Emotions

Days ago frenzied American shoppers stormed Wal-Marts and Best Buys to scoop $198 laptops. This year, unlike last, nobody died. It was a pathetic scene.

Last weekend, as I reported, thousands of people stormed an Oakville, Ontario sales trailer to buy unbuilt half-million-dollar houses with little down. It was an astonishing scene.

In both cases, money came second to competition. Good thing. Most people don’t have any.

Interestingly enough, I ran into a guy who runs a men’s clothing store, also in Oakville. Asked how business was going. Fine, he said, as long as we keep dropping prices. He told me about a customer who wanted to buy a topcoat that was marked 30% off, but for less than the advertised price. When he was rebuffed, the customer said he’s come back in a week when it cost less.

“The hell of it is,” the manager said, “he’s probably right.” He also said virtually all sales are on credit card, with new cash in the till drawer at the end of the day typically totaling under $20. Oh yeah, and all of his salesguys are over 60.

“They come cheap. They’re desperate.”

Does this sound like a community, or an economy, in which people are flourishing? Or is the only economy we really have because of pervasive consumer credit and artificially-suppressed interest rates? Is this what’s driving people crazy?

Weeks ago a friend called from Vancouver debating whether to not to sell his pokey house. He bought it for $470,000 four years ago, and after having his brained fried reading this blog, thought bailing at the top might make sense. Two local realtors confirmed it, and last week he listed for $1.23 million. In Toronto the same house in an equal neighbourhood would sell for less than half. In Winnipeg, a quarter. And it would still be overpriced. He expects offers this week.

As I have mentioned here before, the average down payment for a piece of real estate over the last year in Canada is 7%. As you may have seen scanning some comments on the weekend, lots of people coming to this blog scoff when I use an example of investible assets of $200,000.

Typical of the emails I receive is this snippet: “My wife and I are 46, two kids (9 and 11), and live in Calgary in a POS suburban house which cost us $520,000. The mortgage is now $380,000, and we have $10K in our TFSAs in cash, an RESP with $5,500 in it and cash (in I hate to say it, the orange guy’s shorts) of $28,000. Can you help us?”

No.

How can I? A net worth of $180,000 at age forty-six is a disaster. Paying for the kids’ university education alone will require more than a hundred grand in cash – wiping out all liquid savings when this couple is just a decade away from retirement, and will still have a big mortgage on a house likely worth less. There’s no easy answer – no investment strategy that will save people from themselves, or make up for twenty years of idiot decisions.

This is one reason I keep harping about the societal dangers of residential real estate. It is no longer a sure storehouse of wealth when so many people own so much of it, so extravagantly, with so little equity. Were it not for those government-engineered interest rates, we wouldn’t be having this discussion and Mike Holmes would still be wondering how to afford his next tat.

It’s also why I underscore the true nature of risk. The likelihood of running out of money is far greater than the odds of losing it, especially with life expectancy rising and financial literacy dropping. In a low-rate and low-yield world, GICs fail.

In other words, greed and fear are having their way with us. You’d only buy a Van junker for a million or a Calgary particle board box for half that if you were greedy for gains. You’d only lock money away for a negative yield if you feared the future. Meanwhile, both emotions lead to blindness and a retirement laced with KD and Alpo.

I’ve no doubt things will get worse before they improve. But for many, improvement will never come. How can it, when you’ve financed your life on consumer credit, achieved middle age without a pension or enough net worth, have a family to support, still have debt, invested badly and put most of your wealth in a depreciating asset?

I’ll leave this topic for a while and get back to real estate. But I hope the next time you see someone trample a pregnant woman while trying to get to a cheap laptop, scooping a $600,000 house with 5% down from plans in 20 minutes, or recoiling from buying a preferred bank share while  mortgaging their ass to the same institution that you think about emotions.

There’s a men’s store waiting.

206 comments ↓

#1 Joseph on 11.28.10 at 10:42 pm

Houses in Calgary do not cost $500,000 for a “POS”. Not even close actually.

Second, the kids’ university degrees will not cost the couple a $100,000 because there is absolutely no need for the parents who will be in their fifties should be expected to pay for their kids’ education!

I graduated from UofC 3 years ago, with zero debt and worked part time. You DO NOT need to take 5 classes per semister, take 4 and work a couple shifts a week and full time in the summer. You can easily make $20,000/year in Calgary doing that.

Why does Garth not point this out in his article??

With an attitude like that no wonder they didn’t support you. — Garth

#2 petey paublo on 11.28.10 at 10:43 pm

First – amazing.

Garth is a good public speaker.

#3 Joseph on 11.28.10 at 10:44 pm

Apparently I didn’t learn to spell during my degree!

“semester”

#4 Publius Enigma on 11.28.10 at 10:47 pm

Can’t help but wonder what that net worth of $180k will look like by midsummer if the current financial course remains unchanged.

Good luck with that.

#5 sk76driver on 11.28.10 at 10:56 pm

So if I had 10k to spend right now….would buying preferred shares at any of the big 5 banks be the way to go? I will have 5k room in the TFSA in January and 5k for the wife, I put 50k worth of a premium bond fund a while back into my rrsp when you chirped about those. I have a online brokerage account as well outside of the rrsp. My house in Canada is paid for, so is the one in Mexico I am typing from. I have no financial advisor, I used to but started making real money when I fired his @ss and took over my own money…. Of course paying attention to what you write has not hurt me either… :o)

#6 Contrarian Canuck on 11.28.10 at 11:02 pm

Good stuff Garth. Keep speaking the message.

Housing will be the anchor to economic growth going forward….it will also sink household balance sheets

#7 Mean Gene on 11.28.10 at 11:11 pm

Brain dead baby boomers counting their days till retirement… without a plan.

#8 InvestorsFriend (Shawn Allen) on 11.28.10 at 11:30 pm

Many people are in debt with little to no financial net worth or even negative net worth. Even at 46, as above.

But clearly others have huge net worths.

A few days ago I suggested that the world is awash in savings.

Here I will prove it as a logic puzzle.

All Debt is someone eles’ savings (all debt represents a borrowing from someone who has that debt as an asset as their savings or investment on their personal or corporate balance sheet).

Some savings and investment are not loaned out as Debt. (I may own a rental property with no mortgage)

Therefore for the world in total, savings and investment are greater than debt.

This is a logic test. Is it true or is it False?

You fail if you said it’s false.

The world does have more savings / investment than it has debt. In fact FAR more…

This creates two results.

1. Low interest rates as excess savings are available compared to the demand to borrow more money.

2. Positive net worths, the average person or company has a postive net worth, more savings or investment than debt. Obviously if the average person has a positive net worth than so does the world in total.

Of course the world in total has a positive net worth. It is the value of everything. Period. We don’t have to deduct any debt. The net debt of this world is clearly zero since we don’t owe any money to Martians. (Nor have we in net borrowed any from future generations, how could we? – although some counties have)

The world is full of natural resources plus all the structures and things built by man. All the cars. All the everything. Of course the world has a huge and positive net worth.

Do you own your share? Or do you owe your share? By age 50, the more successful people own their share and then some, the less successful owe instead of own. Life’s not fair. Get used to it.

I find it interesting that as far as I know, no one else is talking about the fact that the world is awash in savings.

Think about it. Try not to strain your brains.

You know I am right…

#9 Patz on 11.28.10 at 11:36 pm

Garth talks about investing from a nuts and bolts point of view and while I disagree with some of his long term economic prognosis, especially where energy is concerned, I readily admit that he knows his stuff, big time. But there’s another element I think of sometimes and that’s how you live your life has a lot to do with how it turns out for your financial security.

I know a guy for instance who’s on his fourth marriage—yeah kinda excessive I know but it’s not hard to see how his personal life has effected his financial life—support payments, splitting assets etc. Likewise, people I know who’ve had various addictions haven’t by and large been too good on the financial side.

I remember a while back Garth mentioned he’d been married for what? 27 years (to the same woman). Another key to his financial success I would say, stability, support all that good stuff. Not RE but related—just sayin’.

And you should taste her squirrel tarts. — Garth

#10 Northern_dirt on 11.28.10 at 11:41 pm

Whats the name of the men’s store in Oakville, I need a new suit..

#11 T.O. Bubble Boy on 11.28.10 at 11:43 pm

This one baffles my mind…

I’m guessing that any extra cash went to the mortgage (that’s how $140k of equity was built up), but I still don’t understand how you could be:
– 46 years old
– able to qualify for a mortgage of say $450,000 (or whatever it was initially)
– own zero investments

What credit bubble?

#12 InvestorsFriend (Shawn Allen) on 11.28.10 at 11:57 pm

A point of claification to my post above at number 8.

Some countries have borrowed from other countries and the borrowing country’s kids might have to pay that back. But in the net it is impossible for the world to borrow from a future generation.

The closest we can come is by depleting the resources.

In reality future generations inherit all the installed structures on the earth and all the stuff and all the accumulated knowledge of the world. It’s like the greatest Christmas ever. Future generations have NOTHING to complain about, even if as in the U.S. they will have to pay a bit of debt to China.

Would you rather inherit a $ 1 million house with $100, 000 oweing or would you prefer no house and no debt?

Personally I would take the $900,000 net worth…

#13 Elmer on 11.29.10 at 12:00 am

The scary part is that this couple with 180k net worth is actually doing well above average compared to other boomers. Boomers form the biggest voting bloc and as millions of them retire with little or no money, I’m convinced that they will figure out some way to make the rest of us fund their retirement, by forcing the politicians to vastly increase OAS/CPP/GIS. As a young guy I’m certain I’ll be paying significantly higher taxes in the future. That’s why I’ve been hesitant to contribute to my RRSP, if I contribute now when taxes are lower and then take that money out in 35+ years when taxes are much higher, I’ll end up paying more taxes than if I just save my money in a non-registered account.

#14 Ben on 11.29.10 at 12:11 am

LOL… Turning $470,000 into 1.23 mil in 4 years time just living in your house, what a capital gains free lottery that is.
Ain’t no preferred stock, ETF, bond or GIC that will ever come even remotely close to that pay off.

#15 JPG101 on 11.29.10 at 12:11 am

#8 InvestorsFriend (Shawn Allen) said:
A few days ago I suggested that the world is awash in savings.

Here I will prove it as a logic puzzle.

All Debt is someone eles’ savings (all debt represents a borrowing from someone who has that debt as an asset as their savings or investment on their personal or corporate balance sheet).
—————————————-

Read about fractional banking and how debt is created. You might change your logic…

http://en.wikipedia.org/wiki/Fractional-reserve_banking

As you see the money supply is elastic and debt is created out of nothing. There lies a great weakness of our monitary system. It doesn’t do well with contracting credit…

JPG

#16 Kevin on 11.29.10 at 12:11 am

Canadian Housing and Baseball Sluggers ( On Steriods)
http://saskatoonhousingbubble.blogspot.com/2010/11/canadian-housing-and-baseball-sluggers.html

While there were whispers of alleged steroid use, the baseball commissioner and team owners turn a blind eye to the possibility ( while there were whispers of an alleged bubble, the finance minister and the real estate association turn a blind eye to the possibility). It did not matter that some players came out of nowhere to crank 50 or more home runs in one year, ( it did not matter that some cities had house values crank 50% or more higher in one year) it was good for the game ( it was good for the economy).

#17 walter safety on 11.29.10 at 12:17 am

#1 Joseph – hang around you will learn that in Garth’s world everybody has to stop work at 56 and nobody can work their way out of trouble . It seems he doesn’t see the education bubble either and that getting to work at 17 or 18 might be a good plan for most people. Save the $100,000 education cost ,heck you could buy preferred shares and let time value of money work for you or travel which pays best of all .

#18 Fritz on 11.29.10 at 12:20 am

At the risk of sounding patronizing yet again….. Garth, Thank God you are on our side!

#19 squidly77 on 11.29.10 at 12:26 am

Bought my house in Rundle (Calgary) 14 years ago for $116,000 sold it FSBO a few months ago for a price that I would have never paid, never. The house was in exceptional condition, but the neighbourhood is deteriorating rapidly.

The deterioration is due to the types that are buying, they find zero down taxpayer backed mortgages and gamble that they will profit from their purchase and as a result the neighbourhood has suffered immensely, grubby and unmaintained properties along with clothes left outside to dry (in the summer) and what seems like seven cars per house. It became intollerable. We left.

So I obviously wouldnt buy another home and decided to rent in what I thought was a rather ritzy neighbourhood.
It is, but the bum holding the mortgage on the house we now rent is well, a complete bum and he’s a realtor to boot (if I had only known).

The home had plumbing issues, I agreed to fix them for next to nothing and I did, now the bum can’t even come with the $500 for the parts.

I hope he has a merry Christmas because his December rent cheque will be denied, he has no idea what an inconvenience a pissed off renter can cause.

#20 Contrarian on 11.29.10 at 12:29 am

My daughter will be 27 and my son 20 , when I will be 50.

Why do most people prefer to have children when they are mid30s??

#21 kitchener1 on 11.29.10 at 12:37 am

The RE bubble bailed out a lot of folks in US and Canada, it papered over there bad spending habits but sadly, most of these folks started to beleive the hype and went all in.

Truth is that when the bubble bursts, it will wipe out equity and retirement dreams like no other asset bubble before it.

#22 Patz on 11.29.10 at 12:41 am

#8 & 12
Clearly Shawn, as you’ve advised us to do, you’ve strained your brain—through a sieve.

You’ve come across this nifty idea—you think—that the world has no debt because all debt is someone’s else’s savings. Here’s a thought for you: assets not only appreciate they depreciate. (In fact they rarely really appreciate in reality but frequently do so as a bubble.)

Let’s look south for a clear example: Guy buys house, $500,000, 10% down mortgage $450K. House value drops to $250K, he’s underwater $200K. He walks. Bank takes over house, they’re holding a note for $450K. They sell at auction, get $200K. So tell me, where’s the guys $50K? Where’s the bank’s $250K? Same thing when equity markets contract or collapse.

This one is just too rich:
The world is full of natural resources plus all the structures and things built by man. All the cars. All the everything. Of course the world has a huge and positive net worth.
All the cars?! Really those are part of the earth’s assets. Ever seen a wrecking yard? A landfill? The North Pacific Gyre—that’s a slowly whirling mass of garbage the size of Texas in the north Pacific. Need I go on? I think not.

I sometimes think when I’m reading posts here that the writer is just messing with us, see if anyone will bite. That what you doin’, Shawn?

#23 Bill Grable on 11.29.10 at 12:46 am

Please, Mr. Turner. WHY do so many people wind up in the mess described in the opening of today’s post?

I just about cried.

I realized that this probably more typical than you and I and the rest of the blog dawgs that follow the ‘Man on the Harley’, can imagine.

Although just anecdotal – here in La La Land there are a lot of very empty restaurants and the loss leaders at the local stupid gadget store get snapped up, but not much else.

Texting and no visual, human interaction on the streets is becoming even more common.

So many people texting, not even watching people right next to them.

Odd. I am not sure where this is all going, but it makes me queasy.

Maybe there is the same disconnect with DEBT – it’s just numbers on a screen?

Over to you, Dawgies – ‘cos this automath is stumped.

#24 calgary illusion on 11.29.10 at 12:47 am

Garth, do you still advocate bank preferreds when it is widely anticipated that interest rates will rise (meaning you may not recoup the initial price paid for the preferred)? Or do you recommend that a bank preferred be a convertible preferred – so that you can possession of common stock in the case of a declining price?

#25 Utopia on 11.29.10 at 12:48 am

I was as surprised as anyone to see yesterdays link showing that the city of Saskatoon is picking up the 5% downpayment tab on a variety of projects. That was news to me. Not good news either.

The way they are building out here in this cold prairie town is a real shame too. Huge box homes that are better suited to California or Texas than to a province that can spend as many as 5 months in sub-zero temperatures.

The lessons of the past have not been learned. You know that when you see a home like one a neighbor of mine is building.

I can only guess at how many thousand square feet it encompasses but it is huge. The basement has 10 foot ceilings for crying out loud!

Huge windows, no tree shelters (they were all removed) and a footprint that consumes the maximum allowable lot size all make this structure an energy sucking money pit.

This thing is designed for a different climate and yet here it is. All blocky, glassy and without real liveable virtues.

I am a really big fan of the older, smaller conservatively designed homes that were actually meant to be lived in. That were designed to take in maximum lighting with minimal heat loss and had basements built for proper food storage over the long cold winter months.

This guys ego-palace though has none of that in mind.

If the lights ever go out he will be banging on the neighbors doors for a place to stay warm in front of a real fireplace that is capable of warming a compact and sanely designed small prairie home.

#26 Dan in Victoria on 11.29.10 at 12:55 am

All of you who DO NOT understand take the time and start here.

http://www.chrismartenson.com/crashcourse

What Garth and the other intelligent posters on here talk about will make more sense after you watch, and learn this.

PS. You are going to have to put some time in…. no magic pill.

#27 Gord In Vancouver on 11.29.10 at 12:56 am

Does this sound like a community, or an economy, in which people are flourishing? Or is the only economy we really have because of pervasive consumer credit and artificially-suppressed interest rates?
_________________________________________

We’ve seen this movie before – south of the 49th parallel.

Excellent article Garth.

#28 Prufrock on 11.29.10 at 12:56 am

“Paying for the kids’ university education alone will require more than a hundred grand in cash”

Are you on crack? What WASP parents pay for their children’s university tuition? A hundred thousand in student loans for little Jane and Jimmy, more like.

#29 dale in van on 11.29.10 at 12:57 am

prarie gal,

alta boreal forest – 35,000,000 ha

syncrude mine – 191,00 ha

divide to get 0.0005457 or 0.0547%

or it takes over 1832 mines to take over the forest.

there are 3 big ones now – so just 1829 more can fit.

or send all our $$$ to iran and saudi.

#30 ChrisG on 11.29.10 at 1:05 am

Elmer, I can appreciate your concern, but you need to calculate the effects of compounding on 35+ years of tax-deferral. Even the negative effect of paying double the tax rate on your income 35 years from now is dwarfed by the benefits of compounding during all those 35 years of tax deferral.

I know this is a topic Garth has written about here (that in his opinion many people are better off to maximize their TFSAs before contributing to their RRSPs), but it is simply mathematically optimal for a young person with 35+ years until retirement to maximize both their RRSP and TFSA each tax year, in order to reduce their taxable income in the current year as much as possible, AND still reap all the long-term benefits of the RRSP and TFSA.

That said, with the typical Canadian being a poor financial planner, I can see Garth’s reasoning for recommending the TFSA over the RRSP for most young, relatively modest income-earners. Odds are they will need that cash sometime in the future before retirement, and having to withdraw funds from an RRSP would be real disaster. Not so with the TFSA, and so giving up the immediate tax benefits of the RRSP over the TFSA is a cost probably outweighed by the benefits in such cases.

I think my personal situation (young 20-something, refused to buy a house during the bubble, no debts, maxed out my RRSP and TFSA room every year) is something of a Canadian anomaly.

#31 nonplused on 11.29.10 at 1:07 am

Ah Garth,

I love to torment you only because you are so close to being right, and I hope that I am also close to being right and together we might argue to the truth, if there is such a thing. But nobody is right.

I like the trend established in this current post that there are risks. There are risks.

I like your investment advice but I think it’s so 2006 or 2014.

Canada will fail, such as Ireland, not because we made the same mistakes, but because we cannot avoid the mistakes of our cohorts.

Ah life! The fools! The foolishness!

#32 TaxHaven on 11.29.10 at 1:08 am

We’ve had “government-engineered interest rates” for years and years now. And we are quite sure that they will move heaven & earth to prevent those rates from rising at all.

This WILL be reflected somewhere. There’s no way to have your cake and eat it too forever.

I think what will ultimately give way will be the purchasing power of the currency, and that in turn will show up in price inflation in necessities & falling prices in everything else – including real estate. This will tank the rest of the Main Street economy, close shoddy businesses, eliminate jobs, cut incomes, and likely RAISE (yes!, as we are seeing in the U.S.) consumer debt levels.

A certain amount of liquid cash, yes. But a goodly portion of your assets should be in gold, now, and distressed real estate, later. In the end, nothing else.

#33 McLovin on 11.29.10 at 1:15 am

West Van median price down 10% in the last month.

Even Vancouver is not immune from gravity apparently.

#34 Wise Guy on 11.29.10 at 1:19 am

Recently at my monthly poker game, I asked one of the players what he does for a living and he tells me, ‘Real Estate’. Acting naive, I ask him how the market is here in Toronto and he says, “Condos are selling like hot cakes”. I asked him about single family homes and he had no comment.

Fast forward a couple weeks and I’m speaking to my buddy who had his condo/loft up for sale in the very desirable Etobicoke over looking the Gardner Expressway. For those not from Toronto, this is not the greatest view or the most desirable location, but it is what it is.

Last month, he was drinking at the bar celebrating the fact that he sold his loft only to be told a couple days later that the buyers financing didn’t fall through! So here he is putting his loft back on the market, third weekend in a row where they have had open houses and he told me that he is so frustrated.

Apparently, there are also four other lofts for sale on his same floor! Now, this isn’t exactly a big building either. I would hazard to guess that perhaps there are 20 lofts total on each floor in a 8-10 story loft.

Condos might be selling like hot cakes, but I’d be curious to know how much longer this can go on for.

My buddy’s plan is to sell his condo and move up to something bigger….a townhouse in the Bloor and Lansdowne area. Once again, not a very desirable area if you don’t know Toronto.

I directed him to Garth’s blog almost a couple years ago when the financial crisis hit and told him that houses would not be going up like they have for the past 10 years. I’ve kind of lost some credibility with him as it hasn’t exactly happened that way, so I just don’t bother anymore.

We all understand what is happening here and how it will all play out, so essentially, I just keep my mouth quiet, rent for my $1000/month, even though I have more than 25% down for a single family home.

I’m happy to wait!

#35 Interesting Times on 11.29.10 at 1:24 am

Garth is bang on! Still a lot of FREE money floating around. You warn people of the up coming dangers and they don’t listen. If Canadian’s want to see there future just look at Europe or the US. We are toast I tell you. Found out from somebody that a co-working ran off to buy in Pickering-Ont, teacher, barely had the 5% down with boyfriend for a 300K town home and cannot even afford any upgrades???. Told her about this website, I guess she did not want to educate herself and will be in trouble when she moves into the sit in 2yrs. Today at uncles house, baby boomer 70yrs, yes 70yrs. Bought a 2 acre lot in Richmond Hill Ont. two years ago at the peak prices???. I estimate for 800K to 1 million. Sold home for 570K last year, renting now, planning to build with kids 3 homes on lot which will probably cost 350K to 400K for each home. What are they thinking???? I just sit back a say nothing anymore. You are 70 yrs old and going into a paid off position to 200K or more debt????? As Garth says you need to have a back-up plan and not have all your eggs in one basket or you are toast! I am worried that the bond market will soon raise interest rates and this will not be good for the RE market in CDN. People in Greece I believe are now paying 10% to 15% for mortgages because of the mess they are in. My question to the blog dogs is this. Canadians are in debt in the tune of 1 Trillion Dollars, 80% living pay cheque to pay cheque, no good jobs out there, Europe self destructing, US RE going down another 20% and they are already in a 5 year RE crash!, and you think we are going to be partying here in Canada with 3% rates. I think all this is going to change once Spain goes under. The bond market will jack world interest rates globally as Spain is no little economy like Ireland & Greece. Let’s see how the kiddies and baby boomers handle rates in the 6% to 10% range when the bond dogs start barking at Canada’s ENORMOUS DEFICIT. Sorry to say but there will be a lot of people walking from there homes. I just think that people are nuts. Every where I drive I see for Lease Signs in every main commercial & industrial park, 3 years ago you never saw this. Wait till the bond dogs force the Canadian gov’t to start cutting gov’t workers like in the UK and reduce there pay at the same time etc. these folks, don’t know but it is coming. I work in the private sector for a company that always makes money, very lucky, however we also cut the workforce two years ago (Big Company too), we went from 14 reps & admin support down to 5 nationally (have you ever heard of a Subway shop with no part-time workers, this is my company). I am left doing 5 jobs with no admin support what’s so ever!!!! Tough times are here and will be getting worse, unless everyone works for the gov’t and these are the only crazies out there buying this over prized RE, but I guess any bogus broker can give a mortgage to any kid on the street also. Garth is also right that 90% of all these mortgages are 5%-7% down. This was confirmed to me by one of the big bank mortgage brokers. When I asked if she had anyone that put down 10% to 20% on RE she looked at me like I was from Mars. Sorry for the talking so much but tough a times coming!!!!!

#36 LS on 11.29.10 at 1:30 am

Cost of my engineering degree to my parents? $3k. And I probably could have managed without that money if I had to.

The practical degrees basically all have coop programs these days. Unless you’re majoring in basket weaving, and then change your mind three times, you’re not going to burn through 50k.

#37 junius on 11.29.10 at 1:31 am

http://www.yattermatters.com/2010/11/bruin-thoughts/

Vancouver is getting pasted.

Don’t believe the hype.

junius

#38 Jeff Smith on 11.29.10 at 1:33 am

I heard patrick the blogger of http://www.patrick.net has been threatened legally for dissing the Realtor trademade.

http://patrick.net/forum/?p=586170#header

#39 crazed ans a little confused on 11.29.10 at 1:54 am

“He bought it for $470,000 four years ago, and after having his brained fried reading this blog, thought bailing at the top might make sense. Two local realtors confirmed it, and last week he listed for $1.23 million”

try this house for 1.2 million

http://www.adrhi.com/property/1015029/

the correction will be worst in than 20 is some areas will less in others …garth prediction is an estimate…not an absolute

#40 Bast on 11.29.10 at 1:59 am

#13 Elmer
Age 46 is not a boomer – it’s a Gen Joneser/ Early Xer. I get so offended when I am lumped into the generation I have come to loathe….let the generation wars begin anew…ps and yes, I also have $180k in net worth, but on the solo plan. No ankle-biters, unless you count the cat and the llamas…

#41 Nostradamus Le Mad Vlad on 11.29.10 at 2:04 am


95% of emotions are better off being tucked away in a dresser that, if it’s ever thrown into the garbage, people won’t even miss their emotions once they are forgotten.

The first three heavens — the Physical, Astral and Causal Planes (Chaos knows what I’m talking about) — are the planes of negative reality, and most emotions come from the Astral Plane, so those emotions are negative in nature.

Hence, the vast majority (unknowingly) are living negative, reactive lives, always reacting to outside circumstances over which they have no control.

It also means — as everyone will understand for themselves — there are no such things as soul mates or soul twins — it’s simply a very poor invention, based on something that doesn’t exist.

“. . . or an economy, in which people are flourishing?” — Certainly, it’s a flourishing, floundering economy, full of DeadHeads (apologies to The Grateful Dead), doomed to go nowhere. It’s in a holding pattern for the time being, that’s all.

“. . . that will save people from themselves . . .” — The nice thing is, is that no one is responsible for ‘saving’ anyone else.

Sure, there are cases when a bystander can help someone who is in trouble, through no fault of their own. But human stupidity is what seems to be inferred here, and there is no cure for that (yet).
*
This person has finally clued in as to what is taking place in the world — the realization that China is about to take over the reins.

Y’all figured I was nuts. Think again — I don’t have anything on her!

Possible reason for the bank run on Dec. 7?

Hmmm. Not sure if it includes instant depopulation. Volunteers?

Interesting, as both are selling assets off. Kinda like boomers selling RE off to fund their pensions with GIC’s and CSB’s.

Deflationistic vampires. I sure ain’t losing weight from deflation!

14:31 clip Peak Oil depression? Plus — Peak Oil Two “A High-Yield Biomass Alternative to Petroleum for Industrial Chemicals.”

Suze Orman’s perspective on things. Apparently, the lady is an author on fiscal stuff.

#42 Devil's Advocate on 11.29.10 at 2:10 am

“As I have mentioned here before, the average down payment for a piece of real estate over the last year in Canada is 7%.” – Garth

Care to elaborate?

#1. Are you speaking of first time buyers alone?

#2. Are you speaking of high ratio buyers alone?

#3. Or are you speaking of all buyers including those who pay cash with no financing, who use conventional financing and high ratio financing?

It must be #1. and/or #2… probably #2. Or maybe it is

#4. Those purchases which had some form of financing but not including any of those which were cash purchased without financing?

Even then, in our area anyway, where approximately 70% of all transactions involved financing and of those had 50% been high ratio and 50% been conventional and if those who used high ratio put NOTHING down and those who used conventional put only the bare minimum 20% down (the minimum to qualify for conventional) logical mathematical deduction would have it that the average was still a 10% down payment.

Now I am quite sure that of those who used high ratio financing few actually put zero down and of those who used conventional financing a whole lot more put more than 20% down so statistically, logically and mathematically the “average” down payment would have to be a substantially more than 10.0% down let alone 7.0% down. And this does not account for the almost 30% who paid cash with no financing for their home what-so-ever nor the fact that of those who did finance the actual number of those who used conventional financing was twice as many as those who used high ratio financing. You do the math…

So is it honestly and statistically true that it really is different out here in Beautiful British Columbia – the BEST PLACE ON EARTH or did you just pick numbers to best suit your inflammatory argument? Or were all those stats courses a waste of time and money and my math skills really do suck just that bad? And if so would someone care to explain to me where my logic fails?

#43 Joseph [Original] on 11.29.10 at 2:11 am

#1 Joseph said “… there is absolutely no need for the parents who will be in their fifties should be expected to pay for their kids’ education!”

I disagree. I’ll do whatever is necessary to put my kids through university – even if it means working two jobs.

Great post Garth! Just what I needed to hear after relatives once again gave me an inferiority complex for not buying a bigger house.

#44 Deliverator on 11.29.10 at 2:25 am

InvestorsFriend:
“All Debt is someone eles’ savings (all debt represents a borrowing from someone who has that debt as an asset as their savings or investment on their personal or corporate balance sheet).”

No, it’s not. When the bank lends someone for their mortgage, that money is literally created out of thin air, with a single keystroke the moment the money enters the borrower’s bank account. For every dollar deposited, the banks can ‘lend out’ 9. That means they can create 9 dollars, that are then loaned, out for every dollar on deposit. This is how money enters the system.

#45 Thetruth on 11.29.10 at 2:45 am

Garth, you shouldn’t hate on low economic class people by calling them pathetic for wanting a $198 laptop; they’re just trying to maintain their standard of living.

like i’ve said many times before, in 15-20 years you will have 2 classes of people in Canada: Upper class and the Lower class (working and destitute). Before readers consider this idea far-fetched, remember this is the norm in Asia including Chia and India where half of the world’s population lives.

If you think we’re going to influence their way of life more than they ours, you need to get your head out of the sand! In BC, minimum wage has remained constant over the last decade while food prices have skyrocketed. It’s happening now!

Before ridiculing people on their investing habits, how about acknowledging the fact that government policies have the biggest effect on peoples lives.

#46 Thetruth on 11.29.10 at 2:53 am

#8 Investor’s Friend (Shawn)

May I add that this is how class segregation occurs…sped up if aided by gov policies.

With respect to RE, it’s a zero sum game. One party takes a debt (mortgage) and another party receives the proceeds and invests them hopefully using Garth’s advice so the gap gets ever larger.

#47 Boomer Gone Wild on 11.29.10 at 2:55 am

[email protected]:

“…this couple with 180k net worth is actually doing well
above average compared to other boomers…….”

Wrong Elmer! We’re all rollin’ in it!

http://www.moneysense.ca/2009/11/01/the-all-canadian-wealth-test/

#48 Aussie Roy on 11.29.10 at 3:30 am

Aussie update

Gee this sounds like the discussion right here about yields.

http://www.theage.com.au/business/property-lessons-from-the-uks-busted-boom-20101129-18dju.html

“Dwellings may be valued only on the rental income they offer to landlords.”

The notion that properties may be valued “only on the rental income they offer” is presented as something of a revelation. To me, this is indicative of an asset class where prices have (or had) broken free of economic reality. Now they are returning to it.

At universities all over the world, finance students are taught that the value of any asset is the stream of future income it will provide, discounted back into today’s dollars. Most professional sharemarket and bond investors would concur with this rule.

Even industrial and commercial property investors recognise that the income stream is of supreme importance. But when it comes to residential property, the same rules seem not to apply.

Without rehashing the arguments for and against Australian residential property being an exception to the laws of finance, to me the UK provides an interesting case study. Three and a half years ago, many Britons were as adamant as Australians are today that “property never falls”.

On a recent trip I was assured that “property in the south-east never falls” (my italics); an illustration of how hard it is to escape from dogma once it becomes entrenched in people’s minds.

The Australian property price debate is divisive and emotionally-charged but, whatever your view, it’s foolhardy not to acknowledge the possibility that capital gains may not always be counted on to bridge the gap between the rental income (or rent saved) and a fair return on your capital.

In many cases, those who bought during the UK boom, accepting low yields in the hope of future capital growth, are now living with the consequences of “negative gearing” and nasty capital losses. It’s not a pleasant combination”.

Ah those banksters god bless them, doing gods work.
http://www.news.com.au/money/banking/deposit-rate-hold-earns-big-four-25m-every-week/story-e6frfmcr-1225962400800

http://smh.domain.com.au/home-investor-centre/its-mind-the-gap-as-sydney-sellers-lop-6-off-spring-prices-20101129-18cqq.html

http://www.theage.com.au/business/weak-data-puts-negative-growth-on-the-agenda-20101129-18d3n.html

#49 dark sad person on 11.29.10 at 3:37 am

#8 InvestorsFriend (Shawn Allen) on 11.28.10 at 11:30 pm

Many people are in debt with little to no financial net worth or even negative net worth. Even at 46, as above.

But clearly others have huge net worths.

A few days ago I suggested that the world is awash in savings.

Here I will prove it as a logic puzzle.

All Debt is someone eles’ savings (all debt represents a borrowing from someone who has that debt as an asset as their savings or investment on their personal or corporate balance sheet).

******************
geezzuzz man-are you totally clueless-

Have you never heard of fractional reserve banking?

FRB = Zero reserve requirements and the Bankers have the ability issue credit with no checks and balances-which is the “exact” reason we’re in this mess-

#50 The Original Dave on 11.29.10 at 4:57 am

question for The G Man or anyone else familiar with the Toronto real estate market today….

What is happening?

On one side, I’m seeing sold signs for places. Maybe a lot of the listings have been taken down (not sure what the numbers say). I’m wondering what the number of sales are in the 416 compared to last year or the year before. How much better has october and november been compared to august and September?

I’m confused and don’t know what to make of things now. People I know that are in real estate are concerned. Heard a guy say “the real estate market isn’t good right now”. This was a few days ago and in Toronto.

I’d like to hear people’s opinions or if anyone knows statistics to clarify things for me.

thanks.

O.D

#51 Am Pa on 11.29.10 at 5:23 am

Garth, Hi!

Nice little niche following you have here. I’m glad you aren’t enforcing tin foil hats until the inevitable Apocalypse comes… that’d be just cliché.

Ah, and your timeless wisdom is oh so beautifully contained in these words: “[in Vancouver] he listed for $1.23 million. In Toronto the same house in an equal neighbourhood would sell for less than half. In Winnipeg, a quarter.”

But of course, sir! It is equally outrageous that the most prestigious Manhattan condos go for $4000 per square foot, while those in Vancouver Coal Harbor are only $1000 per square foot.

Simply outlandish I say!

#52 blase on 11.29.10 at 5:27 am

Garth,

What’s a brained?

#53 cs on 11.29.10 at 5:31 am

@InvestorsFriend (Shawn Allen)
Your whole argument falls apart when you take into consideration banks and fractional reserve lending. The whole idea that debt and savings are at a 1:1 ratio is a pretty simple view.

Also, debt from a war doesn’t leave future generations with a big Christmas bonanza of assets, unless you like climbing over rusted tanks and rubble.

#54 John on 11.29.10 at 5:37 am

Interesting strategy #13 Elmer. Did you consider the opportunity cost of this strategy? That is, the tax refund you can receive today if you contribute to your RRSP. Seems to me that the net present or future value of those refunds over time can only be greater than any increase in CPP premiums.

#55 Lily on 11.29.10 at 5:45 am

Elmer – I have exactly the same concerns when it comes to investing in an RRSP. I do not see how taxes at their current levels can sustain the demands of the boomers. Old=votes and they will get their way.

I hope I’m wrong.

#56 Aussie Roy on 11.29.10 at 6:26 am

Do check out this little gem. Oh Australian “super” is like a 401K.
http://www.smh.com.au/money/planning/reconsider-plan-to-buy-property-20101129-18cy5.html

I am 59 and my husband is 63. We are in part-time employment and pay 15 per cent tax. We now have cash savings of $300,000, with which we would like to set up a self-managed super fund (SMSF) to buy a positively geared investment property. – bear in mind average rental return in Australia is currently between 2 and 5%, but it is a safe as houses. LOL

Before deciding how to structure a property purchase, you should be asking whether this is a good time to buy property. For the average investor, I suspect it is not, given the already overpriced nature of the residential market, the likelihood of rising interest rates and the possibility our resource exports, and thus our economy, may slow as the Chinese government continues its efforts to cool its economy.

#57 Kaganovich on 11.29.10 at 7:35 am

Greetings Dawgs,

An entertaining piece about the cultural malaise here in North America. Enjoy!

http://www.nakedcapitalism.com/2010/11/jim-quinn-lies-across-america.html

#58 Stevie Why ? on 11.29.10 at 8:27 am

Question: Where would a company pension estimated at $ 45,000.00 / year at age 62 put you on the “boomer retirement freight train” (C.P.P. additional and pension not indexed) ?Is KD going to be defined as “fine dining” in future years ?

No debt .. No House and cash in the bank !

#59 debtified on 11.29.10 at 8:43 am

#8 InvestorsFriend (Shawn Allen)

Dear Mr. Shawn Allen,

Please read up on Fractional Reserve Banking to find out whether there is indeed a dollar of saver’s money that corresponds to every dollar lent to a borrower via the banks.

Let us supposed, hypothetically for arguments sake, that you are right. What is the possibility of all the debt actually being paid off by the same people (individuals, society, corporations, government, etc…) who borrowed them? You may be right, Mr. Shawn Allen (if that is your real name), but, as far as the topic of discourse in this forum is concerned, you really don’t have a valid point.

I give you credit for my very first comment on this blog. I have been lurking for a long time.

– debtified

P. S. Thank you for your hard work, Garth.

P.P. S. I am aware that “Debtified” is not a real word. Not yet.

#60 goldenfox on 11.29.10 at 9:17 am

We like being lied to.

http://www.zerohedge.com/print/256309

#61 Kevin on 11.29.10 at 9:24 am

RBC affordability report for November 2010
http://saskatoonhousingbubble.blogspot.com/2010/11/rbc-affordability-report.html

It’s the first time affordability has improved since mid-2009. The RBC Housing Affordability Measure shows the proportion of median pre-tax household income required to pay the principal and interest on a mortgage, property taxes and utilities. The figures assume a 25 per cent down payment and a 25-year loan at a five-year fixed rate.

What are the figures when a 7 percent downpayment is used?( the national average which includes the cash back mortgages) Affordability is worse. Affordability bubble big time. Then add normal interest rates. BIG HOUSING BUBBLE! A downpayment of 25% skews the report.

How does Saskatoon fare?
It looks like affordability has improved by one percent point, but would I believe that Saskatoon is one centers in the nation with low downpayments. Saskatoon experiences more boomers leaving the city than the national average because of retirement to warmer centers ( loss of wealth to the city) and is replaced with young workers with debt and little to no savings. There are people are moving here, but most are not wealthy.

Whole report is here

#62 Moneta on 11.29.10 at 9:27 am

With an attitude like that no wonder they didn’t support you. — Garth
———-
Actually he does have a point.

I paid my way through unversity. Didn’t get a penny from my parents and graduated debt free. It was my choice though. Long story, I’ll spare you.

Now in their late 30s and 40s, most of my friends’ whose parent paid are still at their teat or full of debt living the life of leisure.

#63 paying off Mortgage on 11.29.10 at 9:31 am

Thanks for the change in the blog topic, RE gets a litlle boring day after day. While we are not out of the woods has anyone failed to notice that the federal government year over year deficit droped? And it was attributed the the fiscal spending winding down; but did you read the fine print, corporate profits are up. One month is not a trend but it beats bad news.

My personal comment on why people spend and borrow rather than save is everyone figured the govenment would provide for them. And personally I was like your typical 40 something with no savings. But I just paid off my mortgage and I am saving like crazy and guess what, I actually worry more about having money, then I did when I owed lots of money.

I think people just what the toys and enjoy life, I could understand this mentality when life expetancy is 40.

But then again I have 4 friends and another 5 friends of friends all die recently, all under 55. So what does one do? live or save?

If you have not already done so read this weeks John Maudlins news letter, one of the best yet. 10 years of muddle through economy.

The best point was that even though 10% is unemployed and will likely remain so for many years, 90% is still working.

#64 Got A Watch on 11.29.10 at 9:31 am

Garth – oh come on, the lion is very friendly, as long as she has just eaten a zebra

“Try not to strain your brains.” – One quick way is to skip your vacuous comments entirely, save valuable time, avoid raising blood pressure.

““Could DA have a valid point?”” Yes, the top of your head comes to a needle sharp point. Must cause you to buy a lot of new baseball caps. “”it really is different out here in Beautiful British Columbia” Man, I am just in awe at your amazing wisdom. OK, I lied. Hey, want to buy some tulip bulbs to go with that?

Wise Guy – you are very wise: “very desirable Etobicoke over looking the Gardner Expressway” ‘Yes folks (dons Realt(ho)r (TM) cape), 24 hr traffic noise!, air pollution!, nothing worth mentioning within walking distance!, and of course the luxurious sewage processing plant directly across the highway! Who in their right mind would not want to live here? Buy now, or be priced out forever! The price will be higher tomorrow!”

Your friend is a genius! “move up to something bigger….a townhouse in the Bloor and Lansdowne area”- ‘ Yes! Only 1 crackhead per 10 feet of sidewalk! Many street gangs provide local colour with their graffitti! Stores are nearby, so you can finish shopping before dark, when the helpful local junkies will relieve you of your burdens! Sirens going all night, don’t worry, after a while, you won’t even hear them through your ear plugs!” Brainwave alert here! IQ= shoe size!

You can lead an idiot to water. Best to then drown them.

Kaganovitch – ‘Naked Capitalism’ is one of the best financial Blogs on the net, and has been for years. Always a good read, I look at it every day.

#65 Moneta on 11.29.10 at 9:43 am

Some countries have borrowed from other countries and the borrowing country’s kids might have to pay that back. But in the net it is impossible for the world to borrow from a future generation.

The closest we can come is by depleting the resources.

————-
Why can’t people accept that inflation is coming big time?

debt-to-gdp is going to be fine… Government will use austerity measures on the cost side and GDP will rise thanks to inflation. And of course, CPI will never reflect true inflation because that’s another way of keeping government entitlements under control.

CPP will be fine, it just won’t buy much.

#66 CTO on 11.29.10 at 9:47 am

#8 InvestorsFriend (Shawn Allen)

The is truth to your statement, and that may be ok for the WORLD economy and stock market as a whole. However, i don’t think that will help the micro economics in regions like Ontario rust belt. People in GTA have borrowed and spent their brains out.
I’m thinking,…in a world of a few haves, many who were once haves in this region will be have-nots.
AS well, the world may actually have some savings out there, it is also awash in people that want what the west has had for so long. and with every container ship heading to the west there is a ship full of money heading east, i believe those were Garths words.
I’d rather own well invested cash, savings than debt.

#67 Moneta on 11.29.10 at 9:51 am

The scary part is that this couple with 180k net worth is actually doing well above average compared to other boomers.
——
Not really. It’s all in real estate and they probably did not lift one finger to get there the market did it for them.

And the market will take it away.

#68 Moneta on 11.29.10 at 9:54 am

#8 InvestorsFriend (Shawn Allen) on 11.28.10 at 11:30 pm

———-
Plus you conveniently forget that 80% of the wealth is owned by 10% of Canadians.

#69 Got A Watch on 11.29.10 at 9:58 am

headline: “France, Germany say Euro saved, but investors skeptical” LOL, we are saaaaaaaved, saaaaaaved, I tell you! The Good Lord will provide!

ZH “European CDS Bloodbath Increasingly Threatens Core”

“Perhaps if CNBC could pretend for a second that there was more to the economy than (disappointing) Black Friday channel checks it would realize that there is a complete massacre in European CDS spreads. At last check the Iberian Peninsula was the target of a tactical CDS nuke, with Spanish and Portuguese CDS widening by 23 and 36 bps respecitvely, to 354 and 538 bps. The second tier of bailoutees is also expected: Belgium and Italy, both of which are wider by just over 16 bps, hitting 178 and 232 bps. And lastly, even the core is no longer safe, as Austria and Germany were both about 5% wider to 87 and 50 bps each. Bases are widening as cash bonds are lagging today. The reason for the move, which should be completely expected to all Zero Hedge readers, is as Market News reports, that “a growing school of thought believes that – without major debt restructuring for Ireland – the current solution is just buying time. Many traders also fear that the interest rate applied to the new cash of 5.83% is unmanageable for the Irish economy.” In other words start your Portugal, Spain, Belgium, Austria bailout countdown timer.”

In other news, Tiger Woods announces he is an idiot, again. And now the weather. Jane?

lots of funny headlines today:

“11-29 08:17: ECB’s Honohan says an insurance scheme for banks not available at European level” he fell, and hit his head on reality

“11-29 08:13: Irish Central Bank governor says liberal ECB funding of Irish banks will continue” This ponzi scheme is NOT a ponzi, I repeat, not!

better to laugh, or you might cry

“11-29 08:11: Irish Central Bank governor says fiscal adjustments are necessary even if Ireland did not have any debt” ha ha ha We’d have to have austerity anyway, it’s just good for you!

“Euro declines on Irish bailout” what, printing Billions of fresh Euros is always a good thing, isn’t it?

“Mutual Funds ties to insider probe [‘expert networks’] may prolong withdrawal” Don’t worry, once the FBI leaves the office, we’ll get right on that redemption request, promise

#70 MikeT on 11.29.10 at 10:05 am

what’s wrong with paying with credit cards? I am doing this all the time. Of course, the balance is paid off monthly, and I am getting 3% cash back on groceries and gas and 1% on everything else – and it’s not an introductory rate (that one was 5% – 1% for 6 months). I already got 500$ cash back in 1.2 years that I use it, paid 0$ in interest, and am pretty happy with it.

#71 mattbg on 11.29.10 at 10:08 am

Car sales are helped by this, too. I am not surprised sales are up.

I only paid attention to the financing aspect recently. Long amortizations and $0 down to buy a new car are pretty common.

For example, a Hyundai Accent — a very affordable car to begin with — available with $0 down, 0% financing, and an 84-month amortization.

A Dodge truck with $0 down, 3% financing for 60 months but the thing is amortized over 96 months to bring monthly payments way down. After 60 months, you can give back the car, come up with another $10K, or refinance the $10K at the prevailing rate.

$0 down on a car — an asset that depreciates as soon as you drive it off the lot — speaks of desperation to me. $0 down with 0% financing is even worse!

#72 prairie gal on 11.29.10 at 10:08 am

#29 dale in van: so the FN communities who happen to subsist on that fraction of the boreal forest are SOL, then? And the cut lines due to seismic testing that criss cross the entire province don’t have any effect on wildlife? What about GHG emissions, acid rain and the overuse of dwindling water supplies and burning massive amounts of natural gas?

Its the ignorance of the aggregate of the environmental impact that makes it difficult to reason with tar sands supporters. Their logic is akin to saying its OK to kill a million people because there are already billions on earth. What gives you the right to decide?

#73 Devil's Advocate on 11.29.10 at 10:39 am

“the average down payment for a piece of real estate over the last year in Canada is 7%.” – Garth

I am very interested to know how you came up with that statistic.

#74 rosie on 11.29.10 at 10:47 am

Garth, I see you received a passing mention by James Daw in the Star today. Any comments

He dines on ankles. — Garth

#75 GregW, Oakville on 11.29.10 at 10:51 am

Hi Garth, fyi, artical with additional links

6 Reasons To Start World War III If You Are A Globalist
http://www.infowars.com/6-reasons-to-start-world-war-iii-if-you-are-a-globalist/

#76 Devil's Advocate on 11.29.10 at 11:05 am

#57 Kaganovich on 11.29.10 at 7:35 am
Greetings Dawgs,
An entertaining piece about the cultural malaise here in North America. Enjoy!
http://www.nakedcapitalism.com/2010/11/jim-quinn-lies-across-america.html

To which Rick Halsen I think responded with a most worth balancing comment on that brazenly inflammatory Jim Quinn editorial as follows;

Rick Halsen says:
November 29, 2010 at 1:44 am

Holy Crap.

After all these years it just dawned on me after reading this that I’m truly a no-good consuming ignorant bastard.

How do I become a non-consuming-non-ignorant bastard?

Oh wait a second I understand how I can become one. Stupid me.

I’ll sell every electronic gadget I own, including this computer, sell the expensive car, and ride a shittie recycled bike to the library. Of course after I do all that to myself and my family, I just hope the other 99.999999% out there do the same damn thing so I don’t feel like a complete monkish jackass.

Now seriously, we consume, Jim, because consumable items are tempting to consume and in reality what the hell are we going to do with our funny money? Flagellate ourselves with corded and knotted versions thereof?

I mean come on. We’re basically just barely above chimps in socially refined ettiquette towards one another as it is and many times quite a bit below them.
Thou expecteth too much I thinketh. But hey, someone has to tell us the unvarnished damn truth.
RH

#77 Junius on 11.29.10 at 11:05 am

#37 junius,

I see you have returned from your e-harmonizing. Fraudster.

#78 timbo on 11.29.10 at 11:07 am

Default! Say the people
Irish negotiators raised defaulting but ‘Europe went completely mad’

http://www.independent.ie/national-news/default-say-the-people-2439331.html

man is there going to be a correction when debts finally topple budgets.

#79 BrianT on 11.29.10 at 11:16 am

#16Kevin-I understand the analogy but another thing the baseball roid scandal illustrates is the ignorance of the public and the lack of integrity of the MSM. Baseball is a skill sport-one of the sports where you could take a star from the 50s-say Mantle or Mays-and the guy would still be a star today (Mantle hit a ball right out of Yankee Stadium without any weightlifting strength to speak of). If you took a star NFL lineman of the 50s the guy couldn’t even compete against college players of 2010-and that isn’t the only sport-the list is very long (weightlifting, powerlifting, bodybuilding,MMA, etc.etc.) Roids are LESS IMPORTANT in baseball than a lot of sports, because of the high skill level involved-I am not pointing this out as a baseball fan (watching it is like watching paint dry)-it is more to illustrate the ignorance of the general public in this regard.

#80 Junius on 11.29.10 at 11:18 am

I just returned from a week of travel through Eastern Canada on business. I got my full share of Toronto and a whole lot of the 905 region.

It is good to see that there is an area nearly as crazy as Vancouver. Many people in Toronto still think “it is different there”. What surprised me (but shouldn’t have) is that they all agreed that Vancouver was screwed. However they could rattle off the reasons immediately why TO was different.

The 905 area west and south of Toronto was fascinating. I was headed to meet family and found myself near Milton. It amazed me as I travelled West towards Dundas how many enclaves of large exurban neighbourhoods there were. It seemed like every few miles a farmer gave up his farm for a few hundred 3000+ cookie cutter homes.

After travelling the 403 and the QEW it left me wondering what kind of society we have created where people are prepared to deal with that traffic to live in a large home in the middle of nowhere.

The talk in Hamilton was about the new German company that has taken over the steel plant. Of course, this will save the economy and increase the price of houses. Just like I hear from family in Alberta everytime there is a new oil development or in Vancouver when there is a new somethingorother.

It is a national delusion. It is different where I live…but not where you live.

#81 ex-farmer on 11.29.10 at 11:20 am

Dale #29
You’re bonkers!!
Thanks anyway for reminding us of the magnitude of our collective stupidity.

#82 Live within your means on 11.29.10 at 11:24 am

Went to dinner at one of my husband’s biking buddies Sat. eve. Had met him but not his wife. He’s 53, she 44. From her former marriage she has a boy (11) and girl (19) attending univ. in NFL. They’ve been together 3+ yrs and married last year.

He bought the house in 2000 for $120K or $140K – anyway, a terrific price. Seller was desperate – broken marriage, IIRC. Its a 2200+ sq. ft. well built home (1991) completely finished. Nice neighbourhood. He’s a car mechanic (big co. here) and she’s a hair dresser. She works part time in a high end salon 2 days a week and also has her own business at home. Neither has a pension plan. Dealer that he works for offered an online training program which he takes at home during his own hours, but they pay he’s reimbursed his hourly rate for taking the course. He’s the only one at his shop doing it so he’s hoping it will lead to advancement.

They now owe $160K on their home. After a few glasses of wine she confided in me that he was recently diagnosed with Stage II cancer of the bladder & a tumour on one of his kidneys. She was concerned about their debt. I asked why they didn’t consider selling and rent. My understanding is that he has life insurance with the the mtg. co. and they (she?) is pessimistic about his chances of survival. I tried to encourage her as I was diagnosed with Stage IV bladder cancer 7+ years ago and am still around. I beat the statistics. I offered to email her a support group site (highly supported by leading Dr’s in this field), but she was not interested. I learned so much from being a member of the site. Also, being surrounded by optimistic family and friends can do wonders in one’s outlook.

BTW, when we bought in 1991 we paid $116K for our home less than $1k from theirs. Ours is also in a nice neighbourhood -10 yrs older & about the same size. We had looked at their house, but it was about $8K more than our budget & basement was unfinished then. We bought based on one salary – should one of us lose our job. My husband did a few years later. He went back to school (IT) and we could still live comfortably on my salary.

Pardon for my long post.

Keep up the good work Garth.

#83 Trino Tuta on 11.29.10 at 11:32 am

Hey everybody! Good news! Home affordability improves in Canada: RBC. Yaaaay !!!!

http://www.vancouversun.com/business/Home+affordability+improves+Canada/3899001/story.html

….unbelievable.

#84 Ryan MacKay on 11.29.10 at 11:36 am

@ #8 InvestorsFriend (Shawn Allen) on 11.28.10 at 11:30 pm

Fractional reserve my friend….look up fractional reserve banking. Also, because of interest there is more debt in the world than there is money to pay off. Totally unsustainable!

#85 AlbertaRose on 11.29.10 at 11:38 am

“Greedy for gains and fearing the future” That one got me today. I’ve walked away from a “lifestyle” where it was obvious to the neighbors that I was spending lots and living the good life appearing successful, owning properties, etc. – who cares about the future, I’m covered? Selling off my properties & toys, losing my bragging rights, omg renting and not owning, I was a landlord after all and now I’m a lowly renter, cutting up my unnecessary credit cards, closing accounts. No one can see my portfolio or see my net worth is so much better now and I’m finding this to be a humbling experience. Worth it? Absolutely, but when everyone around you is still going down the credit/debt road and you turn around and choose the money road they don’t get it and they look at you like you have lost your mind. That’s why I come here. Today someone mentioned they are buying a house, time to jump into the market, its time to invest. I just smile and nod because if someone wants to do that go for it but it is not for me anymore. Not planning on owning again. Keep posting!

#86 Devil's Advocate on 11.29.10 at 11:42 am

#61 Trino Tuta

It could be moving the other direction TT.

A little patience it will get there, maybe not to the point you are waiting but in time a lot more will be able to afford a home, and guess what that will mean? The rejuvenated demand will again fuel prices… or a least prevent them from falling that much further.

#87 Timing is Everything on 11.29.10 at 11:45 am

#19 squidly77

Move…again. Your landlord/tenant relationship is doomed already. What happened to the ‘if it breaks, just call the landlord theory’? Oh ya, it was just a theory.
Having fun yet?

#88 Thomas on 11.29.10 at 11:45 am

Isn’t it funny how Garth has been saying for years that “interest rates are going up” and “the government doesn’t control long term rates, the bond market does…” and “blah, blah, blah…”. Well, since Garth started this blog he has been dead wrong and will likely continue to be as interest rates continue to decline. Why, you ask? Because the government DOES control rates – the long ones, too, through abnormal purchases (with our money, no less…) that keep said rates down.

This could continue for another decade.

And Garth will continue to be wrong…

Ah, dude, interest rates went up three times this year, thanks to the Bank of Canada. And there will be two or three more next year. –Garth

#89 Agio on 11.29.10 at 11:45 am

As you may have seen scanning some comments on the weekend, lots of people coming to this blog scoff when I use an example of investible assets of $200,000.

Typical of the emails I receive is this snippet: “My wife and I are 46, two kids (9 and 11), and live in Calgary in a POS suburban house which cost us $520,000. The mortgage is now $380,000, and we have $10K in our TFSAs in cash, an RESP with $5,500 in it and cash (in I hate to say it, the orange guy’s shorts) of $28,000. Can you help us?”
___________________________________________

I may have been one such person over the weekend though I wasn’t ‘scoffing’ merely inquiring or pointing out how to get there as your above letter illustrates. I see so many people like these folks, oft times worse given they have a tendency to lie by omission about their debts. These people don’t even have an actual net worth of 180k given 140k of it is in the house and who knows what it would actually sell for.
I suppose the answer is as you said, you can’t help them. Fortunately you’ll help a few.

#90 Taxpayer like everyone else on 11.29.10 at 11:51 am

[email protected] I knew you were going to get pounded for that comment.

But your explanation does include fractional reserve
banking. In fact it is the principle behind it.

For those who say it doesn’t check an FI balance sheet.

#91 Agio on 11.29.10 at 11:56 am

Boomer Gone Wild @ 47
Wrong Elmer! We’re all rollin’ in it!

http://www.moneysense.ca/2009/11/01/the-all-canadian-wealth-test/
___________________________________________
I remember seeing that test Boomer, it’s a beautiful baby that one. At free it’s overpriced.
I wanted to go to their offices and kick them all in their collective crotch.

#92 Aussie Roy on 11.29.10 at 11:58 am

Thought this might be a good historical read about Aussie house price speculation. Been a while since a big fall, funny how the rental yields quoted are almost exactly the same as Sydney 2010.

Extracts from the book “The Land Boomers” by Michael Cannon, published in 1966… Victoria was made rich by gold, and populous by the immigrants who sought it.

Two great economic booms and depressions had already shaken nineteenth century Victoria. The first occurred shortly after the early Melbourne land sales of 1837, reaching its peak about three years later. The discovery of gold sparked off the second great boom, which reached its peak in the 1850s. People had money to burn, and either dissipated it in wild extravagance or bought property at inflated prices.

The years 1888, 1889 and even 1890 saw the formation of most of the disastrous land and finance companies, and so-called land banks. Under the loose banking and company laws of the time, they were able to take savings deposits, issue shares, float loans, discount promissory notes and other commercial paper, and in general perform all the functions of an established bank.

The boom soared upwards to dizzy new heights. How could such values last? The maximum rentals which tenants were willing to pay often amounted to only 2.5% return.

Read more at
http://dailyreckoning.com/the-land-boomers/

#93 Utopia on 11.29.10 at 11:58 am

Here is a video interview of David Rosenbergs assessment of the economy and our future. As you will likely know he remains in the deflation camp and advocates investments that generate income. In the interview he recommends high quality Canadian corporate bonds, income producing equities, Gold and Silver stock and a few other ideas……

http://seekingalpha.com/article/238929-david-rosenberg-on-where-to-invest?source=feed

#94 Europa on 11.29.10 at 12:12 pm

#66 Moneta “Why can’t people accept that inflation is coming big time?”

Simply because of the math. More money has been lost than has been made/generated/printed. As countries like Greece, Ireland, Spain, Portugal, Italy, etc, etc default on their loans (thus the bailouts), even more money is lost.

Less money = less money to keep prices up = less jobs = less wages, etc.

Necessities will GO UP in price, but luxuries go down.

#95 Brad on 11.29.10 at 12:13 pm

#74 Devil’s Advocate

I am very interested to know how you came up with that statistic.

Here is a source:
http://americacanada.blogspot.com/2009/07/cmhc-and-our-government.html

CMHC is but one source (its numbers are 2007 stats). Recent evidence shows 7% may be optimistic. — Garth

#96 Devil's Advocate on 11.29.10 at 12:18 pm

#19 squidly77

It’s quite obvious what you are all about squid.

Apparently your landlord/REALTOR didn’t do a very good job screening applicants when they selected you. I suspect they have come to realize this and that is the source of your discontent. Such is the life of a “scumbag” tenant. I’ve had a few in my day, they are an uncomfortable lesson but, as with all lessons, a valuable one. You may think you have the upper hand Squid but I suspect you will soon learn otherwise.

Keep us posted though… ;-)

#97 brunt on 11.29.10 at 12:20 pm

#63 Moneta on 11.29.10 at 9:27 am

With an attitude like that no wonder they didn’t support you. — Garth
———-
Actually he does have a point.

I paid my way through unversity. Didn’t get a penny from my parents and graduated debt free. It was my choice though. Long story, I’ll spare you.

Now in their late 30s and 40s, most of my friends’ whose parent paid are still at their teat or full of debt living the life of leisure.
———————–
Paid my own way too for 11 years – except a single parental contribution of $737.11 for my first semester.

I learned early on how to budget, and the difference between “wants” and “needs”. I can squeeze a nickel until the beaver poops.

My brothers went ROTP, and I went co-op. Five boys and parents with low incomes are simply not a mix for the parents paying.

Sure, pay if you can and if you wish. But it most certainly can be done without it. I personally believe that I got a far superior (life) education with paying my own way.

I too am 46, but primarily through thrift have a net worth that would allow me to retire now. But that is primarily due to the fact that I am debt free, know how to live cheaply, and would continue to live cheaply in retirement.

I know that there is far more to financial independence than just thrift. But it is my opinion that it is a necessary component to independence, yet thrift is the one skill that is most often ignored.

#98 grantmi on 11.29.10 at 12:22 pm

WOW!! and then you get this IN THE VAN SUN!!! lol

Owning a home becoming more affordable in Canada: RBC

Home affordability improves in Q3 2010

Read more: http://bit.ly/fEYXw8

#99 T.O. Bubble Boy on 11.29.10 at 12:24 pm

@ #37 junius:

Not just a 10% median price drop in West Van (13% average price drop), but Days On Market went from 72 to 91 in just 1 month!

#100 Moneta on 11.29.10 at 12:26 pm

#91 Taxpayer like everyone else on 11.29.10 at 11:51 am
[email protected] I knew you were going to get pounded for that comment.

But your explanation does include fractional reserve
banking. In fact it is the principle behind it.

For those who say it doesn’t check an FI balance sheet
———-
He does have a point which is someone’s debt is someone’s asset.

What he fails to anknowlledge is that as debt goes exponential, banks ends up owning a larger concentration of the wealth.

The proof is in the pudding as 80% of today’s wealth is onwed by 10% of people.

#101 Devil's Advocate on 11.29.10 at 12:29 pm

#95 Brad on 11.29.10 at 12:13 pm

#74 Devil’s Advocate

I am very interested to know how you came up with that statistic.

Here is a source:
http://americacanada.blogspot.com/2009/07/cmhc-and-our-government.html

CMHC is but one source (its numbers are 2007 stats). Recent evidence shows 7% may be optimistic. — Garth

You both ought to be ashamed of yourselves. And you condemn CREA for presenting statistics in such a manner as to support their SPIN. That website you reference states as follows;

“the average first time home buyer who took out a mortgage had only 7% equity in their homes.”

That is first time buyers and none other. Your comment Garth left a lot of latitude open for misinterpretation and you know it.

Shame on you both. The pot calling the kettle black.

Just so’s the pups and poodles have the full picture…

#42 Devil’s Advocate on 11.29.10 at 2:10 am
“As I have mentioned here before, the average down payment for a piece of real estate over the last year in Canada is 7%.” – Garth

Care to elaborate?

#1. Are you speaking of first time buyers alone?

#2. Are you speaking of high ratio buyers alone?

#3. Or are you speaking of all buyers including those who pay cash with no financing, who use conventional financing and high ratio financing?

It must be #1. and/or #2… probably #2. Or maybe it is

#4. Those purchases which had some form of financing but not including any of those which were cash purchased without financing?

Even then, in our area anyway, where approximately 70% of all transactions involved financing and of those had 50% been high ratio and 50% been conventional and if those who used high ratio put NOTHING down and those who used conventional put only the bare minimum 20% down(the minimum to qualify for conventional) logical mathematical deduction would have it that the average was still a 10% down payment.

Now I am quite sure that of those who used high ratio financing few actually put zero down and of those who used conventional financing a whole lot more put more than 20% down so statistically, logically and mathematically the “average” down payment would have to be a substantially more than 10.0% down let alone 7.0% down. And this does not account for the almost 30% who paid cash with no financing for their home what-so-ever nor the fact that of those who did finance the actual number of those who used conventional financing was twice as many as those who used high ratio financing. You do the math…

So is it honestly and statistically true that it really is different out here in Beautiful British Columbia – the BEST PLACE ON EARTH or did you just pick numbers to best suit your inflammatory argument? Or were all those stats courses a waste of time and money and my math skills really do suck just that bad? And if so would someone care to explain to me where my logic fails?

#102 brunt on 11.29.10 at 12:30 pm

Another demonstration of Garth’s rule of no more than 40% of your net worth in real estate.

The 46 year old with a net worth of $180,000 has a $520,000 house (note that I used the word HAS and not OWNS – the bank owns most of it).

Well, he has 289% of his net worth in real estate. This is a very, very bad position in which to find oneself. A modest 20% fall in real estate values will erode his net worth by 58%. I expect values to fall by more than that – a 30% fall will take away 86%, and a 40% fall will take away 116%.

And THAT is why you should limit how much real estate is as a percentage of your net worth.

So buy a (much) less expensive house, or rent now with some money to invest, or lose your house and rent later with no money to invest. Your choice.

#103 Ret on 11.29.10 at 12:32 pm

The world has changed since 1975 when I done graduated. Paying off student loans then was just a matter of working in a manufacturing factory for 6-8 months making those sweet union wages.

Personally my wife and I were happy that we were able to fully subsidize our daughter’s education. Many our our friends had lots more than us and told their kid to get a student loan. All we asked was that she show a serious commitment to her studies, which she did. What more could a parent ask for?

Our thought was that down the road she gets it all anyway, but now is when she needed our support.

Being retired meant taking on a part time job to earn the funds needed. No vacations, new vehicles or toys but all is well.

I love the part time job and I find good mechanics to keep the “motor pool” going if I can’t fix it myself. Lots of people are working for cash as well so minor home repairs are not the end of the world financially. Living with in your means can be a joyful existence if you stop beating yourself up with, “what the neighbours have that we don’t have.”

Our daughter can now focus on her new job without years of constant money worries.

#104 Moneta on 11.29.10 at 12:33 pm

The proof is in the pudding as 80% of today’s wealth is onwed by 10% of people.
——-
And a large % of that 10% are those who participated in the issuance of that debt.

#105 Paolo on 11.29.10 at 12:36 pm

Never mind people lining up in Oakville, things are looking up all over the GTA.

Who says you can’t believe everything you read in the papers?

http://www.moneyville.ca/article/898211–housing-affordability-improves-in-gta

Hilarious…

Yes I feel better, not as depressed as I do after checking updates on this blog.

My favourite lines: “Housing affordability is improving in the Greater Toronto Area, thanks to lower mortgage rates…However, affordability is not expected to improve moving into next year with the spectre of increased interest rates”

Ya think?

#106 T.O. Bubble Boy on 11.29.10 at 12:36 pm

uh oh – it’s becoming clear that the banks are planning on an end-game for their bubble mortgages… first it was the “collateral mortgage” change for loaning 125% of a home’s value, and now TD Bank’s CEO (Ed Clark) is on record saying that 25-year mortgage limits should come back:

Mr. Clark said Canada should eventually move back to allowing maximum 25-year mortgage amortizations from 35 years now because longer debt repayment leaves Canadians more exposed should the economy tank.

Later, he even compared Canada to the US, where “15-year amortization is becoming the norm”!!!

Looking at what a change from 35-yr to 25-yr would do:
$478,000 @4% for 35-years = $2,107.03/month
$400,000 @4% for 25-years = $2,104.08/month

So, an “average” $478,000 house in the GTA today would carry for the same as a $400,000 house if the mortgage rules were tightened.

That’s a 16%-17% haricut, just from the amortization change… add in some increasing rates, and you’d be looking at a 20%+ drop just based on mortgage calculations alone!

#107 Devil's Advocate on 11.29.10 at 12:43 pm

And what is so wrong with a first time buyer who is just starting out financing the bulk of the purchase anyway. I ask how did most here finance their first home purchase. Oh ya I forgot – most of you are renting.

My wife and I financed our first home purchase after coming out of university with ornerous student loans carrying an 18% rate of interest themselves. We got a “deal” on a mortgage at 16%. That was in 1982 – a time not dissimilar to this.

Today, 28 years later, we own our home free and clear with a value 9 times that we paid for the first 28 years ago. You don’t think this similar turn of events is likely to play out over the next 28 years? Then go ahead and do what ever makes you happy. It’s your life just as it is all those kids lives starting out today borrowing more than 90% of their first home purchase as they embark upon the many years they have ahead.

Greater Fools? Who exactly are the Greater Fools?

If you think this is a rerun of 1982 you’re more irrelevant than I imagined. — Garth

#108 Agio on 11.29.10 at 12:49 pm

brunt @ 102-It’s easier to cut to the quick though spiffy percentages are cool.
These people have an actual net liquidity worth of $43500. The house equity position is unfortunately irrelevant.

#109 Devil's Advocate on 11.29.10 at 12:55 pm

“If you think this is a rerun of 1982 you’re more irrelevant than I imagined.” — Garth

No I don’t Garth. Nor do I believe it is THAT much different. The primary difference between this most recent failing and those which preceded it is the compounding interest which has been added to each successive failing by offloading the bulk of the expense of that which preceded it to the future.

We don’t want to talk about the ultimate dealing that will be required of that. I don’t think it is as near at hand as you. And if it is WTF are you or I going to be able to do about it. You were in politics. You know what it’s like. You tried. Thanks for the effort BTW.

It’s going to take a lot more than just you or me to change things. When that day comes, as it will, the whole pile of crap we are talking about here might not have any relevance at all anyway. So why not live a life instead of holding up in some bunker somewhere with rations in the cellar and a Hummer in the garage in case you need to make a quick get away. Neither are going to make a damned bit of difference when the time comes you know it and I know it. Besides old farts like you and I won’t be the ones dealing with it our kids will… mine anyway.

#110 BrianT on 11.29.10 at 12:55 pm

#100Moneta-NO-if someone owes you money and they are not going to pay you back, you do not have an “asset”.

#111 BrianT on 11.29.10 at 12:56 pm

Now France is joining Ireland and Hungary in stealing from one pocket to give to the other to make the mess look pretty http://www.efinancialnews.com/story/2010-11-29/france-seizes-euro-36bn-of-pension-assets

#112 Joe Q. on 11.29.10 at 1:03 pm

Devils Advocate writes: “You both ought to be ashamed of yourselves. And you condemn CREA for presenting statistics in such a manner as to support their SPIN. … “the average first time home buyer who took out a mortgage had only 7% equity in their homes.” That is first time buyers and none other. Your comment Garth left a lot of latitude open for misinterpretation and you know it.”

Devils Advocate — the citation came not from Garth but from another poster. Garth has in the past cited a mortgage association, and not the CMHC, as the source of his data.

You either need to show us where Garth misled you, or stop putting words in his mouth.

#113 The Original Dave on 11.29.10 at 1:03 pm

GregW, Oakville on 11.29.10 at 10:51 am

Hi Garth, fyi, artical with additional links

6 Reasons To Start World War III If You Are A Globalist
http://www.infowars.com/6-reasons-to-start-world-war-iii-if-you-are-a-globalist/

——————————————————-

Greg W from Oakville, everyday you post an “artical” for Garth to read. It is spelled “article”.

#114 fancy_pants on 11.29.10 at 1:14 pm

good grief. another report through rose coloured glasses…

http://www.cbc.ca/money/story/2010/11/29/rbc-housing-affordability.html

Thank you RBC for enlightening us with reassuring words of comfort. Hey, you can stop stressing folks, RBC is reassuring you that contrary to what your bills indicate, it is not getting more expensive to own a home.

Oh, the games that are played.

#115 Joe Q. on 11.29.10 at 1:23 pm

Devils Advocate writes: “Today, 28 years later, we own our home free and clear with a value 9 times that we paid for the first 28 years ago.”

In an earlier paragraph you mention the onerous 16% interest rates you paid when you were starting out. Then you go on to claim that your current home is worth 9 times what you paid for the first one.

Am I the only one who sees a disconnect here?

#116 AlbertaRose on 11.29.10 at 1:58 pm

Mike T – what credit card are you using? Blows my points cards away
brunt – appreciate the comments on thrift as part of an independent lifestyle very relevant

#117 Live within your means on 11.29.10 at 2:02 pm

.#72 mattbg on 11.29.10 at 10:08 am

We haven’t bought a new car for years as they depreciate as soon as you drive them off the lot. I’ve a 2000 Accord, bought in 2003 or 04. Top of the line. I would have been happier with a small, less luxious one, but I needed a good, reliable automatic as opposed to a standard. We went to a multidealership sale. Spent 3+ hours. We were ready to walk out if they didn’t give us the price we wanted. It has less than 134k kms on it now. I don’t drive much -:), tho did 3 long distance trips with it. It’s in great shape. Husband has a used late model Camry, also purchased used. He does put a lot a mileage on his. We get them both undercoated each year. Paid cash for both. Sold my previous car privately. They have cost us next to nothing in maintenance. I know several people who have taken out leases on new cars. Gather that, unless its used for a business, its not the way to go. Correct me if I’m wrong. When it comes to buying a replacement, it may be wiser to not pay cash. We’ll see.

#118 Devil's Advocate on 11.29.10 at 2:08 pm

#112 Joe Q.

I did respond to your post #112 but must have worded it much to Garths dissatisfaction as it appears not to have been allowed.

So… just go back and re-read my post at #42, #74 and #101 if not this most recent article of Garth’s to which they are in reference to itself.

#119 Aussie Roy on 11.29.10 at 2:10 pm

DA why do I feel I’m going to regret this. Sorry in advance fellos bloggers.

We got a “deal” on a mortgage at 16%. That was in 1982 – a time not dissimilar to this.

Ya think….
Hey how many times your household income was the mortgage? How many times income is it today for people in a “starting out position”? At the same drain on family cash flow what are the two periods comparable interest rates. Your 16% is equal to what a 7 /8% today as a percentage of income spent on interest payments.
So how many times annual income do you think houses can go.? Can you see the relevence of this question, yet.?.

Today, 28 years later, we own our home free and clear with a value 9 times that we paid for the first 28 years ago. You don’t think this similar turn of events is likely to play out over the next 28 years?

Hey who knows at what point a mania held this strong by so many people will be broken. It might get a bit math interesting if average house prices got to say 15 or so times average annual income and a rental return of 1-2%.

Damn I knew I sold too early at 3% yield. LOL

#120 jess on 11.29.10 at 2:18 pm

Another reason for Orange

Gigantic sleaze scandal winds up as former Elf oil chiefs are jailedTrial for huge kickbacks by publicly owned firm reveals years of corruption at top of French state
Share Jon Henley in Paris The Guardian, Thursday 13 November 2003 02.22 GMT
http://www.ewla.org/News/10302/
remember the french elf case?
=============================

Didn’t this guy try to swallow his sim card?
Alfred Sirven

Le Floch’s deputy, 60. Held purse strings of Elf’s entire embezzlement operation, running secret bank accounts in Switzerland, Liechtenstein, Monaco, Luxembourg, Austria and Virgin Islands and personally carrying suitcases of cash around world. Four years on run before arrest in 2001. Misappropriated €107m; sentenced to five years and fined €1m.

http://www.guardian.co.uk/business/2003/nov/13/france.oilandpetrol
Will Iceland investigation tell us something we should know about role white-collar crime might have played in Iceland’s boom and bust and European Banking?
=

http://www.guardian.co.uk/business/2010/nov/29/sabmiller-india-africa-actionaid-report

=================
Another reason for the colour Orange
Going Dutch
A tax-saving dodge in which ownership of brand names and trademarks is moved from the countries where the goods are produced and held instead in the Netherlands. Onshore subsidiaries are then required to pay royalties to the separate brand-controlling subsidiary.

The Netherlands has generous tax rules allowing multinationals to pay almost no tax on royalties they earn by writing down the value of the trademark against them. SABMiller International BV in the Netherlands holds the rights to international sales of many African brands such as Castle, Stone and Chibuku
====================
going dutch
swiss role
The Mauritius connection
Thin capitalisation
Small time tax
http://www.guardian.co.uk/business/2010/nov/29/sabmiller-india-africa-actionaid-report

#121 Devil's Advocate on 11.29.10 at 2:18 pm

#115 Joe Q. on 11.29.10 at 1:23 pm
Devils Advocate writes: “Today, 28 years later, we own our home free and clear with a value 9 times that we paid for the first 28 years ago.”

In an earlier paragraph you mention the onerous 16% interest rates you paid when you were starting out. Then you go on to claim that your current home is worth 9 times what you paid for the first one.

Am I the only one who sees a disconnect here?

What disconnect? I don’t get what you are driving at. Our primary home went up in value over the 28 years we have owned it. What were wages back in 1982? What was the cost of a loaf of bread? What was a gallon (liter) of gasoline?

That housing most recently went up as much as it did is being clawed back as it was in 1981/82 and will flat line for a time as it did after 1981/82. Five years out from now it will start moving up again as it did in 1987 (approx). That our principal residence is worth 9 times as much today does not mean it will continue to be so along a linear trajectory. The market is cyclical but it has over the long haul continued an upward trend and I do believe it will continue to do so as long as we pack more and more people on this planet.

In any event Joe Q my real point is we now have a bought and paid for home. Not such a bad thing I think.

#122 Mr. Plow on 11.29.10 at 2:20 pm

#19 squidly77…

Hold that cheque and see what happens. And please update us on the outcome.

I imagine it might be from an internet cafe since most vans don’t have internet hook up. But maybe you can drive to a wifi area.

#123 GregW, Oakville on 11.29.10 at 2:22 pm

Hi Garth, fyi, artical, and see 3-1/2min video!
Are you paying attention?

Citizens of Europe Rage Against the Machine
http://www.infowars.com/citizens-of-europe-rage-against-the-machine/

“Nigel Farage speaks with such confidence against the EU, as he should, given that a recent mainstream media poll showed 99% of UK citizens want out of the Euro. The battle against the banking cartel is clearly happening with Europe as the spearhead. As Europeans continue to fight back against corrupt international banksters, lazy Americans continue to live with a much lower standard of living and do nothing to challenge the system.”

“These European protests are intensifying as the international bankers move to collect their “pound of flesh” through austerity and sale of public assets. As Europeans are becoming acutely aware of the dubious plan to loot them and the anger at their corrupt elected officials for bowing to banks has reached a boiling point.”

#124 Chaos on 11.29.10 at 2:26 pm

Chaos does know what NLMV is talkin’ about.

But realistically we’re barking up the wrong asteroid here.

Perhaps we should write a book called “earth school for dummies”.

The real question is:
What is the karmic lesson being learned right here, right now? and
How will the karmic debt be paid off?

I believe our guides are laughing their collective asses off over this mess that we’ve created.

I’m practicing extreme karmic risk management for the rest of my life.

If you only have room for one rule…

Do unto others…

Chaos, signing off
we regret this intrusion on regular programing.

#125 realpaul on 11.29.10 at 2:27 pm

I have never witnessed a time where greed and fear were both as prominent in the market place. The two are like well matched armies facing each other down. Does this mean that the marketplace is generally balanced and that investors are climbing a wall of worry? Does it indicate that in true bull market fashion the profit beast shakes as many participants off its back as it can leaving few to win and the majority to lose?

A strange dichotomy is the huge insider selling that has been going on while the stimulus money has been propping up the stock prices. Does trickle down just mean that an opportunity has been created for the rich to get out while everyone else is suckered into the advertisements of a bright future?

http://www.examiner.com/finance-examiner-in-national/is-the-feds-pomo-really-intended-to-help-insiders-sell-shares-before-collapse

And yes, at 46…with two kids….you’re pretty much screwed with such a paltry sum in the bank. It does cost $100,000 to send you’re kid off to a decent UNI….I can attest to that.

The Irish bailout also raids the pension funds skewering the entire savings of the countries retiree’s…..woops…did you say it can ‘never’ happen here? Isn’t Canada’s ‘shadow’ debt to gdp as egregious as any other G7 country?

http://news.yahoo.com/s/ap/20101128/ap_on_bi_ge/eu_europe_financial_crisis

I like optimism…I am a long term bull on the market as I do not believe this is the end of the world….but I hate the idea of eating kibbles as much as the next guy and even preferreds fell more than 40% during the crash of ’08 and ’09….many have not recovered the value lost ( although they continue to pay). Without a larger percentage of cash I would have been forced to sell into a declining market ( that lasted two full years) at a loss. I think it prudent to keep a higher cash component in the case that we do have a double dip. It is not unusual to repeat history…double bottoms are a feature of the recovery…we’haven’t had the second testing of the lows yet. Will it happen…WTFDIK. Can it happen…dimes for donuts possible. Insiders selling numbers seem to think that a lot of people at the top are s**t scared of that possibility.

Being bold AND afraid is not a bad policy……..and never forget to book profits along the way.

#126 Bill on 11.29.10 at 2:27 pm

Thanks Garth. Keeping going.

#127 april on 11.29.10 at 2:31 pm

I haven’t read the RBC housing report though I heard the headlines. I understood it to be saying because home prices have come down they are now more affordable. So instead of saying prices are in decline they make it sound like people should get out and start buying. Correct?

#128 JenC_T on 11.29.10 at 2:39 pm

@ Devil’s Avocate

“1982…We got a “deal” on a mortgage at 16%…Today, 28 years later, we own our home free and clear with a value 9 times that we paid for the first 28 years ago.”

Really? Taking into account *all* the interest you paid over the years, particularly the periods in which you were paying 16%?

Please show your calculations, if you don’t mind.

#129 GregW, Oakville on 11.29.10 at 2:42 pm

Hi Garth, still flying? Articals
(If they can do it to THEM they can do it to YOU and YOUR family! Do you know your history? What are you going to do today, not tomorrow it’ll be to late, to protect all our and your families rights and freedoms???)

Such a Well Behaved Herd of Sheep
http://www.infowars.com/such-a-well-behaved-herd-of-sheep/
“thousands of you forfeited your 4th and 5th amendment rights and allowed the government to irradiate you and view your virtually naked body, or allowed yourself to be subjected to an enhanced pat-down…nothing short of a sexual encounter. And for what?

This is a training and conditioning exercise you fools!

This has nothing to do with making us safer, national security or protecting America. It has nothing to do with making your flight safer. It has everything to do with conditioning you to accept a full body assault as long as the persons doing it are wearing a government badge.

You are being trained to submit and comply….”

Drudge Fought The TSA… And Drudge Won
http://www.infowars.com/drudge-fought-the-tsa-and-drudge-won/

“The big networks and the so-called progressive borg hive, who instantly tried to spin the lack of delays at airports over Thanksgiving as proof that the opt-out protest had failed, conveniently failed to mention the fact that major airports across the country had deliberately mothballed their naked body scanners in a crass PR ploy aimed at deflating the momentum behind the demonstration.

Early reports began to pour in from Twitter users who said that body scanner machines were roped off and out of use in airports such as LAX, Seattle, San Jose and Columbus, Ohio. They also said that pat downs had reverted back to the standard procedure and were not the new grope downs that the TSA had announced a couple of weeks before…”

“The nationwide scanner shut down proved two things.

1) Big Sis’s security talk is nothing more than hot air. If the scanners were so imperative to keep us safe from terrorists then why did the TSA turn them off in a vain effort to score political points?

2) Drudge won. The DHS and TSA were forced to change their policies on both naked body scanners and invasive pat downs – both of which were curtailed over Thanksgiving. Whether such a change stays in place remains to be seen – the war will undoubtedly rage on…”

#130 Europa on 11.29.10 at 2:46 pm

Q. Guess how many condos sold in ALL of Calgary yesterday?

A. ZERO.

Second time this year… You have to go back a very long time to see a ZERO SALE day in Calgary.

Things that make you go hummm…

#131 realpaul on 11.29.10 at 2:50 pm

Did you know its become more affordable to buy a house in Canada according to RBC. Yessssireee…it only takes 69% od pre tax income to buy a bungalow in Vancouver….at an average price of a million ( and at a million you’re really just buying a crack shack).

Intrest rates are low…..get ’em while you can.

http://www.vancouversun.com/business/Owning+home+becoming+more+affordable+Canada/3899091/story.html

Or……for a bit less you can try stuffing your young family into a 300 sq ft litter box in the sky…now thats happiness.

#132 DaBull on 11.29.10 at 2:52 pm

#110 BrianT

if someone owes you money and they are not going to pay you back, you do not have an “asset”.

If you take back you asset you will and that’s what always happens in the end.

#133 Devil's Advocate on 11.29.10 at 2:54 pm

#119 Aussie Roy

Hey how many times your household income was the mortgage?

The house cost us $77,000.00 and at the time our combined gross annual income was maybe $20,000.

#119 Aussie Roy

So how many times annual income do you think houses can go.? Can you see the relevence of this question, yet.?.

Yes clearly I can and I do not disagree with your implication.

BTW at 16% interest that mortgage was costing us about 60% of our gross annual income. Do you get the relevance of that comment Roy? Wasn’t it you who was lecturing me about interest rates yesterday Roy. Surely you can figure this one out.

Thing of it is as much as you the pups and the poodles like to argue with me, at the crux of it we are in greater agreement than you are willing to admit.

The biggest difference I see is that I accept what is knowing there is little I can do to change it but a lot I can do in how I react to it. That single variable over which I have complete control, how I react to it, makes or breaks my happiness. And Roy… despite what you, the pups and the poodles might like to think… I’m a pretty happy guy.

There is a world of opportunity out there Roy.

#134 GregW, Oakville on 11.29.10 at 2:54 pm

Hi Garth, fyi artical, (were do you get food?

Is the Canadian Government very far behind the USA?
Would we be there now if the PM had a majority?)

“We must not allow this to chill us from standing up for our rights….”
“The consequences of inaction are far more severe than the price standing up and being free….”

Homeland Security and Transportation Security Administration Now List People As Domestic Extremist
http://www.infowars.com/homeland-security-and-transportation-security-administration-now-list-people-as-domestic-extremist/

“Will they add them to a list were you can not buy a new car .apply for employment or do business.Will people be put on this list that will make life hard to function because the government has blackballed people who objected to the abusive TSA.These secretive list shows the abusive executive branch bypassing the courts and due process blacklisting their political enemies and opposition.

Is this the emperor striking back against the American people he wants to subjugate?He wants us to conform to his tyrannical world view.Will there be a second wave of a push back of the people against an imperial executive branch because we can not grow our own food and might not be able to buy from the local supermarket because Homeland security has blackballed someone who dares speak out against this President ….” (or PM)

#135 Devil's Advocate on 11.29.10 at 2:55 pm

“The house cost us $77,000.00 and at the time our combined gross annual income was maybe $20,000.” – D.A.

How did we pull that off then? Where there is a will there is a way.

#136 BigAl (Original) on 11.29.10 at 2:56 pm

#19 squidly77 on 11.29.10 at 12:26 am
said “The home had plumbing issues, I agreed to fix them for next to nothing and I did, now the bum can’t even come with the $500 for the parts.
I hope he has a merry Christmas because his December rent cheque will be denied, he has no idea what an inconvenience a pissed off renter can cause.”
=======================================

I don’t know about Alberta laws, but in Ontario you’d have to keep paying your rent in full, and sue him at the Landlord & Tenant Board to get your money back. If he denied authorizing the work or being aware of it, the burden would be on you to prove that you made him aware of the problem, and that he agreed to allow you to repair it. If you win the full amount, the Board might let you deduct it from future rent after the case is decided. If you chose to withhold the rent, he could go through the procedure to evict for non-payment, and an adjudicator may (or may not) allow the withholding of rent.
Wonder what its like in Alberta.

#137 BrianT on 11.29.10 at 3:01 pm

#125Real-Yes, but when you say “everyone else” it isn’t investors putting their own money into the market-overall, EVERYBODY has been pulling THEIR OWN MONEY OUT. Insider selling, mutual fund redemptions, you name it. What is buying is those whose responsibility is to invest others’ capital-pension fund managers and other institutional money managers. Most of these workers have no interest in or desire to maintain or grow managed capital long term-their job is to feather their own nest however that is done.

#138 UrbanCowboy on 11.29.10 at 3:04 pm

Banks can’t keep up with forclosures. 16 months to live in home before bank gets around to it:

http://blogs.wsj.com/economics/2010/11/27/number-of-the-week-492-days-from-default-to-foreclosure/

#139 vreaa on 11.29.10 at 3:17 pm

Los Angeles Compared With Dunbar (Vancouver Westside)

http://wp.me/pcq1o-1AC

What do you get for $2.5M?

#140 Williston Geo on 11.29.10 at 3:19 pm

Age 46 and a decade away from retirement? More than likely closer to 20 years from retirement for most people.

Heck, if they liquidated and invested (as Garth says for 6-7%) that 180,000 plus 10K per year after that in the TFSA would be over a million come retirement.

I really like this blog but sometimes a little too pessimistic in my undereducated opinion.

#141 Coho on 11.29.10 at 3:22 pm

Does this sound like a community, or an economy, in which people are flourishing? Or is the only economy we really have because of pervasive consumer credit and artificially-suppressed interest rates?
_________________________________________

We’ve seen this movie before – south of the 49th parallel.

Excellent article Garth.
====================================
It shouldn’t be so surprising, really, the predicament of people, families, and entire nations for that matter. Just look at history. It has always been a hard slog for the commoners, a perpetual master and slave situation through the ages. It was just a little more subtle until recently than it was in the past.

From the view “above” by the Ruling Class, the emergence of the middle class in western society over the past seven or eight decades has been a rather undesirable but necessary consequence of creating systems through modern technology (communications, satellites, weaponry, surveillance) to bring mankind into total indebted servitude.

Same master-slave attitude, but with modern technology to gradually tighten that vice just a little more each day to squeeze freedom and finances from the populace.

And recently there is the wikileaks fiasco with the front man Assange. On the surface it appears to be a good thing that deception, duplicity and other wrong doings are exposed. But, on the other hand, this development is likely to serve as a catalyst to expand the wars. It appears the USA is to be the most hurt and embarrassed by the leaks. So one must ask, whom or what is backing his actions and why. Must be some very powerful people. These are the ones “flourishing”…

#142 Devil's Advocate on 11.29.10 at 3:33 pm

#128 JenC_T on 11.29.10 at 2:39 pm
@ Devil’s Advocate

“1982…We got a “deal” on a mortgage at 16%…Today, 28 years later, we own our home free and clear with a value 9 times that we paid for the first 28 years ago.”

Really? Taking into account *all* the interest you paid over the years, particularly the periods in which you were paying 16%?

Please show your calculations, if you don’t mind.

The “deal” was referring to the fact that prevailing interest rates were 18% plus at the time. On average I would say we paid about 8.75% interest over the time we had a mortgage. But that was on a $77,000 principle amount which over time remained constant while the actual property value increased.

Now if you think property is NEVER going to rise in value again then I would have to agree ownership is not such a viable option. But we never accounted for it going up so when we got in – that was not so much a part of our plan. We always looked at home ownership as an expense. Yes eventually we expected we would own one free and clear but we never thought it would increase in value as it has from that original $77,000 purchase.

A home is an expense plain and simple. Ours still is even though it is bought and paid for – repairs, maintenance, heating, property taxes etc. But it works for us. That you might disagree is your prerogative. You live your lives as you will and we will ours as we will. Do what ever makes you happy – we certainly are.

#143 Joe Q. on 11.29.10 at 3:37 pm

The issue I have, DA, is that you praised home ownership by quoting the value multiple of your current home vs. your first home, right after indirectly talking about how much mortgage interest you paid to carry that first home.

Outright ownership of a home worth nine times your “starter” is indeed impressive, but if you count the mortgage interest, how do the numbers change?

Don’t get me wrong, DA — I think home ownership makes sense in the long run, as long as you don’t have to starve your retirement savings in order to keep up. But quoting price appreciation to bolster the case for home ownership is unsound, especially in times of small down-payments or high interest rates. It takes a lot to make up for a 16% mortgage or a 5% down-payment.

#144 Live within your means on 11.29.10 at 3:48 pm

#103 Ret on 11.29.10 at 12:32 pm
The world has changed since 1975 when I done graduated. Paying off student loans then was just a matter of working in a manufacturing factory for 6-8 months making those sweet union wages.

Personally my wife and I were happy that we were able to fully subsidize our daughter’s education. Many our our friends had lots more than us and told their kid to get a student loan. All we asked was that she show a serious commitment to her studies, which she did. What more could a parent ask for?

Our thought was that down the road she gets it all anyway, but now is when she needed our support.

Being retired meant taking on a part time job to earn the funds needed. No vacations, new vehicles or toys but all is well.

I love the part time job and I find good mechanics to keep the “motor pool” going if I can’t fix it myself. Lots of people are working for cash as well so minor home repairs are not the end of the world financially. Living with in your means can be a joyful existence if you stop beating yourself up with, “what the neighbours have that we don’t have.”

Our daughter can now focus on her new job without years of constant money worries.
………….

A niece is in her 2nd yr. Masters pgm(in Art History
at Carleton – where will she find a job?). Her parents did take out an RESP when she was born but it did not cover half the expenses of her BA. She obtained a SSHRC ? (scholarship) for her first year of her master’s and had about $27K to live on + an older car her parents gave her. Last summer, instead of working, she went to France and spent 3 mos. with her boyfriend and his family in France. He worked part time while there. Her BF now has his ‘Canadian resident’ papers. Her parents devoted their lives to her. They’ll spend 2 days with them and then are off to Costa Rica for 2 weeks at boyfriend’s at relatives place who own a peacefull resort – http://www.tripadvisor.com/ShowUserReviews-g635538-d1486297-r67114538-Canaima_Chill_House-Santa_Teresa_Province_of_Puntarenas.html#REVIEWS

I worry about my niece and her future. Her extended family have spoiled her over the years. She’s smart (won a presidental award and was recruited by top universities when they lived in US) but times have changed and she later chose to go into a field that is not supported by this govt. At least she’s in our will as we don’t have children.

I’m talkative today. Dreading having to go Xmas shopping tomorrow – how I hate it!!!

#145 Aussie Roy on 11.29.10 at 3:50 pm

BTW at 16% interest that mortgage was costing us about 60% of our gross annual income. Do you get the relevance of that comment Roy? Wasn’t it you who was lecturing me about interest rates yesterday Roy. Surely you can figure this one out.

Thankyou DA yes its about grade 5 math.

So how well would todays prices fair in that 16% enviroment. Prices back then must have been quite robust not to fall as rates rose, gee just maybe it was the lower income to loan ratio.
See the difference yet.
Low multple of annual income – stable robust prices.
High multple of income – unstable prices heavy influenced by interest rates.

#146 Devil's Advocate on 11.29.10 at 4:02 pm

Here’s a good one from your friend Cameron Muir. What caught my eye is the graph depicting housing starts, housing completions and household formations in the Province of British Columbia. Interesting

“We learned that BC is a population growth leader in Canada and that 70 per cent of population growth in the province is attributable to immigration. In this issue we delve further into the impact of population growth in relation to the housing stock and new home construction activity.” C Muir

Go to page three of the Bulletin for Camerons interesting editorial.

http://www.bcrea.bc.ca/publications/2010-11.pdf

Yes it is in fact different out here in British Columbia… you know the rest.

#147 Rich Renter on 11.29.10 at 4:05 pm

I think i’ll buy a house and fill it with stuff i can’t afford, afterall it’s not my money and i don’t care.
Quote: 2010 Average Canadian

#148 HouseBuster on 11.29.10 at 4:07 pm

Garth, the people who buy those overpriced dumps in North Oakville shop at Walmart for their clothing. A Lakeshore shop is more indicative of those that live along Lakeshore which is an even worse indicator because these are the people with the real money.

#149 DiGiacomo on 11.29.10 at 4:37 pm

#130 Europa on 11.29.10 at 2:46 pm

Q. Guess how many condos sold in ALL of Calgary yesterday?

A. ZERO.

Second time this year… You have to go back a very long time to see a ZERO SALE day in Calgary.

Things that make you go hummm…

———————–

wow…. that’s an interesting change from 2006!

where do you get your data by the way? CREB daily stats are shut off today due to year end – would love to get updates when they do this.

#150 Devil's Advocate on 11.29.10 at 4:38 pm

#143 Joe Q.

Again, when we bought our first home we did so without so much consideration that it would increase in value as that eventually we would pay it off and live in a mortgage free home. The rise in value was a bonus and not one we rely upon as a part of our plan. What we did do was buy location and not glitz and glamour so ours have held better in bad times and increased more in good.

#145 Aussie Roy

I have never disagreed that rising interest rates will push real estate values down if that is what you are getting at. Indeed it is the current historically low interest rates which allowed prices to inflate as they have.

Buyers in my experience are generally not so concerned about the price tag of the property as the monthly payment. Rising interest rates will, as I explain to buyers and sellers push prices down and falling interest rates will cause them to go up, which do you think lays in wait on the nearer horizon? Obviously rising rates. Thus it is a pretty safe gamble that prices must fall to at least make up the difference. But by how much and how fast rates will rise well… we’ll just have to wait and see.

#151 Devore on 11.29.10 at 4:58 pm

#115 Joe Q.

In an earlier paragraph you mention the onerous 16% interest rates you paid when you were starting out. Then you go on to claim that your current home is worth 9 times what you paid for the first one.

Am I the only one who sees a disconnect here?

With interest and property taxes, he’s paid for his house more than 3 times by now.

It’s still a good return, for having done nothing except live in a place.

But this just hilites DA’s hypocrisy. Having himself bought at market bottom, with rates nowhere to go but down, he now advocates that 1982 is just like today, which is to say that buying a house at market top with rates nowhere to go but up is a good idea.

Having simply done what young hormonal couples do, buy a house, he marvels at his investing acumen. When actually he was just at the right place, at the right time. The same couples doing the same today are just digging a financial grave for themselves. They’re not going to look like geniuses 10 years from now.

#152 VICTORIA TEA PARTY on 11.29.10 at 5:00 pm

BLACK SWANS…

So many Black Swans, so little sky!

Ireland gets some serious coin on the weekend from, let’s face it, an overly-productive Germany, through the facilities of the IMF/EU.

But the Germans, with their parsimonious ways, don’t want to be the bail-out of last resort anymore for additional idiot nations now lining up to pound on their bank vault for money for them!

Some day soon the DM will be back and the euro will be histoire. And then what?

MEANWHILE

In the interim, Ireland will suffer like crazy and, one day, will just dump the EU/IMF bail-out and go its own way with its own currency seeking alliances with some sugar daddies elsewhere. Tread carefully you luckless elves. Grass is always greener, and short on four-leaf clovers!

So who’s next onto the backside of the IMF bucking bronco? Portugal, Spain, Italy, UK, France, the US (?); the list is long and, I was going to write “dishonourable”, but pathetic might be a better word to describe this collective gaggle of nationalistic backsliders and entitlement bunnies.

It’s amazing how many people in so many countries are not “takin’ care of business and workin’ overtime…” These people believe it to be a birth-right to spend until their countries are economic raggamuffins, only to then bitch and complain when the world’s financial cops (IMF/World Bank) show up and pound down their doors with high interest rate loans in response to all of their profligate spending.

The industrialized world, since this is where most of this financial insanity resides for now, is already getting what it deserves, not what it wanted.

Sure, debtor nations; dump the Euro, dump the Greenback and the pound, and the yen. Go ahead, make your damn day! If that doesn’t work, default! Why not? Heck it’s only other peoples’ money! And the interest rates are so low!

In the ensuing confusion, prosperity will NOT COME BACK. Poverty will be these countries’ constant companions for literally decades to come. Manifestly poorer, hungrier, ill-fed and housed, the teeming, pissed-off, middle class masses, of the industrialized West, are starting to reap the whirlwind of 65 years of debt accumulation.

NO ANTIDOTE

It doesn’t matter one whit how much sovereign governments attempt to pump the markets, cheat on budgets, bury the books and so on, to protect their coddled millions.

Mr. Market always gets his scoflaw. Always. That’s what I get from studying history, as a hobby, for the last 55 years. Same [email protected], different day. Trust me on this.
There can be no other outcome.

MEANWHILE, BACK AT THE RANCH…

Canadians, hooked up to the top of their long-johns in debt take note: This WILL happen to us, starting sometime in 2011 and ending who knows when.

That will be the year of federal and provincial austerity measures featuring public sector freezes and squeezes with catastrophic economic trickle downs into the private sector street corner cafes, ego-inflating massageries and other service industries, which exist only to separate fools from their HELOCs and credit card balances!

ROOM TEMPERATURE EMPIRE

Then there are the 250-thousand Black Swans from Wiki-leaks or whatever that outfit calls itself.

So many diplomatic memos about allies and friends and so much embarrassment from a near room temperature American Empire.

Remember! Not all empires lasted one grand, you know. Most lasted a few generations then…poof!

Dust; gone.

Hello, once again, Black Swan!

#153 Thetruth on 11.29.10 at 5:02 pm

DA…stop posting. Your’re being used. Think long and hard about it.

#154 pablo on 11.29.10 at 5:08 pm

Emotions: “In Toronto the same house in an equal neighbourhood would sell for less than half.”
Probably a lot less than that Garth now that T.O. has distinguished itself as the most miserable city in Canada….imagine that; the center of the universe is miserable………must be constipation from all that smoke they get blown up their butts all the time about what a privilege it is to be living there! Geez that must mean that they’re chronically depressed in Vancouver!!!

#155 GregW, Oakville on 11.29.10 at 5:13 pm

Hi Garth, fyi know any mothers! and still flying?
Artical with link to 12min video(no sound)
If it’s happening in the USA it can happen hear and to you!
Are we paying attention yet? remember your history.
Still feeling safe in Canada with the PM/Government?

TSA Targets Breastfeeding Mother
http://www.infowars.com/tsa-targets-breastfeeding-mother/

#156 Devore on 11.29.10 at 5:22 pm

Boy, did Shawn Allen take a big bite out of his foot today.

Although, as some have pointed out, he does not deny fractional reserve banking, neither does he acknowledge it. To wit, he believes today’s low interest rates are supported by excess savings. Excuse me, excess savings?

There are two major points that counter our Investor’s Friend.

1. Fractional reserve banking allows banks to create money out of nothing. In Canada, there is no official reserve requirement, so banks can inflate money and credit as much as they feel is prudent. BoC can reign in this process by adjusting overnight rates and influencing lending standards.

2. Debt is not wealth.

If savings were truly 1:1 to lending/credit, credit bubbles would never form, because the world would run out of money in very short order. Only due to fractional reserves and debt money are bubbles able to grow.

Most people would probably assume the relationship is 1:1, if pressed. It makes sense. In order for a bank to lend you money, that money has to exist, and it can only exist if someone earns it and puts it in a savings account. The process people do not see is fractional reserve banking.

So this creation of money (electronically created bank money is every bit as good as central bank created paper money) is very misleading to the economy. Greater (and cheaper) lending seems to imply there is lots of savings available (in fact it’s only fractional credit), which implies consumers have lots of disposable income (in fact they have none), which implies there is lots of room for growth (in fact things are over-stimulated), which causes forward-looking economic activity (hireing, expansion, projects), which never materializes (duh), because it wasn’t there to begin with (bingo). You’ve created a false prosperity, a bubble. When the credit is turned off, the bubble bursts, and economic activity crashes to levels actually sustainable.

This is why fractional banking is, well, evil. In a way, you’re right, “wealth”, for all practical purposes, is created when loans are made, because the loan has to be paid off with money EARNED, not created. This is why existing debt can never be paid off. There is too much of it to pay back in real money, earned by the real economy. The net effect of this “debt wealth” is negative to society/economy, but obviously beneficial to those who create it, because it is paid back by extracting real wealth.

#157 Devore on 11.29.10 at 5:32 pm

To continue ;)

No, the world is not awash in savings. In fact it is in desperate need of them.

You can create “debt wealth” without limit. It’s just digits. This does not increase real wealth. If it did, we’d all be rich. It actually decreases real wealth, which is sapped to service this make-believe debt.

Your premise and conclusions are wrong, because you do not see the effects of fractional banking and of debt money.

#158 Lonely Limey on 11.29.10 at 5:40 pm

@ The Original Dave #113

Greg W from Oakville, everyday you post an “artical” for Garth to read. It is spelled “article”.

………………….

If you’re going to be the spelling police might I point out you should have written your last sentence ” It is spelt, article”

#159 Debtfree on 11.29.10 at 5:45 pm

Good blog today garth… haven’t had time to read the comments . I’m okay with that . Below is an insight of japan (basket case ) you think 35/40 year mortgages are goofy try 100 years .

http://www.wealthdaily.com/articles/real-estate-dividends/2856

#160 Increasing that 1% on 11.29.10 at 6:03 pm

OT-
Condolences to family/friends of Canadian Actor, Leslie Nielsen.
Happen to be almost finished his brother Erik Nielsen’s Autobiography “The House is Not a Home”
-he does talk at first of his parents and growing up in Yukon.
Interesting read for Canadians, as he also talks of his time in politics from 1957 to the ’80s.
(From inside cover) “He held a number of key positions, including opposition house leader, Leader of the Opposition, Minister of Public Works, President of the Privy Council, Minister of National Defence, and Deputy Prime Minister…”
He served in the caucuses of John Diefenbaker, Robert Stanfield, Joe Clark, and Brian Mulroney.
As with Garth’s ‘Sheeple’, it gives an insider’s look at Canadian Politics as well as some of our history.

Garth, I’ve been wondering as I read this whether you worked with/met Erik Nielsen? And, Leslie?

I knew the dour one, not the funny one. — Garth

#161 The InvestorsFriend (Shawn Allen) on 11.29.10 at 6:04 pm

A number of people today disagreed with my “theory” that the world is awash in savings which exceed debt. Even though I basically proved it.

(One man’s debt is another man’s savings… what part of that don’t some of you get?) (The low cost to borrow proves it is a borrowers market because there is more savings available to be lent than there is demand to borrow)

Yes I understand fractional reserve banking… and no it is not evil. It has been around for at least 800 years and including when money was 100% backed by Gold.

Look, I am here to educate and not to argue with anonymous ankle biters. Though I do find their tiny barks amusing.

I thought I covered this off the other day when I said:

1. I am right…

2. I am ALWAYS Right

3. Excessive Modesty is my only fault

#162 The InvestorsFriend (Shawn Allen) on 11.29.10 at 6:44 pm

Okay, so I am not excessively modest, that was a joke. But why should I be modest?

#163 Devil's Advocate on 11.29.10 at 6:47 pm

#151 Devore
But this just hilites DA’s hypocrisy. Having himself bought at market bottom, with rates nowhere to go but down, he now advocates that 1982 is just like today, which is to say that buying a house at market top with rates nowhere to go but up is a good idea.
Having simply done what young hormonal couples do, buy a house, he marvels at his investing acumen. When actually he was just at the right place, at the right time. The same couples doing the same today are just digging a financial grave for themselves. They’re not going to look like geniuses 10 years from now.

Don’t be such an irreverent A-hole… go back and read my recent posts and you will note where, several times, where I wrote that we bought it not for the equity gain but rather in anticipation that some day we would live in a long paid for home. And I hardly think it was the bottom of the market at that time. But to your credit yes it was indeed a hormonal purchase demonstrative of being as good a provider as I could for my then young bride – to whom I am still married BTW.

It’s Bullshit like that Devore which compels me to be a thorn in the side of the thick skulled, jealous, gloom and doom prick blog DAWGs like you. Ya… but no offence intended there sport.

Financial grave? You wish.

#164 Devil's Advocate on 11.29.10 at 7:10 pm

#154 Thetruth on 11.29.10 at 5:02 pm
DA…stop posting. Your’re being used. Think long and hard about it.

Ya think?

“If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,” R. Kipling

Who’s the fool..?

#165 Macrath on 11.29.10 at 7:17 pm

Astute Ivy League investors in trouble! They failed to see that train coming long before it arrived.

Universities facing service cuts to climb out of ‘pension abyss’

http://www.theglobeandmail.com/news/national/universities-facing-service-cuts-to-climb-out-of-pension-abyss/article1816725/

#166 Frank from Calgary on 11.29.10 at 7:33 pm

There was a time in North America where the middle class got to its socio-economic postion by how much equity it had. Now a days the middle class is is evaluated according to how much debt it can carry.

That should leave everyone pondering this, a homeless person without a penny to his name is worth more than many highly over leveraged middle class Canadians.

#167 Love this Blog on 11.29.10 at 7:38 pm

#$25 Utopia

“I was as surprised as anyone to see yesterdays link showing that the city of Saskatoon is picking up the 5% downpayment tab on a variety of projects. That was news to me. Not good news either.

The way they are building out here in this cold prairie town is a real shame too. Huge box homes that are better suited to California or Texas than to a province that can spend as many as 5 months in sub-zero temperatures.

The lessons of the past have not been learned. You know that when you see a home like one a neighbor of mine is building.

I can only guess at how many thousand square feet it encompasses but it is huge. The basement has 10 foot ceilings for crying out loud!

Huge windows, no tree shelters (they were all removed) and a footprint that consumes the maximum allowable lot size all make this structure an energy sucking money pit.

This thing is designed for a different climate and yet here it is. All blocky, glassy and without real liveable virtues.

I am a really big fan of the older, smaller conservatively designed homes that were actually meant to be lived in. That were designed to take in maximum lighting with minimal heat loss and had basements built for proper food storage over the long cold winter months.

This guys ego-palace though has none of that in mind.

If the lights ever go out he will be banging on the neighbors doors for a place to stay warm in front of a real fireplace that is capable of warming a compact and sanely designed ”

It’s all about the show and the ego these days my friends. There is a house being built in Watrous, a little town of 1800 people SE of S’toon that is reputed to cost just over one million dollars. IF that couple divorces, loses their jogs etc………..they will crash and burn HARD.
Because no one else here can afford to buy it!
And call me bitter, jealous, or just an asshole, but I relish the day some of these showboaters lose their homes, cars, everything…………because it was all for show.

#168 Midas on 11.29.10 at 7:43 pm

Interesting article about Van RE in the Globe:

http://www.theglobeandmail.com/report-on-business/rob-magazine/is-vancouver-in-a-real-estate-bubble/article1808967/singlepage/#articlecontent

#169 Ben on 11.29.10 at 7:44 pm

Well another co-worker transplant just bought a house in Oakville, albeit it wasn’t a bidding war. The house had been on the market for 167 days at $544,000 and co-worker offered $500,000 even, take it or leave it and the seller took it.

#170 Nostradamus Le Mad Vlad on 11.29.10 at 8:00 pm

#24 calgary illusion — “. . . advocate bank preferreds when it is widely anticipated that interest rates will rise . . .”

My (limited) understanding of Bank Preferreds is that one buys them for constant income, so it doesn’t matter whether interest rates, bonds, yields, DOW or TSX rise or fall — if I buy $100K of bank prefds., all I am looking for is a nice cheque every three months, 80% or more of which is tax-free.

Feel free to correct anything.

#124 Chaos — It is just delightful to rise at the crack of supper, kickstart the day with an overpowering, quintuple-strength mocha accompanied by a huge cinnamon raisin danish covered in about four inches of icing! Do I know health food or whut?!

Everyone else please pass on by. To wit:

“Perhaps we should write a book called “earth school for dummies”.”

In the lower psychic regions, we are presently living in the Kali Yuga (Iron Age), which is the fourth of four ages, the most violent, destructive and spiritually bankrupt one.

There are (give or take) roughly 425,000 years before the lower psychic regions are completely destroyed, then rebuilt.

As the negative force has increased significantly, the positive force must also maintain an equal and opposite balance.

So, everyone / thing is bound to three cycles — birth, life (decay), and death or beginning, middle and end, then rebirth.

Currently there are plenty of old cycles which are in the midst of dying, just as new ones are being born. Dec. 22, 2012 is the end of the Mayan age, the Incas and Aztecs end a few years’ hence.

In all of the above, add in the cycles of the five root races are changing from White to Yellow / Red, which is why the link posted last night came at the right moment, about China taking the economic forefront in 2015 (dates are unpredictable, ‘tho.).

There always will be action – reaction here; thing is not to react to something which no one can control the outcome — “As above, so below”. Instead, look for ways to turn the negative forces into positive ones.

As said earlier, the Mental Plane (4th heaven) is where we will all meet shortly. In the meantime, if you’re ever up in this neck of the woods, drop on by!

#125 realpaul — Excellent post!

#153 VICTORIA TEA PARTY — “. . . prosperity will NOT COME BACK.”

Nicely pointed out. Overall, sheeple will have no choice but to lower their living standards now. Third World Country, here we come!

BTW, Wikileaks and Wikipedia are simply fronts for the CIA and others. Don’t bother with either.
*
2:10 clip Trust the TSA, Nice C&W ditty!

#171 Love this Blog on 11.29.10 at 8:06 pm

#43 Joseph Original

“#1 Joseph said “… there is absolutely no need for the parents who will be in their fifties should be expected to pay for their kids’ education!”

I disagree. I’ll do whatever is necessary to put my kids through university – even if it means working two jobs.”

And I disagree with you. I’ll help, pay a grand here and there……………….but I’veady sacrificed plenty to get them to this point………..including RESP’s. I worked and save to go to school………………they can too. Money give is money blown easily, ya know? I’ve made them earn their way (For their age) and it has worked out very well so far. I’ve two of the most responsible, polite kids you’ll ever meet…………………………..every kid I know, who is mature, polite, repsectful……….has had to earn their own way, not had it handed to them.
I graduated with a student loan, and I alone paid it off. So can they.

#172 Love this Blog on 11.29.10 at 8:16 pm

#60,
speaking of alcohol, idiots and banning……………
Garth, can we all pile on Carioca Canuck? I respect your “free speech” no ban rule……in fact, I strongly support it! But this guy/gal is about 40 oz into a 66.

#173 Publius Enigma on 11.29.10 at 8:25 pm

#162 The InvestorsFriend (Shawn Allen) on 11.29.10 at 6:04 pm

“I thought I covered this off the other day when I said:

1. I am right…

2. I am ALWAYS Right”

Ah yes, I see.

Perhaps this is why your website (which you appear to spend an inordinate amount of time prostituting on this blog) has so few visitors?

The world is full of people who aren’t lining up to hear your logical fallaci….^H^H^H^H^H always correct theories.

Perhaps a youtube video of you and Devil’s Advocate singing Kumbaya would garner you more traffic, no? You both appear to have ample free time to engage in such an endeavor.

#174 Sail1 on 11.29.10 at 8:32 pm

#34 Wise Guy

Don’t wait to long. If your looking for a 20% drop, good luck. 25% is a fair amount for a down payment. If you really want to purchase a home don’t let this blog stop you. If you do, you will never purchase anything.

#175 gattaca on 11.29.10 at 8:37 pm

From Mad Hedge Fund Trader guy’s website (sounds like an American version of Garth)

Don’t Hold Your Breath for Residential Real Estate.

..But one day in 2005, my gardener, José, mentioned that he had just obtained a $500,000 loan to buy a new place in which to house his seven kids, along with a home equity loan to cover the first year’s mortgage payments. How would he make the next year’s payments? The broker said the value of the house would go up, and he could then increase his home equity loan to cover that too.

I knew I had to sell my home immediately, hitting the bid for a tidy $12 million, along with the rest of my real estate holdings around Fog City and Lake Tahoe. At the closing, I couldn’t help but notice that my broker, Olivia, was drunk with greed, with 360,000 dollar bills in commissions dancing in front of her eyes.

Regretfully, I had to let José go. I have been renting ever since. The last price I saw for my former “Xanadu” was $7 million, and I know that a cash offer well below that would talk. I could also lease it for $19,500 a month, which wouldn’t even cover the taxes and the maintenance.

..If you strip away the industry fig leaves, and ignore the paid apologists, the excesses in this sector are truly of Biblical proportions. “Official,” shadow, and bank inventories, and another 1.5 million imminent option arm induced foreclosures, probably mean there is a decade’s worth of supply out there. The demographic pressure of 80 million retiring and downsizing baby boomers easily adds another five years. A capital constrained Fannie Mae is taking down 75% of the new mortgages in the secondary market, the FHA is taking almost all of the rest, and there is no way the socialization of the mortgage market can continue indefinitely. And guess who is number one on the Tea Party’s hit list after Obamacare?

Residential real estate is at best a push, and worst case will drop by half again if the “W” recession pans out. This is why banks, already choking on foreclosed properties, will only lend if you hold a gun to their head. They know there are more big hits to their capital coming their way in the form of tsunamis of more bad loans.

Only buy a home if your wife is nagging you about living in that cardboard box under the freeway overpass. But expect to put up your first born child as collateral, and bring in your entire extended family in as cosigners, if you want to get a bank loan. I heard that Olivia lost her commission and everything else in the stock market crash and committed suicide. I never found out what happened to José. And no, I won’t be uttering the word “rosebud” on my deathbed.

http://www.madhedgefundtrader.com/november-26-2010.html

#176 hobbitt on 11.29.10 at 8:50 pm

#159 Lonely Limey on 11.29.10 at 5:40 pm

Greg W from Oakville, everyday you post an “artical” for Garth to read. It is spelled “article”.

………………….

If you’re going to be the spelling police might I point out you should have written your last sentence ” It is spelt, article”
=========================

sorry dude, only in Limey country is it “spelled”spelt. In Canada, spelt is a grain.

#177 Devore on 11.29.10 at 9:07 pm

#162 The InvestorsFriend (Shawn Allen)

A number of people today disagreed with my “theory” that the world is awash in savings which exceed debt. Even though I basically proved it.

Proved that creating debt increases wealth? Gotcha. That’s why we’re all rich.

You need to brush up on your Economics 101, instead of spinning your own economic theories. Neither creating money nor borrowing money creates wealth. If it did, we’d all be stinking rich. Even a blind man can see savings have little to do with availability of credit and lending.

#178 kitchener1 on 11.29.10 at 9:09 pm

Thought I would share some interesting conversations I have had over the last few weeks.

Seems that my landlord is looking at selling his property in the spring as he has purchased all new applicances/furnance-AC/ etc..

Over the last few weeks, he purchased a new furnance and had his old one installed in my rental, same with the AC. There are 10 years old but still better then the old crappy stuff I had before. Same things with his washer/dryer/fridge– brought all of his old ones to my rental as he purchased brand new ones.

Now, in my area of Kitchener-Waterloo there must be approx 30 SFH for sale with a 3-4km drive, these are all newer listings (4-6 weeks) only seen 2 sold signs. Odd thing is that they all went up around mid oct- or early Nov. Was wondering myself what the deal is its a weird time of year to sell.

Now the funny part, the furnance installer was telling me about how great real estate is and how he will be selling his “flip” in the spring, plumber told me the same thing as well in Septemeber when he was here to fix the toilet.

Spring time is when things are going to go boom in a big way. Sales volume down large, those few bad months are turning into a bad half year. When inventory floods the market, watch out below.

#179 Lonely Limey on 11.29.10 at 9:24 pm

@ Hobbitt #177

It’s the only country that counts as far as this language is concerned ;-)

#180 BrianT on 11.29.10 at 9:33 pm

#178Devore-not sure about Econ 101 helping-I have heard big time MSM economists say lots of stuff just as stupid as what Shawn spouts (trade and fiscal deficits don’t matter, ZIRP will benefit the overall economy,etc.etc.)

#181 BrianT on 11.29.10 at 9:34 pm

Wow-Wikileaks will be doing a big release on a major US bank next http://www.zerohedge.com/article/wikileaks-next-target-big-us-bank

#182 Nostradamus Le Mad Vlad on 11.29.10 at 9:52 pm


2:59 clip Wikileaks and its founder are a complete fraud. Plus — Wikileaks Two (better).

1:01 clip GM — Like A Crock!

Jobs Going “Obama has had two years to change the tax codes to encourage job creation here in the USA and he has not done it.” wrh.com.

1:25 clip dubya says it clearly — war is the engine of the economy. He may be right on this one!

Charts dubya vs. Obama. Don’t forget the US Social Security was looted by Clinton to pay the deficit off.

France is doing the same as Ireland, Hungary and others.

Rich vs. Poor Incl. children.

US – China “The problem with currency and trade wars is that these wars frequently escalate into real shooting wars.

“This country is seriously broke, and the Obama administration is desperate for something with which to attempt to distract a large portion of the American public from the financial misery in which they are mired.” wrh.com.

If Ireland refuses the bailout, what then?

Bozo The Clown “Or, more likely, Bernanke will burn up the presses printing debased dollars while he fearlessly fulfills his hyperinflation mission.”

China Chicken KFC is already set up and working there, so it has to be Barmy Benny.

#183 Taxpayer like everyone else on 11.29.10 at 10:03 pm

162 Shawn – oh don’t be modest. I’m surprised this simple concept is mis-understood by so many people,
including many regular posters.

I’ve attached this little tidbit for an example:

https://www.northsave.com/SharedContent/documents/AnnualReports/AnnualReport06.pdf

Just scroll in a few pages to the financials. You will see
$347M in loans, and $363M in deposits.

This is for Northern Savings CU in BC. Same principle as
the banks, just smaller numbers and nicely laid out for
everybody to understand.

Comments?

#184 Moneta on 11.29.10 at 10:09 pm

The way they are building out here in this cold prairie town is a real shame too. Huge box homes that are better suited to California or Texas than to a province that can spend as many as 5 months in sub-zero temperatures
——
I remember when I was a kid and watched the news, you could tell where it was happening by how people dressed.

Now that the whole world has been Americanized, we’ve gone down the path of shabby cookie cutter everything.

It used to be that we built homes to fit our geography and climate. Not anymore as we have all been forced into the American ROI model.

But the differences are still there and they are starting to poke through the flimsy facade we have built over the last 2-3 decades. Just like the crumbling marble on a Toronto building that was supposed to last 100 years… in Italy I’m sure.

Everything in our system is out of whack. We’ve totally detached ourselves from our environment and and we’re going to pay a price.

#185 Moneta on 11.29.10 at 10:13 pm

43 Joseph Original

“#1 Joseph said “… there is absolutely no need for the parents who will be in their fifties should be expected to pay for their kids’ education!”

I disagree. I’ll do whatever is necessary to put my kids through university – even if it means working two jobs.”

And I disagree with you. I’ll help, pay a grand here and there……………….but I’veady sacrificed plenty to get them to this point………..including RESP’s.

———-

I have the money for their education but I’ll only pay if my child shows dedication. Anything less and I make them work.

#186 hobbitt on 11.29.10 at 10:33 pm

#180 Lonely Limey on 11.29.10 at 9:24 pm
@ Hobbitt #177

It’s the only country that counts as far as this language is concerned
————————-
ya……….but you’ve got to work on that accent!

#187 xyz on 11.29.10 at 11:15 pm

@Taxpayer like everyone else
162 Shawn – oh don’t be modest. I’m surprised this simple concept is mis-understood by so many people,
including many regular posters.

I’ve attached this little tidbit for an example:

https://www.northsave.com/SharedContent/documents/AnnualReports/AnnualReport06.pdf

Just scroll in a few pages to the financials. You will see
$347M in loans, and $363M in deposits.

This is for Northern Savings CU in BC. Same principle as
the banks, just smaller numbers and nicely laid out for
everybody to understand.

Comments?

Seriously if you are going to try to spout fiction as fact then perhaps you should take a grade 8 accounting course.
May I draw your attention to section 3. Cash Resources AKA CASH ON HAND!!!

The Deposits you are pointing out are actually LIABILITIES to the bank not funds that EXIST and there is a BIG 90% or so difference between cash on hand and money on deposit. This is exactly why if 15% of the bank’s deposits were withdrawn in cash the bank or in this case Credit Union would be in some deep doo doo.

So where is this phantom 90%?

3. Cash resources 2006 2005
Cash and current accounts $ 8,683,105 $ 5,544,758
Term deposits and accrued interest
Callable or maturing in three months or less 9,591,270 1,605,492
$ 18,274,375 $ 7,150,250
Under governing legislation, the credit union must maintain, for liquidity purposes, deposits with Credit Union
Central of British Columbia (Credit Union Central) of at least 8% of deposits and borrowings. At December 31,
2006, the credit union liquidity deposits exceed the minimum requirement by $1,275,000 (2005: $2,635,000).

#188 S.B. on 11.29.10 at 11:16 pm

The screws are tightening…middle class say bye bye

Mayor Naheed Nenshi says he has a plan to get this year’s property tax increase down to 4.5 per cent while eliminating the parking fee at city transit lots and keeping police and fire budgets intact.

With Calgary heading into 2011 with a projected deficit of $47.4 million, the mayor’s proposal would see the average household pay an additional $4.50 per month, Nenshi’s office said in a written release Monday.

Read more: http://www.cbc.ca/canada/calgary/story/2010/11/29/calgary-nenshi-tax-plan.html#ixzz16jNWq1cV

#189 ekstso on 11.29.10 at 11:48 pm

#184 Taxpayer like everyone else

Credit Union is not a bank!
Google them and see the difference.

#190 Patz on 11.29.10 at 11:57 pm

I knew the dour one, not the funny one. — Garth

I knew the funny one, not the dour one. –Patz

True, I did. He wasn’t funny like the movies, he was a practical joker who thought whoopee cushions were hysterical. He was also a genuine sweetheart and great to work with. Surely!

#191 BrianT on 11.29.10 at 11:59 pm

Hilarious article-how to blow 10 million (go wild building palaces and decide you need to collect horses) http://finance.yahoo.com/banking-budgeting/article/111434/familys-fall-from-affluence-is-swift-and-hard

#192 Jen on 11.30.10 at 1:01 am

“On average I would say we paid about 8.75% interest over the time we had a mortgage. But that was on a $77,000 principle amount which over time remained constant while the actual property value increased.”
Thanks for taking the time to respond. My question, however, is this: Are you still maintaining that value of your current home is *9 times* what we paid for the first 28 years ago?
I’m assuming you paid off your house in 25 years, so, with an average (quoted by you) rate of 8.75% over that time, you paid:
$77,000 for the principle, about $110,500 in interest costs, not including all the money you spent on maintenance and renovations over the years. So, your house is worth about ….$1.7 mill, then? If it is, I’m very impressed. Good for you.

“Now if you think property is NEVER going to rise in value again then I would have to agree ownership is not such a viable option.”

I don’t recall claiming that…

#193 Taxpayer like everyone else on 11.30.10 at 1:08 am

xyz 189 – excellent! You understand! If you look back at comments at 44, 49, 53, 59 etc….they did not. Moneta and a few others did understand. Its funny, the biggest
oxymoron I hear “I have cash in the bank”!

Eksto 191 – I reviewed the National banks financial statement. To decipher them would require my own blog.
The CU cited was easy to understand – underlying mechanics are the same. See Shawns post at 163 – debt is issued on a base of savings.

I cant give a reference for Shawns claim of 800 years for fractional reserve banking, but its been around a long time, and it has successfully worked for much of it. You two folks write and accept cheques dont you? Maybe have or had a mortgage? Or may get one someday? Maybe you have a GIC in you RRSP? If you do, you must believe in the system, right? I mean, you wouldnt take a cheque on “phantom” money would you?

#194 Timing is Everything on 11.30.10 at 1:26 am

#141 Coho said – “So one must ask, whom or what is backing his actions and why. Must be some very powerful people. These are the ones “flourishing”…”

Follow the money.

#195 Timing is Everything on 11.30.10 at 1:30 am

Geez that must mean that they’re chronically depressed in Vancouver!!!

#196 Timing is Everything on 11.30.10 at 1:33 am

#156 pablo said – “Geez that must mean that they’re chronically depressed in Vancouver!!!”

Nope…BC bud.

#197 Taxpayer like everyone else on 11.30.10 at 1:47 am

xyz – almsot forgot – Jimmy Stewarts explanation of fractional reserve banking

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

eksto – and for you some light reading

http://www.nbc.ca/bnc/files/bncpdf/en/2/e_ri_NBC_AR2009.pdf#xml=http://172.21.128.107/bnc/cda/searchEngine/0,2648,divId-2_langId-1_navCode-1000,00.htmlxml.txt?query=financial+statements&query2=financial+statements+financial+statements+FINANCIAL+STATEMENTS+financial+statements&query3=financial+statements&pr=bnc_en&order=r&cq=&id=4cf486510

#198 Timing is Everything on 11.30.10 at 1:56 am

#160 Lonely Limey
@ The Original Dave #113

http://en.wikipedia.org/wiki/Wikipedia:List_of_spelling_variants

Who give a rats…move on.

#199 RE Bear on 11.30.10 at 2:57 am

Don’t feed the little troll Shawn Allen, the guy supposedly has a degree, an MBA, he’s a PEng, etc, a CFA, although I have NO IDEA what reputable company would have sponsored him. Of course he doesn’t list his institutions…

And apparently he’s never heard of fractional reserve banking?

Shawn Allen, I don’t think you’ve ever been right in your life, lol.

Cya Troll

#200 Deliverator on 11.30.10 at 4:04 am

#96 DA:
Um, the landlord is required BY LAW to have all defects and problems repaired professionally. The landlord doesn’t have a legal leg to stand on. Squid does the guy a favour and the guy bums out on it, and you’re defending him? Shows everyone here exactly what your character is.

When I rented a house in university I did most of the repairs myself. Property manager loved it. Never flinched when I presented her with a bill. When I moved, she offered me my pick of several properties. Handy tenants are golden. Landlords like squid’s are not.

#201 lonely limey on 11.30.10 at 9:29 am

@ hobbit #188

It’s the only country that counts as far as this language is concerned
————————-
ya……….but you’ve got to work on that accent!

—————-

That’s not what the ladies tell me

#202 xyz on 11.30.10 at 10:43 am

@Taxpayer like everyone else

The thought that deposits equal liabilities is a mere illusion of the banking system. They lend 90% of my money, then it becomes someone else s money, so they lend 90% of that persons money and so on in an infinite Ponzi scheme. To suggest that there are more savings than debt in any society using the fractional reserve system is just plain incorrect. Its an impossibility as a function of mathematics. To use one credit union with a seemingly balanced balance sheet is extremely misleading to someone that wouldn’t know any better. In fact, correct me if I am wrong, but Credit Unions have historically kept the math in this Ponzi scheme balanced for the good of their members. The banks are the true evil geniuses.

#203 Taxpayer like everyone else on 11.30.10 at 11:41 am

Good morning xyz. I used the CU example as it is so simple. You can check the NBC link I gave. It shows
deposits at $75B and loans at $58B but there are other
items on the balance sheet my less-than-grade-eight
accounting skills cannot grasp. Amazing that I can run a
business with a seven figue revenue. Anyways, please
feel free to send me a cheque written on your illusory
savings anytime! Enjoy your day.

#204 John Dennis on 11.30.10 at 2:05 pm

Hey Garth,

Just thought I’d share this link with the group. Seems the folks in the US are doing the same thing some of the blog dogs are doing. Selling high and renting low.

http://www.cnbc.com/id/40260336

#205 xyz on 11.30.10 at 2:42 pm

@Taxpayer like everyone else

You are making assumptions that all depositors/investors do not have mortgages/credit and that all mortgagees/debtors do not have savings.
This is simply not the case. As an example, lots of people with margin accounts have investments AND often mortgages.

I would dare to speculate that actual net worth per capita is the the only way to accurately assess the amount of real dollars vs. debt dollars in the system. Last I checked per head count is that Canada is running at a $30K to $40K deficit.

#206 Taxpayer like everyone else on 11.30.10 at 9:43 pm

207 xyz – sorry didnt respond sooner – that “work thing”.
I think you’ve mixed my comments with one of Shawns illustrations. I never assumed separate savers and borrowers. In fact, as you have described, only recently
have I become only a saver as I paid off my mortgage
(to that bank I gave a link to).

Also don’t understand the net worth per capita vs the “deficit”. From link @92 above, average (ie per capita) net worths are clearly positive across all groups
Perhaps it is the debt load you refer to, which as you
described above, doesnt mean these people dont have savings or other assets, which they must as they have positive net worths on average.

Also feel free to pick any credit union in BC and check their balance sheets, which are usually posted on their websites. I have done several, and they all show the same thing – deposits slightly larger than loans. Fractional reserve lending at work!

http://www.credit-union.com/

Blogger Dark Sad has left a good comment with links on the next thread. See (blog) you there.