment…
I’d be rather surprised to see oil at 100 bucks. Inventories rising and demand falling.
http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2010/10/20/Crude_Oil_Inventory_Watch_Surplus_Grows_Slightly_Demand_Remains_Weak.html

Otherwise, commodities have rallied on the dollar (us) weakness. It’s amazing that everyone is so negative on the US dollar now and bullish on the euro, don’t you think? Wasn’t it the reverse a few months ago? I also wonder which reserve currency will survive. The euro, as Jim Rogers accurately states is a FLAWED currency. The US dollar remains king. The yen, the yuan, the Swiss Franc will replace the dollar…ha ha ha Everything is relative.

#116 BrianT on 10.22.10 at 9:05 pm

#105Nost-these huge numbers are never put into perspective for the sheep-that 9 trillion is about SIX YEARS of total income tax revenue. Obviously an income tax holiday wouldn’t be as useful as simply handing the taxpayer funds over to the connected, who can then possibly trickle it down over the peasants if in the mood.

#117 kitchener1 on 10.22.10 at 9:35 pm

#115 Toronto bubble boy

reread my post, i wasnt saying that our CAn $ will be at 1.25US. I way saying that our gas will be $1.25 CAN a liter at the pumps.

Last time that happened our economy stalled and people thought it was the end of the world.

#118 Herb on 10.22.10 at 9:43 pm

S.B. @ #111,

the smileys said it all. Beautiful.

#119 CTO on 10.22.10 at 10:21 pm

#97 Sail1

Hey sail, i have a house and im not sellin…but i sure as hell aint buyiin either!!!

Nice to have some extra cash sittin around in these times and no huge debt…

#120 S.B. on 10.22.10 at 11:20 pm

Did the $USD “flash crash” afterhours tonight? Either this is due to bad ticks, or it is real data:

http://finviz.com/futures_charts.ashx?t=DX&p=m5

#121 HappyBnot on 10.23.10 at 2:42 pm

awww the greed of the many at the expense of the renters! My heart ‘bleeds’ for the ‘poor’ Victoria homeowners who have to drop a mere 100K. Meanwhile renters are being soaked daily by having to pay 3/4 of their wages just to keep a roof overhead all because of you overblown ‘hippie cum yuppies’ who discovered that material goods + bullshit = high status; and it is YOU who have driven the housing markets into the unaffordable ‘state’ we’re in, which has allowed property developers to charge 70% above ‘fair market values’ to us ‘peasants’. This leaves us ‘workers’ nothing to ‘save’ for a downpayment in an overpriced saturated overblown market just to live here. Jobs? There is NO industry here to support the expenses the minions have to cough up just to survive. I don’t know when the bubble will break, but I cannot wait to see these 100K loss whiners burst into flames as they lose all of their $$ trying to save face and keep up the ‘facade’ of being a ‘fat cat’ Victorian; who, more than likely, has been living off the heritance of their forefathers, having never dirtied their own hands except to feed off the system by their own arrogance and look down their noses at the rest of us who actually do work for a living just to serve your egos. Wait for it!

#122 LB on 10.24.10 at 12:23 am

Actually, rental properties in Victoria are increasing daily and more and more are sitting empty each month.I have noticed they are also getting increasingly competitive. It appears Victoria’s rental market is following what I observed in Vancouver’s West End this spring.

Every homeowner here has to rent out part of their home to pay for their jumbo mortgage, so they are contributing to this increase in available rental properties. Check out Craigslist and the Times Colonist for the past week. An abundant selection to choose from and negotiate on.