The Survivalist

In the blackest moments of the financial collapse two years ago I put the chances of us sliding into depression at 20%

Some people might shuck off two-in-ten odds. Not me. Nor should you. If you have life insurance, house insurance, car insurance, pet insurance, medical insurance or disability insurance, how can you not have depression insurance? At 20%, a rerun of the 1930s was probably more likely than you using a pneumatic hammer one weekend to nail your foot to a stud.

Depression insurance, financially, is having a balanced portfolio – lots of differing assets, and a negative correlation between fixed income and equity. So in the 08-09 meltdown, my portfolio lost 13% of its value when the Dow was down 60%. By the end of 2009 it was fully recovered – a year ahead of the S&P 500 (that happened Tuesday). Today it rocks.

Depression insurance, physically, is being as self-sufficient as possible. Hence, my Bunker. Its own water supply and septic system. Standby generator, transfer switch and wiring system capable of replacing the grid entirely in 30 seconds. Meal kits, seeds, fuel and a couple of tons of dog kibble. Oh yeah, and a Hummer with a gun rack. Hey, did I mention the fence?

Depression insurance, emotionally, is not listening to Nicole Foss. Here I draw the line.

For those of you fortunate not to know of her, Foss is a Canadian doomer who writes for a web site called The Automatic Earth, which I used to respect before it went squirrely. She’s now the poster mom for the survivalist fringe that believes 1932 was a one-nighter with Lindsay Lohan and Jack Daniels compared to what’s coming. This week lots of people have been sending me a link to her performance on a net broadcast with that gonzo Max Keiser guy – you can see it below, starting after 14 minutes of whatever.

Says Foss: Canadian banks will be decimated after residential real estate values fall by 90%. Yes, ninety. There is a deflationary credit collapse coming which will also wipe out commercial real estate. Oh, and people in Alberta can set their wells on fire, which presages the province becoming a desert.

While I’ve been warning people about over-inflated real estate values, their orgy of borrowing and HGTC home hornies, predictions like these are as believable as a Royal LePage house price survey. In short, the realtor community’s blowing serious sunshine up your rear with ‘projections’ of a normalized and balanced housing market. Foss, on the other hand, has a welding torch lit as she asks you to bend over. That she looks like Betty Crocker makes it even freakier.

As I’ve said before, there’ll be no depression – unless one hell of a lot changes, and quickly. The Canadian banks will not collapse, as the deals done this week by BeeMo and TD underscore. Profits are gushing, capitalization is adequate, business is diversified into investing, insuring, financing and retail – and the taxpayer’s on the hook for all those mortgages. So even a US-style housing deflation (prices off 40%) would likely not cause one single common stock dividend to be missed.

As for house prices here, I’m sticking with my forecast. A reduction in the average house price by 15%, with the most blood flowing in Vancouver, the Lower Mainland, the Okanagan, on the Island, in Calgary and Edmonton (already in full swing) and the GTA. That will take months to culminate, and be followed by several years of a melt – with real estate values fading by 5% or so a year.

The messy and more unpredictable part comes around 2015, when tens of thousands of below-prime mortgages loaned at emergency rates come up for renewal. Concurrent with that will be the exodus of house-rich and income-starved Boomers, as they dump their houses in a search for the holy grail of yield.

This means the prospects for residential real estate as an asset class suck. It certainly means those people with the bulk of their net worth in a house are sitting ducks for losses and disappointment. And it means thousands of hormonal young couples who bought in the last year or two with 5% down are about to learn one unforgettable life lesson. Yes, kiddies, when you buy stuff without money, there are consequences.

So, see? I can be as refreshingly depressing as the next wingnut. But only if you’re a greater fool who wonders how many tube tops Sandra goes through in a season of Property Virgin. If you’re normal, and understand how debt and greed have turned shelter into roulette, then I may actually make sense.

If a guy with moat can. Did I mention that?

211 comments ↓

#1 sue on 12.21.10 at 11:21 pm

damn! I’ve got a girl crush on your survivalist. I hate her but yet, I can’t look away.

#2 Devil's Advocate on 12.21.10 at 11:22 pm

”Realtors have been lubricating homeowners for months, telling them the sales slide of 2010 was an anomaly and everything will be back to normal (a.k.a. surging prices) in the Spring.” – Garth

Garth, I know you as a smart man. So how is it that you can come up with such an ill conceived notion as that above? What possible motive would Realtors have to do such? Not one Realtor I know and have spoken to has said this. None believe the sales slide of 2010 was an “anomaly”. Most believe it was a natural coming off a high – a normal market correction. Many others have a deeper understanding of it which would garner respect from far more Bears than Bulls. None have tried to convince homeowners it was an anomaly and why would they? What possible purpose would it serve? What do you think they are thinking; “Oh no please don’t list with me now. Wait until Spring 2011 and list with me at a higher price.”? Are you kidding? We deal with here now today. None of know with any degree of certainty what Spring will bring. Hell a whole lot more Realtors need to make a mortgage payment more than a market forecast.

A more convincing assumption might be that Realtors were telling buyers such BS in a bid to get them off the fence. And, as a matter of fact they are. Buyers, especially first time buyers, are jumping off the fence. They have been waiting, and waiting and waiting for prices to capitulate to the extremes the Bears have predicted and have grown irritable and impatient. They are jumping off the fence and are buying. The numbers of first time buyers entering the market is increasing and will continue to if not under the threat of increasing prices then under the threat of increasing interest rates. More likely interest rates than prices. On prices it’s not the threat of them rising so much as the acceptance they aren’t going to fall as much as hoped.

No things are not going to “be back to normal in the Spring”. Not in the sense that they will be like volumes of 2007 and prices of 2008 anyway. More like prices of 2005/6 and volumes of 2000. That’d be a realistic “normal” and we are not quite there yet.

But hey what do I know… seriously I’m just looking at what I see in the trenches and making my best guess. I’ve given up on fancy ciphering.

#3 BrianT on 12.21.10 at 11:22 pm

IMO Garth pretty well summed this one up accurately although he might be slightly low on the % drops-certainly his forecast appears more credible than Foss-time will tell. Nice pic today: I am sure Brynn and Co will appreciate the subtlety. Real nice.

#4 Habsfan on 12.21.10 at 11:26 pm

Is that a belly button hand grenade???

#5 Devil's Advocate on 12.21.10 at 11:37 pm

Oh and today’s pic… she looks like my wife. ;-) Seriously. Eat your hearts out pups. Ok wife doesn’t have a pierced belly button. Nor does she pack an M4.

#6 Melt on 12.21.10 at 11:38 pm

In ’08 you predicted another 15% drop for Toronto back when average prices were $361K. We’re now up to $450K.

Don’t get me wrong — predictions are just that, and come with no guaranteees. And no one should hold you to them “dollar for dollar”.

But your “I’ve been saying this all along” isn’t entirely fair anymore, IMO, even if it does happen.

I was right in 2008. And I will be correct again. — Garth

#7 goldenfox on 12.21.10 at 11:38 pm

#173 goldenfox wrote:

“Understanding Derivatives-a Primer”
————————————————–

Oh Lord goldenfox, that was absolutely hysterical,..and too true (hic). Did you write it?

no. I recieved it in my e-mail, author unknown

#8 squidly77 on 12.21.10 at 11:42 pm

after residential real estate values fall by 90%.

Smokes, that’s a big Bear, Where its HIGHLY unlikely its not impossible, after all Phoenix is nearing a 70% price decline. I can see 60% for Calgary, but 90% seems a little bizarre.

For a while in 2008 Oil crashed 75% and Nat Gas is still down 75%.

Nothing is impossible.

#9 Kevin on 12.21.10 at 11:43 pm

90%? That is a doomer for sure.

In the last 80 years the average housing bust has shaved off 35% and lasted 6 years throughout the world.

Here is a chart with countries from around the world with previous housing busts.

And a couple of charts showing Western Canadian cities housing busts of the early 80’s and Torontos bust of 1990 in real terms.

#10 Wannna B on 12.21.10 at 11:45 pm

There is more **** on the banks books than just a few mortgages backed by Government insurance, lots of rotten stuff derivatives from over the sea as well as here at home many rather touchy mining stocks. As Far as 15% down on housing that is sillier than that 90% of Foss’s. How far have US houses dropped so far? They lead we follow.

#11 squidly77 on 12.21.10 at 11:46 pm

When musing on future price valuations, the prices only need to touch there to come into fruition, they don’t need to stay there.

#12 Spazmogen on 12.21.10 at 11:51 pm

Yes, she is a wingnut.

What does worry me is this: 60 Minutes reporting on the various municipial & state bonds which are ripe for default shortly.

If several cities/towns in each state default, and the state itself is already in deficit and unable to help; what happens? A cascade of risk? The state helps the cities and adds to its own debt burden, only to find little or no federal help. What happens when the city or state can not meet its payroll? Certainly civil servants in the USA are in deep trouble. Their pensions are at risk as their employers are unable to pay. 60 Minutes reports that Illinois is 6 months behind is making payments.

When our largest trading partner is already on its knees, and the situation is only about to get worse, it begs one question: is America a smart place to invest right now or in the near future?

#13 Captain Jack on 12.21.10 at 11:55 pm

HOT! Nice pic Garth!

#14 Rex on 12.22.10 at 12:00 am

Garth,

You are lot more MSM than you let on.

Our major trading partner is in a depression…1 in 7 on food stamps…present and future debt obligations that cannot be paid back….real unemployment colser to 20%. What do you call that and how long before it comes up here?

Keiser may be a clown but listen to what he says.

Also, making a statement that a depression will not happen is irresponsible. There is no way you, or anyone else can predict the future…try something like “in my opinion….depression will not happen”

By the way, I hope that you are right.

#15 stepenharping on 12.22.10 at 12:03 am

Great picture. I love big guns ;)

#16 nonplused on 12.22.10 at 12:04 am

Nicole sounds like a real treat. 90% eh? That’s too much for even me to believe. At some point people start buying them to rent out. If they drop to 10% I am buying 10! Or maybe an apartment building.

Set the oil wells on fire? No matter what the price is people will buy oil, the price just might be a lot lower if demand drops. It will still make sense to monetize them.

But I’m still going to take the over on 20% for the chances of another leg down. Maybe not a depression, but this here financial crisis we have going on is not nearly over. I’d say we’re in the bottom of the third. Sometime over the next 3 years (innings) it becomes apparent that the various governments around the western world are insolvent beyond repair and are printing money without restraint to paper over the deficits and rollovers. The following 3 years resolve the inflation/deflation debate and the problem finally gets addressed, if for no other reason than there will be no choice by then, all possible efforts to kick the grenade down the road having been exhausted. Give or take a few years. It’ll be like a corporate reorganization: nothing happens for years and then everything happens in a few months.

In the end of the day, once the concept of leverage is thoroughly understood for the daemon it is and fully exorcised from the system, we actually have a pretty bright future ahead of us (if we can solve the energy problem). There is a lot of really cool technology coming down the pipes over the next 5 to 10 years. Medical breakthroughs that could make living to 85 affordable too, instead of the current technology that’s bankrupting the system.

PS: I was down next to nothing during the crash, and am up 10% since, but I would never ever take up as a financial advisor and tell other people to invest the way I did. It was a high risk strategy (more like a Doug Casey strategy) and I am converting to a Garth fund as soon as I think the water is safe, maybe second half of next year if there is progress on the banking solvency / government over spending / currency war / union pension plan crises we are in. But there is more than one way to get to Rome. Personal mileage may vary.

PPS: Is that your girlfriend Garth? No wonder your wife turns her attention aside! Or is that someone you hired to man one of the turrets at the bunker? If you have to pay someone for household help, they may as well be hot. Gives new meaning to “Pilipino nanny”.

PPPS: Was that a cool winter solstice / full moon / total eclipse last night or what? I skipped the naked pagan dancing due to the Global Warming cold weather though. The astrologers have all been in the news talking foreboding doom but I personally subscribe to astronomers not astrologers, and agree with the astronomers it was freakin’ cool until the clouds rolled in. Plus, as predictably as a government that borrows money to balance the budget going broke, it was predicted decades in advance. To bad we can’t get the astronomers to look at the government budget for us, but they only deal in billions so they wouldn’t be able to make the computations. Economic numbers are well outside their comfort zone. Maybe we need to get an astrophysicist to look at the world economy and tell him to think of dollars in terms or atoms. That’s right folks, including the derivative complex the known financial obligations in dollar terms now exceeds the known number of stars in the universe! Carl Sagan’s “billions and billions” didn’t prepare us for this math!

Dang it! I said I wouldn’t do anymore rants until after Christmas! I’m going to have to check in to “RA” (Ranter’s Anonymous). I was going to check in to AA before but part of the 12 step program had something to do with acknowledging a supreme being. Now that Garth’s posted this picture I might actually be able to do it.

#17 $froma$ia on 12.22.10 at 12:09 am

Whow! Foss/moss has bigger khahunas than you Garth!

90% drop! whow!

#18 northern_dirt on 12.22.10 at 12:16 am

Gotta love RT.. A state run and controlled Television station that broadcasts in a foreign language to the country it is controlled by. Which in turn is controlled by a questionable government, which has turned a blind eye to the murder of dozens of national journalists in the past 20 years.

As bad as MSM might seem in Canada or the USA, these guys are far worse.

http://en.wikipedia.org/wiki/RT_%28TV_network%29#Controversies_and_criticisms

#19 Basil Fawlty on 12.22.10 at 12:27 am

There are two issues that give me cause for concern, although it is difficult to wrap ones head around either. They are the ongoing government printing experiment of trillions of dollars to try and contain the western worlds sovereign debt crisis and the approximately $1G in derivatives.
It seems that many people are complacent about the trillions being printed, however the situation is as far from normal as PeeWee Herman.
The derivative beast is being held together with bondo and bailing wire and if the Fed and banks were forced to carry these bets on bets at market value, rather than mark to model, they would unravel like a cheap suit.
There just has to be consequences associated with both these financial monstrosities, and only The Ben Bernank could imagine a happy ending. Imagine if the printing stopped tomorrow. Alternatively, imagine QE IX. How about if there was a sudden rash of honesty and bank assets were valued at market. It feels like we are living in the Matrix.

#20 TD69 on 12.22.10 at 12:40 am

Ding a ling. After listening to that half way through I am bullish again after the adjustment. A 90% hit would mean the end of mankind as we are. So credability is now in “thunderdome” arena.
What a ding dong debby downer is. The untasty kind. Too bad she does sound intelligent but loses it in the drive through right before the pick up window.
Hey Spaz #12 thanks. I haven’t watched 60 minutes lately but just read the piece on how bad states are doing in the US but Illinois is on another planet. Now I’m really going back to the future. Holy.

#21 SafetyBear on 12.22.10 at 12:42 am

A long way before US GDP is down 10%, which is according to some the line between recession and depression.

I think the main reason a lot of people think of this one as almost a depression is the time aspect. USA has been in a funk for years now and has detached from any upward projection you’d base on 2003-2006. By the time the USA picks up again the GDP will have been held down long enough that the trend line may well be out by 10%.

For me the main difference is information. Thanks to the internet and many blogs including this one, the current state of affairs is the most analysed ever.That makes it feel more severe somehow.

And as for predictions of home prices dropping 90%…whilst unlikely and just serving as porn to us property renting bears…some areas in the USA have taken some whacking hits. I’m sure parts of Canada will too.

#22 Timing is Everything on 12.22.10 at 12:42 am

Garth said – “The messy and more unpredictable part comes around 2015….”

Who cares about 2015? What’s it gonna be like in 2030, oh Great Gazo??

http://www.bcstats.gov.bc.ca/data/pop/pop/2036bc_people35.pdf

#23 SafetyBear on 12.22.10 at 12:46 am

The UK on the other hand….

http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_cd&idim=country:GBR&dl=en&hl=en&q=uk+gdp

#24 TheBestPlaceOnEarth on 12.22.10 at 12:46 am

Was walking through my neighbourhood Kitsilano tonight where your average heritage house runs you a cool COUPLE of Million or so. Let’s take your projection of 15% loss (ON PAPER!!!) on 2 million. That 2 million house is now worth 1.7 million (You still have a roof over your head). Long term no big deal. That’s the name of the game here folks long term forced savings with a lifetime of memories. Reality is folks this isn’t about real estate agents blowing sunshine. It’s about people willing to pay whatever it takes for paradise. Why else would one pay 2 million for a home on a 33 by 110 lot when one could buy a similar house onthe east coast for 150k? The answer is obvious supply and demand. Let’s get back to that forecast of 15%. Fact is the demand is SO HUGE that there is no friggin way real estate could plunge unless interest rates go up SIGNIFICANTLY. That my friends ain’t going to happen while the baby boomers are in power. What is going to happen is rents are going to continue their march upwards, it’s called inflation folks. Finally to the American who pumps Seatlle. I’ve been there many times, I like it, But the I-5 traffice sucks, the scenery is sub par compared to Vancouver, the weather absolutely sucks raining all the time (gorgeous night out here I might add very warm). Microsoft etc means nothing as Asia wants Vancouver not Seattle. Seattle ain’t no Vancouver, ask any Seattlite they love it here. So keep dreaming renters of that “affordable” day of reckoning. Not happening because like I said to get that house for 1.7 Mill your looking at locking in at 5 years at 8.5% – can you afford those payments? Makes more sense to lock in now and get busy living and stop renting and slowly slipping away to oblivion

#25 shayre on 12.22.10 at 12:53 am

Are you taking one for the team/country Garth?

Have Flaherty, Harper, or Carney asked that you not be too negative and actually bring it down a notch as we run into our own Ponzi-scheme collapse/meltdown?

When all those working in construction and construction related jobs no longer have an income stream, what will their home be worth?

To whom will these homes be rented? The family who just lost it to the bank because they are now incomeless? How much of their welfare cheque will they be able to use to pay for shelter?

Where will the jobs to replace all the construction-related jobs come from?

Our bubble grew much bigger because we had more skin in the game, more savings that could be wiped out. But the end result will be no different than what has happened in the US.

Since 2001, how much have Canadian homes increased in value, especially when put into US$ terms? The fact is, on a per capita basis, we have built more homes in Canada over the ten years than were built in the US, so to think that all this will be a lot less severe than what the US has gone through is just not reality.

#26 Off-Gridder on 12.22.10 at 12:58 am

#9 Kevin….where are the charts?

#27 Anotherlowlyrenter on 12.22.10 at 1:00 am

I agree on the pic but I think you’re too optimistic on your assumption that Canadian banks will be hunky dory if a US housing style collapse happens. Their residential mortgage portfolio — will be OK – I agreeish there — but the associated economic effects of such a decline will cause a sharp rise in bad debts. Moreover, I’d bet that such a decline occurs in tandem with (or as a result of) a Chinese slowdown/weakness in commodities which would further impair the economy.

#28 Jsan on 12.22.10 at 1:02 am

# 5 Kevin,

” In the last 80 years the average housing bust has shaved off 35% and lasted 6 years throughout the world.”

———————————————————-

Where did you get your numbers from? Everything I have read about Japans housing bubble, prices crashed 50-80%. The worst areas in the US have dropped more than 60%.

“Japan home prices peaked between 1990 and 1991. Prices collapsed after this period, falling back to pre-boom levels. In Tokyo, prices fell by more than 80 percent. Some cities are still experiencing declines to this day. ”

http://homeguide123.com/articles/US_Housing_Bust_vs._Japan_Housing_Bust:_What_We_Can_Learn.html

Irish home prices down 50%.

http://tinyurl.com/35v6kfn

.

#29 Kurt on 12.22.10 at 1:03 am

Nice pic, but a warrior without scars lacks credibility.

#30 Jeff Smith on 12.22.10 at 1:06 am

I think I want to take survival classes!

#31 Aussie Roy on 12.22.10 at 1:08 am

I coudnt stay away – LOL…

Yes 90% is very extreme, personally I hate predictions based on nothing (the delusional please note).

I think all those that can see the over-priced nature of property tend to get this question, “how low do you think housing can go”.

My answer is if you look back though history there have been many times when renting is more expensive than to own a property. History suggests this will happen again sometime in the future. This time also seems to correspond to house prices returning to their long term average price to income ratio.

House prices are driven by credit and emotion, house values are driven by wages. Not sure why this simple concept is so hard for some to understand.

How many people have actually thought about the current RE investor business model, where income from rent doesnt cover interest payments let alone other holding expenses and profit is only gained from ever increasing asset appreciation. Its a flawed model once you take away the delusion of ever increasing prices. To be clear I’m taking about current prices versus current rental return, after all this has to be an attractive investment option to keep new investors (not speculators) participating in the market.

Can anyone think of another business model where renting out your investment returns you less than the cost of holding the asset. (Let me guess but housing is different – LOL, not when you look at history).

So how far will they fall, they will fall enough for housing to once again become a true “yield producing asset” not just the current speculative purchase based on “prices always go up”.

Before someone says well rents could rise instead of prices falling to reach this LTA. I would argue this still means 2 main things. 1. that prices are stationery no gains means no profit (actually its a loss) based on the current speculative nature of house investing. 2. It implies high inflation which of course means higher interest rates which increases the holding costs for the RE speculator.

So no prediction here on how much prices will fall but the numbers and history suggest it will be to a level that for the logical yield investor housing will once again become a true investment and not just the speculative position it has become.

Take a look to the south there are many places in the US that it is now cheaper to own than to rent. Yes interest rates are still very low further prices falls are of course possible as these rates rise as true investors (not speculators) seek a return above their holding costs.

I’m sure you can find numbers for Canada but here these long term averages (LTA) are.

Interest rates 8.83%
Rental return 9.04%
Price to income ratio 3.67:1
(Data set Australian housing 1890 to 2008, UNWS)

These will all come around once again as “revision to the mean” is assured, regardless what the delusional believe or say.

Currently housing is not about economics its a religious belief.

#32 shayre on 12.22.10 at 1:08 am

Garth,

… As for house prices here, I’m sticking with my forecast. A reduction in the average house price by 15%, with the most blood flowing in Vancouver, the Lower Mainland, the Okanagan, on the Island, in Calgary and Edmonton (already in full swing) and the GTA. That will take months to culminate, and be followed by several years of a melt – with real estate values fading by 5% or so a year.

How much do house prices fall from their peak in the markets mentioned above?

How many years does the melt run?

#33 Duke on 12.22.10 at 1:10 am

Thanks for adding me to your friends list Garth. Nicole Foss did the same yesterday. Talk about coincidental. Garth I’ve got to say I’m torn. Nicole and you both make great points. Both of you acknowledge peak oil as well as the coming plunge in real estate prices. And your slide shows both convince me to start learning how to roast squirels.

Your assumption is that peak oil will mean that there will continue to be an orderly consumption of gasoline and crude oil in North America and Europe. I’m not so sure about that. 100$ plus oil is also going to put a big dent in stock valuations and quite possibly start another recession. Did you see the spending report today? Spending was down 0.2% excluding energy.

I’m not saying your wrong. In fact I know you have been 100% correct over the last 12 months. If your beard were any longer I’d start praising you as Moses. You clearly understand human nature and the markets better than most. You knew the Boomer Geezers would find dividend paying stocks irrisistable. I can’t believe I didn’t see that.

Right now 20% of my assets are short positions, 20% are commodity long positions and 60% are fixed income. I haven’t made much in the last 12 months but haven’t lost anything either. But I’d be up 10-15% like you if I had listened to you!

#34 Jeff Smith on 12.22.10 at 1:10 am

I reckon this would be a nasty hit on the economy if they all decide to pull a subprime on the student loan. I glad I paid mine off. whew!

http://www.msnbc.msn.com/id/40772705/ns/business-cnbc_tv

#35 T.O. Bubble Boy on 12.22.10 at 1:11 am

Apparently Garth and gun repair shops in Texas have the same taste in “girls with guns” photos:

http://gunsthatwork.com/Repairs.htm

(not that I’m complaining about the pic!)

#36 Republic_of_Western_Canada on 12.22.10 at 1:18 am

Whatever.

Bring on the bikini gunbelts! (I’d like to see her in action though, not just carrying around her gear.)

#37 Patz on 12.22.10 at 1:25 am

If your bunker really is set up the way you say Garth, you’re closer to Foss than you want to admit.

Based on the fundamentals, she’s predicting a full–on depression, worse than the last one because we’re in worse shape going in. But…

All we can say for sure is that for sure we’re going to find out, probably sooner rather than later.

#38 InvestorsFriend (Shawn Allen) on 12.22.10 at 1:33 am

Thank God for wing nuts. If you and I are going to beat the market average, then we need some dum dums to trade their stocks for bottled water and such.

If everyone thought the same way there would not be much of a market for stocks.

But Nicole does command attention. And if you have people’s attention you can always make money even if your message is wacko.

#39 Patz on 12.22.10 at 1:38 am

Speaking of survival, an Italian physicist who has been studying the Gulf Current for years said that the current was disrupted and in fact stopped by the chemical dispersant BP used in the Gulf spill. He predicted, in July, that the UK would have one of its worst and coldest winters on record as a result. He also says the current aka the Loop Current has not restarted.

Let’s hope that’s all tin–foil–hat stuff, ’cause if it’s not then best invest in parkas for the Eurozone. According to the ice core record the last mini–ice–age got going in less than a decade. Gosh, I hope it warms up before the Royal Wedding!
http://blogs.alternet.org/refugee/2010/12/20/britain-coldest-december-in-100-years/

#40 smartalox on 12.22.10 at 1:41 am

I may be exposing my ignorance here, but I read:

[I]So even a US-style housing deflation (prices off 40%) would likely not cause one single common stock dividend to be missed.[/I]

Isn’t it PREFERRED shares that pay dividends, and common shares are bought and sold for capital gains only?

Both pay. — Garth

#41 Nostradamus Le Mad Vlad on 12.22.10 at 1:43 am


Betty Crocker & Jack Daniels & Nicole Foss & Luke Skywalker. Great film, won 38 Oscars. Remember it well!

A mean figure between a (US) 30% housing correction and Lindsay Lohan’s 90% figure would probably average out to a 55% flatliner, give or take.

But Canada’s different, eh? We have a higher debt ratio than most, so there is more to lose on a percentage basis, but most don’t realize or understand it.

We may have more land, but it is filled with sheer stupidity, not natural beauty and commodities.
*
#5 Devil’s Advocate — “Nor does she pack an M4.”

Isn’t the M4 a frozen motorway somewhere in Limeyland? Mebbe I’m in the wrong part of the world!

#12 Spazmogen — “. . . Illinois is 6 months behind . . .” — Last I saw a week or two back, 47 states are broke, bankrupt, running on fresh air, unions and union pension agreements are being torn asunder and tossed into recycling bins.

That’s another reason why 2011 will be a fascinating year, to see how things unfold; it will be nasty.
*
Euro One; Euro 2; and US One.

Re: last night’s (Monday) link about China and India cozying up, now Russia has done the same.

Sovereign Collapse from Ssshhhhhh . . . You Know Whut.

Obama and E.O. for the ‘net.

The Thud Before Xmas is the lack of sales.

Pix from the lunar eclipse.

#42 EJ on 12.22.10 at 1:48 am

This ain’t your average recession. This is a credit bubble. Every credit bubble in history ended very badly. This one is the biggest yet. It’s global. It’s Epic. How could it not end catastrophically?

The only hope they had of coming out of this better than the ’30s depression would have been to not repeat the mistakes of the policy makers back then. But no, they repeated them and multiplied them. The “recovery” is an illusion and is starting to dissolve. Europe is in shambles and they’re trying to cover over it (again) and push it down the road (again), only making it worse (again). USA is broke from top to bottom; Individuals, cities, states, and the Feds. China’s bubble is out of control and even their attempts to deflate it aren’t working, so it’s sure to blow up in their face. Australia’s RE bubble is as out of whack as ours is and will implode with likewise disastrous consequences.

All of this will decimate the precious, precious banks. Their side-bets will go bust as a result, causing a chain reaction of failures since they’re all in it up to their necks and have bought each other’s debt. Government’s answer? More bailouts, at our expense of course. There’s no end in sight to the bailouts until people completely flip and decide enough is enough. Seen the violence in Greece? Expect more.

And everyone’s counting on the boneheads who got us into this situation to get us out of it?? These guys have done EVERYTHING wrong. You can’t possibly look at this global clusterf*ck of a situation and think anyone is coming out with a mere black eye or fat lip.

I wish I could be as optimistic as Garth. I really do. Where’s the silver lining in all this? That the HFT’d-to-death stock market’s A-OK again? That the massaged and “seasonally adjusted” numbers from government and industry say everything’s on the up-and-up while obviously ignoring the rest of the world? The only glimmer of hope I’ve seen is the appointment of Ron Paul, the actions of governor Chris Christie, and the recent bill brought up by Dennis Kucinich. But they’re up against massive resistance from the banks and their cronies. I hope they can start turning things around down there. Who knows, maybe their honesty and common sense might start spreading!

#43 Timing is Everything on 12.22.10 at 1:49 am

Garth said “The messy and more unpredictable part comes around 2015, when tens of thousands of below-prime mortgages loaned at emergency rates come up for renewal.”

Hmmm…Maybe some new secret, yet-to-be announced, government policy\rule(s)\scheme ‘action plan’. You know, just to get by this small ’emergency’.
Federal election 2015 anyone?(After the election in 2012 of course). Ha.

http://en.wikipedia.org/wiki/41st_Canadian_federal_election

#44 garth turner jr on 12.22.10 at 1:51 am

Vancouver will not drop Dad.

It is the capital city of a region that is self sufficient and located in the safest sector of the world.

You and Nostradamus jr. had this argument over Thanksgiving Dinner.

Sheesh Daddio

#45 kitchener1 on 12.22.10 at 1:54 am

Thing with markets is that they still irrational for longer then expected and when things turn to the downside, its usually quicker and more fierce then anyone expected.

In outlining areas of the GTA- Barrie, Brampton,Durham region values are off by way more then 15% already with little to no fanfare.

We will drop exactly as long as it takes the markets to revert back to the mean income index in that region. 5.1 income in toronto means that the drop will be much larger to get back to an approx mean of 3.5.

#46 Devore on 12.22.10 at 1:54 am

Ha, 90%! I don’t know that real estate would drop that much even in a mad max scenario. That’s nuts.

I do think it is absolutely silly to say that the current situation will just go on forever. Governments (and, well, pretty much everyone) running deficits forever is not sustainable. Clearly, for now the music is playing in this game of musical chairs, and everyone is partying. Then the music stops, and there is a mad scramble. All, ALL unsustainable things seem fine and keep going, until suddenly they don’t.

I think it’s also silly to predict when this will happen. Could be a month, a year, 10 years, 50 years, 100 years. Who knows! That’s right, no one, and anyone telling you they do is full of bs. If bubbles and manias are irrational, how can you possibly predict them?

There is zero political will, and even less voter pressure, to address the situation. Zero desire and zero possibility of any government on the planet running a balanced budget, ever. As long as governments can borrow money, they will continue to run deficits and carry gigantic unfunded liabilities, financing the dreams of the something-for-nothing population, who want nice things now, but prefer to pay later. Much later. Ok, never. As long as governments can simply pay off the credit card with a new bigger card, the party will go on. Until, of course, it doesn’t.

In the mean time, be aware of the fundamentals, and basic laws of economics, and assume the defensive position. But don’t lose sleep over it, eh? There’s a life to be lived.

#47 Andy on 12.22.10 at 2:22 am

Garth,

Its difficult to understand why things would get messy in 2015 with boomers. Why would they dump en masse as retirement is not mandated at 65 but you could work till you drop.

Wouldn’t a slow bleed for the next 5-6 yrs of about 2-5% per yr be a realistic scenario in canada?

#48 Tim on 12.22.10 at 2:25 am

Yeah, the survivalist!

#49 obert on 12.22.10 at 2:26 am

LOL: Price decline 15% in a year and then 5%/year… You are an optimist. In SK prices more then doubled in the last 4 years… so your prediction is not a big deal for those who bought 2-3 years ago. You are almost bullish… . There was a housing bubble 3 years ago and now it is just bigger… If you do not agree, can you say when the Canadien residential RE entered into a bubble? One year ago, two, three, four or five???
GT, no hard feelings – I love your blog, etc.- just think that you are 50% too optimistic.
Merry Christmas and Happy New Year!!

#50 Chaos on 12.22.10 at 2:32 am

Capitalism is the ultimate form of socialism for the corporations.

To big to fail…

And rocks always roll downhill.

Man the 60’s were awesome.

#51 Jody on 12.22.10 at 2:32 am

First off, that ain’t an M4 she has, it’s an HK MP5, a pea shooter that would do squat to a government thug wearing body armour. Personally I go for the HK41SG1 a rifle with real stopping power. For face to face combat I prefer the Benelli M4 Super 90. Her finger should not be on the trigger, that is bad gun handling and will lead to an accident. That Foss MILF, I think she’s a bit of a nutter.

#52 dd on 12.22.10 at 2:44 am

Thanks for the picture. I don’t need to know anything else today.

#53 Aussie Roy on 12.22.10 at 2:46 am

DA from yesterday your “land” is a great investment is a great example of Cognitive dissonance. Based on not one single economic principal, not even your own actions but your belief.

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

“People are biased to think of their choices as correct, despite any contrary evidence. This bias gives dissonance theory its predictive power, shedding light on otherwise puzzling irrational and destructive behavior”.

I find it funny people will rationalise anything if it suits their belief regardless of overwhelming contrary evidence. You say you sold RE but you still support the same old beliefs. You mentioned land, I presume vacant non income producing land, so the basis of your belief is land always goes up, seeing that is the only way you could cover holding costs and actually make any money.

#54 dd on 12.22.10 at 2:56 am

….Foss: Canadian banks will be decimated after residential real estate values fall by 90%….There is a deflationary credit collapse…

I totally disagree with her forcast. Real estate at $0.10 on the dollar? Revenue / wages would have to collape for this to turn. Govenments around the world will print boat loads of money before that happens. We will get more price inflation than anything else going forward.

Prices in Calgary have dropped 15%. Still another 15% to go until debt / income ratios are back in line with historic measures.

DD

#55 dd on 12.22.10 at 2:59 am

#11 squidly77

…When musing on future price valuations, the prices only need to touch there to come into fruition, they don’t need to stay there….

True. Buy when there is blood in the streets.

#56 Spiltbongwater on 12.22.10 at 3:09 am

Thanks for the mention of welding torch Garth. Reminded me to check what the withdrawl rate of Flamal 29 is.

#57 Aussie Roy on 12.22.10 at 3:16 am

Aussie Update

http://www.smh.com.au/business/couple-to-face-court-over-collapse-20101221-194fq.html

“The oceanfront Bondi apartments owned by the couple are either on the market or have been sold to repay mortgages.

One sold last month for $1.5 million – $2 million less than its 2008 purchase price. The remaining five apartments are still on the market”.

http://www.theage.com.au/business/property/queensland-mortgages-falling-behind-20101221-193sg.html

“Queensland home owners are falling behind in their mortgage payments at one of the fastest rates in the country, with the Gold Coast and Brisbane CBD among the worst spots, according to a new mortgage delinquency report”.

Dont panic, it will be a soft landing, no bubble here…LOL

#58 dark sad person on 12.22.10 at 3:16 am

I like Stoneleigh-

She is a dark sad person-
She is a deep thinker-
She has an incredible grasp of Mass Psychology-
She has a great understanding of Austrian Economics-
She knows what Deflation is and does-
She understands Peak Oil-
She designed G’s fallout shelter-
She can see ahead quite well–

But-i don’t agree with all she says-
She discounts (to my knowledge) the possibility of a hot war-a technological break through-
She has such deep knowledge of so much-yet she discounts or misses the fact that the Market will win in the end and whatever picture emerges from that-the sun will still come up in the morning and there will always be a Market-always

#59 dd on 12.22.10 at 3:36 am

Inflation, where is it? In China. When China revalues the Yuan it will come home to the US. Wait for it.

#60 Meooyah on 12.22.10 at 4:21 am

“In the blackest moments of the financial collapse two years ago I put the chances of us sliding into depression at 20%”

“As I’ve said before, there’ll be no depression – unless one hell of a lot changes, and quickly.”

==========

Make up my mind.

Learn to read. — Garth

#61 confused and a little crazed on 12.22.10 at 6:30 am

#6 poster – melt

hi garth,

i kinda agree with melt I do remember you prediction of 15 % so van east the houses were going for $699K and in that same area some houses sold for 598K – 630 K so it was about 15 % in that area.

But 2010 prices have exceeded the 2008 highs. i think East van house is about $720K so 15 % would bring it down to about $612 K…not exactly… but you did say average and it will drop another 5 % year after year until 2015. the west end is even more crazy…i ‘m not going to even bother w/ those numbers

regardless this 15 % will not bring it back to normalcy…rents still much cheaper

as for the stock market it will crash again b/c the rules are essential the same. it could be as earlier as Sept 2011.

I do listen to what you say but I do not heed everyword. I ‘ve bought individual stocks. I do n’t have a million in assets to buy securely w/o fear of lost. But I’m doing Ok . learning a few points from u and others books have made me a patience / careful investor. hopefully that will carry me thru life and bring me good financial health…merry xmas to u / dorothy and bandit

#62 jjpetes on 12.22.10 at 6:43 am

Garth, I used to think Max Keiser was mildly interesting a few years ago but he quickly became simply annoying. Why give any press for them at all? He is completely discredited with the JP Morgan silver manipulation gig, hyperinflation calls, as well as so many other miss queues and statement embarrassments during his almost idiotic looking rants. He hit his expiry date for me when he started ranting ridiculously with that short BBC running stint called “The Oracle”.

Nicole Foss, most of her predictions can only be best summed up as prophetic snake oil.

Please people be warned of the type of people that make predictions. They are astroeconomic crystal ball shysters who have absolutely no clue as to whats in store ahead. In fact no one does. Beware of assumptions masquerading as facts. The only fairly reliable indicators you can utilize for future performance are statistical facts such as interest rates, seasonal trend analysis, the forex market especially the US Dollar, also a firm understanding of the futures market which provides you a good analysis tool for the forward contracts where large financial entities are committing capital.

While I will admit that silver is a good asset class to purchase as well as the associated mining stocks, its simply not factual to think that you are going to beat JP Morgan at the markets game by buying an ounce, it is simply not reality.

My point here Garth is keep your website to the topic of real estate and capital allocation. As David Rosenberg so eloquently puts it in his SIRP investing which is Safety and Income at a Reasonable Price.

Garth, if you compare your predictions to Nicole Foss’s then your about to look far too mainstream.

#63 patientbuyer on 12.22.10 at 6:45 am

For those of you who feel renting somehow doesn’t offer the “security” of buying a home, check out how the banks will treat you:

http://www.nytimes.com/2010/12/22/business/22lockout.html?_r=1&hp

I can’t imagine any landlord throwing out your dead partner’s ashes and your family photos.

#64 Bullion.Bunny on 12.22.10 at 7:45 am

Depression insurance, physically, is being as self-sufficient as possible. Hence, my Bunker. Its own water supply and septic system. Standby generator, transfer switch and wiring system capable of replacing the grid entirely in 30 seconds. Meal kits, seeds, fuel and a couple of tons of dog kibble. Oh yeah, and a Hummer with a gun rack. Hey, did I mention the fence?

Let’s review here,

Why would you tell everyone what you have? Is that the smartest thing to do? If things go to shit you have just told everyone where to go. Not the smartest move Garth.

As far as automatic earth goes, 90% drop is a bit extreme, but 75% is sure possible. As far as the market goes, this is nothing but fluff. Government money handed to the banks and used for speculation in the markets. Europe is a basket case and I don’t think Germany is going to pay for the rest of Europe for much longer.

http://www.businessinsider.com/hooray-europe-just-kicked-the-can-down-the-road-2010-12

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8217505/Citigroup-fears-fresh-wave-of-sovereign-defaults-and-bank-failures-in-eurozone.html

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8217859/Citigroup-warns-of-fresh-wave-of-bank-failures-in-Europe.html

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8215358/Pimco-says-untenable-policies-will-lead-to-eurozone-break-up.html

Also as you know most of the U.S. states are in deep trouble, it is the next sub prime just bigger.

http://www.businessinsider.com/heres-one-big-fact-meredith-whitney-ignoring-in-her-muni-doom-prediction-2010-12

The depression is coming, just look at the U.S. How much longer do you think Canadians can continue to spend? The average spending is now 150% of income, when the taps are turned off the crash will come fast.
I’m betting against you and so far it’s been a fantastic trade. Time will tell.

#65 Bullion.Bunny on 12.22.10 at 8:03 am

P.S. Did you get permission to use that image from the “Girls with Guns” people?

I shot my way out. — Garth

#66 Bullion.Bunny on 12.22.10 at 8:12 am

#58 dark sad person on 12.22.10 at 3:16 am

She has such deep knowledge of so much-yet she discounts or misses the fact that the Market will win in the end and whatever picture emerges from that-the sun will still come up in the morning and there will always be a Market-always

All true, but when the credit taps are cut off. Many people will be pissed off! But you are right the sun will rise and the market will be with us in some form.

#67 T.O. Bubble Boy on 12.22.10 at 8:16 am

The doomer scenario makes condo fees and property taxes look even more ridiculous:

A 90% drop on an entry-level $250,000 condo in Toronto would put it at $25,000.

A 5% down/35-year mortgage @4% on that $25,000 condo would be:

$2,500 down, $99/month!!! (sounds like a used car!)

Condo fees would still be $300-$400 per month for many of these places… and property taxes $250-$300 per month.

So, the mortgage payment would be only 10%-15% of the total monthly cost.

I guess that you have this situation in Florida and other places (condo fees and property taxes dwarfing the mortgage payment), but I can’t see anything quite so extreme happening in Canada.

#68 Cassandra on 12.22.10 at 8:28 am

The Automatic Earth is saying EXACTLY the same thing now as it did when you respected it. It is you who have changed your mind. Who was talking about squirrel recipes in early 2009? It wasn’t TAE. TAE was pointing out in March 2009 that we were looking at the psychology of a (temporary) bottom, and that people were panicking prematurely.

Rallies bring back the optimism of a top. Sentiment indicators are off the charts bullish, and with no foundation at all. This is simply herding behaviour in action. Watch what happens when the rally is over and the psychology flips back into contraction mode.

TAE predicted the start of the rally, almost to the day, said it would be a major one and said that by the end of it people would be saying a depression had been avoided. It has not been avoided, only postponed, at the expense of making it worse when it does happen. It won’t be long before that is obvious.

#69 David B on 12.22.10 at 8:47 am

Merry Christmas and Happy New Year everyone.

All us ode fools have a 1.4% riase in our stocking … cool eh?

#70 I call B.S. on 12.22.10 at 8:51 am

D.A. wrote: “…today’s pic… looks like my wife…Seriously. Eat your hearts out pups. Ok wife doesn’t have a pierced belly button. Nor does she pack an M4.”

Either I choose not to believe you, because of your track record of being full of sh!t; which would make you a liar.
Or I believe you, which would make you the saddest human in the world; I mean, if my wife looked like that, I would spend exactly zero time on the interwebs trolling a real estate site (no offence, Garth).

#71 Devil's Advocate on 12.22.10 at 9:03 am

#53 Aussie Roy on 12.22.10 at 2:46 am

Pfft… What I’s getting’ at ain’t got nothing so much ta do with economics Roy. Just simple physics. Ya need somewhere ta plant yer feet there boy. Even up side down under ya must understand that. Don’t be goin’ throwin’ fancy ciphering my way thinking ya can confuse the simplicity of the matter. Land boy… without it yer just floatin ‘round in thin air… or treadin water. How long can you tread water Roy?

Keep it simple. Ok let’s introduce some economics into it but real simple now. Land… they ain’t makin any more of the stuff. People? Well now, let’s see… what was the world population just 100 short years ago? One billion? And what is it today? Seven billion? So, graphing that out on a piece of paper since Christ was a cowboy (let’s not even enter the debate of evolution vs. creation both of which well superceed Christs reign)? Well my up side down friend, you do the math… but to me, I’m thinkin’ one mother of a hockeystick of demand… and we ain’t near done yet.

Oh but in Canada and I am sure the land down under the birth rate is subsiding… Ya that’s going to make a real big difference. Dream on…

#72 Moneta on 12.22.10 at 9:06 am

When our largest trading partner is already on its knees, and the situation is only about to get worse, it begs one question: is America a smart place to invest right now or in the near future?
———
When out real estate bubble pops, do you think our muni market is going to hold up?

What muni market? — Garth

#73 Kevin on 12.22.10 at 9:23 am

Jsan,
Economists Carmen M. Reinhart and Kenneth S. Rogoff wrote a research paper that chronicled housing and equity booms and busts over the years from around the world. What they found that was the average housing bust shaved 35% and lasted 6 years. Of course there were places like Hong Kong which lost of 50%.
You will find it here.

The aftermath of Financial Crises
http://www.bresserpereira.org.br/terceiros/cursos/Rogoff.Aftermath_of_Financial_Crises.pdf

#74 Devil's Advocate on 12.22.10 at 9:24 am

#53 Aussie Roy

“Oh but we’ve got lots of land… all the land in the world.”

EXACTLY, all the land in the world.

We can always build up.

Now why exactly do you think they do that? Might it have anything to do with maximizing the return on the land. More dwellings per square foot of land = more dwellers to charge a lesser per but an aggregate more?

”Agricultural technology will improve the yields from the land.”

Mmmm good! That’s workin’ out well for us too isn’t it?

”Peak oil… technology will take care of that too.”

Yes… some day over the rainbow… Just click your heals twice Dorothy and repeat after me “There’s no place like home, there’s no place like home…”

“Make everything as simple as possible, but not simpler.” – Albert Einstein.

The more people you crowd into a sealed room with limited resources the less room there is for each and the quicker the resources are depleated not to mention that arguements will soon begin to break out. But not to worry… eventually there will be fewer people in that sealed room… a lot fewer… maybe none.

#75 dandy on 12.22.10 at 9:30 am

I think too many on this blog are blinded by their own situation to be objective about the future and what it holds for us.

Those of us who own houses can’t see that it’s going to be so bad.

Those who want to buy a place but can’t afford it need prices to come down.

and those who own or have sold and stated publicly that prices will come down so their reputation is stuck to it!

I guess my point is don’t spend too much of your life worrying about it, get your own space in order and make a plan to be successful and happy whatever that might mean for you.

It’s always an interesting read on here.

Wishing you all the best for the new year and here’s hoping nothin much happens in 2011! :)

#76 Moneta on 12.22.10 at 9:43 am

Personally, I don’t care where my gains come from… dividends, interest, capital. If a growth company is focusing on dividends, it’s a red flag. When a company is distributing more than it is bringing in, it’s a red flag. If a company drastically increases its capital base but revenues don’t follow, it’s a red flag… that is what has happened to our banks.

If companies are increasing dividends, that means they don’t know what to do with their money so they are admitting limited future growth… the problem today is that dividend companies are trading as if they still have growth. And everytime they are buying back shares or distributing money, they are making their company a little less valuable, albeit a little more risky, because some cash is gone! So total market cap should decline but of course the opposite happens until we get a shock and the stock tanks.

In 2000, everyone wanted capital gains because of future growth. Then high tech collapsed, boomers got closer to retirement and everyone jumped on the income bandwagon. There is probably still some juice there because there are still a lot of suckers who still have a portfolio to lose out there.

Income grabbing is the meme of the day. It will work until it doesn’t. Just like Nortel.

#77 Devil's Advocate on 12.22.10 at 9:46 am

My kids are gonna be renting to your kids. Glad to hear you are ok with that. “Landlord“… “tenant“…

Your kids will be subsidizing my kids. OK with that? — Garth

#78 Expat in NC on 12.22.10 at 9:47 am

A nice summary of what Garth has been saying and what most of us here believe to be true:

http://ca.finance.yahoo.com/news/Could-U-S-style-collapse-yahoofinanceca-2480210207.html

#79 Sand Piper on 12.22.10 at 9:48 am

Another mind-inspiring topic Garth – its awesome to get other views on the subject, I’ve been reading so much “the glass is half empty” theory that any upbeat forecast is actually edging me the wrong way.

Garth – our entire system is based on “faith” – do I have faith that the dollar will provide a certian level of return, faith that the police will come when called, faith that our government is working on behalf of its citizens, I have faith the sun will continue providing life supporting warmth..without faith…its a very scary world. And its hard to ignore that our “faith” is reaching a threshold that may be seriously questioned in short order –

No one .. no how .. can predict what life will be like 12 months from now..I am a strong believer that we are just seeing the start of something big – and its abit unnerving – and I have a very hard time understanding how some can refer to previous historic events, and make comparisons for today – when our wealth is built essential on what others are willing to buy in the future..god help us all..

In my inner circle of neighbours – 12 homes, 4 homeowners work directly in the construction industry – 1 works for the automotive industry – 2 are in banking – the rest I don’t know – (me, I work in the Insolvency Industry so I might just be in the right field) – so 50% of these homeowners could easily be in dire straights in short order – once we lose “faith” in our system – its gonna come down hard..

Now that I have depressed myself – Happy Holidays Everyone!!

#80 Grrr on 12.22.10 at 9:51 am

There is a serious attack being made on the banks by a website I read. He warns people against taking out mortgages, which are very profitable for the banks. He advises people not to use savings account, as the returns don’t keep up with inflation. This could have an impact on their capital ratios. He also advises against investing via mutual funds, yet another main profit centre for the banks.

#81 Incubus on 12.22.10 at 9:52 am

She is wrong about tar sand. The EROEI is ~ 3.

“Let’s look at one more example to understand the implications. Let’s say we want 10 gallons of gasoline equivalent for our car. We need to solve two equations: Net Energy = Energy Output – Energy Input; and EROEI = Energy Output/Energy Input. If we combine equations and solve, we find that for light, sweet oil at a 6/1 EROEI, the total energy that must be produced is 12 gallons of gasoline equivalent. Two gallons of gasoline equivalent were consumed in the process of producing the 12 gallons, netting 10 gallons for the end user.

If we wanted to produce gasoline out of tar sands at a 2.9/1 total ratio, then 15.3 gallons of gasoline equivalent must be produced. 5.3 gallons would be consumed in the process, netting 10 to the driver. What I conclude from that is the tar sands is more than 2.5 times as energy intensive to refine to gasoline than is conventional oil.”

http://www.consumerenergyreport.com/2008/11/14/the-energy-return-of-tar-sands/

#82 bullion.bunny on 12.22.10 at 9:57 am

#29 Kurt on 12.22.10 at 1:03 am

Nice pic, but a warrior without scars lacks credibility.

These girls are not warriors, unless you consider shopping a form of war.

#83 Mike B on 12.22.10 at 10:00 am

I make a prediction here. Real estate prices will go down UNLESS they go up. Either way I am 100% accurate in my prediction. Get the picture?

#84 BrianT on 12.22.10 at 10:06 am

IMO many Cdn properties will drop 90% but the ave drop will be far less. Having said that, the reality that Foss is basing her forecast on isn’t understood by that many people. We have had an incredible increase in debt over the last 25 years without an offsetting increase in wealth or income generation. A ponzi scheme. All government economic growth statistics include increases in debt as wealth generation, which is why economists generally are held in such contempt. The entire global economy, including Canada, is far poorer than people understand, in the same way that Madoff’s clients were poorer than they understood themselves to be. All of these bailouts are about getting the connected out and saving them as the scheme is unravelling. What I just typed reads like a grand tinfoil hat delusion, but the math is the math. Contingent liabilities in the USA are up to about 2 million per taxpayer, which means that little of current government entitlement spending (spending on seniors) will exist in the future. It only exists right now because it was put on the credit card that we thought had an unlimited size-now the credit limit or wall has been encountered. Things are changing very quickly-would anyone have predicted two years ago that Obama would be in the position of announcing cuts to SS (CPP in the US)?

#85 anon10 on 12.22.10 at 10:10 am

“As I’ve said before, there’ll be no depression – unless one hell of a lot changes, and quickly.”

Very insightful Garth.

# 54 dd

“I totally disagree with her forcast. Real estate at $0.10 on the dollar? Revenue / wages would have to collape for this to turn. Govenments around the world will print boat loads of money before that happens. We will get more price inflation than anything else going forward.”

The bond market vigilantes won’t be very happy if and when the printing of boat loads of money starts.

#86 Devil's Advocate on 12.22.10 at 10:11 am

#70 I call B.S. on 12.22.10 at 8:51 amD.A. wrote: “…today’s pic… looks like my wife…Seriously. Eat your hearts out pups. Ok wife doesn’t have a pierced belly button. Nor does she pack an M4.”

Either I choose not to believe you, because of your track record of being full of sh!t; which would make you a liar.

Or I believe you, which would make you the saddest human in the world; I mean, if my wife looked like that, I would spend exactly zero time on the interwebs trolling a real estate site (no offence, Garth).

Dang… you are right. Gotta go.

But seriously, she does look like that… Garth could probably confirm it as he does know enough about me to be able to do so.

Such a sad pathetic life I lead… not nearly so rich and rewarding as the Pups and Poodles… Where the hell IS that sarcasm font?

#87 Cassandra on 12.22.10 at 10:25 am

#67 TO Bubble Boy

That is not a realistic scenario. You assume mortgages will still be available. I doubt that for most people, at least not at interest rates or with amortization periods that anyone will be able to afford. The burden of debt is magnified by deleveraging.

Condo fees will fall, at least to some extent. Taxes may fall, but even if they do they will be drastically less affordable. Taxes may also rise as governments try to make up for a collapse in tax revenues in order to meet increasing obligations.

In a deflation, prices fall, but purchasing power falls faster. Nothing gets cheaper, in the sense of being more affordable. Without access to cheap credit, prices at a tenth of their current level would be far less affordable than current prices in a credit-driven world.

If you want a glimpse of the future, look at Detroit, where the average house price is about $5000 and you can get one for free if you promise to pay a couple of back-tax bills on it. Houses are falling down, and many of those left are propped up by 2x4s. There are vacant lots all over the place and the city is thinking of bulldozing whole neighbourhoods. TO could look like that in a decade or so, depending on how fast a lack of maintenance takes its toll.

#88 Devil's Advocate on 12.22.10 at 10:26 am

#70 I call B.S. on 12.22.10 at 8:51 am
D.A. wrote: “…today’s pic… looks like my wife…Seriously. Eat your hearts out pups. Ok wife doesn’t have a pierced belly button. Nor does she pack an M4.”
Either I choose not to believe you, because of your track record of being full of sh!t; which would make you a liar.
Or I believe you, which would make you the saddest human in the world; I mean, if my wife looked like that, I would spend exactly zero time on the interwebs trolling a real estate site (no offence, Garth).

Riddle me this;

That you clearly do not yourself spend “zero time on the interwebs trolling a real estate site” implies that you have lesser interest in your wife than you suggest is ideal. Is that not sad in itself?

Regardless of whether my wife looks like that or not, and believe me she does, that I merely think she does puts me in a way better place than you. No contest. Clearly after 30 years my bride is to me all that she was 30 years ago and more. ;-)

Might be a difficult concept for you to get your head around but I do think the ladies on this blog will understand.

#89 bullion.bunny on 12.22.10 at 10:35 am

This should shake the tree……..

http://www.businessweek.com/news/2010-12-22/banks-best-basel-as-regulators-dilute-or-delay-capital-rules.html

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/12/19_SPECIAL_HOLIDAY_RELEASE_-_Jim_Rickards.html

#90 Alister on 12.22.10 at 10:36 am

A Mexican immigrant co-worker in the 1970s, came to me one day and said ” I’ve been wiped out while I slept last night”. He told me about how the Meican peso suddenly devalued 50%. He had been sending his pay home to his wife and suddenly his house and his cash were devalued.

In the last year the people of Iceland saw their currency devalue 50% and Zimbabwe currency went worthless.

Also Greece and Ireland have seen interest rates soar in a matter of weeks, with Portugal on the hit list and Spain in sick bay. Greece, Portugal and Britain are forced into austerity. The people didn’t expect this a year ago.

My point is that everything can look rosy right now, but changes occur very quickly. Interest rates can move up suddenly, currencies are just paper and ink.

2011 might be the year that US states and municipalities start to default. I hope not, because they are our neighbours and friends. Most people don’t know that Canadas biggest economy, Ontario, runs a deficit the same size as Californias, but with 1/3rd the population. And they say Calif is in trouble. Are we safe? If commodities start heading south, what happens to the Candu $?

A candu back at $.60 would make our gasoline $1.40/L.

Diversify if you can, be liquid and keep informed.

#91 bullion.bunny on 12.22.10 at 10:40 am

Baltic Dry Index dropping like a stone……

http://www.eoddata.com/stockquote/INDEX/BDI.htm

Not good.

#92 bullion.bunny on 12.22.10 at 10:41 am

I shot my way out. — Garth

Ok………how many bullet holes did she put in your ass.

#93 Chris L. on 12.22.10 at 10:46 am

This is why it’s worthwhile to follow this blog. It’s married happily to reality rooted in probability. I also used to follow the Automatic Earth when the shit was hitting the fan. That day is long gone. Now things are much more steady and predictable making things a lot easier. Things trend, and if you say the Automatic Earth still thinks that way, they haven’t adjusted their range well. There will be no trigger that wasn’t foreseen large enough to stem depression. Years ago, this stuff came by surprise, there will be no new dramatic surprises to shock the herd. From now forward, it’s steady as she goes. If you really prepare for a depression now, you’re essentially working to create it, because it’s highly unlikely. That’s not to say that what those in the US are experiencing is not a depression, but it’s to say that we’ll get more of the same tomorrow – generally.

If the world goes to shit overnight, the only thing you can do to prepare yourself now, is to grow your self sufficiency through critical thinking and generalism – balance. This isn’t something you aren’t born with though. Too bad for the majority of the followers in such a case. Successful people are born.

Thanks Garth for having some sense.

#94 T.O. Bubble Boy on 12.22.10 at 10:58 am

The FSBO proposes that all Mortgage Brokers in Ontario will need Continuing Education (much like insurance agents):

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/12/ontario-brokers-to-have-ce-requirement.html

Does this mean that Don Cherry (Dominion Lending) and Doug Gilmour (Monster Mortgage) will have to go back to school?

#95 High Park Renter on 12.22.10 at 11:01 am

I hate it when my Garth and my Stoneleigh bicker. Will somebody please tell me (authoritatively): are we in a run-of-the-mill asset bubble, or a epochal credit bubble?

#96 Erikson on 12.22.10 at 11:06 am

Garth, is this picture about future hard times?
Kinda austerity in military spending?
New economical army uniform?

#97 c ames on 12.22.10 at 11:09 am

i look at your site daily as well as auto earth, zero, jesse,denninger,max , rt ,cnn, krugman, shilling,reich, ect ect ect. weigh them all the same..

#98 The American on 12.22.10 at 11:10 am

At #24: AdecentplaceinCanda, yes, you have lost your mind. You are correct, though, Seattle sure isn’t Vancouver. And we are in bliss for that one reason. I’ve already said Vancouver is “nice,” but to think it is “paradise” is delusional. Seattle tromps Vancouver in every way imaginable, including immigration, topography, recreation, infrastructure, entertainment/arts, night life, and scenery. Most Seattleites will agree they like Vancouver, but NO Seattleite would trade Seattle for that place. Oh, and as for the weather, you may want to consider reading up on which city receives more rain and which city is cooler. Oh hell, I’ll spoil it for you… the answer is Vancouver! As for I-5 traffic, yes we do have that, and that would be because people actually LIVE here and populate our beautiful city. I’ll take I-5 traffic ANY day before I take the horrifically designed city and street map of Vancouver (does vancouver even have freeways? no, i mean REAL freeways? No, it doesn’t.) Vancouver has a road that resembles something kind of like a free way, but it only takes you up to about 5 miles outside of the city core, and then you have to take surface roads to get to downtown from there. Talk about horrible planning… Face it, you simply didn’t like the way my original post tromped Vancouver only to make my point that your collapse is coming. Your prices are not justifiable with the LOUSY economy and sub-par infrastructure Vancouver has. Like we say, Vancouver is Canada’s Miami.

#99 Aussie Roy on 12.22.10 at 11:11 am

DA there is that belief again, the only “economics” you mentioned was the actual word. Any mention there on affordability, the linkage between wages, rental return, production return, holding costs and prices of dirt.

Please dont be so childish and attempt to belittle me with this kind of stuff. You dont need to prove to anyone what tactics you use, we already know.

“Ya need somewhere ta plant yer feet there boy. Even up side down under ya must understand that”.

#100 bigrider on 12.22.10 at 11:12 am

DA- If you have been married to your wife for 30 years then she cannot look look like the girl in the pic unless you married your wife when she was 5yrs old or something.

#101 dave in calgary on 12.22.10 at 11:13 am

A bit of news for all the people who keep suggesting Garth is guilty of copyright infringement for every photo he uses: These are stock photography images. The sole reason many of these photos are taken is photographers try to get people to purchase a license in order to use them. There are whole stock photography websites to browse, and when you see an image you’d like to reproduce you pay a small fee for a license to do such. If Garth was willing to fork over a bit more money I am sure we could have done away with that green bikini top….

It took me hours to paint that on. — Garth

#102 garth turner jr on 12.22.10 at 11:13 am

Mad Max Syndrome will hit Southern Ontario, Quebec and the Atlantic Provinces.

Residential bunkers will be the norm across Eastern Canada’s landscape.

After Western Canada secedes, the above will follow within a year or two.

Smart Money is finding its way west.

Is yours?

#103 jen on 12.22.10 at 11:15 am

I am not sure where her ‘90%’ comes from (possibly out of a hat)- but in reality virtually all of the stats on the issue are a little suspect. For example when the Japanese real estate prices tanked in the 90’s there were differing views on the range of price drop (some people actually claimed the price drop was as high as 90%).

The official US price drop of 40% has been disputed – some believe it was higher. The point being the percentage increases and decreases in any market can be created differently and manipulated- kinda like creative accounting practices.

#104 Cassandra on 12.22.10 at 11:15 am

#93 Chris L,

“Now things are much more steady and predictable making things a lot easier. Things trend, and if you say the Automatic Earth still thinks that way, they haven’t adjusted their range well. There will be no trigger that wasn’t foreseen large enough to stem depression. Years ago, this stuff came by surprise, there will be no new dramatic surprises to shock the herd. From now forward, it’s steady as she goes.”

ROTFLMAO! You’re in for a shock in the not too distant future.

#105 45north on 12.22.10 at 12:05 pm

las Vegas: here is an article with pictures of some bad bets.

http://mcaf.ee/df3b0

Bullion Bunny: Baltic Dry Index dropping like a stone

significant. Wonder what’s happening to Golden Seas in Alaska?

#106 Trino Tuta on 12.22.10 at 12:08 pm

This time there’s no sarcasm (by the way there is a very urgent need for a sarcasm font)…… Garth, that’s the best picture you’ve ever posted on your blog. Damn!

#107 beyond neanderthal on 12.22.10 at 12:09 pm

Don’t be too quick to throw stoneleigh under the bus. Garth has very little understanding of how life is supposed to be. Sometimes going broke and having to move in with your daughter and then sharing in the raising of her child is the most satisfying and joyful thing that could possibly happen in a lifetime filled with growth and more legacy than dollars have been known to offer. Most people don’t get wealthy walking the juggling – gymnastics of the Turner Trilogy. They are cutting edge innovators with vision. That’s where the money truly shows up. Tossing Stoneliegh off as a nutjob is dangerous. This is a very articulate and intelligent woman in a very unusual time. Garth is no ruler and all being of space time and dimension – I’m sure there’s human flesh underneath that thick skin.

Not enough flesh to enjoy going broke and moving in with relations. Where would I put my bike? — Garth

#108 AG Sage on 12.22.10 at 12:09 pm

>90%?

Wow. I guess the Take No Prisoners mentality can extend to economic forecasts as well as fashion and weapons acquisition. If we are putting in our personal predictions for posterity. I’ll toss in a 30% nationwide and a 49.8% for vancouver.

Anything exceeding 50% is difficult except over the very long term. People just stop selling, and if the bank takes the property, *they* don’t bother selling because at that point they will be in a government funded long hold.

>I wish I could be as optimistic as Garth. I really do.

Apparently you can be as optimistic as Garth and still build a bunker. I don’t think that word means what you think it means.

Btw, Garth, did you really put in a switch to wire the generator to the whole house rather than just a few essential circuits? You must have one mother of a generator. Personally, I wouldn’t want the rest of the household to treat the situation as “normal”.

I wouldn’t want conversations like:
A: The entire nation is in a blackout, Zombie Mad Max is driving up and down our street, so why in beelzebub’s name are you playing the wii on the plasma tv??
K: Because we plugged it in and it worked.
A: That power is for keeping the food cold you know and for running the motion detection gun emplacements. Go read a book instead. And if it gets too dark to do that, go to bed, we’re playing Amish Family Robinson whether the plugs work or not!
—-
I’ve only tangled with this stuff while living in India, where houses come pre-wired for use with generators or battery packs. And the rolling blackouts are on a schedule.

It’s a mama of a genset. — Garth

#109 John on 12.22.10 at 12:11 pm

@#44 Garth Turner Jr

How do you like living in the bunker? I like that you have a power transfer switch in your house. Help your dad test it out once a month! :)

#110 Devil's Advocate on 12.22.10 at 12:16 pm

#90 Alister on 12.22.10 at 10:36 am;

EXACTLY!

But liquid in what? Gold? Fiat Notes? Bank Stock?

And what happened to the domestic and intenational value of Mexican real estate?

What was a burrito worth? Not what monetary figure it sold for but rather what it was deemed worth -what was a ready willing and able buyer prepared to pay for it?

See commodities consumables, of which housing is one, have an inseparable intrinsic value which maintains a relative parity with the general state of the economy. If that perceived value gets out of whack with the real intrinsic value it eventually gets pulled back in line. If the economy adjusts so too must the monetary price we place on that intrinsic value of those commodities.

It’s consequential not causal. We don’t need to fix the housing markets they will fix themselves. We need to fix the economy. Maybe it will take something like your Mexican friend experienced.

#111 Contrarian on 12.22.10 at 12:20 pm

15% sounds about right. You’re talkin’ at the end of 2011 vs current prices, right?

5% per year each year until 2015? So about 30% down by 2015? Then what?

#112 Mr Lee on 12.22.10 at 12:35 pm

Too many of these contrarians are busy filling in their own pockets on “pessimism porn”. Whether it is a Foss, Keiser, Jones, Celente et al; they have one thing in common and that is to sell their view in order to make money.
Now the same could be said for Mr. Turner, however it comes down at looking at the resume. Mr. Turner was at the altar of decision making for many years. Foss, as Mr. Turner stated with his Betty Croker likeness, was busy baking cookies.

Take Garth’s advise because it should be intuitive. Diversify, get out of debt, do not get into too much debt especially in one asset category, and if you do buy precious metals do not bet the farm on them either.
Common sense prevails in all times, as for the Depression in the 1930s. Read you history as to the causes and the effects.

#113 Leanne on 12.22.10 at 12:47 pm

#77 Devil’s Advocate on 12.22.10 at 9:46 am
My kids are gonna be renting to your kids. Glad to hear you are ok with that. “Landlord“… “tenant“…

*******

More like “slumlord,” although I must admit your last statement about your wife did redeem you a little.

#114 Chris no longer in England on 12.22.10 at 12:47 pm

Where did you get that picture of me?

#115 Mouldy Basement Renter on 12.22.10 at 12:50 pm

Wow ! Not one “outraged , sexist” photo comment. I’m impressed at the commenters here……
#90 Alistar
yup 2011 Bankrupt Municipalities, More Negative mortgage renewals coming up in the US, U.S Unemployment stuck at almost 10%(officially).
A Jobless recovery doesnt foster a lot of confidence in the working stiff that are still living pay cheque to pay cheque……
Interesting times…

#116 Jan Etter on 12.22.10 at 12:52 pm

#87 Cassandra on 12.22.10 at 10:25 am
“That is not a realistic scenario…
If you want a glimpse of the future, look at Detroit, where the average house price is about $5000 and you can get one for free if you promise to pay a couple of back-tax bills on it. Houses are falling down, and many of those left are propped up by 2x4s. There are vacant lots all over the place and the city is thinking of bulldozing whole neighbourhoods. TO could look like that in a decade or so, depending on how fast a lack of maintenance takes its toll.”

Well, it could look like that since anything is possible, but how likely is it? I find it difficult to understand what characteristics and circumstances are shared by Detroit and Toronto. Detroit’s inner City had for decades been in decline, even when the auto industry was artificially pumped up on $20k profits per SUV, paid for out of loose loans. If you drove through Grosse Pointe and then Greektown even thirty years ago the disparity was way more stark than between Lawrence Park and Jane/Finch today.

While it is true that Toronto is becoming more and more like many US Cities in terms of income disparity between downtown and suburbs, it is nowhere near the situation as in Detroit. Detroit is a one-horse town whose horse has been sick and wheezing for decades. The GTA has the most diverse economy in Canada – corporate HQs, seat of government (Queen’s Park), banking centre, TSE, construction, manufacturing, etc. If we are truly behind the US in terms of timeline, then why would Toronto in ten years be the Detroit of today, rather than the Chicago or New York of today? (and that’s not to say Toronto is anywhere near the economic heft of a New York or Chicago, just its standing relative to other urban centres in the country.)

IMHO, what is more likely for Toronto is an accelerated and pronounced decline of the inner suburbs in terms of income disparity and a decline in economic development along the underserved Finch West and east Scarborough corridors (exacerbated by Mayor Ford killing off the light rail projects), downtown condominium prices falling disproportionately as they did in ’90-96 and building permits for new residential in the GTA municipalities slowing to a trickle.

What will be interesting from a sociological and economic perspective is to what extent, if any, certain areas will be more resistant to price declines in the resale low density residential market. While more or less dependent on the same economic engine, there are big differences in terms of demographics and household finances in the GTA – compare, for example, Old Oakville, “new” Oakville, Brampton-Springdale, Woodbridge, south Richmond Hill, Markham-Unionville, Newmarket, Ajax, and Oshawa.

The median listing price in Detroit is now $89,900, not $5,000. — Garth

#117 noplused on 12.22.10 at 12:55 pm

So many stories out there not getting enough coverage:

http://www.rickackerman.com/2010/12/muni-bond-markets-descent-into-hell/#more-29307

#118 Junius on 12.22.10 at 12:57 pm

#24 BPOE,

It is interesting to note that people have simply stopped responding to your ridiculous posts. Your current one is so riddled with faulty assumptions and ridiculous assertions I could spend an hour on it. But I won’t.

Here are the 3 things you don’t get:

1) 15% down is just the start in Garth’s prediction. 5% per year thereafter is what happens. I think Vancouver is in for more of a jolt than that but by time it is done over the course of 4-8 years we could see prices down 50%.

2) Rents are NOT going up. They have only increased marginally in the past few decades. Unless income goes up substantially – which is not happening – rents will stay flat or more likely go DOWN.

3) In respect to the DEMAND issue see above and guess what will happen to supply. Supply will increase which will suck up demand.

Finally, again, your Asian horde fantasy is just that.

#119 Chris no longer in England on 12.22.10 at 1:03 pm

Devil’s Advocate –

So your wife looks like me. Adulation may now be shared. I was getting writer’s cramp answering all those fan letters anyway.

#120 dark sad person on 12.22.10 at 1:11 pm

#79 Sand Piper on 12.22.10 at 9:48 am

No one .. no how .. can predict what life will be like 12 months from now..I am a strong believer that we are just seeing the start of something big – and its a bit unnerving – and I have a very hard time understanding how some can refer to previous historic events, and make comparisons for today –

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

I think that you can-with some probability look at historic events and relate them to today-
What’s happening today and going to happen tomorrow is nothing new-
We’ve been here before many times-only need to ask Gold-the Free Market-the Austrians and the Sun-this is all old hat to those Four-

Keep in mind-11 Economists out of 15,000 (and a few Bloggers) called correctly years ago-what you see today-

How to know?
Follow the Money-always-

http://1.bp.blogspot.com/_nSTO-vZpSgc/SRVLM8Kif0I/AAAAAAAADs8/Ad1Iwf_fPJ0/s1600-h/base-money-yoy-1.png

#121 Devil's Advocate on 12.22.10 at 1:14 pm

#101 Leanne

Believe me Leanne when I tell you there is a very, very great demand for slumlords. Take away that lower end accomodation and you will put a lot more people on the street than there already are.

And Pups and Poodles slumlords are generally more “pet friendly”. LOL… sorry I just couldn’t resist.

#122 dark sad person on 12.22.10 at 1:15 pm

SOB–pasted the wrong chart above-

http://4.bp.blogspot.com/_nSTO-vZpSgc/SRVN4sw-LCI/AAAAAAAADtE/6EYg40HZUfo/s1600-h/base-money-yoy-2.png

#123 bullion.bunny on 12.22.10 at 1:19 pm

Coming to Canada in the near future.

http://www.usatoday.com/money/economy/employment/2010-12-22-1Ajobless22_CV_N.htm?loc=interstitialskip

#124 Soylent Green is People on 12.22.10 at 1:24 pm

How pension reform was sandbagged
By Thomas Walkom

Quebec may have delivered the coup de grace. But Federal Finance Minister Jim Flaherty’s quite sensible, and now stillborn, plan to expand the Canada Pension Plan was doomed a year ago.

That’s when a newish, hard-right Alberta party called the Wildrose Alliance began to seriously threaten the province’s ruling Tories.

At the time, other Canadians paid little attention. But in the small, closely-knit world of Alberta conservative politics, the success of Wildrose was a seismic event.

First, the upstart party won a Calgary byelection. Then, under the leadership of media-savvy ex-journalist Danielle Smith, it persuaded two Conservative MLAs and one independent to cross the floor.

Fearful of being outflanked on the right, Stelmach responded with a major cabinet shakeup.

His most important decision — and one that would prove fateful for the pension file — was to name Ted Morton as finance minister.

Morton is so far to the right that he makes Prime Minister Stephen Harper look squishy. Like Harper, he signed the so-called “Firewall Letter” of 2001, which called on Alberta to withdraw from joint federal-provincial programs like medicare and the CPP.

Unlike Harper, Morton has never changed his mind.

One of Morton’s most famous ideas was to dam Alberta’s rivers at the Saskatchewan border so as to prevent water from flowing eastward.

As finance minister, Morton moved quickly to sabotage pension reform. He announced that Canada’s grossly inadequate pension crazy-quilt was just fine and needed — at most — minor tweaking.

He insisted that any such tweaking be operated by private financiers rather than government.

This put him at odds with Flaherty who, at the time, was developing a scheme to expand the cost-efficient CPP.

In fact, Flaherty’s initial plan, supported by Ontario and most provinces, was by far the boldest on offer from any Canadian government. It would have seen mandatory premiums paid by employers and employees gradually increase over time in order to fund a more generous pension regime.

It made Liberal Leader Michael Ignatieff’s proposed reform — a voluntary supplement to the CPP — appear namby-pamby by comparison.

But by late summer, rumblings from Alberta were beginning to unnerve Ottawa. Flaherty’s scheme would require an eventual hike in payroll taxes. With the hard right on the ascendancy in Alberta, any government advocating such a hike would leave itself open to attack.

And while the Wildrose Alliance is only a provincial party, Harper’s Conservatives know their history. They know that the remnants of another Alberta provincial party, Social Credit, inspired Reform. And they know that this Reform Party, by capturing the imagination of first Alberta and then the entire West, eventually destroyed Canada’s old federal Progressive Conservatives.

For Harper, the wisest course politically, was to nip any trouble in the bud.

What caused Quebec to nix the Flaherty scheme is not yet clear. An enhanced Quebec Pension Plan (the province runs its own version of the CPP) would probably have been well-received by voters in Canada’s most statist province.

But for whatever reason, Quebec quietly decided no. Last Thursday, Flaherty announced he was deep-sixing his own scheme in favour of Morton’s private-sector option. The next day, Quebec announced that it wanted to postpone any talk of CPP/QPP expansion indefinitely.

The arguments given by both Quebec and Alberta — that a payroll tax increase now would threaten economic recovery — are clearly bogus. Given the glacial nature of federal-provincial relations, any agreement reached this week would have taken years to put into practice.

Nonetheless, their combined opposition doomed the proposal. Changes to the CPP/QPP require the agreement of Ottawa and seven provinces representing two-thirds of Canada’s population. Between them, Alberta and Quebec have just enough residents to veto anything.

Technically, the country’s finance ministers have agreed to revisit the Flaherty scheme next summer. The economics are clear. Expansion of the CPP is by far the most efficient way to ensure that employed Canadians — the vast majority of whom lack workplace pensions — save enough to get by in retirement.

But unless the politics of the situation changes dramatically, that won’t happen.
.
.
.

#125 UrbanCowboy on 12.22.10 at 1:41 pm

I think the 90% melt down could be based more on Alberta, specifically tar sands cost-effectiveness, looming deeper recession, and the possible fact that places like Edmonton and more specifically Calgary house prices inflated relatively more, meaning a bigger pop is underway. I personally hope she’s right, cause I’m a renter with money in the bank and licking my chops over forclosed/discounted properties.

#126 Junius on 12.22.10 at 1:41 pm

#95 High Park Renter,

You asked, “are we in a run-of-the-mill asset bubble, or a epochal credit bubble?”

How about somewhere in between?

#127 Ottawa on 12.22.10 at 1:45 pm

Hi Garth,

This is little different topic though : TAX

What are the chances that Mr. F will remove (or reduce) the dividend tax credit to citizens (directly OR indirectly)? As he did with Income Trust?

Thanks for sharing,

Zero. — Garth

#128 prollywrong on 12.22.10 at 1:55 pm

from the (#78) yahoo finance article posted above:

“In October the buy/rent ratio was about 1.85x. This means with average mortgage sizes increasing and becoming more difficult to afford, homeowners pay almost twice what renters pay to put a roof over their heads.”

that’s insanity! we rent and save 3 grand a month. none of our home-owning friends (all professionals in their thirties) save anything.

our plan is to rent and save for five years, then re-evaluate. if the market tanks, we win. if the market flatlines we go in with a much larger down. if the market continues to bloat we simply continue to rent and save even more, or take another year or so off to travel.

it may not be the most aggressive plan; it may not be the most glitzy plan and it may not make us barrons, but its the plan we’re comfortable with.

what we are NOT comfortable with is being owned by the bank (thieves) and dependent on the government (liars).

#129 CTO on 12.22.10 at 1:55 pm

#87 Cassandra

T.O could look like Detriot, God forbid!!!

Acually, did you see the report in the Globe and Mail last week? Very telling of a tale of TWO Cities with T.O before the end of this decade. Couple the social poverty issues with a highly leverage marginal society heavily dependent on lax lending stards and overly inflated housing prices…I hate to say it or even think it but the reality could very well be Detriot!
Detriot was one of the prized Cities in the states before 1970. It didn’t take very long for it to deteriorate to its hollowed out shell by the mid 1980s and knowone seen it coming…

see artiacal:

http://www.cbc.ca/canada/toronto/story/2010/12/15/three-cities-report542.html

#130 Tony from Calgary on 12.22.10 at 2:06 pm

Oh no!
My #1 favourite blog writer is criticizing my #2 favourite blog writer! I guess I’ll just have to lean on one of my other favourite bloggers, Ben Rabidoux (http://financialinsights.wordpress.com) while Garth and Nicole duke it out…

Oh crap! Ben over at Financial Insights is writing about Nicole too! What’s a guy to do?!?

In TAE’s defence, I really like their “article roundup” style of blogging. Allows me to get TAE’s “out there” views but still read the source material they’re basing it on.

#131 jess on 12.22.10 at 2:07 pm

Are the fastest growing companies usually the best?
And does fastest mean the one’s with the secret Algorithms with traders that have personalities that seem “hunter” like ?
————————————
Is there some truth to what he says? Is he self interested?

Keiser’s “Virtual Specialist Technology” (VST) was developed for the Hollywood Stock Exchange (HSX), a web-based, multiplayer simulation in which players use virtual money to buy and sell “shares” of actors, directors, upcoming films, and film-related options. The program determines the true market price automatically, by comparing “bids” with “asks” and weighting the proportion of each. Keiser and HSX co-founder Michael Burns applied for a patent for a “computer-implemented securities trading system with a virtual specialist function” in 1996, and U.S. patent no. 5960176 was awarded in 1999.

Keiser’s company HSX Holdings sold the VST patent to investment firm Cantor Fitzgerald

http://www.webofdebt.com/articles/computerized_front_running.php
===========
Instead of Tobin Tax , Keiser’s premise is to
fix the problem at its source — the price-setting mechanism itself. Keiser says this could be done by banning HFT and installing his VST computer program in its original design in all the exchanges. The true market price would then be established automatically, foreclosing both human and electronic manipulation. He notes that the shareholders of his former firm have a good claim for voiding out the sale to Cantor Fitzgerald and retrieving the program, since the deal was never consummated and the investors in HSX Holdings have never received a penny for the sale.

===================
“Bondholders Tax”
Wall Street Capitalism: A Theory of the Bondholding Class, economist E. Ray Canterbery explains what happened. The tax cuts drastically increased the incomes of the rich and they used their newfound money from the tax cuts to buy the Treasury bonds, notes, and bills that the Treasury Department had to issue in order to finance Reagan’s deficits. The combination of monetarism (high interest rates), supply-side tax cuts, and the phantom Soviet threat created the bondholding class. In essence, a Wall Street Welfare institution known as the bond market came to dominate politics in the United States. Instead of using taxes to fund the federal government (and increasingly state and municipal governments), taxes on the rich were cut and they were handed an “investment opportunity” so that working and middle-class taxpayers now pay a “bondholder’s tax” to firms like Goldman Sachs and JP Morgan Chase (as well as Japan and China).
===========
Is this not what MR. Kucinich states in his bill?
http://kucinich.house.gov/UploadedFiles/NEED_ACT.pdf

#132 BrianT on 12.22.10 at 2:10 pm

#116Garth-on Realtor.com the median listing for Detroit is $15000 so $89000 seems like a real stretch (my guess would be whoever is throwing out that 89 thou number is pulling in the burbs).

#133 jussupow on 12.22.10 at 2:11 pm

Garth garth… so disappointing. Stoneleigh has been saying the same thing for a very long time and you know that. She is not flipflopping(unlike others) and her calls are as astonishing as they are precise. Without a doubt she is one of the most intelligent analyst out there. Focused. Consistent. Persuasive. Far-fetched.

To the obnoxious aussie brat… “based on nothing”? Have you read anything at TAE? Oh (at the risk of being diagnosed with cognitive dissonance, incorrigibility of first-person sensation reports or unsusceptibility to redneck jokes) please do yourself a favor.

The guy of madmax scenario. I am certain you know by how much the re valuations fell during GD. No you don’t.

#134 BrianT on 12.22.10 at 2:13 pm

#116Jan-Chicago is in serious trouble so you don’t want TO to follow that crooked path.

#135 BrianT on 12.22.10 at 2:18 pm

#116jan- On realtor.com,over 2000 properties listed for sale in Chicago under $75000, so TO becoming Chicago isn’t as pretty a dream as you make it out to be.

#136 jay ocean on 12.22.10 at 2:21 pm

I like Garth as much as the next guy, and I don’t mind a little thumpin’ of “wingnuts” now and again. But since when is a guy who constantly speaks of his bunker loaded with survival gear not a wingnut classic? Is it tongue in cheek, or is Garth an out there suvivalist? And now Garth feels he has to call out the “radicals” for their outlandish views and predictions. Well, it doesn’t take much to be on the left politically of an ex-Conservative party, mainstream financial analyst who claims to drive a Hummer.

People on this site act so high and mighty. So intelligent and smart. So mainstream. Most simply want to make money, so cling to believing in this corrupt system. And worship Garth like the oracle. Sad. Garth is simply a mainstream analyst who states the obvious in a fun way. The photos he uses on the site stimulate teenagers. He swaggers, he tilts at windmills, he panders, but he swims on the surface. He is as deep as Stephen Harper is friendly. Garth is nothing if not one dimensional.

Max Kaiser, unlike Garth, has been in Finance. He speaks truth to power. He calls bankers what they are, financial terrorists. He treads where Garth fears to go. Garth just wants to maintain the status quo.

Nicole Foss, likewise, towers over Garth’s mainstream analysis. Doomer? Where’s your bunker Garth? TAE has been spot on from the beginning. If you want to pick the 90% number, fine. See South Florida, Nevada, and yes Detroit. See Tokyo. Two years ago they predicted over 20% unemployment in Spain. They predicted violence in the streets of Europe. Despite predictions, they have provided the most comprehensive analysis of current economic conditions. You dismiss them as readily as realtors dismiss you. I guess even Garth can’t help but want to kick another analyst. Garth, you’re a fun guy, but you’re no Nicole Foss.

Well, if you think Betty Crocker’s 90% prediction is cool because it’s not mainstream, then don’t waste your time on us. Care for a squirrel cookie before you go? — Garth

#137 insider_trading on 12.22.10 at 2:28 pm

#77 Devil’s Advocate

Your kids will also be debt serfs….

#138 Devil's Advocate on 12.22.10 at 2:38 pm

MY CHRISTMAS WISH TO THE PUPS AND POODLES

“I want to thank you Pups and Poodles for inviting me into your home to discuss something I am truly very passionate about; what it’s going to take to sell your home in today’s market.

You have read and seen the news about the current state of affairs in the real estate and mortgage markets and you have formed your opinions.

By the time I am finished, you will have a better, deeper understanding of exactly what it would take to sell your home in today’s “New World”.

I know you have some important things you want to accomplish. After listening to you talk a little about your circumstances, I believed I could help you. To make absolutely sure, I’m going to make some pretty bold statements and ask some thought provoking questions. Thought provoking questions a traditional REALTOR would never ask for fear of loosing the opportunity to do business with you. But I know only by asking those questions and learning the answers can I truly do my job helping you get where you want to be. In order to do that I must learn what is important to you not tell you what is important to me.

As I listen to your answers, if I don’t think I am the right consultant to help you, I will let you know immediately.
Before I ask you those thought-provoking question, I will show you how I work, and if you don’t think you are the right client for my consulting service, please let me know – fair enough?

When we are done I will ask you what you believe is the best option for you.

1. You don’t have to do anything. I’ll have given you all the information you need, and if your still not ready to decide yet, that will be fine.

2. You can do this all on your own. Every year thousands of people buy and sell on their own. So if you decide to do this all on your own, let me know.

3. You can decide to work with a traditional. I would even be happy to refer you to a more traditional agent if that is what you decide.

4. Or you could choose to work with me because you believe I am your best option.

So at the end of our consultation, I’ll ask you… what’s it going to be 1, 2, 3 or Me?”

It was a good run… running clears my head

…not only that I wrote my wife’s Christmas card while doing it. That is correct “I wrote my wife’s Christmas card” for no other, in volumes of words, could express my thoughts and feeling as well as I could in even just three words of my own. But there were/are more…

Write your wife a card. Unlike men women actually read the card and cherish it long after the gift. Screw up and it’ll cost ya.

And I figured out what to get my wife for Christmas. I have been struggling with that one for weeks now. Practical or personal…. ski boots or… Practical has it’s time and place but Christmas? Christmas is not about practical. We have lost sight of what Christmas truly is all about, personal relationships not whether sales are up or down. I resent the pressure to buy gifts and tend to rebel with practical favour. But this Christmas will be about the ones I love not my personal political rebellious agenda fought with arsenal of practicality. There is a child in each of us who longs for Christmas past. I’m going to find mine by giving to them theirs.

I’ve been participating on these blogs now for over two years by my recollection. When I started I was far more a “Bear” than I am today. I initially came here seeking affirming opinion of my concerns. Over time I have grown to take a surprising fork in the road, surprising to me anyway. I have chosen to follow a path toward a more optimistic destination and I am Bullishly intent on getting there. I don’t know how that happened but it did and I must thank you all for it because I certainly like better where I am today than where I was two years ago. Not that my life was in shambles two years ago but certainly my concerns were getting the better of me then and had I continued along that route who knows where it would have taken me.

So, again, I truly do want to thank you Pu… blog participants and you too Garth. I know I seem a twit at times but really my intentions are sincere. Give it some thought and I think you will understand.

So Merry Christmas to you all and may your new year be filled with all that hidden prosperity contained deep within just waiting for you to realize. Merry Christmas ya all… I hope you too can look forward to this time and next year with all the hope and optimism I can in great part because of you.

Cheers
DA

#139 GregW, Oakville on 12.22.10 at 2:39 pm

Hi #193 Nostradamus, 12.21.10 at 9:23pm
re: the link you gave, – Toxic sodium fluoride in water.

If you look just a bit, it’s quit insane it’s still being added to the masses water supply in the west. Forced medication with known toxic waste, and the dose isn’t controlled, concentrations yes, but not the amount you drink/dose isn’t. And you have other fluoride exposure from some foods and drugs.
A 250ml(large glass) of water has about the same amount of fluoride as 1 pea size amount of fluoridated tooth past.
The tooth past tells you DO NOT SWALLOW to call poison control if you swallow more.
Tell me again why it’s still being added into the drinking water???

Why are the people we are told is there job to look our for people health not, can’t they read and use there brains anymore???
It seems it is not in your best health interests to remain uninformed, especially when it come to fluoride forced on you through it’s addition to your drinking water. Some action on your part to have water fluoridation stopped in your town will be required! If your lucky you’ll just need to get the people that can vote it out to read the information, the science, that is available for them to take action. The people with vested long term interest or something, can’t seem to read and act in your best interests!

I do not drink and cook with my towns fluoridated water since I learned just how toxic it is to the brain a soft tissue of the human body, including your families.

Here is a site with good science based info. There is a 28min easy to understand video everyone should make time to see as well as link to 2006 NRC report and lots more, scroll down a bit for the video and book links, ‘ The Case against fluoride… can be read on google books for free.

Copy the video and give it to your Medical Doctor and ask them if you should be concerned, if your still not sure. Your Doctor and Dentist most likely only know the rhetoric we all have been told, that it is safe and effective in reducing cavities. No need for you to make sure of the facts or learn just how toxic it actual is!

Pigs started receiving fluoride, if it’s good for people it must be good for pigs right? The pig litters were so screwed up they stopped giving it to pig, it was not economially justifiable to keep giving them fluoride dew to toxic effects. But when asked what about people, were told there was no economic disadvantage, so it continues to this day. I ask you again why do you still want to be forced to drink this stuff or force any human being to drink fluoridated water???

FYI, Brital carbon water filters do not remove fluoride.
http://www.fluoridealert.org/

#140 Look Around on 12.22.10 at 2:45 pm

Garth,
We just had a really nice ride on the MFC roller coaster. Your readers should take your advice and diversify. Thanks…AND
PS. Great pic today. I hope she doesn’t have permanent marks on her legs from those tight holster belts.

#141 brynn on 12.22.10 at 2:56 pm

wow

i love all these stats falling out of thin air – constructed by doomers and pumpers on both sides..zero validity to either…
Foss is a freak extrodinaire and the fact that her name is even mentioned illustrates the degree of nutters perusing this site.

who the heck cares if real estate falls 15% (another fabricated stat) it has risen almost 100% since the turn of the century, so homeowners wont take home quite as huge of a tax free benefit..boo hoo

#142 Cassandra on 12.22.10 at 3:01 pm

#112, Mr Lee

“Now the same could be said for Mr. Turner, however it comes down at looking at the resume. Mr. Turner was at the altar of decision making for many years. Foss, as Mr. Turner stated with his Betty Croker likeness, was busy baking cookies.”

Baking cookies? Is that what you think every middle-aged woman has spent her life doing? What a neanderthal perspective you bring to the discussion.

I had a look around actually, and found this:

http://www.financialsense.com/contributors/nicole-m-foss

#143 Alex on 12.22.10 at 3:08 pm

A friend of mine sold his house this past May in Toronto for 430K. (He bought it in 2007 for 360K. Anyway, he called me and said he was so happy now, instead of paying 3500 every month (mortgage and
all expences) he pays 1500 in rent(2 bedroom apartment)
and since then he was twice in Mexico (with his wife and 7year old kid) and tomorrow he is going to Vegas for 3 nights 4 days (4 1/2 star hotel and buffet included) for 490 CAD per person. That is what all this RE industry/CHMC made to people. THey made them house rich but life poor. No wonder why there is no consumer spending growth lately in the country.
I am very happy for him as I believe he made a right decision. I bet in 5 years he will rebuy his house for 1/2 price.

#144 GregW, Oakville on 12.22.10 at 3:09 pm

Hi Garth, fyi article New study out of China.

At least China and others are smart enough to be looking!
Can Canada still really afford to keep taking the change on this?

Fluoride in Water Linked to Lower IQ in Children
http://www.infowars.com/fluoride-in-water-linked-to-lower-iq-in-children-2/

#145 bill on 12.22.10 at 3:10 pm

”The Automatic Earth needs your support this Christmas season!”

they want your money…..
what a surprise.

#146 Robert Dudek on 12.22.10 at 3:12 pm

Federal governments will never run out of money because they can create as much as it wishes out of thin air.

What matters is the goods and services we humans create for the benefit of each other.

Barring something of the magnitude of a major asteroid hit or a major nuclear conflict, the technological capacity of humankind will not diminish, and therefore our collective wealth will not, either.

Those are the salient facts. Everything else is a handwaving exercise.

#147 garth turner jr on 12.22.10 at 3:16 pm

URL…3 world’s countries lists of per capita average earnings.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

…Is it true Canadian Binners earn more than 65% of the World’s average?

#148 Jan Etter on 12.22.10 at 3:19 pm

#134 & #135 Brian

You must have really bad dreams if you consider the ~40% drop in condo prices we experienced in the 90’s to be a “dream”. I’m re-reading my post but I don’t see how it paints a pretty picture – it’s not Mad Max or armageddon like some are forecasting, I admit. I don’t see where I said Chicago or New York was rosy, it’s not and it’s getting worse, but neither Chicago or New York is Detroit, and that’s the comparison that was made to Toronto. My point is that the real estate markets are different depending on which US City you look at (e.g. Detroit, Miami, New York are all different beasts).

According to Case-Shiller House Price Index (which can be compared to National Bank/Teranet Index here b/c of similar methodology) U.S. National Composite prices as of Sept ’10 are down 30% from the peak in Q1 2006 and it’s looking likely that it will continue to fall. So, if Chicago is down 30% ~4.5 years later, that sounds a lot like Garth’s prediction of 15% in 2011 +5%/year until 2015.

http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff–p-us—-

#149 Reasonfirst on 12.22.10 at 3:34 pm

#2 Devil’s Advocate

“More like prices of 2005/6”

That’s about 28% off the peak in the part of Victoria I am watching. I would say that is about what the average bear on this site is expecting. Are you being swayed?

r

#150 Debtfree on 12.22.10 at 3:37 pm

Nice pic Garth guns and rockets sure beats those manthongs almost tossed my cookies . The tae bunch are over the rainbow . The thirties did not have social safety nets like today . On a lighter note . http://www.remaxkelowna.com/view_agent.asp?AGENTID=228 I’m not sure if it’s her many years of experience or her stunning good looks that makes me want another piece of real estate. I’ll have to look deeper.

#151 CTO on 12.22.10 at 3:39 pm

#128 prollywrong

I think your plan is 100% reasonable using logical principles.

I totally agree that people who are buying overpriced houses today, financed through the banks, if not paying dearly already will be house poor in the very near future.

Who losses – home buyers, general taxpayer

Who wins – realtors (for now), banks (for ever)

It all depends on ones perception of life
-blow your wad and impress the neighbours
or – save money, live stress free, enjoy the pressent and look forward to the future with achievable dreams…

#152 kitchener1 on 12.22.10 at 3:46 pm

Real estate will decline because it has too. Its a reflection of only two things:

1. People’s willingness and compacity to borrow
2. Lenders willingness to supply credit

That is as simple as the whole RE dynamic is. Period.

#1 takes into account interest rates, buying on premise that prices will rise and very lax lending standards. What price point will 6% or 7% or 8% rates support? Answer that question and thats were house prices are going as incomes are not increasing.

#2 takes into account lenders attitude toward debt which is influenced by outside factors, ie. CMHC insurance, market share, bond market etc..

F really only has 2 options at this late point in the game, he either tightens lending standards ASAP as we already have record ownership rates, its the only variable he can control. What happens when we get 80-90% ownership rates? Or he lets it ride and hopes that CMHC does not blow up. Politically, he only has one choice and thats to change lending standards. IF and i stress IF CMHC blows up and requires a bailout, the Con’s will be done as a political party for a min of 10 years!!

People who are tapped out are not good for a service model economy like ours. There can be no recovery, ever, if people are at peak credit and not willing or able to take on debt.

Interest rates are set by the BOND market and not F or Carney, they merely respond to what the BOND market is doing. This pipe dream that they wont let interest rates rise is silly. Ireland/Spain/Portugal/Greece have NO SAY in were their rates are headed. NONE

My interpertation of the news headlines from Carney and other worldwide finance guys is that 2011 will bring a very swift reversal of low interest rates. Rates will rise fast and my guess is that they will go up at least 100-125 basis points from Jan 2011-Dec 2011.

G8 lowered rates in unision to kill the carry trade, they will rise rates in unison as well.

#153 T.O. Bubble Boy on 12.22.10 at 3:55 pm

Wow — CMHC is making significant funding cuts in 2011, including $80M less for Quebec:

http://www.montrealgazette.com/business/City+province+decry+cuts+income+housing/4011843/story.html

Is this a sign that CMHC sees the writing on the wall, and is ready to shrink? (finally!)

#154 Bill Grable on 12.22.10 at 4:08 pm

Arianna Huffington’s latest book, Third World America, explains how those with the least power and money have been getting squeezed for decades:

[The median middle class American] in September 1979 was earning (in constant, inflation-adjusted dollars) $25,896 a year. In September 1995, that same man or woman was earning $24,700 a year — a 5 percent cut in salary over the intervening decade and a half. (P. 54)

Meanwhile, the financial system has strangled U.S. growth by parasitically growing from 3% of GDP in 1965 to 7.5% of GDP currently.
Money was diverted from capital investment, the most important stimulus generator for our economy, to save corrupt financial institutions.
Financial services now account for 35-40% of all corporate profits in the U.S.

That number should be less than 5% in an honest economy.

CEOs of bailed-out banks earn more than they did before the bailout.

http://tinyurl.com/28lyme3

#155 Steven Rowlandson on 12.22.10 at 4:09 pm

Hello Garth.
I see my call for a 90% drop in real estate prices is not totally the ravings of a mad man.
Ah the canadian banks, what a clever bunch they are.
Lending currency out of thin air to support the purchase of property that too few people could afford. Real bunch of geniuses they are. Glad I abstained from getting involved in buying real estate. Getting wiped out in the stock market between 1983 and 1990 was bad enough. Far better to buy gold and silver and just sit tight and wait for the chance pick up the pieces after the so called super gods crash and burn due to their excesses. Nice picture Garth.

Steven

#156 Bill Grable on 12.22.10 at 4:21 pm

Addenda: Re: Keiser = RT.com = is a Russian based Digital Service. I say, consider the source.

‘Stoneleigh’ has some good points, I admire Tavakoli -but I think Keiser taking some glee at the thought of people ‘jumping out of windows and going SPLAT’ – shows where this dude is coming from. J E R K.

I am going to send him some Squirrel recipes and a book by Garth.

#157 young & foolish on 12.22.10 at 4:41 pm

So, everybody including western governments are way too deep in debt ….. does anybody really think we will be able to pay back trillions owed, or are massive defaults on the way ?
Either way, if RE does go down 40-50% over the next few years, where will salaries be? Be careful what you wish for.

#158 The Original Dave on 12.22.10 at 4:54 pm

http://www.citytv.com/toronto/citynews/news/local/article/105291–crews-battle-house-fire-near-yonge-and-401-your-pictures

when you see home fires spiking, you know that the market is going soft. This is a home that was being built.

#159 dark sad person on 12.22.10 at 5:03 pm

#141 brynn on 12.22.10 at 2:56 pm

wow

i love all these stats falling out of thin air – constructed by doomers and pumpers on both sides..zero validity to either…
Foss is a freak extrodinaire and the fact that her name is even mentioned illustrates the degree of nutters perusing this site.

who the heck cares if real estate falls 15% (another fabricated stat) it has risen almost 100% since the turn of the century, so homeowners wont take home quite as huge of a tax free benefit..boo hoo

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

Talk about stats falling out of thin air-

You compare a house prices at the turn of the Century to today and come up with a figure of a 100% rise in price-
How did you calculate that?
Inflation adjusted?
How do you compare prices over 100 years with today-when we have a floating Money system-anchored to nothing?

Here’s a stat-that cannot be disputed-
An ounce of Money (Gold) has risen 6900% over the last 100 years-when measured in todays $ price like you do-

The home that was bought 100 years ago was paid for in Gold-
Ouch-
Talk about nutters-

#160 Mister Obvious on 12.22.10 at 5:09 pm

#98 The American

I tend to agree with you. But if pressed to choose between Vancouver and Seattle I would take Portland. Now there’s a nice little city. It’s all the things that Vancouver can never be without the 24-hour shrieking sirens of Seattle.

But try to understand Vancouver. This equation should help: West = Wealth. To clarify, there are several ‘wests’ to sort through. For those unfamiliar with our fair town, there is:

(1) ‘West Vancouver’. This is not Vancouver at all but a separate city stretching halfway up the mountains on the North Side of Burrard inlet. This has always been the enclave of the very rich. Although a freeway does pass through the bottom of it (Trans-Canada Highway) nobody who lives there would dream of travelling on it. In fact, no one ‘arriving’ in that neighbourhood ever found a reason to leave.

(2) ‘The West End’. This is the western side of the peninsula upon which Downtown Vancouver sits. For decades it was almost completely high-rise rental apartments. Of late, some of the greedier landlords are trying to evict long time tenants and convert some of these apartments into saleable strata units. Needless to say, these actions are hugely controversial.

(3) ‘The West Side’. This is the part of residential Vancouver where those who can’t quite afford West Vancouver choose to live. This is also where the ‘Rich Asians’ are scooping up homes for 2 million+ thereby muscling the progeny of the lumber and mining barons of the twentieth century out of their rightful bounty.

The people of the ‘west side’ have always known a freeway from (God forbid) Toronto points directly at them. They have lobbied successfully for years to keep it well away from their hallowed ground. Even dumpy East Vancouver (who imagine the east-west boundary to be moving ever toward them) refuse to tolerate the intrusion of multi-lane transport. That’s why the Trans-Canada highway turns abruptly north right at the city limits and veers off to become somebody else’s problem.

We choose instead, to live with ceaseless gridlock. It’s not much problem if you’re rich and retired with no real need to go anywhere in particular. For everyone else, I guess there’s always Edmonton. I hear there’s some huge opportunities opening up there. And there’s still a lot of surrounding empty prairie to spill into as real estate values climb ever upward.

#161 RickOShea on 12.22.10 at 5:11 pm

Who isn’t a whiny nihilist after listening to the Keiser Report?

#162 Devore on 12.22.10 at 5:56 pm

#133 jussupow

The guy of madmax scenario. I am certain you know by how much the re valuations fell during GD. No you don’t.

Who you calling guy?

Actually, I don’t think YOU know.

http://www.thedigeratilife.com/images/homepricesL.gif

Where’s you 90% drop, guy?

#163 tangocash on 12.22.10 at 6:04 pm

here is a little fact i borrowed from yahoo finance that i found shocking….
Here’s a final bit of analysis that should raise a few eyebrows. The Canada Mortgage and Housing Corporation has insured $773 billion in mortgages and loans, while holding only 1.2 per cent in equity.

But at its worst before it went technically bankrupt, Fannie Mae, the largest mortgage insurer in the U.S, had 1.5 per cent equity in its loan portfolio.

#164 BrianT on 12.22.10 at 6:16 pm

#157Young-a major RE collapse will hurt the entire Cdn economy-everyone is aware of this fact. The collapse will not be caused by anyone “wishing” on this blog, contrary to your belief system, nor will it be altered by a change in the “wishes” of this site.

#165 Timing is Everything on 12.22.10 at 6:25 pm

#58 dark sad person – just 4 U

TheBigSnit

http://www.nfb.ca/film/big_snit/

#166 Drake on 12.22.10 at 6:30 pm

Garth, I want whatever you’re smokin’! Might as well be smokin’ something because there isn’t much we’ll be able to do to stop the train heading our way.

#167 realpaul on 12.22.10 at 6:42 pm

I think a factor of consideration over the next few years ( particularily 2011 & 12) is the nine trillion dollars in corporate debt that is rolling over. This is open market debt…sure to unbalnce the tidy game the government has been playing with the behind closed doors ‘bond’ buying they have been doing. No one is forecasting a source for the nine trillion to be repaid……some companies are in a position to roll their debt over….many not….could be fireworks in the exchange.

#168 eddy on 12.22.10 at 7:04 pm

The automatic earth is the LAST place to go for financial insight. They have been saying 90% drop in Canadian real estate prices and the END OF CREDIT for the last TWO YEARS.

#169 eddy on 12.22.10 at 7:18 pm

..bad predictions are not enough for these two shills, Max and Nicole both believe in something called Global Warming. Why does Max bring up global warming, it’s off topic and nobody asked him about it?

http://www.youtube.com/watch?v=9gWY7V_y-Hw&feature=player_embedded

#170 Keith in Calgary on 12.22.10 at 7:27 pm

We’re not going to take a 90% hit to our property values like she thinks…….50% yes……without question, and spread out over a 3-5 year period. We’re already down almost 20% again, here in Calgary, since the highs of May 2007.

I love watching Max Keiser though.

Yes, he’s a little dramatic and theatrical, but I don’t often find myself thinking he is nuts or disagreeing with him……like I do with the nutbars in the MSM and at CREB and CREA.

#171 jess on 12.22.10 at 7:28 pm

well, i suppose we could all just unplug from the mood shifters .

rebo news bots and sentiment finders and “unstructured data” “unstructured data,” as it is known — can shift the mood from exuberance to despondency.

news algorithms
Wall St. Computers Read the News, and Trade on It
By GRAHAM BOWLEY 3:01 PM ET
Traders are using software to track news, blogs and even Twitter posts to identify shifts in market sentiment.

#172 The InvestorsFriend (Shawn Allen) on 12.22.10 at 7:30 pm

Dark Sad at 159 comments on Brynn at 141 who mentioned houses up 100% since the turn of the century.

Dark Sad then rants about house prices 100 years ago.

Earth to Dark Sad, the turn of the century was not 100 years ago but 11 years ago… Remember Y2K?

wake up!, the year is 2010… The century has turned…

so has the worm… (whatever that means…)

#173 High Park Renter on 12.22.10 at 7:33 pm

#126 Junius

I recently read this description of the difference between an ‘asset bubble’ and a ‘credit bubble’:

“Overpriced assets are like poison mushrooms. You eat them, you get sick, you learn to avoid them. A credit bubble is different. Credit is the air that financial markets breathe, and when the air is poisoned, there is no place to hide.”

–Charles Morris, ‘The Trillion Dollar Meltdown’

To extend Morris’ metaphor, Garth, I suppose, is poison control; Nicole Foss is… the morgue? Anyway, it seems to me like asset and credit bubbles are an either/or thing.

Another way of putting the question: are we on the brink of a cyclical downturn against which a balanced portfolio is a good hedge (Garth’s position), or are we at the precipice of something new and staggeringly more dangerous (Nicole’s position).

There’s a lot riding on who’s right.

#174 bridgepigeon on 12.22.10 at 7:39 pm

Northern Dirt,
Russia Today was one of the only American media sources to talk about the death of the Howard Zinn, America’s Mahatma (His talks are on youtube). The most important intellectual alive today (NY Times), Chomsky, is also essentially disallowed from all US mainstream media, you can hear him talk freely on RT. One has to search out foreign and alternative media to get any balanced opinion of what is going on. Sure it’s not always perfect, but at least it’s not the same old story were fed here.
Al Jazeera had great coverage during the bombings and killings in Iraq. In Afghanistan and Gaza they were the only media. The US missile strikes on their stations in Kabul and Baghdad was very unfortunate… Check out how many non pro US military reporters have been killed lately.
The people in communist and more repressed countries often an advantage over us regarding media information. They know not to trust it.
This blog contradicts what they’re feeding us here…I like it.

#175 CTO on 12.22.10 at 7:51 pm

#162 expand your means on 12.22.10 at 5:51 pm

“I believe that homeowners and shareholders will continue to be richly rewarded in 2011. Canadians in particular will be doing very well in the coming new year!”

Right…

The economy will improve huge and all this debt will be paid down in the next 2 years before rates rise…Or even better, rates will never rise and there will be wealth happiness for all !!!

Right?

#176 TD69 on 12.22.10 at 8:01 pm

#160 Mister obvious hit it with #98 American-all except for the Portland part-which was only fun during Animal House filming.
Here’s the deal today in Van. Woke up to 9c and went skiing at local mountain, yes a real mountain and one of 3 locally with black diamond runs and a 15 minute drive from my door(West Van). 11 am golfing at a local track, all of which in the lower mainland are open and gorgeous. A little water on the track helps the ball glide. Sunny. Just leaving to go out winter salmon fishing on the eagle craft moored on the Fraser river-25 minutes from home. Will be at the north arm mouth by UBC/wreck beach dropping lines. 10c outside. Dec.22.
40 sockeyes in the freezer from last summer. Maybe it’s just me but I’m not alone in where it’s at out here. And they just wrecked another $8 million lot by my brother on the westside to build a $25mill pad for 3 people from Taiwan. Kid included. Glad we left Windsor as infants.

#177 Ben on 12.22.10 at 8:01 pm

Now That Everyone Likes Stocks Again, Is It Time to Sell?

With investor sentiment bubbling at levels comparable to just before the market’s historic highs in 2007, now may be the time to pull back some before the froth gets out of hand.

Strategists are almost universal in expectations for the market to climb from 10 percent to 20 percent in 2011, and investor polls show bullishness around 60 percent. Those are numbers reminiscent of October 2007, just before the worst of the financial crisis hit and the market lost more than half its value.

At the same time, stocks have been climbing steadily higher during what is a normally great month, rising 6 percent even on low volume. Finally, more than 3,400 new highs have been hit this month on the New York Stock Exchange.

It’s at just such times of massive exuberance that the market is poised for a letdown.

http://finance.yahoo.com/news/Now-That-Everyone-Likes-cnbc-79768860.html?x=0&sec=topStories&pos=main&asset=&ccode=

Does this mass excuberance sound a little to familiar on the real estate scene in Canada

#178 wellwell on 12.22.10 at 8:27 pm

Garth, you know I love you, but Foss is no more a wingnut than you are. Like the novelist John Wyndham, you specialize in the pleasures of “cosy catastrophe” – i.e. the world is changing catastrophically, but we’ll be alright as we watch events unfold from our cosy bunkers.

Foss is focused on the credit and energy shortages of the next century, but she is absolutely right that house prices can fall quite precipitously in the near term by more than 50% and in extreme cases (e.g. Detroit) they can fall by 90%. In her “A Century of Challenges” lecture, she outlines in considerable detail what she believes will happen if our current financial difficulties dovetail with the onset of peak oil declines. There is simply nothing to replace the incredible energy bonanza of easily obtainable crude oil.

Interestingly, many of her ‘solutions’ are no different from yours with respect to personal self-sufficiency, but she does not believe our financial institutions will continue in their present form. She advocates local community networks to fill the gap, something that your libertarian instincts presumably prevent you from advocating :)

#179 jess on 12.22.10 at 8:27 pm

the irish index

http://www.esri.ie/irish_economy/permanent_tsbesri_house_p/

20/06/2006

“National House Prices in Ireland have risen by an average of 14.9% for each of the last ten years according to a special edition of the permanent tsb House Price Index published today. Compiled in association with the ESRI, the index is widely regarded as the most authoritative measure of house price movements in Ireland. Today’s special edition of the index was published to mark its 10th year measuring house price changes in Ireland. Headline figures from the special 10th Anniversary Index reveal the following:

•National house prices have increased by 270% over the past ten years – compared to a total rise of just 30% in the consumer price index.
•The average cost of a house in 1996 was just euro75,000. Ten years later (2005) the average cost had increased to euro280,000.
•On average national prices rose by an AVERAGE of 14.9% each year for those ten years.
•In one year (1998) average national prices grew by a massive 30%.
•Ten years ago the average difference between buying a house in Dublin or outside of Dublin was just euro10,000. Today that figures has grown to some euro130,000.
•A third of the current total number of houses in Ireland (547,000 houses – known as “the housing stock”) was built in the last ten years.
•The value of all the houses in Ireland is estimated at some euro412 billion – a four-fold increase on the figure ten years ago.
•Rise in number of house completions each year from 33,700 (1996) to 81,000 (2005). ”

Ireland’s permanent tsb House Price Index is produced by the Irish bank permanent tsb, which owns about 20% of the country’s residential mortgage loans. This index takes a home’s size, type, location and other characteristics into account using a complex technique known as multivariate linear regression analysis.

#180 cellar dweller on 12.22.10 at 8:28 pm

@TD69
Since it isnt daylight until 8am here I assume you drove up to Cypress to ski in the rain and fog this morning. For what? To get rescued by North Shore Search club ?
Then you went golfing at 11am ( wow 1.5 whole hours of skiing eh? If you factor in your driving to and from the mountain. On those aged legs of yours?).
Then off to the links at 11am to smack balls out into the soggy goo of Northlands rain soaked fairways. (minimum 4 hrs playtime because they love to book 7.5 minutes between tee times to “packem stackem and rackem at the Pro shop).
Then you went FISHING? Wow, its now 3pm and ya just finished golf(according to your estimates) It gets dark by 4:30 so ya better hurry because it takes at least 45 minutes to get from North Van to the Fraser in Vancouver traffic.
Unless of course your one of those vancouverites that ALWAYS brags about ” sking in the morning / golfing in the afternoon” types> But when you ask them if they have actually done it? “No” is ALWAYS the answer.
Cut the BS.
It “cheapens” your other arguements

#181 Mikey the Realtor on 12.22.10 at 8:29 pm

At least Foss has the balls to put herself out there while Mr Ilargi is hiding behind the curtain whispering sweet nothings. Some of their predictions seem somewhat radical but who can really say for sure? nobody.

As for RE, no collapse in Canada. Rich Asians and Italians are keeping this baby alive. 10k+ pups and poodles are just salivating for 2011 to come so they can pick up RE at a cheap price, just to be disappointed miserably.

#182 Nostradamus Le Mad Vlad on 12.22.10 at 8:38 pm


#178 Ben — “It’s at just such times of massive exuberance that the market is poised for a letdown.”

Yup — was it not Buffett who said “Sell when others are buying, buy when others are selling”? Better yet, recall Bre-x and Nortel. Take the profits, reinvest elsewhere.
*
“Fighting for peace is like screwing for virginity!” Sign in The Bayou Pub, Baton Rouge, LA.

4:17 clip Cheap Flights in Ireland. Flights are 50p. Great song and the vocals are terrific!

Bovine Excrometer! Hype the booga booga up; get sheeple afraid and panicky. Lots more FFs on the way — probably goes with last night’s link about retail sales being flat.

0:25 clip Lloyd Blankfein — Douchebag of the Year. A masterful achievement! “The Private Central Bank system (US Fed) is designed to always create more debt than can be paid, in order to enslave the people. It therefore follows that no matter how hard you work, or how much you sacrifice, the government can never get out of debt. You have only two choices. Either to allow yourself and your family to be dragged down to homelessness and starvation alongside the government that voted the Federal Reserve into power, or cut your losses, stop throwing good money after bad, and let the system collapse while you still retain enough of your own wealth to start again.” wrh.com.

1:13 clip Hilarious! Christmas with the TSA. SNL skit.

GW in Bermuda and Europe — Read the comments!

GW in Oz “Snow falling on New South Wales the first day of summer probably didn’t hurt.” wrh.com. Sun spots have vanished, and the sun is on a time out. The last ice age only took a short time to completely encase Europe in ice.

Promises Promises Cancel their goddamn bonuses already!

‘Net Control ain’t gonna work.

#183 john m on 12.22.10 at 8:41 pm

#177 TD69 on 12.22.10 at 8:01 pm<<<< have another toke :-)

#184 Alister on 12.22.10 at 8:56 pm

#110 DA

All you can do is try to diversify so, have some gold for currency diversification, have some in Asian ETFs for currency diversification, have RE to live in, have some cash in a stash and so on. Don’t forget that many mutual funds stopped redemptions when things got bad, so they can become illiquid.

Things change so fast that all you can do is diversify. The speed of info in todays world, has created instability due to the moneyed herd changing direction at any moment they smell trouble. Canadians need to realize their world is different and there is no such thing as “Canada is immune”. When I look at our deficits and budgets, I wonder when someone from the outside will view us as a credit risk.

Right now we are viewed favourably due to commodities prices.

#185 realpaul on 12.22.10 at 9:01 pm

Don’t be so surprised if the cr*p hits the fan. Look what the ‘smartest man in the room’ ( Peter Schiff) has to say.

“What lies ahead is a new era of rising interest rates, soaring consumer prices, increasing unemployment, economic stagnation, and lower living standards. Instead of stimulating the economy, quantitative easing and deficit spending will prove to be a lethal combination. Bondholders beware, the bell tolls for thee.”

http://www.24hgold.com/english/contributor.aspx?article=3258929282G10020&redirect=false&contributor=Peter+Schiff&mk=1

Think about it……if the highest percentage of all mortgages written are high ratio squeakers then what will happen when rates burst higher…..as thay are already doing…yields are exploding….bonds are DOA.

Even in the equity markets people are doing exactly the wrong thing at the wrong time. Now that equity mutual funds are recovering from the 08-09 debacle….’investors’ are pulling record amounts out of equities and piling into a collapsing bond market.

A denier posted earlier that they’d gone shopping a Macy’s and found that prices ( from the cheap TShirts to the TV’s made in Bangladesh and China were great buys) while ignoring that gas prices, taxes, groceries, utilities, fee’s etc have all gone through the roof. This is exactly the type of ‘head up the bum’ thinking that makes life easy for F and the gang.

BTW gallons of industrial paint are also the same price as last year but the starving seniors, starving families, broke ass middle class losers aren’t shopping at Macy’s for cheap crap…they’re trying ( in vain) to feed themselves and their families….and finding they can’t heat the house and feed themselves at the same time. According to Schiff…it’s only going to get worse….faster.

#186 AG Sage on 12.22.10 at 9:02 pm

>#165 BrianT on 12.22.10 at 6:16 pm
>#157Young-a major . . . The collapse will not be caused by anyone “wishing” on this blog, contrary to your belief system, nor will it be altered by a change in the “wishes” of this site.

Oh! I’ve been watching for this. This happened in 2005/6 in the U.S. People started blaming the blogs and newspaper columns for swinging sentiment and therefore the markets. (The lack of impact from the previous 2-3 years of bearish messages being irrelevant, of course.)

If we are willing to believe a crashing market invokes the 5 stages of grief. Then we are starting to shift between stage 1 and stage 2.

#187 dark sad person on 12.22.10 at 9:10 pm

#173 The InvestorsFriend (Shawn Allen) on 12.22.10 at 7:30

********************
Sounds like {Shawn/Timing is everything’s} ass is still stinging from all the the many times I’ve kicked it around this board-

How’s those stock prices based on earnings doing?

How’s the dollar for dollar debt to savings going?

We did teach you that it is the “taxpayer” that backs the $-

I hope-
*****
I suppose my confusion comes with someone talking about price increases since the “Turn of the Century” as if it was the one 100 years ago-
Who would anyone say such a thing when this one was only 10 years ago?
Wouldn’t the normal thing to say be- prices have gained 100% in the last “10 Years” ?

But it doesn’t matter cuz-same bottom line-numbers are a bit different-
Here ya go Shawnie-

Since the “turn of the century”

Gold has gone up 460%

My point Shawnie-was that the number has to be “Inflation adjusted” as in Dollar devaluation-

How much have you really made when measured in “real money”

Damn you’re a dense one Shawnie–

http://www.youtube.com/watch?v=7VKdwx5AB5k

#188 Tim on 12.22.10 at 9:12 pm

Re #98
Who in their right mind would want to live in America? The land of guns, deficits, subprime and tea party wackos, not to mention the majority who voted Bush in a second time. I like to live in a country where it is safe to walk the streets at night. A country that takes care of its people instead of spending the bulk of its money on the military.

#189 eddy on 12.22.10 at 9:26 pm

I like RT too, for entertainment purposes, but when I see ‘RT’, I think ‘Red Terror’, not Russia Today. I would NEVER trust it. It’s Controlled Opposition.

Re Howard Zinn. He’s in this film: PSYWar-Wake Up, (about advertising, propaganda, selling wars etc)

http://www.youtube.com/watch?v=NXg70qJQ6O0&feature=player_embedded

#190 ballingsford on 12.22.10 at 9:37 pm

Garth, is that one of your bunker guards? Where can I get one of those???

#191 cellar dweller on 12.22.10 at 9:39 pm

@189 Tim
Dont be too smug about Canuckda! Our fearless leaders are just as stupid with taxpayers dollars as our friends to the south. And the only reason we dont spend on our military is because they do! ( Up until a few years ago the Canadian Troops were nick named “The borrowers” because we had to beg plane rides, equipment, etc. on UN mercy missions.)
Im living in a city that just hosted the “Owe-Limp-Icks” and now we’re spending $600 million to put a “retractable” roof on a CFL football stadium !?!?
We have a fricken Billion Dollar condofiasco that the “One Term Wonder” Mayor has opened up 110 suites to Welfare recipients and another 115 suite to “subsidized apartments” for emergency services workers. This has GOT to be the most expensive “staging” of a real estate property delevopement since the Sultan Of Brunai flew into Dubai to look at a suite in The Burge Dubai (or as the locals call it ( The Finger to the West!).
But I digress…..
Open a ballot box, dump the contents on the table and start the “fools parade” all over again, anywhere.

#192 realpaul on 12.22.10 at 9:43 pm

German economists discuss the outrageous salaries of the civil service as the one and only cause for the demise of the EU.

“Homburg: I see things completely differently. The cause of the euro crisis is not to be found in the irrationality of the financial markets. Rather, it lies in the fact that certain countries lived beyond their means. A Greek train driver earns a monthly net salary of €5,000 ($6,600), and Spanish air traffic controllers make up to €300,000 a year. ”

In Canada we have the same parellel insanity with firemen , police, teachers, administrators etc tec all recieving double and triple their counterparts in the US in an economy a tenth the size.

We’ll see the unions fighting for the status quo…and we’ll see F retaining the ring wall around the crazy compensation packages until the Cons get a majority for the sake of political peace leading up to the next election. The bottom line is though that like in the EU and US we have over compensated a noisy cantankerous group within society and its time they come to heel before we all get dragged down.

The Canadian economy is not improving…thats just a fact…the IMF warned Canada today that the country is in no position to manage its growing debt.

http://www.spiegel.de/international/europe/0,1518,735812,00.html

#193 cellar dweller on 12.22.10 at 9:44 pm

@189 Tim …. and as far as the comment “Where its safe to walk the streets at night”…..
Was that an unregistered AK47 the Police found in Shaunessy last Friday night? After the shooting of 10 people at a restaurant in the same “toney” area?
If you think our streets are safe, take a stroll down to Main and Hastings in Vancouver after 10pm and the walk towards the pawn shops at Hastings and Abbott.
yeah…. Fun stuff.

#194 Observer on 12.22.10 at 9:45 pm

@Tim
What’s wrong with America? Typical BS.
Plenty of guns in Canada…did you notice the shootout in Vancouver? No shortage of deficits here either. Subprime? Do your homework. Also if they weren’t spending money on their military, you would be, due to our need to bulk up. Get your head out of the sand.

#195 cellar dweller on 12.22.10 at 10:01 pm

Ahhhh Yessssss Vancouver BC.
The BestPlaceonEarth.
Or so it is claimed.
The Richest “Postal Code” in Canada ( West Van )
and the Poorest “Postal Code” in Canada ( Downtown East Side).
Eat more Lotus leaves and forget all your troubles……
Merry Christmas, pass the crack pipe

#196 cellar dweller on 12.22.10 at 10:05 pm

Or, as Studs Terkel the author, once replied when asked why there were so many crazy people on the West Coast.
” On the 8th Day, God tipped the entire American continent on its side and all the fruits and nuts rolled west”……
Gotta luv an ex Chicago Tribune Reporter for his brutal observations. :)

#197 TheBestPlaceOnEarth on 12.22.10 at 10:05 pm

Skiing in the morning golfing in the afternoon it just doesn’t get any better. One day all homes on the West Side will cost 25 million. 2011 is poised to be a stellar year on the West Side.
OOOOO
And they just wrecked another $8 million lot by my brother on the westside to build a $25mill pad for 3 people from Taiwan. Kid included. Glad we left Windsor as infants.

#198 cellar dweller on 12.22.10 at 10:09 pm

Beer time gotta go !

#199 Painted Toenails on 12.22.10 at 10:35 pm

Played Squash for an hour, had a blast. Went upstairs to the little pub, hoisted a microbrewery pint of the good stuff and after a light lunch, hopped in my car, hit the retractable roof button and cruised home with the top down.

West Coast. You pay to live here but damn, it’s worth it!

#200 silvia on 12.22.10 at 10:39 pm

Garth, what’s your take on apartment buildings as an investment? There are quite a few in southwestern Ontario with cap rates in the 10% range.

#201 Betty Crocker on 12.22.10 at 10:41 pm

This post is beneath you Garth. It amounts to no more than ridicule and name-calling, with no serious attempt to refute the points raised in my interview. I am disappointed. Respect is a two-way street.

I have been entirely consistent in my view of where we are going and why. I am not swayed by temporary counter-trend moves that make no difference whatsoever to the big picture.

Those who do not understand herding behaviour are doomed to repeat it. Now, when people are incredibly optimistic, is not the time to join them in throwing
yourself off a cliff. When the herd is optimistic, take the other side of the bet. That’s what the insiders will be doing.

I wouldn’t touch equities with a barge pole right now – not any equities at all. I’d be sitting on the sidelines in cash, where it’s safe, rather than playing the same game of musical chairs that everyone else is playing. It’s addictive, but like all addictions, it will end in tears.

Canadians are in denial. People simply don’t recognize a bubble when they’re in one. I hardly ever speak in Canada, where people are so insulated from reality on the whole (with notable exceptions of course). People in the USA and Europe listen, because they’ve seen what’s happening and they understand as a result. Just look at Ireland, where a typical house is already worth only 40% of the mortgage on it. They know what a bubble is.

Canada has a date with reality, likely some time in 2011. Just watch the liquidity leave the real estate market as the credit noose tightens. Canadians are so over-extended. There is probably nowhere on Earth so divorced from the real world. This is sad and unnecessary. I remember trying to explain power systems to Donna Cansfield at Ontario’s Bill 100 hearings, before she was Ontario’s energy minister. She sneered at me for explaining the Californian experience, saying that we should rely on Canadian experience. This amounted to turning Ontario’s back on knowledge that was readily available for anyone who cared to look. This is the level of ignorance and denial that I encounter every day. I did not expect to find that attitude here, of all places.

We agree on much, of course. But extremism will change few minds. Try a few cookies. — Garth

#202 dd on 12.22.10 at 10:51 pm

# 85 anon10

“The bond market vigilantes won’t be very happy if and when the printing of boat loads of money starts”

What? Where have to been for the last 10 years? The printing has been going on since 2001. Why do you think gold has run from $250 to $1400? Gold is not getting more expensive … the dollar is depreciating.

#203 BrianT on 12.22.10 at 11:01 pm

#202Betty-You are obviously a lot smarter than the average person, and I don’t actually disagree with you on your basic opinion of where the economy is headed, however, some of your statements prompt questions. When you state that cash will be incredibly scarce, how does such a large % of the Cdn workforce employed in the government and pseudo government sector fit into this model? One would assume these employees will be getting a huge effective pay increase, at least until the large scale layoffs take effect (which realistically would take many years at the earliest). Our actual private sector is a fairly small part of the overall economy at this point, which is a long and medium term problem, yet makes a sudden and drastic drop in employment difficult to manage IMO.

#204 BrianT on 12.22.10 at 11:06 pm

#202Betty-If you think Garth’s post was beneath him, you don’t read this site very often-it was actually right at his normal level (no offense Garth).

#205 TD69 on 12.22.10 at 11:22 pm

Cellar dweller. You poor debby downer Cellar dweller. I have a nice basement under stairwell rental just for twa on pandora. Make sure the rent’s on time. Looks like jealous comments are your spec. from the others you chastize. You sold me my ticket this morning at Seymour right? be more like john m #184 and people will like you and you’ll actually make some money to have fun in life. and don’t be late on the rent pal.

#206 AG Sage on 12.22.10 at 11:49 pm

>Dec.22.
>40 sockeyes in the freezer from last summer.

My wife wants to know why–if you have 40 sockeyes in the freezer–you are out fishing.

#207 TD69 on 12.22.10 at 11:54 pm

Hey #198 best place on earth.
1986 bought first 50x120ft lot in Mackenzie Heights for $92k. Know what it’s worth today-$2.2mill. 22x in 24 years. Is it worth it in my internal world-no. But the market decides not us. As long as the Fed prints moneys it resets to zero every 20 years. And they are printing more than ever. My Chinese partners tell me there is way more than 1.3 billion folks over there-they just hired 23 million census workers-additional workers. So who knows. You are correct 2011 on the westside will be nuts. But not in White Rock aka Abbotsford on the water. Just supply/demand cranking the juice.

#208 TD69 on 12.23.10 at 12:25 am

#207 It’s the last true freedom.

#209 Utopia on 12.23.10 at 12:33 am

If we ever see Canadian real estate at 90% off we will certainly be in the midst of not just a credit collapse but a national calamity and a full-on economic collapse. Let’s hope Nicole is wrong in her paranoid thinking and that her extremism is not catching.

Meanwhile, I could not help but notice your lady in the picture today is short 90% of her outerwear.

Connection? Has the AutomaticEarth been exposed?

#210 pablo on 12.23.10 at 3:58 am

A 90% decline in r/e pricing; yeah right, when that happens we can all bend over and kiss ourselves goodbye.
But before I go mad max, I’ll rip all the copper pipe and wire outa my mcmansion and any other fixtures that I can sell at the scrap yard before dropping the keys off at the mortgage holder’s office, no; hang on, I can throw them on the scrap metal pile too, besides; there won’t be anyone manning the office anyhow they’ll all be out hunting squirrel. The heck with gold, silver and other precious metals, forget stocks, etf’s, reit’s and bonds I’m piling my money into squirrel meat futures- who’s with me?

#211 The American on 12.23.10 at 11:19 am

At #189: Tim, you aski who would want to live in America? The short answer for you is about 300Million people more than who would want to live in Canada. You are living in a country that lies to its people (ie. banking system’s actual health, reality of a real estate bubble, government debt, consumer debt, etc.) – your country does not takes care of you. If you bring up health care, I’ll have to break that down for you too… Nearly ALL Canadian senior officials come to the U.S. for their medical care, especially when it comes to life-threatening ailments. You then gladly bend over and anti-up ridiculous taxes for virtually sub-par infrastructure, yet you do it with a smile. Oh, one more thing, we’re free in this country to be crazy-voting, gun-slinging, tea party whackos if that’s what floats your boat.