Investing update

Blair is 60. “I have very little put away for retirement,” he writes me. No bull there. His nest egg is but $40,000.

“I am somewhat confused as to invest the equity we have in our home or to not invest it,” he continues. “We do have a substantial amount of equity.  We owe $96,000 on our home and it is worth $460,000. What do you suggest?”

We’ll get to Blair in a minute. The larger question is why so many people have so little. Days ago I told you about a Wells Fargo survey which found Americans think they’ll need $300,000 to retire on, but have saved just 7% of that. Worse, people aged 50 to 59 have average retirement caches of only $29,000. This is beyond alarming.

In Canada such stats are harder to come by. Seems, however, about 50% of Canadians have an active RRSP and the average amount saved is a little over $40,000. The other half have no retirement plan, which is the pits, since 70% of all Canadians will quit working without a pension.

Retire on CPP? Hardly. The average payment for the public pension plan plus the OAS supplement is $1,000 a month. That buys food. Period. In the States, your monthly payment can be almost double this amount, but only if you wait until age 70 to start collecting. That should make for a riotous six years.

Obviously millions of people are screwed. Unless they change their ways. Unless they learn. And as this pathetic blog keeps on pounding, selling a house to raise money to live on, après work, is a crappy plan.

Among the problems is that far too many are financially illiterate. For example, they don’t know the difference between registered and non-registered money. So bear with me for a moment.

Non-registered money is that which is invested outside of a tax shelter, and on which you’ve already paid income tax. You’ll now be taxed on money this money makes, but at varying rates depending on the kind of income generated. Interest is taxed at 100%, capital gains and dividends at around 50% (times your marginal rate) – which is a hell of an argument for not wanting a GIC or HISA.

You can avoid being taxed in whole or in part with a registered account – which means this is recorded by the government, so F can watch and drool over every little sous you earn. Here are four common registered vehicles.

RRSP – registered retirement savings plan. This defers tax to a later date and lets you earn income within the plan free of immediate tax. You also get to deduct contributions (to a limit) from your taxable income, which is cool. But uncool is the fact every dollar in an RRSP will be taxed when it comes out, and taxed as income – which is (like interest) at the highest level. Worse, once you hit 71 (and your RRSP must become a RRIF), you’re forced to withdraw money every year and pay tax on it, whether you need it or not. Many people (I’m one) believe RRSPs could eventually become tax traps.

TFSA – tax-free savings account. Here you get no deduction for putting money in ($5,000 a year or double that for a couple), but nor do you ever pay tax taking it out. Income earned inside is tax-free, you can catch up on missed contributions, and even replace money you remove. The TFSA is only a couple of years old, but will come to replace the RRSP as the prime retirement vehicle. This is where your first cash goes.

LIRA – locked-in retirement account. When you work for a company with a pension plan, then get caught on security video licking that hot accountant in the stock room and are sacked, this is usually where the accumulated money goes. But you can’t touch it until you are too old to be randy. Then it bleeds like an RRSP.

RESP – registered education savings plan. The feds let you put aside up to $50,000 for the higher education of children unfortunate enough not to become rock stars. The cash can grow tax-free inside the plan and then be withdrawn by the kids, who usually are in a zero tax bracket. If they do actually make something of themselves, and get groupies instead of becoming heart surgeons, you can put a hunk of this in your RRSP, if you have the room. Best of all, the government will give you annual grants for contributing.

Besides not having any of these, the biggest mistake people make is thinking these are products, instead of just vehicles. So they let the nice lady in the bank ravage them by having a GIC RRSP, or a TFSA that’s actually in (wait for it) savings. Others ‘buy’ an RESP from one of those greasy outfits that demand huge upfront payments and deliver abysmal returns.

These mistakes result in lousy growth, which pretty much destroys the utility of a registered investment. I’m constantly amazed at the 30-year-olds with 2% guaranteed investment certificates in their RRSPs or otherwise sensible parents who start an RESP for a newborn and buy only guaranteed investments, even though there’s a 16-year time horizon. In both cases, there are three more letters to learn. ETF.

We have a looming retirement crisis because of greed and fear. Greed that makes people buy too much house. Fear that makes them repel risk and stay poor.

Finally, back to Blair.

He has a net worth of $400,000, of which 90% is in one asset – his house.

That he’d even email me this question tells you all you need to know about what’s coming.


#1 HouseBuster on 12.12.10 at 10:19 pm

People are going to start dumping houses to get at that equity… 2003 prices are on the way… and that’s just for starters.

#2 Kevin on 12.12.10 at 10:21 pm

stats on Canadian wealth are not easy to find, but I found some that prove you are right.

Real estate assets comprised 38.3% of the net worth of Canadian households in 1999.
Real estate assets comprised 42% of the net worth of Canadian households in 2005.
Real estate assets now comprise 48% of the net worth of Canadian households and are the highest in two decades.

Canadians real estate wealth vs net wealth

#3 Dan T on 12.12.10 at 10:25 pm

Hi Garth
Tom from Mississauga here. Looks like I got my brother onto you here. He’s moved back to the land of maple syrup and renting. Thanks for the presentation at the airport. Very logically laid out. Brought out 4 people to it. My hockey buddy and his wife (they are going to get an etf with some preferreds instead of doing reno to a perfectly fine house). And my parents. I was going to show the old man how smart I was. He showed me he already has 5 of the 7 biggest stocks in the etf XEG. Oops! So I asked what I need to start doing. Humble pie tastes terrible, eh? The message is getting out there. Hitting the road again dude? What’s the ETA on the next book?

#4 tiger_baby on 12.12.10 at 10:28 pm

continue from yesterday’s comments …

The reason government is involved in economy is that … people want it to. People consistently rate economy one of the highest priorities out of all government functions. Who’s going to go laissez faire with anything when their employer demand that they be responsible for it?

Regarding the laws, we would have been able to have a simply law system, except that some, acting in their own best interest, try to circumvent the spirit of the laws to the detriment of the others. A simplified tax code, while easier for you and me to understand, may not be in the country’s best interest, given the ever changing economic landscape.

Could someone provide, or a reference to, a business plan to run the fed gov with 20% of staff? Maybe we should contract government functions out to the private sector, they probably have the ability to reduce staff 80% … with rest of the duties outsourced.

food for thought:
The countries in the world are in competition with each other without (much) further/higher “government” meddling, why has the superior laissez faire system not risen to the top?

special section for cookie and gang

ref: # 144
1. customers all over the world chose not to follow ms Rand
2. please look up “monopoly”
3. please provide a business case for entering the Canadian wireless industry, without the tower sharing rules
4. ?? OK but you are still not keeping your last penny

– I’m not saying ‘business man’ = ‘evil genius’. I’m only saying that a business man’s objective is to maximize $$, by finding the path of least resistance.
– It’s always good to broaden your literary and economic horizon.

ref: # 38
– CDO/CDS etc are unregulated private sector innovations
– “locked limit on leverage ratio” will be enforced by who? is that compatible with “let the free market work”?
– is the majority of the private sector lobbying for or against mark to market?

ref: # 136
>> what are the effects of constant money supply in an environment where both individual productivity and the number of individuals are increasing significantly (eg. over the last few decades)?
>The value of money, and thus savings, goes up?
Who, in that case, will make any investments (for example higher education). How would that effect our future competitiveness?

#5 JPG101 on 12.12.10 at 10:29 pm

Three part pst from the Huffington Post worth reading:

#6 T.O. Bubble Boy on 12.12.10 at 10:33 pm

The Toronto Star had its own version of a “why you’re all screwed in retirement” article back in October:

Why even a $1 million RRSP isn’t a pension.

#7 dd on 12.12.10 at 10:39 pm

…Blair is 60..His nest egg is but $40,000….

Easy to solve Blair. Trip to Vegas. Place it all on black 13. Retire rich.

#8 LH on 12.12.10 at 10:49 pm

13 is Red, not Black. Better put it on double zero.

#9 ontheshoreline on 12.12.10 at 10:51 pm

I believe now you can (at age 55) unlock 50% of your LIRA and at least put that portion in a regular RRSP.
I plan on doing that with my Lira next year.

#10 GenXer on 12.12.10 at 10:51 pm

A timely posting in the Star on the very same topic:–optimistic-boomers-unprepared-for-retirement

#11 Geoffrey L on 12.12.10 at 10:52 pm

Don’t expect the government to help you in the future. Tom Flanagan, Stephen Harper’s consigliere recently had this to say on Harper’s economic strategy in the near future:

“I’m hopeful there will be some ideologically-driven, neo-conservative cuts to government,” political scientist Tom Flanagan, a former chief of staff to Harper, said in an interview.
Such cuts, he added, would be consistent with Harper’s long-term goal of reducing the size and scope of government.
“I think that’s always been sort of the long-term plan, the way that Stephen was going about it of first depriving the government of surpluses through cutting taxes . . . You get rid of the surpluses and then it makes it easier to make some expenditure reductions.”

You, fellow Canadians, are either the benefactors or beneficiaries of these expenditure reductions.

#12 T.O. Bubble Boy on 12.12.10 at 10:53 pm

Apparently mortgage brokers aren’t very financially literate either… here’s a press release from, which actually states:

“The insecurity in the US, China and Ireland markets lead to fear and anxiety causing people to take their money away from the stock market and place it on the bond market thus raising interest rates for fixed rate mortgages”

Ummm… when money flows into the bond market, that raises the price of bonds and lowers the yield, so mortgage rates fell.

Good to know that so many people put their biggest purchase in the hands of these knowledgeable professionals!

#13 Tim on 12.12.10 at 10:57 pm

“Worse, once you hit 71 (and your RRSP must become a RRIF), you’re forced to withdraw money every year and pay tax on it, whether you need it or not. Many people (I’m one) believe RRSPs could eventually become tax traps.”
What else does one do who missed the real estate boom and is priced out? Where to I put my investments? I can only put 5K per year in a TSFA…

#14 Boombust on 12.12.10 at 11:07 pm

Why do we presume that Blair is a financial illiterate/ dunce?

Maybe he is just one of the legions of “working poor” that this country has been seeing more and more of in the past number of years. Ripped off and disenfranchised.

If you don’t HAVE it to “invest”, you do what you need to do with it. Eat, pay rent, operate the car.

He has probably worked hard all his life to even accumulate what little he has.

You can’t eat equity. — Garth

#15 LH on 12.12.10 at 11:08 pm

I am an idiot. 13 is indeed black. Clearly I have never dropped money on a roulette table in my life. I only bet on sure things.. like houses!

#16 yyc bubble on 12.12.10 at 11:17 pm

If you think you only have 5k of room in a tfsa, as of Jan 1st, you have 3x 5k.

If you have more to invest and do not want it in a registered account just open a cash trading account at a brokerage. If you trade within that account you could be subject to capital gains taxes (but these are taxed so preferentially for low income earners it is not really a problem). Your dividends, if you earn them are also preferentially taxed. I don’t see why someone with a modest income would be too frightened of taxes, keep in mind you don’t pay EI, CPP or income tax deducted at sources on these capital gains.

Actually a couple has $30,000 in TFSA room in January. If they have a kid old enough to file a tax return, they could have $45,000. — Garth

#17 Elmer on 12.12.10 at 11:18 pm

ETFs are great for rich people like Garth who buy thousands of dollars worth of ETFs once or twice a year, but for those of us who invest by making small monthly contributions, index mutual funds are the way to go. I can also withdraw my money from my index funds as often as I like without paying a fee unlike with ETFs.

This blog is scaring me again. — Garth

#18 OttawaMike on 12.12.10 at 11:29 pm

Re:Cookie Monster unmasked

I really got a charge out of many posters committing assault and battery on this blog’s newest wordsmith.
I wonder wire we continuing to rebut this re-volting guy?
Maybe it is time to switch to a new topic.

Hopefully in future he will regale us more in his field of expertise such as the care and handling of flashlight batteries.

#19 BrianT on 12.12.10 at 11:30 pm

#11Geoff-Flanagan is either ignorant or lying on this one-the neo-conservative tactic of running up big fiscal deficits was never intended in any way to “downsize” government expenditures-that was the way to sell it to the sheep. The goal of bigger deficits is bigger debt-I wonder who makes money servicing all this government debt?

#20 Denisa on 12.12.10 at 11:30 pm

Todays blog gave me further insight into my own risk, and plan on the greatest return for the least risk in my investment portfolio.

#21 Thetruth on 12.12.10 at 11:35 pm

Garth said:

Retire on CPP? Hardly. The average payment for the public pension plan plus the OAS supplement is $1,000 a month….

Let me expand on a contrarian point of view…

If you retire at 65 in Canada with ZERO money saved and NO CPP, you will get $1250 per month in BC (OAS + GIS guaranteed income supplement + provincial supplement) for each person. If a couple decides to get divorced when they retire (but still live together), this becomes $2500 per couple TAX FREE plus free medicare and pharmacare.

Oh, some may declare bankruptcy at 65 while having moved their money out of the country to buy/rent a winter home where you spend your winters ALL WHILE COLLECTING THE GIS GUARANTEED INCOME SUPPLEMENT!

The GIS (approx $1000 per month per person) is meant as a top up for low income seniors struggling to get by because they didnt save for their retirements. But seniors are using this for 5 month vacations. The working class in Canada hopes seniors wont spend this free money (taxpayers) outside Canada.

This abuse by our retirees from all stripes must end! The young and preboomers will not be able to afford you much longer!

This will not end well either for the young or retirees!

You are deluded. — Garth

#22 jess on 12.12.10 at 11:38 pm

… more porn tv. going after pensioners who are behind on their taxes

tax lien securitization trust –
liens hopping state to state, fast-paced, online auctions have used drop boxes and empty offices as their addresses.

The Federal Trade Commission, which has no direct oversight of the tax lien industry, has taken action under general consumer fraud statutes. The agency is suing tax sale promoter John Beck Amazing Profits, LLC, a fixture on late-night television. More than 600,000 consumers have purchased Beck’s lessons, according to the lawsuit. The agency alleges that customers initially pay $39.95 a month, but those fees can escalate to $4,000 on average—some three times that much—for more course material and other advice in how to purchase homes for what Beck says are “pennies on the dollar.”

“Despite their best efforts, consumers have been unable to buy homes for a few hundred dollars at tax sales or to quickly and easily earn substantial amounts of money,” FTC lawyers wrote in court filings. The suit is set for trial in California at the end of 2011.

Beck’s attorney, Larry C. Russ, said his client disputes the FTC’s allegations. He called Beck a “guru” of the tax lien business who is selling a “how to” book and courses to help other investors.”

#23 Signpost in the bushes on 12.12.10 at 11:49 pm

Garth, your wonderfully concise and very clear explanation of the complex investment/savings choices available to Canadians, should help many who read it.

May I add one further thought on RRSPs; these savings vehicles may indeed have caused many to question why they bothered, (especially if they have made other good savings/investment plans), when they finally withdraw it from a RRIF and, perhaps, send a large portion of those same withdrawals back to the government as income tax.

However, for those who may wish to temporarily retire for some time before they reach age 65, the RRSP can systematically be withdrawn to fund a multi-year sabbatical of some kind e.g. a sailing trip, a hike around the world, to write a book, return to school etc. So my suggestion is; the RRSP can be an extremely useful savings cache when used for a pre-retirement purpose and withdrawn at modest annual rates with a very small, or no, tax penalty as a result.

Alternatively, if left until age 71 when compulsory amounts must be withdrawn from a RRIF (which is what the RRSP becomes after transfer/conversion), these RRSP investments/savings can be an impediment to the full entitlement/enjoyment of other Canadian pension programs such as OAS and GIS which can each provide a substantial supplement to the CPP.

For those who demand large annual retirement sums of money, my suggestions may seem irrelevant, but for those who choose to live simply and with much less, they may well apply.

Finally, a thought from Henry David Thoreau; “What is this life, that we give it to laying up treasures which moth and rust will corrupt and thieves will break through and steal?” There are so many different ways to spend one’s allotted time on this earth…..

I thoroughly enjoy your writing style and the humour which is always so evident. I’m still working on the many possible interpretations of tonight’s elephant picture—I trust that for him, it was a happy ending(?).

RRSP money can only be withdrawn tax-free for buying a house or an approved educational expense. If not repaid into the plan, it becomes taxable income. — Garth

#24 T.O. Bubble Boy on 12.13.10 at 12:06 am

Back to our friend F for a second… apparently he (and many others in Harper’s cabinet) overspent their budgets this year, but the “Economic Action Plan” came to the rescue to give them extra funds!

So, not only did the Action Plan waste taxpayer money on novelty cheques and adverstising for the Conservative party (and hundreds of random construction projects that don’t create a single sustainable job), it was also a front for over-spending politicians.

Isn’t Flaherty supposed to be Rob Ford’s #1 buddy? Apparently they don’t share the same views when it comes to wasting taxpayer dollars.

#25 Signpost in the bushes on 12.13.10 at 12:12 am

Yes, money withdrawn early from an RRSP most certainly would be taxable income. How much tax will depend on the annual amounts withdrawn combined with any other source of income. Hence my suggestion that small annual amounts be withdrawn to fund one’s time spent in pursuit of some worthwhile purpose.

#26 Ben on 12.13.10 at 12:13 am

Frig this blog is depressing, I’m worth nothing.

#27 nonplused on 12.13.10 at 12:17 am

How are TSFA’s insured? Do they fall under CDIC, with a $100,000 limit per depositor per institution, including other accounts? Or do the have “broker insurance” for a million dollars but no capital behind it like my on line brokerage account? Or do you just fall in line with the other creditors?

Didn’t I say they are vehicles and not products? — Garth

#28 nonplused on 12.13.10 at 12:21 am

PS I am obviously talking about the case where the institution fails, not if my investment looses money.

#29 Geoffrey L on 12.13.10 at 12:24 am

Garth, I get really scared too whenever I hear someone say that they “bought an RSP” last year and they want to buy another one this year, so I know how you feel.

#30 Cookie Monster on 12.13.10 at 12:25 am

#4 tiger_baby on 12.12.10 at 10:28 pm

From #144 yesterday my second point repeated below

2) If a company’s monopoly is so effective at providing a good or service that competitors can not compete then that’s good, no harm done?

I should have said

2) If a company is so effective at providing a particular good or service that its competitors can’t compete and it gives them the appearance of monopoly then that’s fine, no harm done. Like the Alcoa case years ago.

As far as sharing of cell towers, sure there may be a legitimate need for government regulation in some sectors for sharing certain equipment.

Admittedly there will be situations for business where government does have to set some rules and I would contented this is fine so long as the rules are objective and fair and enable increased competition via free markets etc., but must not be done purely at the expense of an incumbent for the benefit of a newcomer.

Where I live I have Rogers cable and no other choice for cable provider so this is a monopoly on cable, but its understandable because it’s not practical to run multiple redundant cable systems through a city and sharing is out of the question because of the nature of the equipment involved. So my choices are Rogers, satellite, internet from Bell or move or nothing.

Natural gas and electricity are open to competition through shared infrastructure because they’re fungible commodities.

Government involvement with business through the use of laws and regulations is fine when it makes sense to do so and the laws are clear and objective.

#31 nonplused on 12.13.10 at 12:26 am

Oh and another question: Can I have multiple TSFA’s with different institutions each at $10,000/year like I can do the CDIC dance at several banks, or is it one TSFA at 10g/year, 2 at 5g, 3 at 3.3r g, etc. or only one TSFA allowed.

Have as many as you want, but the total cannot exceed your allowed contribution room. — Garth

#32 Geoffrey L on 12.13.10 at 12:31 am

Here is something interesting for you all to read:

Canada’s banks got high marks from the International Monetary Fund for escaping much of the carnage that ravaged U.S. and European financial institutions in the wake of the global financial crisis. Have they done enough to leverage that position?

Yes and no, but here’s the thing: In Canada the hardship still lies ahead. Our houses are still 20 to 30 per cent above normal levels, salaries are shrinking and a lot of Canadians are heavily indebted. There’s a lurking disaster, to the extent that you have reduction of purchasing power and we are just not saving hardly anything as a nation.

That’s pretty bearish.

I think things are going to get a hell of a lot worse. We still have a trade deficit today despite the fact that commodity prices are incredibly high.

I hope I’m wrong but I think Canada is on the edge of a lot of trouble.

#33 InvestorsFriend (Shawn Allen) on 12.13.10 at 12:33 am

You’re Poorer than you thought…

If you are lower middle class, About 40% of “your ” RRSP belongs to the tax man.

Higher middle class. it could be closer to 50% as you lose Old age pension… Your RRSP income takes you into the clawback range…

Low income? if any low income person retires with an RRSP it could virtually all be taken away by the government as you may partially or fully lose elegibility for the GST credit and old age pension supplement… and get taxed besides…

High Income. If you are over $100,000 or so in retirement the clawback will be done and your marginal tax rate is around 40%

When doing a net worth statement, count your house equity at 100%, RRSP savings at 60%, TFSA at 100% and taxable investment accounts at about 80%. The lower percentages reflect the expected deduction for tax…

Now remember when you contrubuted to your RRSP you got about a 40% income tax refund. So basically it only cost you 60% and it is only 60% yours. It is still a good deal.

Your 60% actually grows tax free (assuming same marginal tax rate at withdrawal). The Government’s 40% you will have to pay all that back. So think of it as zero tax on your 60% share and 100% “tax” or takeback on the 40% that was contributed by the governement and always basically remained government money.

That is how the math works assuming 40% marginal tax rate throughout…

#34 nonplused on 12.13.10 at 12:35 am

Yet another thought:

One of the nice things about RRSP’s is that the institution (bank, brokerage) has to by law have the securities on hand allocated to your account and cannot lend them out, so they supposedly do not need insurance. In the case of the institution going bankrupt (notice that the root word is “bank”), you still get your shares, bonds, cash, what have you, even if the receiver has to mail them to you. Assuming the institutions are following the rules. Do TSFA’s fall under similar legislation? No answer will be presummed to mean “no”.

#35 Joseph [Original] on 12.13.10 at 12:37 am

#21 Thetruth is not deluded.

I just had a conversation with my parents a few days ago who said that they knew many folks who are now getting a combined income as a couple of $25K through GIS and OAS. They bemoaned the fact that they scrimped and saved and now are living off their hard-earned savings while others pissed away their earnings and are now making as much as they are (or just about) through payments by the government for a total of $25K annually. This is the exact number they used. As I have stated on this blog before, they also alluded to couples who gave away their wealth to their children, proceeded to declare 0 annual income as a result, and are now getting that $25K per annum as well while living in the home that they helped their kids purchase with their wealth transfer. Whatever is left is cake as is the new revenue stream of $25K annually from the government.

#36 Mean Gene on 12.13.10 at 12:39 am

Blair and Sammy the firefighter should go into business together and buy a trailer park… the new home of the babyboomers.

#37 Contrarian Canuck on 12.13.10 at 12:40 am

Thanks for the unbiased advice Garth. It sure can’t be found in the media! It seems the media wants to get their facts from the real estate industry and other housing shills.

#38 TD69 on 12.13.10 at 12:43 am

it’s noahs ark time folks …………….look at uncle sam’s land of the broke ……………….I mean braver….oopps I did it again

#39 Paully on 12.13.10 at 12:48 am

Actually, RRSP money CAN be withdrawn tax free, if you have no other income during the year that you make the withdrawal, and you only withdraw as much as you have in available basic tax credits. Some pretty big limitations there, but tax-free it would be.

#40 walter safety on 12.13.10 at 12:49 am

You can’t eat equity ? True but it makes for very inexpensive shelter.

#41 Jeff Smith on 12.13.10 at 1:01 am

>RRSP – registered retirement savings plan. This defers

I think one of the problem with RRSP is that you can not hold US cash (at least I don’t know of anyway). Let’s say I want to purchase a US stock say Intel or something of that nature. I have to convert my Canadian cash into US dollar before I can buy. The problem with this is that the brokerage house (say TDWaterhouse, ScotiaItrade or whatever) will charge you an outrageous amount to do this conversion. Same thing when you sell the stock. The brokerage house will charge you an arm to convert it back to Canadian dollar. Nice eh? You are allowed to invest in foreign stocks but can’t put foreign cash your rrsp to buy them.

#42 Chappy on 12.13.10 at 1:28 am

I was directed to your site from a collegue of mine. From reading your blog I’ve discovered a couple of things. I’m extraordinarily ignorant when it comes to anything financial. I understand that debt is bad. I understand that real-estate is going to drop, and interest rates are going to go up. Outside of that, I don’t have the foggiest clue of what you are talking about. I also understand that I’m probably in the majority out there that doesn’t have a clue. That is scary in itself.

I understand that I need to get educated in these matters before its too late. The next question is “How do I get educated?”

#43 Jsan on 12.13.10 at 1:31 am

You want to talk about a ballooning Real Estate bubble. If this Bubble bursts allot of other Bubbles will go down with it.

“China Overbuilding to ‘Hit a Wall’: Chanos”


#44 Jsan on 12.13.10 at 1:50 am

“Ottawa, banks discuss measures to rein in Canadians’ personal debt…….Deputy finance minister Michael Horgan has broached the topic in prebudget consultations with executives from Bay Street firms, sources say.

Several bankers have told him that they would support further federal moves to cool the mortgage market, including cutting the maximum term of mortgages or increasing the minimum down payment.”


#45 Jane on 12.13.10 at 1:57 am

Good posting, Garth. The lack of funds saved for retirement by so many close to retiring is going to shape the future of all Canadians in the next decade.

#46 Aussie Roy on 12.13.10 at 2:01 am

Aussie Update

This weekends auction clearance rate set new record in Brisbane with 93% of properties NOT selling, just a 7% clearance rate. Its OK its different in Queensland, its part of the soft landing – LOL

Citizens, awake, and cast ye off the chains of home ownership

Property roller coaster not over yet

Families still on street despite banking reforms

Bubble, what bubble, no bubble here – LOL….

#47 Nostradamus Le Mad Vlad on 12.13.10 at 2:04 am

“This is beyond alarming.” — In this case, I presume you are not referring to the pic!

“The larger question is why so many people have so little.” — Guess when the boomer years took hold in the mid-1950s, when us kids started in the workforce that is when the sense of entitlement began, that because they had worked for so long and hard that govts. were expected to pay them a nice pension, etc.

Unfortunately, shit happens and now it’s blowing all over the place. The only thing one is ‘entitled’ to is the pension plan that one paid into, be it a TFSA or RSP — one’s own retirement plan. Other than that, nada, zilch.

“Unless they change their ways. Unless they learn.” — The lessons the world, and most in it, are going through presently are a great learning lesson; it’s called flying by the seat of your pants and holding on for dear life.

If one is able to utilize their creative imagination, and create a few things along the way, or work in different modes of work then it should be okay.

But for those who have been on the same treadmill for 20 + years, life is getting difficult.
SS, CPP, OAS, GIS — Don’t rely on these, as govts. may downsize or end them. Create your own pension plan using TFSAs!

Who has all the gold? Because ‘they’ make the rules (all of which can be broken).

HAARP With a lunar eclipse arriving on the 20-21st (a week or so), a good reminder of how sheeple can be fooled most of the time.

DSP — Mish’s view on HI (won’t happen), and is strictly a politically-motivated event. If it does occur, changes in govt. policy will be in disarray (as most of them are now).

GoM New and different perspective.

1:45 clip South Korea admits it fired first, so why does the west seem so obsessed with war against North Korea and, by extension, China?

Big pharma using bone drugs.

Murder by banxters Dracula would make a more interesting interview.

11:02 clip Sex, Lies, Iran and WikiLeaks plus other assorted stuff.

#48 the commenter formerly known as... on 12.13.10 at 2:13 am

My retirement plan is simple. Start working the dope “grow op” and live the high life…no pun.

#49 Michelle on 12.13.10 at 2:28 am

Actually a couple has $30,000 in TFSA room in January. If they have a kid old enough to file a tax return, they could have $45,000. — Garth

We single, childless boomers are disadvantaged! I have a cat who’s 18 years old. Can I make a $5000 TFSA contribution for her?

#50 Jack on 12.13.10 at 2:35 am

As you had noted last week.. Lets see is F grows some balls…

#51 BuBu on 12.13.10 at 2:49 am


#52 dark sad person on 12.13.10 at 3:21 am

#4 tiger_baby on 12.12.10 at 10:28 pm

ref: # 38
– CDO/CDS etc are unregulated private sector innovations
– “locked limit on leverage ratio” will be enforced by who? is that compatible with “let the free market work”?
– is the majority of the private sector lobbying for or against mark to market?

I believe those words are bits and pieces taken from a post i did on the last thread-

So had you posted all of it-i think you wouldn’t have a reason to ask those questions-

I know what CDO;s/CDS’s are and what they’re make up consists of and they bloody well were regulated-
(for as much good as the bogus rating companies did)
they were grade rated by Moodies/S&P etc. and sold to Banks and Corporations all over the World-
They sit in off balance sheet accounts and cannot be brought to the Market for pricing because the value is probably zero-

Locked limit by who you ask-

Had you read closer-you would have discovered i was talking about a Gold Standard and a locked limit supply of Credit based on Gold Reserve ratios-
Of course you need to keep in mind-it was only a hypothetical scenario-but possible because we had it once and it worked-
Of course you would need an honest Government dedicated to the People and forced by a hard backed Money supply -which we do not have-specifically because we have had no Monetary Anchor since 1971 and so the corruption and outright stupidity is rife throughout Political regimes like we have now-

Are you scoffing at “Let the free market work”?
Because if you are-then let’s go deeper into this subject and I’ll explain it for you-

#53 Bilbo Bloggins on 12.13.10 at 3:25 am

What comes to mind is the story about the grasshopper and the ant. In the store the ant was nice enough (and had enough savings) to share with the grasshopper when winter arrived.

Now we all know in the real (people) world, grasshoppers outnumber the ants big time.
We are up to our eyeballs in debt.
Taxes are going up and the younger generation is going to be on the hook for more contributions.

Aint this a beautiful country!

#54 Sasquatch on 12.13.10 at 3:45 am

My opinion as a Gen Y born is that the Boomers will more or less be able to retire, but the generations after will not. In other words the Gen X’ers and beyond will not be able to retire in mass. Either they will be the burden and responsibility of there children or work until they die.

Already I’m starting to see a growing amount of twenty somethings still living with their parents. Perhaps like the old days they will eventually inherit the property and look after their parents as they get too old.

If the boomers are going to have a rough time retiring, the generations after who are preparing less will be hit even harder.

Most people do not understand the CPP is a pyramid scheme that broke when the child rate hit 2 per couple. In places like Manitoba it has become 1.2 children per couple now, and that 1.2 later adults will have to pay for a generation twice as many as them.

#55 Mark on 12.13.10 at 3:49 am

It’s interesting about these options, we have the same problem in Australia. Our superannuation (retirement structure) sounds a little more limiting, but people have the same reaction to it – take no interest and in turn use the default option and then complain about the bugger all growth crumbs they receive.

They continually think it’s a product, when it’s really a tax structure to invest within.

#56 O on 12.13.10 at 3:53 am

I fully understand Garth why you are frustrated at people for not saving enough money and not investing money (so they don’t run out of money in their retirement era).

But I would like to propose two reasons why to this that might help you sleep at night:

1. Generational dynamics. We are in the generation of risk-adverseness.

2. People grew up being fed the “Debt=wealth” and and “Instant gratification” lines. The “gov’t will take care of you” and “it won’t happen to me/here/us as I’m/here/we are different”.

When you combine 1 and 2, you get what you have today. Little interest in investment products that are preceived as risky (and little understood) with low savings rates.

I think if the CDN Gov’t/Banks actually gave people an incentive to save with increased savings % then people would. But even the CDN Gov’t thinks debt = wealth.

#57 prollywrong on 12.13.10 at 4:04 am

the rundown on the basics is appreciated, Garth.

I understand you dislike Index Funds and the “couch potato” investment portfolio in general. why? how about a post detailing what’s wrong with that approach? fees at a discount broker will add up if i’m contributing to an ETF monthly.

also, do RRSPs make sense if you’re in your early 30’s, have a good pension plan, and are able to save 2 grand a month?

#58 Linda Pearson on 12.13.10 at 5:07 am

#23 Signpost in the bushes on 12.12.10 at 11:49 pm

Finally, a thought from Henry David Thoreau; “What is this life, that we give it to laying up treasures which moth and rust will corrupt and thieves will break through and steal?” There are so many different ways to spend one’s allotted time on this earth…..

Thoreau may have repeated this but like so many pithy thoughts, it originated in the Bible. In the new testament, read Matthew, chapter 6 verse 19.

#59 VanLarry on 12.13.10 at 5:15 am

“Besides not having any of these, the biggest mistake people make is thinking these are products, instead of just vehicles. So they let the nice lady in the bank ravage them by having a GIC RRSP, or a TFSA that’s actually in (wait for it) savings.”

Someone educated me what’s products and vehicles in this context? What’s the difference?

I do understand the main point of it, besides the wording. I recall some “investment website” where the author encourages people to put their money on GICs in their TFSA. A commenter asks and states why not buy preferred shares? Author’s best response: commissions.

Let’s see, it’s GIC 5 years, at rate of 3.4% (just before 2009, start of TFSAs it’s a fair rate) $5000, you get $909.8 in total interest.

For pref. shares: Let’s go $4000~pretty fair, since you’d be off a bit, these are shares, at rate of 6% (also fair, since early 2009 most pref. shares were at discount prices) After 5 years, you’d get $1200 in total interest. So commissions paid, assuming you’ve bought and sold after 5 years, say $100(very conservative amount, in reality it’s less).

You’re still ahead in pref. shares by roughly $190 bucks after commissions (difference = $1200-$100-$909.80). But wait, there’s more! Don’t forget, since you’ve bought these shares around early 2009, it’s VERY LIKELY that they’ve gone up in value. So you’ve most likely got capital gains too!

#60 David on 12.13.10 at 6:12 am

I guess its just irony, and perhaps this is simply stating the obvious, but the prime reason that many Canadians have been duped into chasing the real estate bubble is that were seduced by ridiculous, unsustainable low interest rates. D’uh.

Meanwhile….the major problem for people focused on the other side of the ledger is that, becasue of the same immaterial interest rates, our money is totally stagnant without climbing up the risk ladder. No matter what Garth or anyone else says, it’s not as sure-fired sesnsible a thing to do as it sounds. Generalized, historical statistics about it being a wiser and more tax-effective thing to do ‘in the long term’ are of cold comfort to someone 60 years old when he watches a market crash.

So, I fear that it’s not only the greedy, irresponsible people with 4 highly leveraged rental properties who are facing doom. It’s most of us.

#61 Dave in Victoria on 12.13.10 at 6:17 am

Granted it may be fun to take a dump on people without an RRSP or other retirement investment vehicles, but it’s a great oversight to ignore larger societal factors and conditions that could be contributing to this phenomenon.

I imagine most people are more concerned about mortgages, rent, food, hydro, gas, car insurance, the odd sweater, hockey fees, ballet classes, childcare, dental appointments, eye exams, Nabob coffee, 12 grain bread, gym memberships, cable television, and flat screen TVs than they are about saving for retirement.

The average family income seems to bounce around like a drunk employee at an office party, but it appears that for most people, retirement savings is beyond their means. Sure they might be able to contribute $100 bucks a month, but with such a paltry amount most people would rather whack a few cases of Lucky Lager each month, hoping to destroy their livers before the onset of sagging appendages and fading memories.

#62 Oasis on 12.13.10 at 8:36 am

oh no. don’t look now.
precious metals up, energy up, food commodities… up.
bonds and usd… down.
what a surprise.

#63 bigrider on 12.13.10 at 8:39 am

For those in the “RRSP tax trap” now looking to RRIF consider placing the RRIF payments in a diversified basket of flow throughs each and every year. Again, only for those with ample assets and money to live on without the need for the RRIF payments. The strategy does work despite the “expensiveness” of the underlying flow throughs. Since it’s Garth’s blog, you can email him I’m sure for further explanation.
Yes believe it or not, some people retire with way more than they need .

#64 T.O. Bubble Boy on 12.13.10 at 9:15 am

@ #41 Jeff Smith

RE: excahnge rates on buying $USD investments in a RRSP…

I believe that with most brokerage RRSP accounts, you can make a same-day purchase of a $USD money market fund (a “wash” trade) with the proceeds of the sale of another $USD investment.

The only tricky part is that you actually need to call in to the brokerage to do this (you can’t do it 100% online).

#65 T.O. Bubble Boy on 12.13.10 at 9:27 am

Funny video about the financial literacy of those buying houses in Vancouver:

(courtesy of whispers from the edge of the rainforest)

#66 CTO on 12.13.10 at 9:53 am

O #56

You’re absolutly right, people believe in the myth, DEBT = WEALTH. what a future we have in store!!!

#67 CTO on 12.13.10 at 9:59 am

I implore anyone one with a few bucks to invest, to seriously look at the US RE markets. Canadian Cities are hugely overpriced. To get a sense of perspective look at Coral Gables Florida.

Garth, what are the pitfalls in investing in Florida Real Estate? Any help?

#68 Got A Watch on 12.13.10 at 10:03 am

#42 Chappy (and any other new readers) – here, mate, a few websites to get you started, old cobber:

-first, this site, of course, for Canadians – Garth provides great free info – if you go back a few days he posted a personal financial plan for consumers that lays it out in detail

Newbie Forum at Market Ticker all ‘newb’ questions answered, many excellent links, mostly US oriented but a lot of investment themes are similar anywhere

Bill Cara Canadian master market trader, 40+ years experience, author of “The Trading Wizard”. Daily Blog, but the best part is his “Week-In-Review” posted Sundays, it goes into great detail about how various global markets interrelate and why, very insightful.

6 Canadian financial/investing sites, all very good and well worthy of time spent reading, many, many posts about almost every possible topic:

Canadian Capitalist

Efficent Market Canada

Million Dollar Journey

Norquay’s Financial Fridge Magnets Blog

The Pursuit of Financial Happiness

Tax Tips

If you want to learn to read the “charts” that every financial and trading site post:

Incredible Charts a great Aussie website, see the links down the left side under ‘Education’ for the clearest definitions of technical chart analysis concepts I’ve seen, easier to grasp than most other websites

StockCharts Chart School for more advanced learning, more concepts

Google is your friend, just search for every word or term you are not familiar with. ‘Investopedia’ has good definitions, always comes up near the top of a search.

Ask lots of questions. If you post them here, somebody will try and help you. Get an accountant (tax/investment specialist if possible) and a lawyer. And a comfy chair and a good monitor, you’ll be spending a lot of time reading. But if you don’t educate yourself, nobody will do it for you. Your ‘Bank’ will be happy to “help” you lighten your wallet, but they might not be really helping you much with their results. Learn all you can, them make an informed decision. Good luck.

#69 somecatchphrase on 12.13.10 at 10:07 am

I know a guy (boomer) who doesn’t participate in his company’s dollar matching RRSP program. The company will match, dollar for dollar, up to six percent of income. Think about it. A guaranteed doubling of your money, risk free, and this dude doesn’t partake. Why do I share this with the blog? The individual in question has 15 years experience as a sales rep for a major Canadian mutual fund company. With financial “experts” like this, no wonder so many people are screwed!

#70 Kris on 12.13.10 at 10:13 am

No wonder my wife left me for an elephant…

#71 BDG-YYC on 12.13.10 at 10:13 am

#42 Chappy on 12.13.10 at 1:28 am
” I’m extraordinarily ignorant when it comes to anything financial … I’m probably in the majority out there that doesn’t have a clue … I understand that I need to get educated in these matters before its too late. The next question is “How do I get educated?”

Dear Chappy :-)

First … The good news is that your very candid admission most likey puts you well above average right out of the gate. No denial, no baggage, good to go. So congrats … yours is a very special post and by no means “average”.

As I’ve posted previously … there is really no excuse for anyone with a bit of interest, a little committment and some highschool live in financial ignorance. Yup, especially given the particularly low level of financial awareness across the population it is entirely reasonable to expect that someone can move from a standing start to being well into the top quarter when it comes to financial knowledge is very doable and in far less time that one might realize.

Of course one of the main excuses that many people throw out to rationalize and justify their committment to lasting ignorance is … “hey … who has the time” and of course there is a long and compelling list of all the “stuff” that deprives them of any hope of actually doing anything.

Yet the average Canadian the same one who is financially pooched and too dumb to figure that out … spends more than 20 hours a week watching TV. That’s over a thousand hours a year and when you look at that on a household basis that means that a couple spends the equivalent between them of a full time job … watching CRAP on television … but they have no time put towards matters financial. That is of course unless you consider: Flipp That Crap, or Paint that Shack, or Property Bimbos, financial education programming. Not sure how much additional time goes into twitter dumb.

The fact of the matter is that anyone who whishes can move themselves from a standing start to the top quartile in the population in almost any subject matter of their choosing, with no cost and on their own schedule from their own home by taking advantage of quality information that is freely and easily available on the internet in just 90 days.

Look at it this way … for an average Canadian … just half of their TV time represents 10 hours a week – better than 40 hours a month – 500 hours a year. That’s a thousand hours for a couple.

There are some amazing resources available on the internet that few people take advantage of. This is particularly the case when it comes to matters financial.

I would think that a number of knowledgeable people on this site have some favourite web resources that have considerable educational value … that they might even post links for if asked … here are … Oh … the games on …..

Best wishes to you :-) !

#72 This is not going to end well on 12.13.10 at 10:23 am


Why do you think this is not going to end well? People have not saved for retirement. So what!

So guess what, for those who do not have retirement money they are going to continuing working? That’s a fact of life you either live in the now or you save for the future, millions made the wrong choice.

Will millions of Canadians sell there homes to get cash to retire?

No because they need a place to live so if RE drops in Value so does thier equity. Therefore they will work.

Your theory about millions dumping RE is flawed because no one will sell a worthless asset, no one is going to rent because they have no money, better to stay in the house. Just like the millions of Americans who have negative equity, its cheaper to live in the house and wait it out.

There will be no money and people will be in negative equity,, so they will work forever. Good on you.

I do not see the doom and gloom you see, what I see if a very disappointed boomer group who went through life spending instead of saving. So now greater fools you will have to work. Very simple ending.

If working to you die is doom and Gloom then I will accept that.

It does not take ‘millions’ of people selling to influence the housing market. A few hundred thousand will do. As for Boomers working endlessly. At what? — Garth

#73 AxeHead on 12.13.10 at 10:32 am

What Garth has provided is Canadian retirement planning and investing 101. This sort of unbiased education is a serious ommission from the Canadian landscape, at a time when it is most needed.

Keep publishing the education blogs Garth – how about ‘how politics really work 101’ next time. You have been where very few of us have and have insight that we could all benefit from. Put a financial twist on it just so you don’t get too cynical.

#74 Wealthy Renter on 12.13.10 at 10:35 am

I agree with most of what Garth says sbout the impending retirement crisis, especially for the want-to-be social elites with the Lexus SUVs in the driveway, $400 dinners, out of control spending and zero savings.

However, the retirement system is not a dire as Garth depicts. On Sunday, my wife (Chinese born Canadian) and I (Canadian Chinese) went to visit her high school principal who came from China in the mid 1990s, where he was immediately dumped onto the state by his son, whom he never lived with. His wife came shortly after.

Teacher Zhang is in his early 70s, and he and his wife have NEVER paid a cent of income tax in Canada, and we estimate that he and his wife receive over $40 000 in cash and services from taxpayers (Old age security x 2, free health care, a really nice senior apartment in Etobicoke at a fraction of market value, some drugs and dental etc.) They are in great shape. They work part time jobs under the table, have very active social lives, holiday back in China two months a year and send taxpayer money back to their daughter.

They are lovely people and didn’t create the system. They simply educated, connected and notwithstanding the fact they don’t speak a word of English after 15 years, take full advantage of their entitlements.

From my vantage point, Canada is a great place to retire without money. Their retired lives are wonderful.

To receive OAS you must be (1) a Canadian citizen or legal resident of Canada, (2) at least 65 years of age and (3) lived in Canada a minimum of 10 years after reaching. The maximum benefit is just over $500 a month. Perhaps you should rejoice you live in a country (unlike China) which does not let old people starve in the streets. — Garth

#75 AxeHead on 12.13.10 at 10:35 am

#75 – there are just so many jobs at Walmart. You WILL sell, at a loss, in desperation, when you can’t eat the granite or arborite counter tops. You are deluded.

#76 BDG-YYC - Chappy ... on 12.13.10 at 10:35 am

A couple of sites for you … :-)

Crash Course … Perhaps the best 3-1/2 hours you could spend … in bite sized pieces …

Financial sense archives … Amazing collection of interviews with noted financial/economic authors etc.

#77 Lost in YVR on 12.13.10 at 10:50 am

To #16 YYC Bubble and to Garth:

I thought TFSA’s were sheltered from any forms of taxation?

Contributions are with after-tax income. Gains are tax-free, as are withdrawals. Exceed your contribution limit, and get whacked. — Garth

#78 ciaoant1 on 12.13.10 at 10:56 am

Hitler parody video – Hitler as a CEO

#79 Kaganovich on 12.13.10 at 10:59 am

An interesting treatment of Adam Smith and the morality of the hidden hand:

Cookie, you seem to be crumbling a bit. It seems your last post wasn’t nearly as imbued with that Randian brand of egotistical triumphalism…Mr. Roark would be dissappointed.

#80 Timing is Everything on 12.13.10 at 11:15 am

#40 walter safety

Good point. Plus, you can ‘grow’ food on your ‘equity’.
We do. It also provides ‘free’ heat (wood) and water. My ‘equity’ is mostly off the grid.

All of which you can rent, and let your liquid assets pay the overhead. — Garth

#81 O on 12.13.10 at 11:26 am

#66 CTO “You’re absolutly right, people believe in the myth, DEBT = WEALTH. what a future we have in store!!!”

This just in:

“The ratio of household credit market debt-to-personal disposable income hit a record 148.1 per cent in the third quarter from 143.4 per cent in the prior quarter
The current rate, at 148.1 per cent, is the highest since record-keeping began for that series in 1990. Back when the series began, the ratio was 87 per cent. ”

Sad eh.

#82 bullion.bunny on 12.13.10 at 11:43 am

It does not take ‘millions’ of people selling to influence the housing market. A few hundred thousand will do. As for Boomers working endlessly. At what? — Garth


#83 BrianT on 12.13.10 at 11:44 am

#75Axe-not necessarily. The reverse mortgage scheme at CMHC is a pretty sweet deal, and as housing values crumble I would expect it to become very popular. IMO most do not understand how bureaucracies like CMHC or Fannie/Freddie operate-the goal is not increased profitability, rather it is increased SIZE.

#84 Tre on 12.13.10 at 11:50 am

Thanks Garth for all you do, great post. I know most of the stuff you covered, I’m glad you went over it for those who don’t know about the government sponsored vehicles of financial planning. Great job and keep up all the good work.

#85 Junius on 12.13.10 at 11:59 am

#30 Cookie Monster,

In your example you have also stumbled across the problem with monopolies even in a regulatory monopoly and how this leads to “crony capitalism” as described in your original article. It is complex, there are no easy answers.

You said,” Where I live I have Rogers cable and no other choice for cable provider so this is a monopoly on cable, but its understandable because it’s not practical to run multiple redundant cable systems through a city and sharing is out of the question because of the nature of the equipment involved.”

Indeed. During the infancy of the cable business in the 1970s it made sense to offer geographical monopolies to companies so they could safely invest in the necessary infrastructure to build the system.

The problem in this case (as in many) is that once built the company does not want to stay in the box. When the cable company was given your name, home phone and address it was given the most valuable piece of marketing information they could ever want. This allowed them to move into internet, mobile and other services by bundling their primary product.

Fast forward 30 years and now 3 companies – Shaw, Bell and Rogers control more than 80% of the Canadian broadcasting system. How did this happen? Their control of the consumer side put them into an advantageous position to control the system.

Meanwhile the controls on them have been continually eroding as the CRTC has been weakened and a Conservative gov’t that believes in “unfettered markets” sees no contradiction in granting regulatory monopolies absolute control on the marketplace. Remind you of the financial services sector?

It is complicated but yet another example of why the economics of the 50s is too simplistic to solve today’s problems.

#86 Junius on 12.13.10 at 12:11 pm

Another good article on the housing bubble in China. For all of those who doubt that Jim Chanos is correct. Even the gov’t admits the bubble may be over 50% in many key markets.

#87 classic on 12.13.10 at 12:14 pm

To “O”:

Did you know that in Spain, the household debt is only 115% of household income, and that the housing market has been frozen there for quite some time. Nothing sells any more over there. The supply of greater fools has magically dried out!!!!!!!!!!

Wonder why!!!!!!

In the meantime, we are going to survey deflation in Japan in May; direct flight from TO: less than $960. all incl. And well accommodation in proper hotels in Tokyo and Osaka should cost less than a Best Western in Cambridge Ontario.

Deflation, Amazing!!!!!!

At 65, we are living a little!!!!! Our retirement savings might be swallowed by inflation, but I don’t know too many who, passed 75, can do much …..anyway!

#88 Timing is Everything on 12.13.10 at 12:27 pm

All of which you can rent, and let your liquid assets pay the overhead. — Garth

Agreed, one can rent…..But why, if you do not have to?
We can still let our liquid assets pay for the overhead.
We’re not ‘average’.

#89 Timing is Everything on 12.13.10 at 12:28 pm

Mr. moderator, #36 was an oops…sorry about that.

#90 Timing is Everything on 12.13.10 at 12:29 pm

Damn # 86 was an oops…Sorry again.

#91 Junius on 12.13.10 at 12:31 pm

Wait! There is no housing bubble after all! So says an article in the Toronto Sun and we all KNOW that the Sun newspapers are the best in the country for reporting. Or it just that the writer is part of the industry. Laughable in its simplicity and stupidity. He cherry pick bank quotes and only goes back to 2008 to discuss the run up.

#92 Ret on 12.13.10 at 12:36 pm


Don’t worry, be happy. Hey dude, it is time to turn those lemons into lemonade. Party on!

Blow out your mortgage and credit cards for every cent that those silly Canadian banks will give you and move to Phoenix. Pick up a cash only part time job and retire with your dignity and self respect intact. At this point, what have you got to lose?

This 2007 built home is just one home of hundreds.

Or if you need a larger 2005 built home with 3000sf, 3 baths for a few dollars more at $144,500,

Note the property details given on this Zillow site. The MLS info. given in Canada in comparison, is a just about useless.

#93 dark sad person on 12.13.10 at 12:38 pm

Espionage Act: How the Government Can Engage in Serious Aggression Against the People of the United States

This week, Senators Joe Lieberman and Dianne Feinstein engaged in acts of serious aggression against their own constituents, and the American people in general. They both invoked the 1917 Espionage Act and urged its use in going after Julian Assange.

The Espionage Act was crafted in 1917 — because President Woodrow Wilson wanted a war and, faced with the troublesome First Amendment, wished to criminalize speech critical of his war. In the run-up to World War One, there were many ordinary citizens — educators, journalists, publishers, civil rights leaders, union activists — who were speaking out against US involvement in the war. The Espionage Act was used to round these citizens by the thousands for the newly minted ‘crime’ of their exercising their First Amendment Rights

I call on all American citizens to rise up and insist on repeal of the Espionage Act immediately. We have little time to waste. The Assange assault is theater of a particularly deadly kind, and America will not recover from the use of the Espionage Act as a cudgel to threaten journalists, editors and news outlets with.

#94 eaglebay on 12.13.10 at 12:50 pm

Don’t worry about about China.

#95 PTDBD on 12.13.10 at 1:12 pm

RBC: You Can Now Hold U.S. Dollars in Registered Accounts

This is commonplace. — Garth

#96 milestraum on 12.13.10 at 1:23 pm

Hi Garth, I’ve been reading your fun blog for ages—even when I’m traveling. So if you see hits from strange parts of the globe, it might just be me.

Now one question has been niggling at me. I don’t understand exactly why you suggest so strongly putting high flying assets into your TFSA. Wouldn’t the RRSP strategy to shelter your highest taxed assets (cash, bonds) first apply here as well? By putting your high-flying stocks into your TFSA, aren’t you effectively wiping out their inherent tax advantages (partial capital gains tax, deductibility of losses)?

And comparing the RRSP to the TFSA, looking at pure numbers, I think it would still be better to put money into the RRSP first if you expect your tax rate be lower at the time you withdraw. But I think you’re right that most people should put money into the TFSA first just because of its flexibility.

Thanks for your blog. I’ve written blogs before and I’m amazed how consistently you write and somehow keep it interesting.

The TFSA is the only vehicle in which you can score gains and yet pay absolutely no tax on them. Therefore this is the first money you take out and live on during retirement, since no tax is triggered. Therefore the last thing you want to do is shelter slow-growing assets, since this just diminishes your potential tax-free retirement income. Why waste such a sexy tool? — Garth

#97 Macrath on 12.13.10 at 1:43 pm

Global sovereign bond yields are rising fast, including Japan. The Bernank`s QE2 was supposed to bring rates down. Are these the bond vigilantes we have been waiting for ?

#98 refinow on 12.13.10 at 1:45 pm

Be careful what you wish for!!

I have been scanning blog for last couple of days and see many people questioning the rational behind 40 year amortizations and the 5% down??

We have seen massive changes in lending policies already this year, the biggest being refinances reduced to 90% maximum, instantly every home owner was handed an instantanious reduction in borrowing power of 5 %..

If they drop the 35 year amortization and the 5% down, you are pulling a very large percentage of first time home buyers out of the market. Not good for housing prices>>> Will only help burst the bubble…

As opposed to what – feeding the bubble? Who benefits from ever-higher housing values? Certainly not first-time buyers. — Garth

#99 jess on 12.13.10 at 1:46 pm

dark sad
thanks for that swedish documentary …

“The court must do its work. After 30 years Cambodians are entitled to justice. But I’ll forever be grateful to the frail old man who decided to tell me the truth. For without the truth, we will never have a chance of achieving the reconciliation that I and so many other survivors of the Killing Fields so desperately seek.”
Enemies of the People, a film by Thet Sambath and Rob Lemkin, opened on 10 December in London.
Remember the Swedish Match King Ivar Kruegar?
Trust Indenture Act in 1939
Ivar Krueger, the swedish match king expansion plans were to borrow bonds collateralizing them with gold, then later switching the collateral with risky south american bonds which eventually defaulted after the 29 crash. The law was enacted to protect the integrity of collateral against future Ivar’s and to define the role of trustees for bond indentures and collateral.

It is all relative? Put it Back
According to the Boston Post
The so-called Basel III regulations will require banks by 2015 to hold no more than 10 percent of capital in risky assets, which may include mortgages, one person with direct knowledge said.
As of Sept. 30, BofA owned more than $12 trillion in mortgage-servicing rights, down from $19 trillion last year. The bank owns and services mortgage assets totaling $2.1 trillion.
contracts are local the court in new york has no control over what you signed in minnesota(civil war case)
with no usury limit which is why credit cards can have such high rates.

Processor states State Usury laws roll backs

They used to until in “1980 Citibank offered to “invest” with new jobs other than agriculture . Ten years later Citicorp was the largest private employer in the state with over 2800 workers. It spent 27m. on buildings encompassing several hundred thousand square feet of space in order to process 17m of it 27m. visa and mastercard accounts, The state derived 20m /year from the bank as a franchise fee the only tax paid. The processing center collected over 1.5 b. /year in payments. Other card processors moved in such as ,sears,goodyear tire and rubber co and united air lines.”(page 96 collateral damage,The Marketing of Consumer Debt to America by Charles Geisst )
Delaware created its own version of a bank liberalization law. on the condition that they did not engage in retail banking and in return a very low state tax rate was imposed that actualy decreased to only 2.7 percent when the card subsidiaries earned more than 30m…”

#100 BrianT on 12.13.10 at 1:48 pm

#93Dark-This is why human rights are so fragile-you have the majority of your politicians and about 100% of your billionaire class opposed.

#101 This is not going to end well on 12.13.10 at 1:49 pm

A good read from the Bank of Canada

Do you need more?

The Bank’s advice to Canadians has been consistent. We have weathered a severe crisis–one that required extraordinary fiscal and monetary measures. Extraordinary measures are only a means to an end. Ordinary times will eventually return and, with them, more normal interest rates and costs of borrowing. It is the responsibility of households to ensure that in the future, they can service the debts they take on today.

#102 PTDBD on 12.13.10 at 1:51 pm

“This is commonplace.” — says the Garth speaking of holding American $ in Registered Accounts.

Is it?? Do you have time to provide a list? I see a lot of people mentioning “wash trades” but I didn’t realize dual currency accounts were available for Registered accounts, especially with the major Banks.

#103 T.O. Bubble Boy on 12.13.10 at 1:54 pm

WE’RE #1! WE’RE #1!

Canadian Household Debt Exceeds U.S. Levels for First Time in 12 Years

Take that USA!

Canadian Household Debt = 148.1% of gross income (and rising)

#104 dark sad person on 12.13.10 at 1:55 pm

Go Iceland!

Show the lazy sleeping chickenshit Canadians how to stand up and fight for their freedom and their kids future-

2010-12-13: Julian Assange: Readers’ Choice for TIME’s Person of the Year 2010

TIME magazine has just closed the Person of the Year readers’ poll. Megan Friedman summarized the results: “Readers voted a total of 1,249,425 times, and the favorite was clear. Julian Assange raked in 382,020 votes, giving him an easy first place.


The Icelandic Parliamentary General Committee met yesterday to discuss the ban that Visa and Mastercard placed on donations to WikiLeaks, reports The Reykjavik Grapevine. In attendance were representatives of Icelandic electronic payment companies Valitor and Borgun, which work with Visa and Mastercard, The Consumers’ Alliance, Amnesty International, and WikiLeaks spokesman Kristinn Hrafnsson, who joined via video link.

Róbert Marshall, the chairman of the committee, said that “People wanted to know on what legal grounds the ban was taken, but no one could answer it. They said this decision was taken by foreign sources.”

2010-12-13: Australian media figures in support of WikiLeaks
Submitted by admin on Mon, 12/13/2010 – 12:03

The leaking of 250,000 confidential American diplomatic cables is the most astonishing leak of official information in recent history, and its full implications are yet to emerge. But some things are clear. In essence, WikiLeaks, an organisation that aims to expose official secrets, is doing what the media have always done: bringing to light material that governments would prefer to keep secret.

It is the media’s duty to responsibly report such material if it comes into their possession. To aggressively attempt to shut WikiLeaks down, to threaten to prosecute those who publish official leaks, and to pressure companies to cease doing commercial business with WikiLeaks, is a serious threat to democracy, which relies on a free and fearless press.

#105 prollywrong on 12.13.10 at 2:02 pm

thanks to everyone who posted links to basic financial education sites. very helpful.

here’s a zombie-boomer specific question: can debt incurred by a parent (when a house sells for significantly less than it’s outstanding mortgage, for example, and there’s NO WAY the debt will ever be paid back by the boomer’s retirement income) be passed onto children when the parent dies? kind of like a reverse, black-hole inheritance of debt?

as for zombie-boomers working, an anecdote. a home depot recently opened in my town. interviewers expected 40-60 people to show up for the job fair. on the first day 160 showed, second day 200, third day 100. i would guess at least 3/4 of the people there were over fifty years old. these are generally shitty, part-time, low-paying jobs that used to be done by high-school students.

so the zombie-boomers will work, yes.

…and in London news, the ZB’s show they still want it all at the expense of everyone else.

#106 duesouth on 12.13.10 at 2:17 pm

Well here it is again. Money market in the U.S. promoting real estate as a 3-5 year hold and great buy now… go figure….

#107 X on 12.13.10 at 2:17 pm

re # 98 – the gov’t doesn’t have to make the cuts immediate, they could change the 5% down to 10% over a course of 5 years, same with 35 year amortization to 30 years, so as lessen the impact on the immediate RE market.

If that makes too much of a difference for a buyer perhaps they should not be a buyer.

#108 GregW, Oakville on 12.13.10 at 2:18 pm

Hi #233 TD69, re: your post yesterday.
Thanks for contributing!

FYI, I find it hard to read all capital lettered postings, due to someone once telling me, using all capitals is the equivalent to yelling. Don’t worry no need to yell here to be heard. Certainly if you want to use all capitals don’t let me stop you. ;)

#109 Debtfree on 12.13.10 at 2:21 pm

86 junius you really must read some facts about china re . chanos is out of touch . The minimum down payment in china for first home is 20% the average down payment made is 50% plus .

#110 bigrider on 12.13.10 at 2:28 pm

A question to debate on this blog:

1) Should CMHC be dismantled?

2) If not, why should it exist?

#111 Joe Q. on 12.13.10 at 2:35 pm

Another poster wrote: “If they drop the 35 year amortization and the 5% down, you are pulling a very large percentage of first time home buyers out of the market.”

Which came first, the chicken or the egg?

If down-payment minimums are raised to 10% and amortization lengths shortened to 25 years, we will see a quick drop in entry-level home prices, and it’ll probably be pretty quick.

I can’t think of anything that would benefit first-time buyers more than reducing the cost of their first home.

#112 Signpost in the bushes on 12.13.10 at 2:37 pm

To #42 Chappy and #57 Prollywrong

Google Derek Foster and buy his first two books “Stop Working-here’s how you can” and “The Lazy Investor”
At your local bookstore, buy Rob Carrick’s book What’s Good, Bad and Downright Awful in Canadian Investments Today”
From Garth Turner buy “Money Road”

With these four books read in that order; I promise that much will be explained to you about investment/savings options. Much of the mystery and confusion will disappear.

In addition, if you watch BNN’s “Market Call” a few evenings each week, you will gradually evolve into a more confident investor who is able to develop your very own personal investment style. Thanks to the many internet discount brokerage sites available to home based investors today, you can do it for yourself! No one will care for your money quite so much as you will. Good luck to you both.

#113 noplused on 12.13.10 at 2:39 pm

#114 BrianT on 12.13.10 at 2:41 pm

Classic article from the Toronto Star-the welfare system needs to be changed so that you can continue to own a big house while being supported by renters that probably can’t afford to buy your place-the former chief economist of TD feels it is very important to make this change to support “asset levels”–welfare-rules-forcing-people-into-destitution-report-finds?bn=1

#115 CTO on 12.13.10 at 2:42 pm

#92 Ret

Maybe Mikey the realtor can sell those Phenix properties to Blair.

I know if I was retiring here, I’d hire Mikey to sell my overpriced home to some fool and buy a small part time res here and by a house down there. Live your winters in the warm sun for a fraction of the cost and have a nice cheap mobile up here with a boat slip for summers.

Canada = extreemly overpriced
America = good value
Buy low -> sell high
Debt = homeless

#116 Bill Grable on 12.13.10 at 2:54 pm

Mr. Turner and some of us dawgies have been warning about a harp spike in Interest Rates – don’t believe us – how about Mark Carney of BOC – Monday, Dec 13th, 2010 – you are now officially warned –

“Bank of Canada governor Mark Carney repeated warnings Monday to Canadian households and businesses: don’t be caught off guard by current low interest rates and that a rate hike could be swift.

In a speech to the Economic Club of Canada in Toronto, Carney said efforts by various governments to stimulate the economic recovery are keeping borrowing rates low.

But when rates do begin to rise again, Carney said, the increase may be swift and fierce and has the potential to catch many with debt loads they can no longer afford.”

Read more:

#117 GregW, Oakville on 12.13.10 at 2:57 pm

Hi #47 Nostradamus, Thanks for the link on Bisphosphonate bone drugs.
Is that the same as the BPA in plastic, tin-can liners and some cash register receipt printer paper, that Canada just said is toxic? Hopefully the ‘toxic’ status with cause it use in common products we all are getting exposed to changed?

#118 MikeT on 12.13.10 at 2:58 pm

@ #65 T.O. Bubble Boy:
This video is so true, this weekend I met with a friend of my friends and the guy told me that at work, they have a programmer, single mother, who bought a house in Toronto. Now, her school-age kid goes to sleep hungry sometimes, because she can’t afford to buy food! She has ramen noodles for lunch that she takes from home and also she works extra hours and her kid gets no attention (shall I say “nurturing”?) from her mother.
Also, the guy told me that he plays tennis (costs him about 60 bucks per month). Usually, he had to register very early in the season to get a spot, because there is very high demand for them. Recently, he missed the early registration days, but when he logged in, there were LOTS of spots available. As he speaks with other people he meets on the court, he interprets this oversupply of spots as the inability of the people to come up with those meager 60 bucks for tennis! People are cutting back on expenses! (too bad I didn’t ask if he has to pay cash for that, or if credit card payments are accepted).
On the other hand, my wife says malls are full of people who buy like crazy. I figure lots of it is on plastic…
This will not end well.

#119 dark sad person on 12.13.10 at 2:59 pm

#99 jess on 12.13.10 at 1:46 pm

According to the Boston Post
The so-called Basel III regulations will require banks by 2015 to hold no more than 10 percent of capital in risky assets, which may include mortgages, one person with direct knowledge said.


Yep-and they’re doing their level best to get that crap off their balance sheets as they slide the sludge onto FNM-CMHC- etc,–which just happen to be Government entities which are funded by—

guess who?


#100 BrianT on 12.13.10 at 1:48 pm

#93Dark-This is why human rights are so fragile-you have the majority of your politicians and about 100% of your billionaire class opposed.


You know it and our clueless asskissing vote gathering Politicians are being led around by the few who make up the 100%

#120 AG Sage on 12.13.10 at 3:02 pm

>#62 Oasis on 12.13.10 at 8:36 am

Everyone is staring at China, waiting for them to give cues. That in itself is worrisome.

#121 BAD on 12.13.10 at 3:08 pm

It seems that Carney may have finally woken up:

He suggested the bank may raise interest rates even in a low-inflation environment to discourage risky borrowing.

“While the bar for further changes remains high,” he said, “the bank has the responsibility to draw the appropriate lessons from the experience of others who, in an environment of price stability, reaped financial disaster.”

Interest rate rise may be sharp: Carney

Now that’s as clear message as it can be without actually giving out dates of the interest raises and their size. Carney may have learned his lesson from the experience of others, but have we?

#122 Junius on 12.13.10 at 3:13 pm

#109 Debtfree,

I posted some info on China. Where is yours?

I have been to China and worked with Chinese companies. Have you?

#123 GregW, Oakville on 12.13.10 at 3:19 pm

Hi #47 Nostradamus, thanks for the last link interesting. Found this link beside yours on youtube ‘BBC_ISRAEL Did 911’ regarding some actual false flags attaches that have happened.

#124 Anne "Pom Pom" Rohmer on 12.13.10 at 3:21 pm

There goes the neighborhood……Hot off the press

“Low rates today do not necessarily mean low rates tomorrow. Risk reversals when they happen can be fierce: The greater the complacency, the more brutal the reckoning.”

Mark Carney warns again on debts: Complacency can lead to reckoning

#125 Vancouver_Bear on 12.13.10 at 3:27 pm

Welcome to Vancouver the “best” place for gangs…..oh, don’t forget to bring your bulletproof vest and AK-47 with ya…Vancouver Mayor strongly recommends both thing as a “must have” during your unforgettable visit to the Lower main_gang_land

#126 JD2000 on 12.13.10 at 3:29 pm

Here is personal experience investing with Investors Group, “we are committed to building personalized solutions on an individual basis. For over 80 years we have been helping Canadians and their families to achieve their financial goals. Our clients are not an account, or a number. They are people, members of our community” when you sign up you see this: “Important Disclosures
All numbers provided in the Retirement Planner calculations are hypothetical in nature and are based on assumptions entered into the
calculation. You should check the figures in the report to ensure they are reasonable and meet with your expectations. There is no assurance that
investment performance or the inflation rate will approximate the figures entered into this calculation as assumptions. The hypothetical
lIustrations do not represent the performance of any specific investment vehicle.”
“These projections are based on certain assumptions that are believed to be reasonable, but there is no assurance that the actual results will be consistent with this projection. The actual results may vary, perhaps to a material degree, from these projections”

Should you agree to implement the investment strategy by signing below, we will work together to:
1. Update your personal information to ensure your goals are being met;
2. Develop and maintain a customized asset mix;
3. Review, on a regular basis (or at your discretion), this investment strategy report;
4. Ensure important information like investment updates, quarterly statements, and other periodic reports are provided.

Results I have after 10 years:
Review, on a regular basis (or at your discretion)= never possible due to the amount of accounts/clients :-(
Lost 24% of the portfolio over 10 year period, going foreword, suggestion from expert buy more mutual funds
That is not going to happen

#127 Sexy Lady on 12.13.10 at 3:39 pm

If you have anything to do with the creation of the TSFA, then you deserve a big hug and kiss.

I`m puckered. — Garth

#128 AG Sage on 12.13.10 at 3:40 pm

#109 Debtfree on 12.13.10 at 2:21 pm
86 junius you really must read some facts about china re . chanos is out of touch . The minimum down payment in china for first home is 20% the average down payment made is 50% plus .

Chanos knows that the bricks and mortar banks are a drop in the bucket. Where does someone making 8k a year get that downpayment money?

Answer: They borrow it from a loan circle. Mortgages are a new idea in China; they are/were professing to be communist at one point. The shadow banking system is older and it rules the day.

Say Wu wants to buy a (cheap) apartment for 100k from Wang. He goes to a loan circle to get 20k. He goes to the bank and gets 80k, he gives the 100k to Wang. Wang joins the loan circle and (let’s say he’s prudent, for some reason) puts 20k into the loan circle. The loan circle turns around and loans that same money out again. Say this happens 5 times in one month. This non fractional reserve lending system has taken 20k of M0 money and created 100k of M1 money out of it. All of it completely outside the control of the central bank.

Now imagine that Wang invests the entire 100k back into the loan circle. Or any loan circle–the multiplier effect works no matter where he does it. Forget quintupling the money every month, the money added from the bricks and mortar banking system is actually functioning as steroids on the no-reserves shadow banking system. 20k of shadow money turns into 500k of shadow money in an eye blink.

Wait a year and let the simple multiplier run (just to make the numbers somewhat sane) We started with 20k in our little sample of the shadow banking system and now we have 1.2 million, *without* the money added by brick and mortar mortgages. Now imagine everyone in this giant circle of IOUs gets their note called. Like Bernie Madoff’s clients holding sheets of paper that add up to 1.2 million of accounts receivable, there is only 20k of actual paper money available to make everyone good. And buildings upon buildings of empty apartments.

With those additional funds from the mortgages reinvested in the loan circles we have something too astronomical to conceive of at the end of a year.

We think of China as being centrally controlled. Not so much. Their banking restrictions are only changing the peripheral money driving this bubble. It’s also limiting state funded projects which, funny enough, risks limiting affordable apartments from being constructed. This is why they just announced that state-based real estate entities are still allowed to borrow and *no one else.*

#129 fancy_pants on 12.13.10 at 3:45 pm

Looks like M.C. has been lurking around here stealing tidbits of info…

These warnings have been echoed around this blog long before this was news

#130 BrianT on 12.13.10 at 3:57 pm

They need to stop posting blogger comments under these propaganda pieces-it doesn’t help at all. This one is reasonably well written, so it has a good chance at bypassing logic-until you read the logical blogger rebuttals underneath it

#131 tran, Calgary on 12.13.10 at 4:00 pm

What about Canada?

#132 shifty on 12.13.10 at 4:00 pm

“The other half have no retirement plan, which is the pits, since 70% of all Canadians will quit working without a pension.”

This is a disaster! The implications to the future general economy will make investing a mine field. Geeeeeeez!

#133 Arun on 12.13.10 at 4:02 pm

Hi Garth… you are being proven perfectly correct… plz see

#134 GrimWeeper on 12.13.10 at 4:04 pm

Holy Shite – I’m spitting mad. Just called T.D. Waterhouse to make arrangements for withdrawing a modest sum of cash from my rather sizeable RRSP account and was told that in addition to withholding tax, T.D. would be charging me a $25. administration fee.

I made my first and only modest cash withdrawal from this same account in 2009 and was definitely not charged admin. fees at that time.

Anyone else paying fees for withdrawals and any advice, Garth, as to how modest income seniors can fight back?

#135 GregW, Oakville on 12.13.10 at 4:13 pm

Hi Garth, fyi article What else is done for money and what are the true costs for us all?

N.J. doctor supplied steroids to hundreds of law enforcement officers, firefighters
“In just over a year, records show, at least 248 officers and firefighters from 53 agencies used Colao’s fraudulent practice to obtain muscle-building drugs, some of which have been linked to increased aggression, confusion and reckless behavior.

Six of those patients — four police officers and two corrections officers — were named in lawsuits alleging excessive force or civil rights violations around the time they received drugs from him or shortly afterward.

Others have been arrested, fired or suspended for off-duty infractions that include allegations of assault, domestic abuse, harassment and drug possession. One patient was left nearly paralyzed after suffering a stroke his doctor attributed to growth hormone prescribed by Colao….”

#136 Devore on 12.13.10 at 4:19 pm

What a change, what a change a year makes.

Every so often I make it a point to watch the house pr0n channel. These days, the US-based shows/episodes, are showing a completely different picture than they used to. Gone are the high stress, nail-biting multiple-offer scenarios. In are high stress, nail-biting short sales.

Where sellers used to glee over six digit profits with multiple bidders and zero conditions, now they are taking haircuts, bringing checks to the bank, carrying two mortgages, putting their own money out of pocket to repairing inspection deficiencies, and selling far below asking after months on market.

#137 GregW, Oakville on 12.13.10 at 4:22 pm

Hi Garth, fyi new maybe, only if you haven’t been reading Garth’s blog. News Staff
Bank of Canada Governor Mark Carney expressed alarm Monday as new figures revealed Canadians are now carrying more debt than Americans for the first time in 12 years.

#138 Aaron on 12.13.10 at 4:27 pm

take a look at the foreclosures on the map, especially Florida:

#139 Fractional Reserve on 12.13.10 at 4:28 pm

The warning bells are ringing loud and clear as our trusted central banker Mark Carney warns Canadians that they have taken on too much debt. Duh! Garth has been raising the red flags for over two years and the time is near when the chickens come home to roost.

#140 Fractional Reserve on 12.13.10 at 4:35 pm

Household debt is at record levels according to our trusted Mr. Carney. Duh! Garth’s warnings have been ignored by the masses to date but the chickens are coming home to roost in the very near future. Note Carney states that rates will rise suddenly and unexpectedly. Those who think rates are going to stay low forever and going to be in massive trouble.

#141 Mikey the Realtor on 12.13.10 at 4:37 pm

Once again our fellow blogger and friend Mr Carney has come out with another warning, along with his warning he also had a side order of ‘low rates’ to stay for a while longer, just as I have been saying.

What do low rates mean? Well it means that the RE gorge is not over. I know many of the pups and poodles are going to be barking loud and obnoxiously against the reality of it all. Anybody wanting cheap RE can forget about it for at least a decade, a catalyst is required for prices to turn around and we have nothing coming up, high rates is a no, boomers selling is another 5+ years away, 35 year amort may become 30 or even 25, now that may start something, but don’t hold your breath.

On the other hand, look on the bright side; DA and I are here to take care of all your RE needs.

#142 rory on 12.13.10 at 4:42 pm

A parody on private and public pensions appropriate for today’s topic. then click on video.

Allternate site is!

#143 Devore on 12.13.10 at 4:48 pm

Cross-pollinating from the VCI blog:

Interest rate rise effects may be sharp: Carney

But when rates do begin to rise again, Carney said, the repercussions may be swift and fierce and have the potential to catch many with debt loads they can no longer afford.

Look out below!

“Experience suggests that prolonged periods of unusually low rates can cloud assessments of financial risks.”

The Bank of Canada will set interest rates based on inflation, not on whether a large swath of Canadians have taken on too much debt, he added.

He suggested the bank may raise interest rates even in a low-inflation environment to discourage risky borrowing.

Really? Rates can rise even in a low interest rate environment? Sharply and suddenly?

Warning bells have been ringing since the first rate rise announcement 6 months ago. How many heard?

#144 Pr on 12.13.10 at 4:48 pm

No you having it rong ! In canada since 1999 you dont have to work you just have to buy a house are two and wait! Its the way to teach your children , buy and wait! Its eaven better in 2008, no cash, NO SAVING,NO PAPER, just aplied to buy a house, and you are ok. You will make 10 of thousand every year. The rulers now, are so amazing, that to make sure that your not to thite every months, they give super extra low interest rate. Its a great country. House Party!

Put the weed down, dude. — Garth

#145 David B on 12.13.10 at 5:02 pm

And this means what?

Interest rate rise effects may be sharp: Carney
Last Updated: Monday, December 13, 2010 | 2:20 PM
CBC News

Read more:

#146 tangocash on 12.13.10 at 5:04 pm

that 148% debt to income figure is a bit of a headline grabber. few are mentioning that household net worth is up. debt can be used to create wealth if used properly

And how many do that? — Garth

#147 GregW, Oakville on 12.13.10 at 5:11 pm

Hi Garth, fyi article This story would sound funny but…
I wonder what it will truly cost us all, and what the PM is going to sign to keep corporate trade flowing over the boarder? Remember free trade the soft wood deal he signed! Your rights and freedoms next?
I hope this isn’t coming to Canada any time soon???
Being investigated for looking after your kids best interests, only in America you say?
Maybe our Canadian constitution can help us?

Father Harassed By CPS For Feeding Kids Organic Food

#148 dark sad person on 12.13.10 at 5:11 pm

#121 BAD on 12.13.10 at 3:08 pm

It seems that Carney may have finally woken up:

He suggested the bank may raise interest rates even in a low-inflation environment to discourage risky borrowing.

“While the bar for further changes remains high,” he said, “the bank has the responsibility to draw the appropriate lessons from the experience of others who, in an environment of price stability, reaped financial disaster.”

Interest rate rise may be sharp: Carney

Now that’s as clear message as it can be without actually giving out dates of the interest raises and their size. Carney may have learned his lesson from the experience of others, but have we?


The seen and the unseen-

Let’s look at what awaits those who Carney are warning about and more importantly-what happens “when”-

First of all-he doesn’t have to raise rates to prick the bubble-anyone with half a clue can see it’s making a u-turn on its own-
If Banks left rates low-it would slow the speed and volume of Defaults as the bubble unwinds-
So why would they raise rates and trigger a massive wave of Defaults that will for sure occur a few Months ahead of rate hikes?

I see it like this-
Our Government has “borrowed” 280 Billion from us and stuffed it into CMHC and most of it is just “sitting there” in plain sight (in case the Defaults overwhelm our World envy Banks)–So–the only way for Banks to lay their sweaty hands on “our” Money-is for borrowers to actually Default on their loans-

High rates will bring on the Defaults at a nice steady increasing pace-
While this is happening-the pile of 280 Billion will be dwindling and the balance sheets of our little darling Banks will be expanding-

That’s what this is all about-nothing more-

#149 jess on 12.13.10 at 5:11 pm


….”Risk management departments were less about controlling exposure to adverse credit events than about identifying deal structures which would minimise the amount of regulatory capital allocated to any exposure.”

#150 Mouldy Basement Renter on 12.13.10 at 5:13 pm

#61. dave in Victoria
Hilarious AND true !
You just spoke for the vast majority of “non” investors out there……

#151 Pr on 12.13.10 at 5:17 pm

If they drop the 35 year amortization and the 5% down, you are pulling a very large percentage of first time home buyers out of the market. Not good for housing prices>>> Will only help burst the bubble…

As opposed to what – feeding the bubble? Who benefits from ever-higher housing values? Certainly not first-time buyers. — Garth
And if the rulers dont stop this infation of house price, you children will be homlesse, are it be impossible for them to buy a house. Its enought!

#152 O on 12.13.10 at 5:18 pm

#146 tangocash “that 148% debt to income figure is a bit of a headline grabber. few are mentioning that household net worth is up. debt can be used to create wealth if used properly”

I can’t see how debt = wealth, ever (sorry Garth). You have to pay off the debt to equal wealth, and if you do that, it’s not debt. If it’s leveraging, it’s still debt/speculation.

Everyone (inc gov’t) thought that debt = wealth and that is one of the main reasons we all got in this world recession in the first place.

#153 Rod Serling on 12.13.10 at 5:27 pm

Up she goes … where she stops .. no one knows! :)

#154 etreamar on 12.13.10 at 5:30 pm

#41 Jeff Smith on 12.13.10 at 1:01 am

You can get an S&P500 Index Fund (INTEL is captured) that is hedged to CAD. In a TFSA, you get dividends which you can reinvest whenever your heart desires … and all tax free. No currency exchange fees either. TFSAs are way better than RRSP, but why not have both.

#155 jess on 12.13.10 at 5:42 pm

114 BrianT

This is a repeat of the discussions that took place during the deep recession of the early 90’s( Bob Rae times)
This woman is only finding out what others faced only a decade later …she is finding out what it is like to be in their shoes.–welfare-rules-forcing-people-into-destitution-report-finds?bn=1

#156 LB on 12.13.10 at 5:42 pm

For banks to continue trying to offload the responsibility for their own lax lending standards onto the Bank of Canada,the Government and all others is both audacious and laughable, if only because citizens continue to stand for it.

Unbridled capitalism has proven has corrupt as unbridled communism and this financial crises has at least highlighted what has been undermined by the infiltration of government by corporate special interests: ie that there is a purpose and necessity for government’s role and that is to maintain a vigilence in maintaining oversight and in regulation for the COMMON good,not just for some .

The Bank of Canada’s mandate is to manage inflation through adjusting their interest rates. Period.

The government did introduce, through CMHC this past April, the requirement that all borrowers needed to qualify for a 5 year mortage rate. What did the banks then do? They all circumvented this by lowering their 5 year rate so they could continue to lend more as there was no accountability, risk or ramifications for them.

Globally, banks,having already offloaded risk onto borrowers (via bankruptcies),governments (via CMHC and deficits created from bailouts) and taxpayers (via increased taxes and decreased services and benefits),they are also now trying to offload the pain onto bank shareholders (via across -the -board “haircuts”).

All the while, profits and bonuses for an ever more select banking elite continues to soar.

It is time financial institutions were made accountable for their own actions.This means increased capital/ratio requirements and resumption of default risk, (attained through higher interest rates),reduced profits and bank failures.


#157 Junius on 12.13.10 at 5:45 pm

#128 AGSage,

Thanks for your explanation of a Chinese circle jerk. You have explained everything in a manner that satisfies me that you know nothing.

Now Chanos runs a $6 Billion dollar hedge fund and has scores of analysts pouring over economic data to come up with his opinion. In response, you offer the Wong guy theory.

#158 David on 12.13.10 at 5:46 pm

134 Grim: Scotiabank is doing the same thing to me…a $25 ‘de-registration fee’ for withdrawing any amount from the RRSP.

I’m sure it costs that to press 3 keys on a computer screen…..shysters.

#159 AG Sage on 12.13.10 at 5:51 pm

#155 Junius on 12.13.10 at 5:45 pm

Nice of you to actually point out what you thought was wrong with Wong. (It was Wang, actually, a much funnier name.)

#160 Junius on 12.13.10 at 5:52 pm

#141 Mick the Dick,

Welcome back seller of fear and greed. I understand that your reading skills are about as bad as your analytical skills so I will provide a quote from Carney that says it all.

Carney said, “Ordinary times will eventually return and, with them, more normal interest rates and costs of borrowing.”

He also said, “Owing to the declining affordability of housing and the increasingly stretched financial positions of households, the probability of a negative shock to property prices has risen as well.”

What this means is that you better get another career. One bump in the road and the Re business in this country is in the ditch. In the meantime it continues to walk a tight rope.

It is over. Give it up. Time to go service yourself.

#161 Devore on 12.13.10 at 5:54 pm

#156 LB

For banks to continue trying to offload the responsibility for their own lax lending standards onto the Bank of Canada,the Government and all others is both audacious and laughable, if only because citizens continue to stand for it.

Banks do not set lending standards. For that look to our friends F and the merry bunch of legislators on the hill. They of course, unlike the greedy capitalist pig bankers, only have our best interests at heart. CMHC and Bank of Canada are not private institutions.

Unbridled capitalism has proven has corrupt as unbridled communism and this financial crises has at least highlighted what has been undermined by the infiltration of government by corporate special interests

“Unbridled capitalism”? You misspelled “crony capitalism”. (That’s where friends in high places, ie, the revolving door between industry and regulators, are called upon to enrich corporate and special interests at public expense.) That’s ok, it’s a common mistake these days, the letters are right next to each other.

#162 BrianT on 12.13.10 at 6:07 pm

#143devore-Here you have the high profile Bank of Canada head honcho doing everything but telling RE sellers to lower their prices and get that thing sold ASAP and not too many are listening-ironic.

#163 Bill Grable on 12.13.10 at 6:12 pm

How about a few of you posters grow up, drop the invective and snark and get to the point.

#164 jess on 12.13.10 at 6:20 pm

“Equity Stripping”

In fact, the homeowner in this case was actually the victim of a scam run by one of the bank’s very own employees. But despite that, the bank moved to foreclose anyway.

Six Years Of Stress

The banks say they’ve been doing all they can to work with homeowners to avoid foreclosures. But don’t tell that to Rachel Keyser from Deerfield, N.H.

“I can’t tell you the emptiness,” she says about dealing with the threat of foreclosure. “I mean, my knees started to shake, my stomach got into a knot.”

Keyser’s been on the verge of losing her home for years now. And she says the reason is that one of Countrywide’s own employees ran a scam on her, and stole a lot of money.

It all started way back in 2004, before Bank of America bought Countrywide.

Just a few months after she bought her house, Keyser says, a loan officer at the local Countrywide office called her and pushed her to refinance.

“He didn’t ask for me to come to the office or anything like that,” she recalls. “We had a couple of phone calls, and he came to the house. So this guy walked in with another very nervous-looking fellow who was supposedly a real estate person.”

Keyser is a single mom and an art teacher. She’d already been a homeowner. And she put down a $100,000 down payment when she bought the house.

But she readily admits that she’s not very sophisticated with legal paperwork, and was probably too gullible.

She says the Countrywide agent got her to sign a bunch of papers. It turns out that he was running what’s called an equity-stripping scheme, where he got her to borrow more money — and he put it in his own pocket.

Asked how much money he took from her, Keyser says, “$165,000 — the entire equity of the house.”

Loan Scam Sparks An Inquiry

Keyser’s story is backed up by documents from a state of New Hampshire Banking Commission investigation. She called the authorities, and the state eventually barred these con artists from doing business in New Hampshire. NPR spoke with three other homeowners who fell victim to the same scam.

#165 dark sad person on 12.13.10 at 6:30 pm

149 jess on 12.13.10 at 5:11 pm

Global harmonisation of prudential supervision around the Basle Accord meant that the hobgoblin of excess leverage became systemically entrenched in all markets, in all nations. The foolish consistency of harmonised capital adequacy was adored by little minds of global bankers and central bankers worldwide.


Leveraged against the truest form of Wealth on the Planet-
The Resources of all Countries and the Labor involved to extract them-

Banksters could care less about the gross Leverage and Debt to Equity failings-
They just scored 20 years of free Labor and all the riches of the World in one scoop-

#166 MKUltra on 12.13.10 at 6:37 pm

I feel sorry for those elephants. There are so deprived of any privacy/solitude that they have to resort to ‘getting it on’ with a bunch of annoying tourists and locals along for the ride.

#167 Vancouver_Bear on 12.13.10 at 7:04 pm

#141 Mikey the Realtor on 12.13.10 at 4:37 pm

The monthly interest amount even with these ultra low interest rates on that million dollar Gangcouver crack&meth shack will be twice the amount of my rent….why bother? Oh yeah I forgot your wife has to eat….

Sorry, you are on your own….dude.

#168 tangocash on 12.13.10 at 7:05 pm

#146 tangocash “that 148% debt to income figure is a bit of a headline grabber. few are mentioning that household net worth is up. debt can be used to create wealth if used properly”

I can’t see how debt = wealth, ever (sorry Garth). You have to pay off the debt to equal wealth, and if you do that, it’s not debt. If it’s leveraging, it’s still debt/speculation.

Everyone (inc gov’t) thought that debt = wealth and that is one of the main reasons we all got in this world recession in the first place.


…..debt used to create wealth is a very standard concept. Anywhere from some guy borrowing money at 2% and investing it for returns above that in the form of individual leverage (margin if you will) to companies using a bond issue to raise funds for capital expenditures. As long as your return is higher than your costs to service the debt, your are creating equity. God knows the average person with a home and a big fat mortgage for the last 15 years knows about creating equity with debt….the question is can they make it a realized gain by selling in time….

#169 CTO on 12.13.10 at 7:37 pm

#141 Mikey the Realtor

Mikey, look south my friend look south…

Can’t you sell RE in the states. When it becomes abundantly clear how badly overpriced Canada is, the RE in beautiful Florida will be on the way back up. Canada DOWN!

Everybody! Look at MLS international at other countries and see for yourself how badly overpriced Canadian Cities are.

#170 Vancouver_Bear on 12.13.10 at 7:39 pm

Video for Mikey the realtur:

Very funny….and all applicable to Gangcouver 100%.

#171 CTO on 12.13.10 at 7:43 pm

#151 Pr


I thought i was a bad speller! This guy takes the cake!

#172 Mikey the Realtor on 12.13.10 at 7:44 pm

#160 Junius on 12.13.10 at 5:52 pm

Good Evening Junius,

I have a hard time believing that you belong to any professional group as you constantly resort to name calling when someone has a difference of opinion. like I said, most of the pups and poodles will get angry and obnoxious. You sir are the winner. Btw, what website did you get that law degree from? Just curious.

#173 tran, Calgary on 12.13.10 at 7:46 pm

BoC warns interest rate hike will be swift, brutal.

#174 Devore on 12.13.10 at 7:59 pm

#168 tangocash

Sure, borrowing money for capital expansion is all fine, if done properly. Borrowing money for consumption, such as your typical consumer line of credit or mortgage refinancing is certainly foolish, unless it is an emergency you cannot pay for out of savings. That’s because it does not provide any growth, and simply steals from your future income, so you will be spending less in the future (minus interest).

And as Carney himself warns Canadians today, “experience suggests that prolonged periods of unusually low rates can cloud assessments of financial risks,” and “we continue to warn Canadian households that interest rates are unlikely to go down in the future. They’re far more likely to go up, so Canadians should plan accordingly.”

#175 The InvestorsFriend (Shawn Allen) on 12.13.10 at 8:01 pm

The greatest wealth on this planet is our accumulated knowledge base. And most of that is free for the taking.

Just ask the Chinese. They took the free knowledge (and rightly so) and built (and are building) a first world economy in about 35 years (say 1980 to 2015).

Remember, be a Winner, not a Whiner.

Remember too, (in general and on average) Winners Win and Losers lose. Losers also Whine.

The world is your oyster… grab some…

#176 Cookie Monster on 12.13.10 at 8:07 pm

#85 Junius on 12.13.10 at 11:59 am
They have a monopoly on cable for an area but not on services in total, there’s always Bell, satellite, off air antenna, move or choose not to buy at all. No one is forced to patronize a cable company. Unlike OHIP.

I would argue too that the internet and programming is a great value. I pay about $125/mo. to get the VIP package plus HPO, MPIX, TMN and high speed internet. So yes it’s a local monopoly on cable but they’re still competitive in the market. So I can’t complain, at least not like I used to complain about Bell over the years. Now there was a monopoly everyone hated. Thank god those days are gone.

I don’t know what you mean exactly by economics of the 50’s and 60’s but if you mean liberty, I contend freedom and individual rights do not have an expiry date.

#177 S.B. on 12.13.10 at 8:08 pm

Walked by a mortgage place today, their sign says: The average rental rate in Toronto is $1123 – this will support a mortgage of $270,000

8O :o

What about the land transfer taxes, condo fees, closing costs, taxes…they never mention these…

#178 john m on 12.13.10 at 8:24 pm

During a visit to Thetford Mines, Que., Harper suggested the situation is the result of individuals’ choices, and the government can’t control how they spend.

“We continue to warn Canadian households that interest rates are unlikely to go down in the future. They’re far more likely to go up, so Canadians should plan accordingly,” he said.

…………….. there you go folks…despite spending millions of taxpayer dollars to tell us things are different here our great leader is sucking back and saying “too bad suckers”…kinda reminds me of Bernie Madoff

#179 Devore on 12.13.10 at 8:29 pm

#168 tangocash

And, as you’re alluding to, borrowing money to buy a house allows you to build leveraged equity over time, but unless you sell it to realize any gains, all you get from owning a million dollar house is a million dollar property tax bill.

#180 doctore on 12.13.10 at 8:49 pm

What is this all about aussie roy?

#181 GTA001 on 12.13.10 at 8:50 pm


Your friend Mark Carney the Govenor of the Bank of Canada made a big speech today about the country’s personal indebtness of $1.5 Trillion and warning about shocks to the economy that could lead to rising unemployment, forclosures and bankruptcy. It would be a great post for tomorrow!!!!!!

Wait for it… — Garth

#182 Cookie Monster on 12.13.10 at 8:51 pm

Listen fools, I gotta take a break from this site and get back to work. So I just wanted to say thanks to Garth for the forum and to my adversaries last week for their inspiration, I got a great post out of it.
check it out it’s been refined a little better now.

Now I must get back to work, capitalism calls… err I mean socialism demands, I have bookkeeping and tax filings to prepare for my oppressor.

#183 Nostradamus Le Mad Vlad on 12.13.10 at 8:53 pm

#110 — big rider — Let CMHC fail. Banks here are big enough to absorb any losses.

#117 GregW, Oakville — Hi Greg — They are quite similar, to the best of my understanding.

#129 fancy_pants — To a large extent, this is a good example of why (roughly) everything is co-ordinated and pre-planned.

Next year is when more mortgage defaults happen in the US, commercial RE starts tumbling, re-setting of mtgs. begins in earnest here and down south — in other words, TSHTF big time.

This does not include fights between countries. A lot of things will be happening so quickly that Garth’s fingers don’t have enough speed to keep up to date (which is why we’re all here).

#134 GrimWeeper — Slightly different, but at CIBC it is free to open a HELOC, but it costs $75 to close. Banks will do any- and everything to grab someone else’s money.

140 Fractional Reserve — “. . . to our trusted Mr. Carney.”

Trusted by whom? He worked alongside Hank Paulson at GS, then was appointed by a hardnut right-wing politico who is hell bent on destroying Canada, so I have a somewhat differing view on “trusted”.

#148 dark sad person — “. . . it’s making a u-turn on its own-”

Well put, and some may understand! Don’t hold you breath, ‘tho.

#154 etreamar — “. . . why not have both.” — BINGO! A little self-discipline is necessary to put money away consistently.

#184 april on 12.13.10 at 9:07 pm

I’m curious Garth. Carney keeps warning about household debt but does little to slow it down. If he’s really concerned why doesn’t he make the changes now rather then waiting for the next budget? Between now and the next budget there could be a rush of buying to secure a home before the changes take place and sellers get their inflated asking prices which elevates prices that much more…maybe?

#185 LoonyToon on 12.13.10 at 9:18 pm

Some people are screwed. I’m 33. I rent. Happily. I owe about $10000 on a car at a real good rate (0.9%). Got a few grand in the bank, 5 grand in a tfsa and a pension worth $75 K.
Owning a house doesn’t appeal to me at all. Any value I got out of it would just go back to repairs, ’cause those 25 year shingles aren’t getting any cheaper, or younger.
When Freedom 55 comes, here’s one cat who won’t be putting the retirement savings into a water heater, I’ll send you money from Mexico.

#186 AR on 12.13.10 at 9:24 pm

Is this blog for the 65+ crowd alone? What kind of life is lived with only senile retirement years in mind? I’d rather enjoy myself while I’m young.

Hey look, everyone, it’s Kurt Cobain! — Garth

#187 Wealthy Renter on 12.13.10 at 9:42 pm

To receive OAS you must be (1) a Canadian citizen or legal resident of Canada, (2) at least 65 years of age and (3) lived in Canada a minimum of 10 years after reaching. The maximum benefit is just over $500 a month. Perhaps you should rejoice you live in a country (unlike China) which does not let old people starve in the streets. — Garth

With due respect, our senior teacher friend and his wife have almost $1900 income per month, when their guaranteed income supplement and other allowances are factored in. They pay almost no rent in a very good quality senior home. Teacher Zheng told us $400 per month, which I cannot verify.

I am all for a strong social safety net and happy if poor seniors are well provided for. I agree also that we are heading for a retirement crisis, but the situation you oft describe for retiring seniors is not that dire – even for a senior couple that has never paid a cent of income tax in Canada. They are actually quite well off.

Whether Canada can afford this level of service in the future is another question.

‘Quite well off’ in your world is $22,000 a year? There, but for the grace of God, go you. — Garth

#188 Nostradamus Le Mad Vlad on 12.13.10 at 9:57 pm

Science Stem cell research — further advances.

BoA Recall the toxic mtgs.? “Who in their right mind would buy these, unless it is the Fed, looking to dump the cost on the American Taxpayers?!” Remember CMHC — feds. here may try to pull the same stunt, but taxpayers in any country are not responsible for their govt’s. debts — the politicos are!

Drought “This, coupled with inflation, will most likely cause food prices to soar in 2011.” See how different events are actually connected?

NAU / SPP In case the first two do take place, this may be the outcome.

Oz banking system set to implode? Plus — JPM and Silver Don’t ferget the 80% of copper they bought a couple of weeks ago!

The source pretty much rules out this action. Faux News, a.k.a. 24-HOUR WARMONGER NEWS!

EU and Palestine If true, good on the EU!

11:44 clip But — “If they EVER let the UK vote on the EU – we’d be out of it within 2 hours… and they KNOW that… hence we’ll NEVER be given the referendum.”

Food Shortages Reasons may include the bitter winter and the GoM.

Not So Well Known Bernanke is working overtime.

Detroit broke Guess people are leaving. Who is going to clear all the snow?

US$52 billion of aid, yet Afghanis are still dying from starvation.

Derivatives Quadrillions to be dumped soon?

#189 Timing is Everything on 12.13.10 at 10:06 pm

@ #72
As for Boomers working endlessly. At what? — Garth

Foraging for food, perhaps?

Dispense charity from a safe distance.

#190 GrimWeeper on 12.13.10 at 10:07 pm

#158 David & 183 Nost ~ Thanks for your response.

Subsequent to my rant with another T.D. rep. this afternoon, and seriously threatening to move all my accounts to Questrade, she relented and said I could make my withdrawal and admin. fee would be waived (this one time). Wow, all this preferential treatment for having President accounts with T.D. Waterhouse is cracking me up, but I’m confident things aren’t better elsewhere.

Fearful of blowing a hole in my upper ozone, I didn’t bother to enquire what they’d charge if I should decide to move everything elsewhere. A pox on bankers and their ilk – keep your bloody hands off our hard earned shekels.

#191 S.B. on 12.13.10 at 10:09 pm

Was this posted? “Too big to fail” ;)

I know know…prefereds are not debt…but dividends are issued by discretion only…I know I know, no CDN bank has ever elminated dividends. It will not be different this time…

RBC downgraded by Moody’s
Globe and Mail Update
Posted on Monday, December 13, 2010 9:36AM EST

RBC has been lauded as one of the big Canadian banks to survive the financial crisis relatively unscathed, but Moody’s is a little bit worried about the bank’s commitment to growing its capital markets business, “which potentially exposes bondholders to increased earnings volatility and poses significant risk management challenges,” the agency said.

If a Big 5 bank misses a preferred payment, you’d better not have a GIC. — Garth

#192 S.B. on 12.13.10 at 10:13 pm

I can hear Garth’s keyboard banging as we speak…a thundering missive about Bank of Canada and personal debt levels!! Will not end well!!

#193 Joe Q. on 12.13.10 at 10:28 pm

#177 S.B. on 12.13.10 at 8:08 pm writes: “Walked by a mortgage place today, their sign says: The average rental rate in Toronto is $1123 – this will support a mortgage of $270,000”

Yep — it sure will, at 5% down, 35-yr am and 4% interest (you can run the math).

On a five-year mortgage term, that buyer would need to see 4% annual appreciation in house value just to break even (not counting taxes or fees).

#194 Mikey the Realtor on 12.13.10 at 10:34 pm

Van_bear and CTO

My offer still stands; I can sense the frustration from not being able to buy RE. You have some great people on the site to get your finances in order, myself and DA can take care of the sale, I’m sure Junius will try to get the legal aspect done, not sure if he made it that far in his online law course yet, and best of all once you are happy and settled in your new digs, call up our buddy Garth and he will set you up with some preferreds. Take action folks!

#195 brainsail on 12.13.10 at 10:45 pm

After reading Carney’s comments today, why do I think that there is going to be a large rogue wave of financially challenged people rushing out to buy houses in the next couple of months thinking that their chances of owning a house will end in the near the near future?

#196 nonplused on 12.14.10 at 12:22 am

OK, so I think I understand the TFSA a little better. They are a “vehicle”, so you actually own the investments you buy more like a brokerage account. But I am not sure how that is handled if it’s in cash (not saying it should be, but there are “savings accounts” being marketed as TSFA’s). My wife has an ING TSFA which is in cash, for example (she’s not much of an investor. She’ll buy ETF’s when I say I’m all in but that’s about it.).

I’m also still a little unclear as to how the custody of the shares, bonds, what have you works. Does the bank/brokerage have to hold them on an allocated basis like with an RRSP, or can they loan them out, or are they treated as general assets of the bank against the liability to the account holders generally, along with other bank assets?

If you have cash in an TSFA, can the bank make loans against it on a fractional basis like with a regular account? My understanding is that they cannot do this with RRSP cash, but why anyone would have RRSP money in cash I don’t understand.

#197 nonplused on 12.14.10 at 12:54 am

So far I’ve been to Wikipedia,, the RBC site, this article, basically all the first page links that come up when you Google “tax free savings account”, but I didn’t see anything that addresses the nature of the account from these 2 perspectives:

Is the account insured against the failure of the institution in any way, and,

What is the custodial nature of the account (i.e. is it like an RRSP, where the institution has to actually have the shares/bonds/etc.), or like a fractional reserve savings account (they lend out the money), or like a margin account at a broker (where they can lend out your shares).

Not like it’s a big deal, at $5000 per year you can only stash so much money there. Still, it could be a big deal for people who have that much to invest, so it would be a shame if it wasn’t insured and had custody issues. It’s a great concept, but on the other hand if it causes people to move CDIC insured money out of their regular accounts it could represent a real problem in the unlikely event of a failure, assuming there is a problem with the custody of the assets. I’m not saying there is, I can’t find any info so far saying either way how it works.

But I am a tiny bit suspicious why we are getting something for nothing here. When you get something for nothing, there is usually a catch.

#198 Kate on 12.14.10 at 1:29 am

Elephants were cute.

#199 Vancouver_Bear on 12.14.10 at 2:45 am

#194 Mikey the Realtor on 12.13.10 at 10:34 pm

I can uderstand the level of your wife’s frustration, but don’t uderstand why do I have to pay twice the amount, I spend on housing now….. just in interest in order to own a mortgage? Makes no sence and also utterly stupid.

#200 David on 12.14.10 at 4:29 am

190 Grim….excellent news! And it’s powerful for me to be able to tell Scotiabank that someone at a competitor bank did exactly what you did…which goes without saying that I will be doing, so thanks for that!

Banks in Canada lose their collective shirts about every 10 years by making too many loans to one industry or sector of the economy. And just as predictably, they quickly and quietly make it all back off their retail sheep, $20 at a time.

‘Next!….What can I do to you today?’

#201 Cashman on 12.14.10 at 9:13 am

RRSP’s are a fraud, plain and simple. Oh sure you get the ‘tax break’ now, but when you retire, watch out! My mother retired 5 years ago, and has owed every year since. Go figure. Retirement savings my foot, once you have tons of money saved up and go to withdraw it at age 65, gotcha. CRA is just rubbing their hands when you turn 65, waiting for you the fool, to take out that money and taxed at 100%. That’s a good deal if I ever saw one. Not.

#202 Vancouver_Bear on 12.14.10 at 6:33 pm

194 Mikey the Realtor on 12.13.10 at 10:34 pm

OK, deal. You pay all the interest and I pay the principal on 35 year am.