Government

The hulking guy in the grey suit with the silver hair grabbed my elbow as I held up the back wall of the caucus room.

“Talk?” he said.

We slid through the sound-proofed double leather-covered doors into the coffee room. A few other government MPs were there making phone calls. Two staff wrote messages on small slips of paper which were given to trusted messengers who ducked inside to press them into the hands of caucus members, as party bosses and the prime minister stared down from their podium.

It was early 1990. I’d been in Parliament for less than two years and had a large measure of respect for this man – largely because I knew he was about to blow himself up for all the right reasons. Michael Wilson was the country’s finance minister, tasked to find a way out of a debt and deficit spiral which threatened to hobble Canada.

His solution was a new value-added tax. It would prove to be powerful enough to turn the national deficit into a surplus within five years, and destroy forever the Progressive Conservative Party which ushered it in. Me included.

Wilson had a fat sheaf of papers in his hand. On the top was a white business envelope covered with numbers – his favourite place to jot things. We went to a quiet corner out of earshot and he asked me the question: how much of the new GST should be levied on houses?

I mention this for a couple of reasons. First, today there is no GST (or HST) on residential real estate, except high-end new construction. If you wish to worship me, I shall try to be worthy. Second, you’d be amazed at how casually major policy issues are sometimes decided in Ottawa.

Sure, MPs are made busy forming committees and traveling the country to hear briefs laboriously prepared by citizens and special interest groups, but the guys who actually write budgets never even see them. It’s political theatre. If any real influence-peddling is done, it’s to key MPs and ministers directly. It happens in their offices, and behind closed doors. And it is never written down.

These days F is the guy with the two big offices – one on the Hill and the other five blocks away on the top floor of 140 O’Connor, where the Department of Finance lives. In recent months he’s been whispered to by the CEOs of several major banks, the country’s real estate cartel, the governor of the bank of Canada and his own concerned officials. The issue is simple: real estate and debt.

Emergency interest rates, needed to keep the economy from withering and blowing away, have also resulted in unfettered borrowing and a consequent run-up in house prices which threatens to pop. Too many families are over-extended and mortgage borrowing has hit unprecedented levels. The bulk of new home loans being taken out are high-ratio and high-risk, with virtually all new first-time homebuyers opting for 5% down payments and 35-year amortizations.

Carney, F, the bankers, the Finance guys – they all know it’s unsustainable. They know rates will normalize. They know the consequences. They watch CNN. They realize what a real estate meltdown would do to consumer spending and the economy. And they’ve been trying to find ways to slow down this runaway freight train – the one which turned housing, the staple of middle class wealth, into a casino and a futures market.

Under consideration are several main reforms.

  • Requiring higher minimum down payments for home purchases where mortgage insurance is required (any time less than 20% is put down). Today buyers must pony up just 5%, and while the bankers have suggested this be moved to 10%, the bet is F will settle on 7%.
  • Tightening rules for condo purchases. Today just 50% of condo or strata fees must be included in a list of expenses measured against income to see if a buyer qualifies for financing. That would be moved to 100% – not unreasonable when monthly maintenance payments in some buildings today equal what rent used to be.
  • Banning no-money-down mortgages, now widely offered by a slew of independent mortgage brokers; tightening up on the ‘liar loans’ or self-declared income mortgages where self-employed people are not required to prove their income; and, setting new rules for cash-back bonuses some banks give new mortgage customers. In the real world these are called ‘bribes.’
  • Shortening the maximum amortization on a mortgage eligible for mortgage insurance from 35 years to thirty.

Will this make a difference? Yeah, probably. It will hasten the inevitable, cool the market faster, remove more first-time buyers and clean up some of the sleaze which has bred at the edges of a sweaty business. But it will also give F and his boss the patina of action, casting them as guys who moved in the best interests of a nation of house porn addicts.

When, of course, they are the guys who peddled it.

Had it not been for government intervention when house prices were coming back to earth in late 2008, today home ownership would not be at 70%, families would not have historic levels of debt, a Vancouver SFH would not cost a mil, equityless young couples wouldn’t be at risk, the savings rate would be higher, real estate would not equal gambling and Mike Holmes would still be insulating basements in Woodbridge.

But this is politics.

“I’m from the government. I’m here to help you.”

212 comments ↓

#1 squidly77 on 01.14.11 at 11:36 pm

Our analysis of CMHC rule changes on Calgary prices indicates that for every year that insured mortgage terms were extended beyond 25 years Calgary house prices rose by between $6,000 and $10,000. Between 40% and 70% of residential price changes in Calgary between 2004 and 2009 can be attributed to CMHC amortization rule changes.

DA, what say you..

#2 An Cat Dubh on 01.14.11 at 11:36 pm

Good post. Mark Carney, former GoldmanSachs employee. Don’t trust him. Though what you are saying is inevitable.

#3 Debtisforever on 01.14.11 at 11:40 pm

Nice changes. But too little too late, I’d say. Heard on the radio today that we’ve experienced the best possible real estate downturn-a “soft landing”. They expect 2011 to be stable. Uh huh. Wait. And watch.

#4 The Original Dave on 01.14.11 at 11:47 pm

first! first?

#5 bsallergy on 01.15.11 at 12:05 am

Ah we are deep in doodoo, calgary school of common sense ecomics doodoo, selfservative in search of a majority doodoo. These monkeys will sink us faster than the last conservative government did, sorry you were part of that nonsense too.

#6 kitchener1 on 01.15.11 at 12:06 am

The upcoming changes will all depend on how the books of CMHC are right now.

Im still going with 10/30 as my prediction.

This is the same crew that promised not too break up income trusts and then slaughtered them.

same crew that brought in 0/40

BUT i still give them the benefit of the doubt. I honestly believe that they did not anticipate the level of crazy borrowing that took place.

condos will be the first to drop as always and im seeing the tail end of that right now.

i remeber back in 08, when inventory was rising and sales were happening at the same pace as leafs winning games that either this is it or its a dead cat bounce and when it really hits it will hard and sudden.

Here is what the majority of the population do not understand because 70% is invested in RE. If we go back to 2003 prices were they were at 3.5 times income (if my memory is correct) its a win win for everyone.

people still buy houses, still have money to go to dinner once a week, watch movies, put their kids in their respective sport teams, still do the 1 week vacation etc..

its a healthy economy, and one that is sustainable. People will buy new cars if they can afford it, they will buy new furniture,tv’s go to movies, dinner etc.. compared to todays where two incomes buying a house means crappy food, no dinners, no movies, vactions at lake ontario etc…

the banks see it, the smart money knows it. the political crew is well aware yet the populace is blind???

#7 Snowman on 01.15.11 at 12:09 am

Had it not been for government intervention when house prices were coming back to earth in late 2008, today home ownership would not be at 70%, families would not have historic levels of debt .”

Gouvernments around the globe have done the same thing. How woulda’ve been any better not to lower the interest rates and push the country into an unnecessary depression, just to keep the ownership rate at %67?
The mistake was the 0/40 few years before, the lower interest rate basically they had no choice.

#8 April on 01.15.11 at 12:09 am

Garth, are going to be speaking in the next few mths in the Lowermainland?

Perhaps. Truth be told, I am declining most invitations to speak since I’m too damn busy. I will miss the airport groping, however. — Garth

#9 Tim on 01.15.11 at 12:18 am

Too late,
the bubble is inflated and most who wanted to get in the market are already in.

#10 Elmer on 01.15.11 at 12:26 am

Had it not been for government intervention when house prices were coming back to earth in late 2008, today home ownership would not be at 70%, families would not have historic levels of debt, a Vancouver SFH would not cost a mil, equityless young couples wouldn’t be at risk, the savings rate would be higher, real estate would not equal gambling and Mike Holmes would still be insulating basements in Woodbridge.

Yeah but then you wouldn’t have anything to bitch about on this website. What would you do with your time? You’d go insane from boredom.

#11 T.O. Bubble Boy on 01.15.11 at 12:27 am

Thought of the day:

RE Associations and mortgage brokers downplay the percentage of new mortgages are high-ratio… yet, they also fight tooth&nail against any changes, and try to claim that today’s loose standards (most of which have only been around for a few years) are critical to the market.

So – which piece do you think they lying about: the “low” number of highest-ratio (5%/35-yr mortgages) coming in, or the importance of cheap money to their business?

Flaherty should just go for broke and make 0%/50-year mortgages available – that could get every adult paying a mortgage every day from the time they turn 18 until they retire!

#12 wetcoaster on 01.15.11 at 12:28 am

“Heard on the radio today that we’ve experienced the best possible real estate downturn-a “soft landing”. ”

Our trusty pilots Captain Von Muir & Pastrick put down the landing gear while the planes still at 30,000 feet. Thank you for flying BC Bubblejet, don’t mind the upcoming turbulence, it’s just the pent up demand for parachutes and barf bags.

#13 InvestorsFriend (Shawn Allen) on 01.15.11 at 12:37 am

7% down and 30 year amort sounds okay. (A tightening but not enought to kill the market… we hope)

It will be impossible though to really ban the zero down since there are so many ways to borrow.

Consider if I take $50,000 out on a line of credit for investments. Then later I use that for downpayment on $500,000 house. I owe 90% on the house and 10% on an unsecured line of credit. Technically I had 10% down.

How is that any different than another guy who borrows 90% against the houser and the bank loans him 10% unsecured for the down payment? I think that will continue.

What can be done is to insure no more than 93% of an accurate appraised value is secured by the house first mortgage. The other 7% can come from savings or just other borrowings unsecured if the buyer can qualify for that.

Even 93% is a LOT of exposure for the bank since it assumes the house price will not drop. 7% will get eaten up in costs even if the house is sold for full value.

I think what saves our banks and CMHC is that the homeowner is on the hook for any losses if the house is foreclosed on (the loans are recourse loans). Therefore few ever walk.

It’s been a virtuous circle. Almost no one walks and therefore few distress sales and therefore prices stay high and therefore people suck it up and pay the mortgage and don’t walk.

But that may be a delicate dance. If a shock happens and we get a flurry of distress sales, then that may cause a lot more people to give up on paying mortgages if they think the house is worth less than the mortgage, leading to more distress sales, lower prices, more walks… (Although to walk in Canada means bankruptcy, so we will never see the throngs of walkers that the States got)

#14 Spiltbongwater on 01.15.11 at 12:41 am

Garth, can the Government change the 20% rule for not needing CHMC insurance and move the requirement up to 25%? Would there be anychance of that happening in the near future?

#15 BC Bring Cash on 01.15.11 at 12:41 am

Absolutely Garth. The average village idiot does not see the conflict. F helped to create the problem in the first place and now pretends to be the GENIUS who is going to rescue us from our foolishness. What a fraud our Finance Minister is. Puppet of the Banks once again. His title should read Revenue Minister instead.

#16 Soylent Green is People on 01.15.11 at 12:45 am




The CRUSH 2011 Steve Harper Calendar now available as a free download at:

http://www.tiny.cc/CRUSH_2011__Calendar

Get them HOT while Steve Harper is still our “Crime Minister.”





#17 Sad on 01.15.11 at 12:48 am

Had it not been for government intervention when house prices were coming back to earth in late 2008, today home ownership would not be at 70%, families would not have historic levels of debt, a Vancouver SFH would not cost a mil, equityless young couples wouldn’t be at risk, the savings rate would be higher, real estate would not equal gambling and Mike Holmes would still be insulating basements in Woodbridge.

Yes but it bought H&F two years of power and boosted the economy. It was but an illusion. We face all the same structural problems plus unemployed construction workers and we have greater deficits to overcome as well. Stole from the future. I wonder what rabbit H & F intend to pull out of there hat. I guess that is why the Fed election is looking better sooner than later. Fool the fools some more.

#18 Rich Renter on 01.15.11 at 12:51 am

I think you can leave your “I told you so t-shirt” in the closet for a tad longer master Turner.
F, C and H will manipulate things so much in the next few months, that you’ll never be a hero.

My dog thinks so. I am fulfilled. — Garth

#19 Min in Mission on 01.15.11 at 12:51 am

“I’m from the government. I’m here to help you.”

Good one!!!!!

#20 Crash Callaway on 01.15.11 at 12:56 am

When govt starts to cover their behinds you know the trip to the woodshed is coming.
They’ve run out of scams to delay it.

#21 Behavioral Finance on 01.15.11 at 12:57 am

Real estate has been the futures market for the last ten years around the world.

#22 concessionman on 01.15.11 at 12:58 am

“I’m from the government. I’m here to help you.”

That goes right up there with “Military Intelligence” and “Jumbo Shrimp”….

#23 Junius on 01.15.11 at 12:59 am

#1 Squidly,

“Between 40% and 70% of residential price changes in Calgary between 2004 and 2009 can be attributed to CMHC amortization rule changes.”

Noted before but worth repeating for anyone who does not understand that all of these gains were because of debt that fuelled sentiment.

#24 a prairie dawg on 01.15.11 at 1:03 am

Thanks for the insight into the big game, Gman. Some of it was expected, but some of it was terrifying. lol

#25 Nostradamus Le Mad Vlad on 01.15.11 at 1:06 am


“If you wish to worship me, I shall try to be worthy. ” — All hail Garth God Turner!

And now back to regularly skedyooled programing. NOT! Let’s try this in reverse:

“But this is politics. I’m from the government. I’m here to help you. When, of course, they are the guys who peddled it. But it will also give F and his boss the patina of action, casting them as guys who moved in the best interests of a nation of house porn addicts. Carney, F, the bankers, the Finance guys – they all know it’s unsustainable. They know rates will normalize. They know the consequences. And it is never written down.”

Aha! They KNEW all along what was going to happen, covered their own butts to protect themselves, helped it along by proroging Parliament twice to silence dissent and soon, they will play their final card in going for a majority.

Where is The Rhinocerous Party or The Monster Raving Loony Party when we really need them? Out to lunch?

The person’s truck is under water, in conjunction with the west’s finances. The frenzied finale could unexpectedly appear a lot sooner than most realize, with an awful lot of unintended consequences.
*
Interesting Pic Sun seen through millions of ice crystals (Krystal Meth?).

China’s new stealth fighter has caught a lot of countries by surprise.

Chicken McNuggets 50% is food, 50% is the surprise of the day! Dipping sauces are nice, ‘tho.

Loonie Tunes The sun is appearing in the wrong places at the wrong times. Could be something to do with the astrological brouhaha currently going on.

Bloody Nerve the US has in telling other countries what to do.

Food Shortages Five ways to prepare.

Shark Fin’s Soup Ummm, not quite (but not far off).

BP Other than the fact they are almost off the hook, the Gulf doesn’t look that great.

Gold Are an individual’s accounts safe from prying eyes? Stuffing bullion into mattresses is not a bad thought.

Junk Bonds and leveraged buyouts. More of the same.

#26 john m on 01.15.11 at 1:11 am

Great post Garth….. H.F.C. created this mess and now they are trying to show concern by doing a total flip-flop and putting the blame on the people who believed all their tax payer funded propaganda encouraging them to take advantage of easy loans..”things were different here”.These bumbling incompetents have turned a “temporary”recession into a pending disaster. High priced real estate and high taxes do not create jobs. Employers are pulling out looking for locations with low overhead and cheaper labor . These people (H.F.&C.) as well as us all have witnessed in advance what happened to our neighbors in the US and they ignored it……….does this country ever need a change!

#27 Junius on 01.15.11 at 1:18 am

“Had it not been for government intervention when house prices were coming back to earth in late 2008……”

To quote Robert Frost, “The Road Not Taken”.

“F” followed every other idiot gov’t on the planet and stoked our economy with debt. Of course it started more than 2 years earlier as he began to relax the CMHC rules. However he really doubled down in 2008.

Time to bring in an F – “stupid is as stupid does.”

#28 Popeye the sailer man on 01.15.11 at 1:22 am

A bit off subject, but wow:

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/01/a-record-year-for-reverse-mortgages.html#tp

“………….it seems like a given that it’ll post exceptional double-digit growth again in 2011.”

#29 specuskeptic on 01.15.11 at 1:23 am

You mentioned in your post that “Carney, F, the bankers, the Finance guys – they all know it’s unsustainable. They know rates will normalize. They know the consequences. They watch CNN. They realize what a real estate meltdown would do to consumer spending and the economy. And they’ve been trying to find ways to slow down this runaway freight train – the one which turned housing, the staple of middle class wealth, into a casino and a futures market.”

This should not come as a surprise either -> http://tinyurl.com/4r6dnup

“Alan Greenspan’s housing bubble coffee break” – Quelle Surprise!!

#30 Timing is Everything on 01.15.11 at 1:23 am

This is still a RE blog, right?
Anywho…for what it’s worth…As good a guesstimate as any…

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/01/canadian-interest-rate-forecast-.html#more

#31 Junius on 01.15.11 at 1:25 am

#14 Spiltbongwater,

You asked, “Garth, can the Government change the 20% rule for not needing CHMC insurance and move the requirement up to 25%? Would there be anychance of that happening in the near future?”

Yes, they can change it any time. It is gov’t policy. That is the real point of Garth’s post.

The chances of this happening are slim to none in the near future but excellent in 5 years or so.

Right now they are walking on a tight rope trying to curb debt but not slow the economy. It is kind of like sucking and blowing at the same time.

Eventually when the market turns down and we see a few waves of foreclosures they will be forced to tighten back up or face the wrath of the credit agencies. However by then H and F will be gone.

#32 a prairie dawg on 01.15.11 at 1:29 am

As anyone who reads this blog regularly has come to realize…

“H” = the PM (the head honcho)(rents at 24 Sussex)
“F” = the FM (the appointed financial fall guy)
“C” = the B of C governor (the guy appointed to hold the brake and the throttle)

H F C

Household Finance Corporation.
http://www.encyclopedia.chicagohistory.org/pages/2708.html

Ironic.

#33 Just a Tech on 01.15.11 at 1:30 am

http://www.moneyville.ca/article/921774–why-no-money-down-mortgages-can-work?bn=1

This guy doesn’t get it does he? He talks about what kind of debt you can service on a monthly basis as a determining factor. Well thats bubble finance at it’s best. Haha these historically low interest rates make a perfect time to pay down principal? What about the historical average? That will be a perfect time to lose your shirt.

Also, you know things aren’t good anyway when he makes an article that’s pitched to people that have no money in the first place.

#34 Victor on 01.15.11 at 1:36 am

PM says news rules must ensure viable mortgage and property market

OTTAWA — Prime Minister Stephen Harper said Friday his government would look at whether any new rules were necessary to ensure Canada was able to maintain a “viable” mortgage and real estate market.

However, the Prime Minister, in Montreal for an aerospace announcement, declined to address a National Post story that Ottawa was looking to target the condominium market with specific measures that would make it tougher to qualify for a loan on a high-rise apartment.

Sources told the Post the rules being discussed would add 100% of condominium fees to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage. Furthermore, the government is considering whether to increase the minimum down payment required to purchase a home, from 5% to 6% or 7%.

Read more: http://www.financialpost.com/news/economy/says+news+rules+must+ensure+viable+mortgage+property+market/4110749/story.html

#35 echo on 01.15.11 at 1:40 am

Don’t get me wrong Garth, I’m not trying to bash you here, I like your blog, I even went to see you when you were in Vancouver and I enjoyed your show, but you have to admit that your timing as well as most readers of your blog (me included) has been terrible in predicting real estate prices. If someone in most parts of Vancouver or Toronto (the places you predicted would be the worst hit) were to sell today they would make more money than at any other point in the last 3 years (when you started predicting the decline). I realize that factors came into play but that’s not the point…we were wrong. It’s easy to make excuses as to why we were wrong or why the decline has been delayed, but it doesn’t take away from the fact that had someone held real estate for the last 3 years in this low rate environment they’d be richer now, and had they been scared from posts and comments that they read on this blog and sold a few years ago they’d probably be kicking themselves.

Had you only started writing your blog today with predictions of declining real estate values in the coming months, or had you stated 3 years ago that prices actually wouldn’t really start to decline until spring 2011, you would come across much more clever than you are now.

It will happen, prices will come down at some point, but everybody knows that. It’s perfect timing that makes people rich, or saves people a lot of money, that’s the tricky part, and unfortunately that hasn’t been achieved in your blog writings……here’s to a 2011 decline!

The blog is not about bow to squeeze money out of real estate. You sound like part of the problem. Regardless, the smart money always sells too early, not too late. — Garth

#36 Milhous Plumbers on 01.15.11 at 1:45 am

Wonder if Mr Carney’s planning his sortie or at least got it on the cards?

#37 cornstars on 01.15.11 at 1:45 am

I love the the Mike Holmes comment ! that’s what he does best, thanks Garth !

#38 dark sad person on 01.15.11 at 1:52 am

Carney, F, the bankers, the Finance guys – they all know it’s unsustainable. They know rates will normalize. They know the consequences.

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

?F?K?N?O?W?S?

You gotta be joken–

It took 30 years for rates to normalize last time this happened-i don’t see what’s different now-

http://bit.ly/gI3LFV

C knows–
He’s known all along-thus the 300+ billion that was tucked away long before the bubble popped-
What exactly was that for when this was never gonna happen?
Remember?

H-F-C were all at the alter for the past 4 years- telling us we in K’anada were all sailing in a harbor of calm amidst a Global superstorm-

Here’s a call–

This what happens in deflation-
Bank lending and corporate borrowing will basically cease to exist-the serfs are cooked already-
Japan is a good example-

http://bit.ly/dXXN0D

C will not do any more then tinker with the ONLR-

Our World envy’s will borrow at zero-buy treasuries out on the curve and use the spread differential to (cough) recapitalize-ohhh and to hurry the recapitalization-use their Hedge funds to front their speculative bets in the futures market-totally void of any risk-cuz-they know that any and all losses will be fully backed and funded by the peasant taxpayer as always-

#39 Utopia on 01.15.11 at 1:58 am

#1 squidly77 wrote:

Our analysis of CMHC rule changes on Calgary prices indicates that for every year that insured mortgage terms were extended beyond 25 years Calgary house prices rose by between $6,000 and $10,000.
—————————————————-

So what you are saying in effect is that if amortization periods are reduced from 35 to 30 years it could instantly wipe 20,000 dollars off Calgary home values (if the process functioned in reverse in other words,..then this might amount to a correction of 4000 dollars x 5 years on its own).

#40 jjpetes on 01.15.11 at 1:59 am

Richrenter above, For some of the criticisms I have there is one thing that makes Garth my hero, his introduction of the TFSA. From all of us that are young enough to get more than 25 years worth of wealth building with this tax free vehicle I would like to thank you Garth Turner for introducing this once in a history of Canada opportunity.

Question Garth, do you think this to good to be true Registered account will last? Or will the gov eventually find a way to dip into it once guys like me have a substantial amount in them within 10 years? Is there a provision in the legislation to keep it truly tax free indefinitely? Sadly, I think to ask the question is to answer it.

Another Q, was the TFSA created to offset the OAS/CPP that gen Xers like me will probably have such minimal benefit from?

jj

#41 Utopia on 01.15.11 at 2:03 am

Interesting article today Garth. My own observations of the political scene were that Executive Assistants held all the cards. Cross them and you never got to breathe a word to anyone at any level. They wrote the speeches, set policy, sorted the sane from the whack-jobs, arranged the appointments and interviews and told the MP’s what to say and when. Then they sent out the press releases to confirm it all. Got paid more sometimes too.

#42 nonplused on 01.15.11 at 2:13 am

It was the right thing you boys did back in 92, Garth. All governments at every level should be forced by constitutional law to balance the budget except in times of war or national emergency, although I don’t know what sort of emergency would be big enough. That way the tax rates will send the proper signal to the voters when we collectively try to decide just exactly how much government we want.

The way we do it now, where we just keep spending and spending on every seemingly worthy cause and borrow any shortfall is just a Ponzi scheme. Through our RRSP’s and such, whenever we lend money to the government by buying a bond, we are just lending the money “to ourselves”. Only since we aren’t going to be able to actually pay anybody including ourselves back in real dollars, you may as well have just paid higher taxes.

I don’t know what the tax rate needs to be to get to zero in Canada, probably not a lot higher at the federal level due to 92, but Ontario and BC are probably looking at doubling taxes at the provincial level, and most municipalities are looking at a 50% increase. Draconian? Yes, but a pay as you go government is the only kind that doesn’t collapse due to the “Tragedy of the Commons”.

And just so you know I kept voting Conservative. Except for Preston Manning. I liked him and I was in his riding at the time. But fat lot of good he ended up doing. Should have been a Reform/Conservative coalition government in my opinion, but the Conservatives got whacked by the Liberals in Ontario and Quebec, and the Reform party was never going to be more than a western party that might increase the voice of the west with the Conservatives. Once the Conservatives got whack out east, the Reform party was never going to be able to penetrate eastern Canada to replace them. And the failed attempt to do so gives us the current version of the Conservative minority government we have now.

Oh well, voting Conservative back then wouldn’t have helped either. I remember winning a bunch of money when I predicted that the Reform party would win more seats than the Conservatives, and they did, especially out west where it was a landslide. But the Conservatives also got routed by the Liberals in Ontario and Quebec, and that undid a lot of good. The Reform candidates, I believe anyway, would have worked with the Conservatives from the east if there were any, but demanded more fairness. And some Conservatives to work with. There weren’t any.

The old Conservative party actually completely died that day. The east voted almost entirely Liberal, the west conclusively Reform. Stephen Harper’s new Conservatives are not quite the same animal.

#43 Dman on 01.15.11 at 2:20 am

If if CMHC backs FTB mortgages only it will bring RE down and fast! Was it not the reason why it was created in the first place?

#44 back again on 01.15.11 at 2:38 am

Squidlly77

still waiting for the crash….funny,

#45 Peter Pan on 01.15.11 at 3:00 am

I saw Brad Lamb and some other real estate bimbo on the CTV news tonight… It’s like anything higher than 5% downpayment and a shorter amortization than 35% will completely destroy first time buyers… They fail to mention just 6 short years ago, amortizations were set at 25 years or less and before 1999, 25% downpayments were the norm for CMHC insured mortgages. But the philosophy from these realty bozos is “let the good times roll” where naked greed is masked as concern for home buyers.

#46 Jeff Smith on 01.15.11 at 3:04 am

“home ownership at 70%”, and Garth said why we all don’t drive mercedes. Come on man, with the house prices you are seeing in Canada. That should have been, why we don’t all drive Ferraris. LOL, you are a little too soft sometimes there Garth.

#47 Utopia on 01.15.11 at 3:09 am

Getting back to your article today Garth and the options that are under consderation by the Government and Bank of Canada,……I no longer believe we will see any major changes coming forward that might risk capsizing the real estate market (and with it, the wider economy).

That is especially true at this critical moment, just as the spring housing thaw is about to lead to the summer melt we all know is coming anyway.

The problem as we all know here is that it would take little more than a nudge by government to send the real estate market right off the ledge. The few healthy buyers remaning might not actually rush to make purchases as is normally the case. The holdouts are a savvier lot these days. They read the news too.

That is why the leadership is in a bit of a pickle. We all know some action needs to be taken but caution is the byword now. The wrong policy move could send the market over the edge and nobody wants that. None of us can afford it.

The boys are now tasked with engineering a soft landing at this stage and not making any sudden move that brings on a crash like we have seen in the States.

Debt levels are high for us all right. Insanely high. That does not mean that they cannot still be managed by most home owners barring any external shocks. What is notable is that the unemployment rate is improving and some quality jobs are returning.

Generally, most people I talk to are surprisingly confident as well. This is certainly one of the great differences that separates Canadians from Americans at this time. We feel good about the future. Perhaps we are fools.

I know one thing though, we cannot downplay social mood. It has been one of the pivotal factors in having brought us to this stage of debt in sanity. Yet despite the bad news on so many other fronts we still feel pretty darn good! Are we nuts in this country.

As astonishing as it is unbelievable (even to me), we seem to be in something of a recovery mode too although how long that will last is a question mark. The dollar is a concern for sure. Too high for my liking and especially at a time when the US dollar looks like it may weaken further.

At the moment my thoughts are, that provided employment numbers hold or improve and interest rates do not rise too quickly, that Canadians will retain some confidence in the real estate market in the comng year. Nothing can be done about the larger demographic pattern however. The big picture trend remains intact and no government has control over that.

The short term is the worry. There is every reason to believe that any sharp change in policy, too many rate increases or a resumption of the slowdown in the US could tip us over the edge and send home prices reeling with negative consequences for everyone.

Lets all hope the boys can pull off a small miracle here. This is a time for finesse, not force. The last damn thing we need is to join the Americans in mopping up the damage after our own home-grown credit party gets crashed.

If high debt levels are the only price we end up paying for having kept the economy on an even keel these past few years then we should consider ourselves lucky, say a short prayer of thanks to the angels in heaven and then just pay the damn bill and get on with life.

This is one time I agree with the interventions of CREA although not on behalf of their own selfish agenda. The thing is, there really is a lot at stake now. If the boys can pull us back from the edge at this late stage without triggering a major correction they deserve a hug at the minimum. Call me crazy but I think they will do the right thing. Just faith.

Look at the carnage everywhere else.

#48 Jeff Smith on 01.15.11 at 3:09 am

By the way, I keep saying this, whatever the CFH team try to do now is just lips service. It’s too late. The water is off the falls. It’s gone! Do you think all those kids who got the cheap crack cocaine and smoked can suddenly say oops, can I unsnort the stuffs and give it back to you Mr. Crack Dealer?

#49 Guarded on 01.15.11 at 3:11 am

Just increase the interest rate and market will correct itself automatically. It does not matter if it is 0/40 or 5/35, only way to pop this bubble is raising the interest rate, all the cheap money/credit will go away and people will start to think about savings and will actually save.

#50 realityguy on 01.15.11 at 3:14 am

I’ve been thinking about what Garth has said about inventory going up. But I’m not a guy who believe in anything until I do the research myself.

Just in the last week inventory in burnaby went from 944 to approx 1200 and east van went from 1900 to 2122.

I also been going to open houses and talking to the real estate PIMPS, bragging how house prices has gone up via property taxes, but the reality is the tear me down houses which were selling for approx 585,000 in april are now trying to sell for 524,000.

A nieghbour close by was offered 585,000 for their tear me down in april and is now trying to sell in the 550,000 range. But tear me down houses in much better shape are being post for under 550 right now.

The mid range houses have not been selling, they been sitting for the entire year idled.

As for Carney and F, I wouldn’t be surprised if they did nothing. They been useless last year and I believe the trend will continue because they are gutless.

#51 Peter Pan on 01.15.11 at 3:44 am

I would direct your attention to a good synopsis in Salon magazine about the day Mr. Greenspan was asleep at the switch in 2005… Ample evidence was given to the Fed about lax mortgage regulations and the resulting overheating market… but Mr. Greenspan chose to do…. Nothing. Is there an echo in here?

http://www.salon.com/news/alan_greenspan/index.html?story=/tech/htww/2011/01/14/alan_greenspan_housing_bubble_coffee_break

#52 Jeff Smith on 01.15.11 at 3:46 am

>#25 Nostradamus Le Mad Vlad on 01.15.11 at 1:06 am
>China’s new stealth fighter has caught a lot of countries
>by surprise.

http://helablog.com/2010/12/china%E2%80%99s-impressive-looking-secret-stealth-fighter-%E2%80%93-j-20/

http://njuice.com/This-Is-Chinas-Secret-Stealth-Strike-Fighter

Looks like they copied-catted the US F-22 Raptor. Look at these photos. The resemblance is uncanny. As the above articles alluded to.

Look at these images for comparison.

J-20 (China)
http://www.lowyinterpreter.org/image.axd?picture=2011%2F1%2F110104+j20.jpg

F-22 Raptor (US)
http://texasbestgrok.mu.nu/images/F-22Nose.jpg

#53 Jeff Smith on 01.15.11 at 3:52 am

Oops, the second link for the F-22 Raptor didnt show up. Here it is again.

F-22 Raptor (USA)

http://www.richard-seaman.com/Wallpaper/Aircraft/Fighters/AmericanJets/F22Taxying12oClock.jpg

#54 aVanMan on 01.15.11 at 4:17 am

0/40 was just the last of the loosening of the CHMC, the tinkering that led to this bubble started back in 1999.

* 1954 25/25
* 1999 5/25
* 2003 remove the house price ceiling.
* 2005 5/30
* 2006 5/35
* 2007 0/40
* 2008 5/35
* 2011 ?/?
sources:
http://financialinsights.wordpress.com/2010/12/15/the-great-mortgage-amortization-debate/

http://www.cmhc-schl.gc.ca/en/corp/about/hi/index.cfm

#55 Canuck Abroad on 01.15.11 at 5:26 am

Comments 144 Jim / 180 Shawn Allen last thread – Garth you said, “…However she could borrow a large sum to set up a non-registered account, then use the RRSP withdrawals to pay the loan interest. The withdrawals would be taxable and the interest tax-deductible, allowing for zero tax and, in effect, a wealth transfer into a non-sheltered investment pool…”

I have read this was possible and intended to do exactly this when I can start to draw my pension. I believe it really is possible to draw down your RRSP (effectively) tax free and 100% legal (?). Of course I have watched the pension/tax rules change so frequently here in the UK that it is near impossible to plan ahead…

Jim it sounds like your mom’s pension pot is large enough to justify hiring an advisor to get it structured legally.

Garth, is this covered in your book (previous or next)? Is it fairly simple to structure or does it require a tax lawyer? I can handle the investment aspect myself but am out of my depth tax-wise. Presumably assets growth in the non sheltered pool is taxable at the time of disposition? I would like to get much more information on this if you would kindly point me in the right direction. Thx.

#56 EJ on 01.15.11 at 5:42 am

Has there ever, anywhere, been a massive run-up in real estate resulted in a “soft landing”? It is extremely unlikely. Once you take away that which props up the market (ie. mania), you cannot expect it to just float there. Oscillation occurs commonly as a natural phenomenon, and will apply here as well; return to the mean and overshoot.

#57 kansai_92 on 01.15.11 at 5:46 am

CMHC must be eliminated.
Mortgage risk cannot be priced correctly with government backstopping the loans.
If private industry is not willing to guarantee mortgages on their own, this must mean that the risk is much higher than today’s returns.

#58 Worldwide on 01.15.11 at 7:34 am

Garth, you deserve a lot of respect for what you have done in politics, for educating the masses on finance and RE and for your blog here. I don’t know why the press and some MPs and even some bloggers here don’t give it to you.

“Under consideration are several main (RE) reforms”

That is great news, you are right in 2008 the Gov’t really pushed the market up where it had no right being, but at least they are taking steps to reverse it and hopefully learned from their mistakes (and borrowers/RE specs as well). They are on the right track to slow the debt train down.

Next station is higher interest rates and even 25 year am.

#59 BigAl (Original) on 01.15.11 at 7:46 am

Oh great….another mad-dash boom market for everyone who wants to “get in” before the new rules come into force. Realtors and mortgage brokers will milk this for everything they can.

And seriously, when I think about it, do I really want to see the crash that happened in the U.S. happen here, with the widespread misery it has caused? Why? Just to see the remaining 35 percent who don’t own be given a better deal?
Just to see the average Canadian have less mortgage debt, but then turn right around back into consumer/credit card debt, fuelling the growth of the “new economy” with all of its new part time McJobs? Oh yes, the always-benevolent private sector will save me!

I get the feeling now that many here are the fans of bloodsport, sitting on the sidelines with their popcorn and soda letting the economy/real estate market entertain them, waiting for the blood, gore, and explosions.

If the crash happens, enjoy the show.

#60 Kaganovich on 01.15.11 at 8:36 am

Attention blog doggies!

Ms. Foss has written another article explaining the case for deflation. It is excellent. Please read:

http://theautomaticearth.blogspot.com/2011/01/january-14-2011-zombie-money-kills-real.html

#61 bigrider on 01.15.11 at 9:18 am

” Mike Holmes would still be insulating basements in Woodbridge” Hysterical

Finally Woodbridge is mentioned ! This is the nucleus, ground zero, for house addicted, real estate pumping, house humping maniacs. The region is full of Real estate agents, mortgage brokers private mortgage investors/lenders ,builders, contractors etc. etc.

Oh ya that’s right, because it’s full of Italians, the absolute KINGS of RE mania !

#62 Live Within Your Means on 01.15.11 at 9:30 am

#14 Spiltbongwater on 01.15.11 at 12:41 am
Garth, can the Government change the 20% rule for not needing CHMC insurance and move the requirement up to 25%? Would there be anychance of that happening in the near future?

…………………

IIRC, when we bought our current home in 91 a 25% down was the requirement to avoid paying CMHC insurance and that is what we did. Not sure when it changed to 20%. Anyone know?

#63 Nemesis on 01.15.11 at 9:35 am

“…you’d be amazed at how casually major policy issues are sometimes decided in Ottawa.” – Garth…

No one who can sing ‘Hearts of Oak’ while quaffing grog would be… ;)

#64 mattbg on 01.15.11 at 10:00 am

I am now hearing radio ads for mortgage brokers who mention the rumour of mortgage “reform” and advise people to get in before the rules change.

How stupid do you have to be to not realize that a tightening of rules would put downward pressure on the price of the asset behind the mortgage you are being advised to hurry into?

Very irresponsible on the part of the broker, too. And, as you already pointed out, the real estate cartel are pushing the same issue.

#65 Herb on 01.15.11 at 10:12 am

“If any real influence-peddling is done …”

What do you mean “If”?

#66 T.O. Bubble Boy on 01.15.11 at 10:25 am

@ #51 Peter Pan

That “Greenspan Coffee Break” text is like the pre-9/11 GW Bush Security Briefing “Bin Laden determined to strike U.S.”… the information is right in front of you, but it just wasn’t a priority at the time.

Somehow, Canada’s situation seems so much worse — because NO ONE can claim that they didn’t know what was happening… every single statistic that characterized the 2005-2006 era US Housing Market is now present in Canada: Debt/Income 148%, home ownership 70%, House Price/Income ratio well over 4, House Price appreciation well ahead of inflation for 10+ years, and the list goes on.

The other text in the greenspan article (from the same report on subprime lending) was more striking to me:

“It’s not clear at this point if the MBS market will be an efficient distributor and disseminator of risk or if those in that market will be the last to recognize the risk that’s embedded in what they’re doing and know how to price it.”

And – remember – this was based on a Mortgage-Backed-Securities market that actually *tried* to figure out how to account for lending risk. The CMHC monopoly doesn’t even attempt to figure out how to price in risk — they give the exact same rates/pricing to EVERYONE!

So, in the U.S., the fact that buyers of mortgage-backed securities didn’t have an accurate risk profile of what was in those pools of mortgages was a major factor in those investments blowing up. Also, the “undiminished appetite, particularly for the nonconforming mortgage product” is noted, as is the fact that “there is no slowing in sight, despite all the warnings that we have heard”.

Gee – a mortgage market where the majority of loans are non-conventional, and people keep taking on more and more mortgage debt despite all of the warnings… that’s nothing at all like Canada’s situation!!!

#67 a prairie dawg on 01.15.11 at 10:28 am

@ #54 Canuck Abroad
“Presumably assets growth in the non sheltered pool is taxable at the time of disposition?”

Correct me if I wrong (and they will), but in a cash investment account, gains aren’t taxable until the security actually gets sold. Then it gets assessed capital gains tax. (and only 50% of the gain is taxable per current rules) Plus if you match up any capital losses against those gains in the same tax year, they reduce your net capital gains payable even further.

Any dividends produced from the securities would be taxable, but the tax rate for that one eludes me. (might be lower than income tax though) (they “might” not be taxable if re-invested either)

Isn’t there also a once-in-a-lifetime capital gain waiver? Up to 100K free or something like that? Handy say if you disposed of a revenue property, or had to cash out the entire account all at once for some unforeseen reason?

And no future tax bomb waiting at 69/70 like with an RSP. (ie: forced to convert all of it to a LIF, RIF, annuity, etc)

That’s what I get from it so far…

Can someone chime in to confirm/deny?

#68 JC on 01.15.11 at 10:36 am

Jim Rogers makes a very salient point in the podcast about the correlation between the degree of artificial manipulation of prices and the degree of severity when reversion to the mean happens.

An interesting tale of an asset class (real-estate) and a commodity (food).

Real investment in agriculture has been on the decline for the last 30 yrs. The “game changers” that enabled new productivity in Canada (like the development of Canola) were all large, publicly-funded programs. The end result of this investment (which was substantial) was new productivity by introduction of new markets… not just enhanced productivity. For at least the last 30 yrs we’ve rested on those laurels and taken for granted that food is just a consumer staple that magically appears in the Supermarket and that somehow through the magic of competition prices stay cheap. Unfortunately, this isn’t the case… food is cheap and has been for 30 yrs through govt manipulation.

Now it looks like we are set for a “violent revision to the mean” if the reports of increasing food riots in Southern Asia are to be believed.

On the other hand, real-estate is an example of an asset class which is artificially inflated through the hand of government. 0/40, 5/35 (pick your poison), allocation of 1 million hectares of prime farmland in China for empty condo developments, century-low mortgage rates… and now record-high homeownership numbers have all had the effect of making the revision to the mean (day of reckoning) more violently tumultuous.

I wouldn’t be suprised to hear in the future that bulldozing whole swaths of suburbia for reclamation of arable land is a good idea.

Food is the only captive market that 100% of us participate in thus agricultural commodities at the end of the day are the only commodities that have absolute pricing power.

#69 Cowboy_aka_My_View on 01.15.11 at 10:53 am

Nice post would be nice if those changes came in and made a difference, but that will just get the herd antsy and add to the problem for a little longer. Banks cry foul, but are one of the biggies in market manipulation while rolling in all the cash-backs @ higher rates (in a forsaken low rate environment) The Cons will create another stampede.

Garth Turner was right in 2008! Those who followed Mr. T’s site, amongst others Like Brian Ripley’s and the Teranet etc. Hell if you Mutts actually went out there to sniff the rubber you would have found from Dec 2008-Mar 2009, some bargains believe it or not! Down -15% – definition of correction. No other bids/offers and some negotiating power-vultching. However some waited for the great crash.

By then we all lost perception. Smack dap in Armageddon, here we were sharing squirrel recipes. This is the same friggin Government who invented the diet prime 0/40 mortgages. By May 2009, it was too late, the Cons gave everyone the push/rush to go out and buy a home or two. First time buyer rebates, the fantastic HomeRenoTaxCredit & the lowest floating rate ever amongst other perks.

Inflate or die!

#70 T.O. Bubble Boy on 01.15.11 at 11:12 am

If this article from the Hamilton Spectator is any indication, they may be even more in denial than Vancouver:

http://www.thespec.com/news/canada/article/473550–few-foreclosures-no-bank-failures-canada-offers-lessons

“Canada doesn’t have an equivalent to Fannie Mae or Freddie Mac, which purchase mortgages from banks and pool them into bonds. The argument for Fannie and Freddie is that they take loans off of a bank’s books, freeing them to lend more.

Canada has no such secondary market for mortgages, yet it hasn’t hurt the ability of its banks to lend or significantly raised the cost for borrowers.”

ummm… how can someone publish an article about mortgages in Canada, and NOT KNOW THAT WE HAVE CMHC?!?!?!?

Even more ridiculous, the writer actually mentions mortgage insurance later in the article:

“Should a borrower opt not to put down 20 percent on a home purchase, they must purchase mortgage insurance to cover the debt in the case of default.”

My favourite “non-statistic”:

“Canadian banks generally provide 25-year mortgages, with 20 percent down payment.”

I guess in Hamilton, the word generally is some kind of weird pseudonym for “might have done this in the 1990’s, but have no incentive to do this today”?

How could CMHC have between $500B-$600B in mortgage insurance on its books (out of the $1Trillion total mortgage market) if everyone “generally” put 20% down and took 25-year amortizations?

… and I thought that the Vancouver Sun, Calgary Herald, and Montreal Gazette had the worst real estate columnists!

#71 Bill in Burlington on 01.15.11 at 11:16 am

I was in Collingwood yesterday and had lunch with a friend who’s a real estate salesman. The market in the Collingwood Blue Mountain area is dead. In the past 4 weeks: 240 New listings
42 Sales

#72 Kevin in Winnipeg on 01.15.11 at 11:18 am

7%… big deal. Banks will find a way to accommodate the irresponsible.

A acquaintance of mine bought a $540,000 in Winnipeg with 20% down over 35 years at a “special builder’s variable rate” of 1.5% for 2 years. Of course, he did not have the down payment. The bank gave him a $60,000 line of credit to purchase the house lot from the builder. When the construction started, the builder gave him back the $60,000 which he then used as the down payment.

A $440,000 mortgage plus a $60,000 line of credit must be like warm milk at night.

#73 Kevin on 01.15.11 at 11:19 am

First time buyers are loaded with debt before they buy a home
http://saskatoonhousingbubble.blogspot.com/2011/01/first-time-buyers-are-loaded-with-debt.html

By 2009, the average debt for university graduates was $26,680, while the average for college graduates was $13,600.

new starter housing of an acceptable quality to the purchasers with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual household income of that urban market.

In Saskatoon, first time buyers with $80,000 would need to go voer over 4.5 times income for a decent house for a family.

70% of women with young children were now working outside the home, pointing to the need for two incomes to make ends meet.

First time buyers do not need long amortizations, or creative financing to get into the mortgage market, what first time buyers need is affordable housing. It is that simple.

#74 Utopia on 01.15.11 at 11:21 am

@ #52 Jeff Smith

China’s new stealth fighter has caught a lot of countries
by surprise.
——————————————————–

Surprise is right. And worry too. If those guys can build and deploy fighter jets with the same level of ambition that they apply to making any other manufactured good then the world had better start shoulder-checking the passing lanes and expecting to be overtaken. Fast.

There is nothing quite like nationalistic fervor, mixed with optimism, competition, pride and a strong belief in your own nations goals when it comes to getting the really big jobs done.

Remember, that’s how the Americans got to the moon.

#75 T.O. Bubble Boy on 01.15.11 at 11:41 am

This just heard in Manhattan (and printed in the NY Times):

BUY NOW OR BE PRICED OUT FOREVER

#76 BDG-YYC on 01.15.11 at 11:43 am

#6 kitchener1 on 01.15.11 at 12:06 am

“Here is what the majority of the population do not understand because 70% is invested in RE. If we go back to 2003 prices were they were at 3.5 times income (if my memory is correct) its a win win for everyone.”
_______________

Shirley you can’t be serious ! And … yes … I am calling you Shirley on this one.

To have prices revert to ’03 levels (which is not at all unlikely) would/will have devestating consequences for a subdstancial portion of households who are overindebted, overleveraged, and highly exposed to the financial consequences that would result from such a substantial erosion in thier predominant balance sheet item. Further, the ripple effect on employment resulting from such a “bust” even if it were to occur over an extented timeframe would be harsh to say the least.

While you may be partially corect to the extent that there would be SOME financial winners in such case it is quite clear that the great majority of households would not at all come out as “winners” … A reversion to ’03 pricing will prove to be a Loose-Loose-Loose-Loose-Loose process for most.

If you are not among the 70% who currently do not own a home – by your own choice as opposed to as a consequence of economic hardship and/or cronic disadvantage you might consider that by far the 30% of households in this group are not and will never be full participants in the economy. Home ownership is simply beyond thier reach for practical purposes. The economic consequences for employment, social programs, and private charitable institutions will hurt this group while increasing crime rates, and discontent. This group includes many young people and students who need opportunity, hope, and employment and are among the most vulnerable in hard times.
Now if you are among the few in this group who by choice (you could just squeeze into the market at these levels based on a 5/35 2% variable – you might find yourself quite dissappointed a few years down the road to find that a $250K house at 25% down and 8% is just as far out of reach/unreasonable as $450K is now.

If you are among the third of homeowners with less than 50% equity in your home you can look forward to a return to 2003 prices, as a very best case, obliterating 100% of your present equity and finding yourself with Zero Net Worth. Note that that is the best case scenario for the thin slice whose homes are half paid for. The extent of the consequences and hardship only increases as you work your way down to the unfortunate recent homebuying household that was just able to meet the economic hurdles at 5/35 or 0/40 and can be looking forward to having a $350,000 mortgage on a house with a value of $175,000 and facing the prospect of having thier mortgage payments double. The economic and social consequences of this can’t be construed as “win-win” prospect … can it?

O.K. … so far your ’03 price reverrsion looks like a shit-sandwich for about half of the households in the country.

So that leaves about half of the households in the country with some measure of capacity to absorb such a pull back in home equity without having thier balance sheets go negative … but wait … are their people out there with more than 50% equity in their home … but a significant amount leverage induced risk … you betcha.

Now … is there a segment of the population who will come out on the winning end of your ’03 reversion scenario … of course … if they can hang in there for 3 to 5 years … cash in over a few years … and perhaps wait it out for another 5 or 10 years. Will they likely enjoy much of the ride? Most Im sure will not be feeling like winners for most of that ride.

Will there be some who thrive through it all? Of course! But I think that in the end there are going to be a hell of a lot more Losers than winners in the process.

Now … there are likely fewer than 10% of homeowners who have the capacity to actually withstand such a hit to their balance sheet without experiencing a significant overall set back in thier plans … but we’re probably looking at 5% of households.

Look south … 4 or 5 years into your little “win-win” reversion scenario.

You really should give your head a bit of a shake … or something. It’s about the debt … all of it.

#77 Joe on 01.15.11 at 11:45 am

Garth , Mortgage brokers are offering no downpayment mortgages because sleazy Scotiabank offers the product and lends the money . You make it sound like MB’s are the problem? Hardly. Scotia is the only lender doing this that I know of.

As a mortgage broker i’m offended by your jabs at me . Can you keep aiming them at the banks instead?? :)

I covered the banks’ financing of such distasteful practices in a recent post. You are both guilty. Feel better? — Garth

#78 Devil's Advocate on 01.15.11 at 11:49 am

#1 squidly77 on 01.14.11 at 11:36 pm
Our analysis of CMHC rule changes on Calgary prices indicates that for every year that insured mortgage terms were extended beyond 25 years Calgary house prices rose by between $6,000 and $10,000. Between 40% and 70% of residential price changes in Calgary between 2004 and 2009 can be attributed to CMHC amortization rule changes.
DA, what say you..

And he takes the bait; While I am sure there appears to be a correlation and indeed the matter would have significant influence I wouldn’t want to rely upon it as a forecasting tool.

———————————————-

What saddens me most is confirmation by Garth, who was once there himself and ought to know, that government fiscal and monetary policy is decided so casually. I was so gullible as to have once honestly believed it was a matter of, at the very least, consulting with the wrong economic think tanks. That it is done in backrooms by duly elected but not necessarily well educated politicians, face it there are more than a few in too high a place, listening to lobbyists and picking numbers out of thin air but for their probable most palatable acceptance by the voter has me quite aghast. No wonder our finances are in such a terrible state!

Mark Carney seems like a man with the pedigree to make such decisions. If not he seems the type who would at least consult more with the likes of they who do. It appears to me he is more told what to do by the lesser equipped politicians than asked what to do by them. Am I wrong? I like Mark. I think he has a good head on his shoulders but then he has the credentials to back it up.

Stand before a judge and he most typically does not make judgment without first retiring to his quarters to do a little research. No they do not have all the answers up there in their heads ready to be pulled out of that grey matter filing cabinet immediately when the need arises.

So what you are telling us Garth is there is little to no due diligence practiced when national fiscal and monetary policy is decided. If there is any it is a process of absorbing the wants of those special interest groups with persistently bombard our politicians with demand until eventually they cave or are brainwashed to think it the right thing to do?
I am curious Garth, for all the claims of apparent ineptitude that infests CREA to what degree, might you be willing to admit, does such ineptitude infiltrate the halls of Parliament Hill? After all the only requirement to become a politician is that you be able to convince a very small contingent of that already small group of Canadians who actually vote! Doesn’t even take a “six week correspondence course”.

#79 Victor from Vancouver on 01.15.11 at 11:51 am

Recently talked to a friend who considers buying now in Vancouver. In conversation he mentioned his friend, a very smart person in his opinion, who sold his house in early 2010. My friend was totally puzzled by this. Why would such smart person sell his house in Vancouver! Maybe that smart guy made a terrible decision and now regrets about it? I asked my friend: so how does that guy that sold his house look like now- is he distressed, does he try to convince himself that he was right, does he regret his decision? No, not at all, answered my friend. The guy that sold looks very good and that is what puzzles me. And here is what I told my friend about this: I said, assuming the guy you are talking about is indeed so smart, I am sure he invested his money. How much do you think his house appreciated in 2010? My friend’s guess was 5 to 10%, more likely 5. I said, here is the answer to your puzzle- this guy being so smart, invested his money and made at least 15% on it in 2010, but more likely 20% or more, and it wasn’t particularly difficult to find good investments this year. What else do you need to know? Smart guy simply makes more money now- why would he regret selling his house? And then there was a moment of truth. My friend looked really surprised and said: how can you invest money to get 15% growth in one year? Is it even possible? I recommended my friend to google 2010 graphs of stocks and ETFs- (just any random ones) and see what was going on this year.
Garth is preaching this constantly, but there is a huge group of people that can’t understand the concept. You don’t need to worry if you sold a house in 2008, 2009, or 2010. Who cares if it appreciated 10 or even 20% since then. If you invested money properly, you made 15% or more EVERY YEAR after you sold- and you are richer now.
Myself, I sold my RE (in a country far away from Canada) in a moment when everybody was still buying and nobody could understand why I am selling. It was 2008 when RE crash already happened in the USA but in the country far far away people ignored that fact and that gave me a great opportunity to sell. In fact, I sold too early. If I waited another 2 months I would get 10% more. But do I regret? Let’s see. First, now, in 2011, I can buy my property in a country far far away back for 50% of what I sold it for. In addition to that in 2009 I converted US dollars that I received for my property into CAD when exchange rate was about 1.15-1.20 CAD/USD and by now I made at least 15% simply on growth of CAD. On top of that I invested part of my money and that part grew 40% from 2009 to 2011. And the funniest part of all this is that when I talk to my friends and family in my old country now and say that I consider buying some RE for investment, they think that I am crazy. I tell them that at these ridiculously low prices it makes sense to buy RE and rent it out- positive cash flow is guaranteed. To understand this all you need is a piece of paper, a pencil, and a calculator. And what those people answer is: yes it makes sense, BUT NOBODY IS BUYING REAL ESTATE NOW! Same people that until 2008 were saying that EVERYBODY SHOULD BUY REAL ESTATE.
I live in Vancouver now and my observations of local RE market are best described as “I’ve seen this somewhere before”. People don’t understand how dangerous the herd mentality is in a speculative market driven by sentiment. And, people don’t understand simple mathematical statements such as 15% is greater than 5%, and therefore you don’t need to catch the actual peak when you sell your less profitable asset.

#80 Devil's Advocate on 01.15.11 at 12:10 pm

#59 BigAl (Original) on 01.15.11 at 7:46 am Oh great….another mad-dash boom market for everyone who wants to “get in” before the new rules come into force. Realtors and mortgage brokers will milk this for everything they can.

The “Mad Dash” started before Christmas BigAl. Had it not the numbers would have been worse than they were. It will continue through the early spring until the changes are caste in stone for some near future date when the business will really ramp up bringing forward future demand. And we will after wonder why it has gotten so quiet.

Lipstick on a pig? More like a corset on a fat chick. Makes me wonder if the new rules are not so much for sanity sake as to pump it up if only for a short time while they try think of another magically deceptive way of making things look other than they are.

Yes the party was a good one… you can always tell it was so by gauge of just how ugly that beauty you met last night really is as she lay next to you now in the sober wee hours of the morning after. ;-)

Just to keep you all up to speed… Yes I am still a Bull. No I have not become a Bear. This is reality… always been this way… but in every market, up or down, there is peril and there is opportunity. Think about it… there is ALWAYS someone going broke and there is ALWAYS someone doing exceedingly well. Which do you want to be?

It’s a game – it’s all a game. Learn the rules, break them if you must – but if you do be prepared to pay the consequences. It’s just a game…

Oh and never play the game with people you dislike or distrust… emotions will get in the way of your skill in the game. But more important you need to have respect for your opponents or the game will become a fight. Games are a lot more fun than a fight.

#81 Devil's Advocate on 01.15.11 at 12:17 pm

THAT’S IT! I will run for public office! I’ll even bring Garth back in and without hobble.

mwahahahahahahaha

#82 ottawan on 01.15.11 at 12:22 pm

For the best book I have ever read in my life about the present relationship between the American Banks and the politicians, read “Griftopia” by Matt Taibbi. Mark Carney had a 13 year career with Goldman Sachs and I am sure learned his lessons well. Every thinking person should read about the true reason oil prices rose..not peak oil; why both parties in the US are distracting everyone from the true issues and how the obama promised one thing during the campaign and made concessions to the truly powerful and how the uninformed pubic is screwed. The best book I have read in years… available online for free at your public library where you can reserve it with just your card number. Try it.

#83 Behavioral Finance on 01.15.11 at 12:23 pm

Next step for real estate mania….

http://freshome.com/2007/09/08/amazing-upside-down-house/

#84 Cassandra on 01.15.11 at 12:38 pm

#60 Kaganovich,

That article at TAE is by Ilargi. Ms Foss writes (much less frequently) as Stoneleigh.

#85 Behavioral Finance on 01.15.11 at 12:44 pm

echo,

It is impossible to predict perfectly the bottom or top in any asset, but one thing is for sure it is much harder to sell on the way down when it comes to real estate especially if buyers retreat or due to past demand the pool of potential buyers is diminished. Please do not forget that the drastic decrease of interest rates in Canada saved the real estate market.

#86 GregW, Oakville on 01.15.11 at 1:08 pm

Hi Garth, FYI This sounds interesting at 5 today. I think you can down load it later?
TVO Big Ideas
U of T professor and clinical psychologist, Jordan Peterson, delivers the 2010 Hancock Lecture entitled The Necessity of Virtue. He discusses virtue from a contemporary perspective that both encompasses and extends beyond moral and religious contexts. Through compelling stories and research, Dr. Peterson illustrates the necessity of virtue both for the individual and for society at large.
http://www.tvo.org/TVOsites/WebObjects/TvoMicrosite.woa?bigideas

#87 Anotherlowlyrenter on 01.15.11 at 1:30 pm

5% equity to 6-7% equity is just too low. In my opinion, the CMHC does not charge nearly enough for that added risk to the taxpayers.

As many would agree, much of the excess prices in Vancouver come from Asian buying. In Hong Kong, banks cap mortgages at 70% L/V. That hasn’t stopped prices there from falling 65% during crashes. I wonder how much prices could fall in Vancouver – what with 95% L/V here- when the tables turn?

http://www.hktdc.com/info/mi/a/ef/en/1X05WT9C/1/Economic-Forum/Evolution-Of-70-Loan-To-Value-Policy.htm

#88 Erasmus on 01.15.11 at 1:37 pm

This video is an extremely ‘frank’ explanation of the root cause of the economic meltdown from the perspective of Ireland and and Irishman:

http://www.zerohedge.com/article/irishman-speaks-his-mind

And it’s different here?

#89 UrbanCowboy on 01.15.11 at 1:40 pm

When the forclosure land slide begins I wonder how remorseful Canadian banks will be with trying help people make payments. Or will it be like the US where they were glad to take’em back and add to their inventory.

#90 Canuck Abroad on 01.15.11 at 1:43 pm

67 a prarie dawg – thanks!

#91 john m on 01.15.11 at 1:44 pm

“His solution was a new value-added tax. It would prove to be powerful enough to turn the national deficit into a surplus within five years, and destroy forever the Progressive Conservative Party which ushered it in. Me included.”………..As much as i dislike Mulroney i have to say the right thing was done..the quest for power came secondary to the right decisions for our country. ……….We now have a political party in power who base every decision on what is best for them at the sacrifice of the taxpayers who pay their salaries.Step by step our democracy is being destroyed I.M.O.

#92 Timing is Everything on 01.15.11 at 1:44 pm

#77 Joe

I covered the banks’ financing of such distasteful practices in a recent post. You are both guilty. Feel better? — Garth

What is the broker guilty of? Getting the best rate/product for their client’s needs? MB are kinda like lawyers, get a good one and they are worth their weight in GOLD…Ha! Sorry about that, Garth.

“Don’t blame a whole group of people for the actions of a few.” – Archie Bunker (All in the Family)

#93 JS Ritchie on 01.15.11 at 1:52 pm

“I knew he was about to blow himself up for all the right reasons. Michael Wilson was the country’s finance minister, tasked to find a way out of a debt and deficit spiral which threatened to hobble Canada.

His solution was a new value-added tax.”

I’m confused Garth…you like the GST but dislike the HST?

The HST will not pay a nickel of debt or deficit, and should not have been imposed in the middle of a recession. You confuse easily. Seek help. — Garth

#94 MikeT on 01.15.11 at 1:52 pm

The “best interests of a nation of house porn addicts” are lower interest rates, lower downpayments, and longer mortgage amortization time. Anything F & Co. do to increase rates or downpayments, or to shorten the amortization time will be against the nation’s interests. Even if this will bring some sanity to the markets, the people will be pissed big time. (almost all of this blog’s dawgs, as well as any contrarians who don’t know about greaterfool.ca are not part of “the people” I am writing about).

#95 UrbanCowboy on 01.15.11 at 1:55 pm

BTW the US bad/toxic/high risk mortgage rate is pegged at 10%, what are we potentially sitting at in Canada? Anyone know or can guess.

#96 Mike on 01.15.11 at 2:11 pm

Garth – can you do a post on the effect of a crash vs flatline vs slow melt on the unemployment rate?

My thinking is that one of the biggest factors for Canada having a UE rate 2% lower than the US is the number of construction jobs lost there vs here.

It’s a tough spot – on the one hand we’ve done better than our peers the past 2 years but on the other, going forward other countries will have taken their lumps while we could be facing another leg down ….. and this time there may not be worldwide 0% interest rates to push us out.

Having a RE crash 5 years after the US is not good if at the time we crash their interest rates have already been raised and are back to somewhat ‘normal’ levels …. could lead to a flight of capital

#97 GregW, Oakville on 01.15.11 at 2:18 pm

Hi Garth,

I was speaking with a guy on Thursday that was at the G20 in T.O. He wondered about the persons higher up that were giving the orders. I haven’t heard much if anything about who they might be. Isn’t PM H at the top for the T.O. G20 and that SSP meeting in Canada?

You might recall the two stripped down police cars placed and left for hours in the street before ‘someone’ set them on fire Saturday and left to burn for hours, for the photo op I suspect.
Or the SSP where 3 masked undercover cops with rock agitating for violence, but luckily were found out before…. The PM H commented to the media about the conduct of the protectors before noon,(he said something like he was discussed with there actions) that leads me to wonder if he had foreknowledge about the undercover operation???

At the G20 most of the humans on the ground that’s including the riots police seemed as afraid as the peaceful protesters I was told. He saw the look in there eyes. The guy I talked to had spoken with 2 RCMP guys at breakfast. The police were happy since many were getting payed around the clock for 5 straight days, about a mouths worth of pay.

He wonder how many of the aggressive persons trying to agitate, again looking in there eyes and running at people were suffering the effects of steroid use? We test Olympic athletes for steroid use, maybe we should check the police too?
Seems to me non-steroid influenced minds can stay cooler under stress, thus better able to protect themselves and we the people, not to mention the effect steroids could have on there home life.

The guy also mentioned seeing the police that surrounded protectors and blocking them in all were presenting electrical cattle prod clubs. And that the police detained some persons before the G20 that are still locked up. I can’t confirm that, but if true what kind of tyrannical Government are we now under? It doesn’t sound like the kind of Canada I was expecting to wake up in. Is it the one PM H spoke of when he said you won’t recognized Canada when he gets done.
What if he had a majority?

What kind of Canada do you want you kids and grand kids to wake up in?
What are you going to do to help make/keep Canada a place we wont and can all live in?

#98 cecilhenry on 01.15.11 at 2:30 pm

I love these pictures! God help the little people.

I appreciated your article yesterday regarding TFSA etc.

I would be interested to hear your thoughts regarding RRSP’s and the tax time bomb upon withdrawal.

I have a fair amount placed in RRSP’s but I’m not very comfortable with it. I’ve ceased to view it as a big part of how I measure my savings. I don’t know where to keep my money sheltered from tax.

TFSA are miniscule- I’ve written to F and H many times regarding increasing the TFSA contribution limits SUBSTANTIALLY.

Why should I be taxed twice plus for my origincial earnings? If I spend it on alcohol and debauchery it’s just fine. But if I invest it wisely and take risks, the government thinks it deserves a cut (a 2nd time). This is wrong.

WE are not free.

#99 Jsan on 01.15.11 at 2:35 pm

Heard Ozzie Jurock on Moneytalks this am. He was saying how there is allot of talk about tougher mortgage lending rules coming this year. Of course he than said if you need to qualify you better do it now as you may not qualify after the tougher rules. That aside, he also said that the loose lending standards of the last few years and abnormally low interest rates fueled the house price explosion. He even admitted that 30 Year amortization periods were dangerous. He mentioned how allot of people, especially “investors” that own revenue properties may have a hard time or not be able to get their mortgages renewed at all in the future due to tougher qualifications. We have seen this already in the local news where new home buyers that qualified under very easy standards even today cannot qualify and cannot renew their mortgages. Expect allot more of this. He also talked about how many future buyers had been brought into the market thanks to cheap interest rates and easy qualifications and that this probably has pulled some of the future demand away. I guess this is what happens when you have an unprecedented level of home ownership in this country.

#100 Alister on 01.15.11 at 2:40 pm

So here we are with our backs to the wall, and no way out. Houses doubled in ten years and are now out of reach for most wage earners, yet none of these costs were reflected in the CPI for the last decade.

Surreal !

#101 Jsan on 01.15.11 at 2:41 pm

Wow, we are so wonderful in this country. We should all be so proud that our lending practices have been so safe and sound compared to those of the US. They really should take lessons from us. We have no Fannie Mae or Freddie Mac such as they do……..or so the article suggests. NO, we have worse!!!! Fannie Mae and Freddie Mac bundled their bad mortgages and sold them to investors around the world spreading the risk to the planet. Here in Canada, our version of Fannie Mae and Freddie Mac, the CMHC takes bad mortgages and gives all of the risk to the Tax payers of Canada to worry about.

“Few foreclosures, no bank failures: Canada offers lessons ”

http://www.thespec.com/news/canada/article/473550–few-foreclosures-no-bank-failures-canada-offers-lessons

.

#102 race against time on 01.15.11 at 2:46 pm

A friend of mine has suggested that home sales will never freeze up. Prices will just keeping dropping until someone can afford to buy.

I have argued that there is a stagnant middle ground between growth and depreciation wherein there will be no significant sales volume, because owners refuse to drop their prices any further and buyers still cannot afford to purchase.

Garth, my impression of things you have said is that it may happen here in Canada/BC over the next few years.

Is this scenario possible and if so could it last for a protracted period of time?

That is absolutely possible. Human denial is a powerful thing. — Garth

#103 Basil Fawlty on 01.15.11 at 3:32 pm

I remember the GST being implemented to replace the MST (Manufacturers Sales Tax). It was a tax shift at the time, the same as the HST today shifts taxes from the large corporations to citizens.
Maybe Mulroney saw the outsourcing of Canadian manufacturing coming and acted proactively. Alternatively, he may have just given some of his industry financial backers a break.

#104 Timing is Everything on 01.15.11 at 3:32 pm

The rules can, and will, be changed at anytime. Ha! Luv it.

Cheezy quote of the day (but I like)…

Two basic rules of life: 1. Change is Inevitable 2. Everyone Resists Change. Remember this: When you are through changing… you’re through. – Anonymous

————————————————————

#59 BigAl (Original)…

I prefer sno-cones. Speaking of…

#105 Devil's Advocate on 01.15.11 at 3:35 pm

#101 race against time on 01.15.11 at 2:46 pm

A friend of mine has suggested that home sales will never freeze up. Prices will just keeping dropping until someone can afford to buy.

I have argued that there is a stagnant middle ground between growth and depreciation wherein there will be no significant sales volume, because owners refuse to drop their prices any further and buyers still cannot afford to purchase.

Garth, my impression of things you have said is that it may happen here in Canada/BC over the next few years.

Is this scenario possible and if so could it last for a protracted period of time?

That is absolutely possible. Human denial is a powerful thing. — Garth

Motivation… there is ALWAYS someone who is more highly motivated to sell as there is always someone who is more highly motivated to buy. Real Estate is as emotional a purchase as an. Denial is a huge emotion to be sure but how it influences a real estate transaction is very much dependent upon how it is applied to it.

I believe your friend has a good point and that no matter how we may try to deny any thing of fact eventually we must face those facts. It is your friend’s point that is the very foundation of why real estate isn’t going anywhere. People need a roof over their head. Be it rented or owned someone has to have bought it if only to rent it to the renter. The volume of transactions, if sequestered for any length of time due to price resistance one way or the other, only builds a pent up demand. In the interim however there are always properties being bought and sold.

#106 dark sad person on 01.15.11 at 3:36 pm

96 GregW, Oakville on 01.15.11 at 2:18 pm

Careful Greg-don’t get too close to the truth-it gets blocked here-
If it isn’t the truth-then it should be easy to dismiss-no?

#107 Live Within Your Means on 01.15.11 at 3:37 pm

I know of a young couple who bought a house, with his mom co-signing, yet she lives in a co-op TH. Thankfully she is no longer responsible. But, the unmarried couple then went on to buy another house and rented out the first. Both homes apparently are not in the greatest area, but they paid a fair amount for the home they currently live in. He lost his job, yet they went to Mexico for vac. Gather they are in deep sh*t financially and these 20 somethings will probably split. Have ‘0’ sympathy for either of them, as I know their history.

#108 Devil's Advocate on 01.15.11 at 3:46 pm

In very crude approximations;

Peak volume in the Central Okanagan – about 3,000 SFD typical of an exuberant market

Typical volume in the Central Okanagan – about 2,000 SFD typical of a balanced market

Worst case scenerio maybe as low as 1,500 SFD sold if the market goes completely sideways. And if it does those 500 short will just be pushed back or already have been brought forward.

It’s all good left to it’s own devices. It’s when we try meddle with it that it goes awry.

#109 Gord In Vancouver on 01.15.11 at 4:05 pm

Another great post, Garth.

Speculators and already overextended people will still feast on the proposed minimum mortgages requirements (10% down, 30 year amortization).

Down payments should be boosted to a minimum of 20% and amortization terms should be cut back to 25 years.

#110 Joe on 01.15.11 at 4:22 pm

CMHC / Canadian Government is the single biggest problem that caused the overpriced housing we have today. It’s not the interest rates, realtors, mortgage brokers, banks, etc.

Look no further than 5/35 mortgages that started years ago and “special” products CMHC designed for self employed, rentals , new immigrants, etc..

The government made this mess and the next budget they might try to start cleaning it up…..

#111 john m on 01.15.11 at 4:39 pm

“I will miss the airport groping, however. — Garth”<<<<<<<<<<<<< hilarious! :-)

#112 nonplused on 01.15.11 at 4:44 pm

#101 race against time

I think it’s happened in Calgary. It could just be the cold but the number of listings as absolutely plunging, yet vacancies are pretty high. Sellers appear to be leaving the thing empty and not listing until “prices go up”. Or spring, the weather has been awful.

But how long it can last I don’t know. It’s an expensive and risky way to do business. Not only do you have the carrying costs, but if prices continue to drift slowly south in Calgary (chpc.biz) sooner or later sellers will realize the longer they wait the more they loose. They are going to be waiting a long time for house prices to exceed the peak in July 2007. I have to admit these guys are pretty stubborn though, 4 years in just about with prices still slightly down and nobody is throwing in the towel. And most of the boomers involved lived through the crash of ‘82. Must be since prices did eventually bottom they’ve been trained like Pavlov’s dog to hold on until the bank kicks you out.

In commodity markets this sort of behaviour from the sellers usually happens just before capitulation. For example, when producers start shutting in gas because they think prices are unsustainable, it’s going lower. I can think of not one single time where producers announced shut-ins because the gas price was “unsustainable” where it didn’t turn out that you know what? Yes, it was, and for a lot longer than anyone thought. The latest round was last summer and prices are still trending down, production up, and no end in sight. If it wasn’t for the shortage of pressure pumping units in the US, the situation would be much worse.

So the point is withholding inventory only works if there is nobody else who can supply the market. Watch out for the new home builders, who can still turn a huge profit on a newbuild, to simply up sales.

#113 Junius on 01.15.11 at 4:45 pm

#93 MikeT,

You said, “The “best interests of a nation of house porn addicts” are lower interest rates, lower downpayments, and longer mortgage amortization time.”

Why don’t we just give houses away?

You really don’t get it – do you. We have already distorted the market about as far as the economy can stretch a fixed asset. The market moves prices to factor in the subsidy and we end up with a “new normal”.

Taking it any further would grossly distort our economy (beyond what it already is) and makes the eventual correction more difficult. Meanwhile you expose our entire society to more risk by piling all our wealth into one asset. A recipe for total disaster.

Furthermore the wealth effect makes people feel wealthy by not adding anything long term to the economy. Rises in asset prices do not raise productivity or create a sustainable economy. In fact, they do the opposite by providing an illusion that we are prosperous only to see it taken away when the asset falls in price.

Go ahead. Let’s do that and waste another decade. How slow we are too learn.

#114 Junius on 01.15.11 at 4:51 pm

#101 race against time,

You asked, “Is this scenario possible and if so could it last for a protracted period of time?”

It is not just possible it is much more probable. Keynes once famously pointed out that prices are “sticky” on the way down. Humans have a natural aversion to accepting losses. There is a tremendous amount of behavioural research on this. This is why it is so hard to negotiate salaries or any benefit down.

There may be quick drops in pockets but it is likely to play out over many years. The US is in their 5th year from the peak and prices are still falling.

This is the year of the Bear Trap. Many people will be looking to buy after the first 10-15% drop. However they will find that prices will continue to drop for years afterwards. Guessing the bottom is hard. However when you are near the peak you know it is a long way off.

#115 InvestorsFriend (Shawn Allen) on 01.15.11 at 4:53 pm

GATHER ‘ROUND KIDS CLASS IS IN…

Let’s talk about how much a young couple can afford to pay for a house or to pay on a mortgage…

All that talk about a rule of thumb of affording to pay 3 times income for the house or affording to pay 30% of your income on the mortgage (including property taxes and perhaps heat) is pure BUNKUM. It’s dangerous nonsense meant to make you feel good about making a disasterous decision.

Fact is YOU can afford to pay the monthly payment that YOU can afford to pay. Simple as that.

And it’s HIGHLY individualistic. It depends on the answers to a whole slew of questions:

What are you paying now for rent or mortgage? How comfortable is that?

How secure are your jobs?

What wage increases can you expect?

Do you have or plan kids (very expensive beasts!)

Are you thrifty with your money (willing to watch every dollar?)

Do you have student loans?

What car payments do you or will you face?

Commuting costs?

Other existing debts?

Are you willing to forego travel and dining out or not?

Are you willing to pay this over 35 years or would you insist on getting it paid off in 15 years?

What cushion do you need in case mortgage rates rise or other sh*t happens?

There are many more questions like these…

At the end of the day only YOU can decide if $2000 per month (or whatever) is affordable to YOU given ALL your unique circumstances.

This is common sense and is irrefutable. You know it, I know it, Garth knows it and God knows it. (It’s just your banker and your pushy friends who may not know it – your real estate agent and your mortgage broker know it too, but don’t expect them to point it out. They are not your mommy).

Rules of thumb around a percentage of income are crude and dumb because they fail to take account of all your other costs (which vary tremendously by couple) and what is left over that YOU can AFFORD on the mortgage.

Rules of thumb around payng so many times income are beyond dumb and are idiotic because they totally ignore that a vastly different figure would apply at different interest rates and interest rates do move dramatically over the years.

Your homework is to think about this…

CLASS DISMISSED

P.S. Choosing to buy an unaffordable house is like choosing the wrong spouse. You could regret it for a lifetime. Be careful. Follow your own instincts. Do not be pushed into something you may regret. If you get cold feet, RUN!

#116 Dazed and Confused on 01.15.11 at 5:14 pm

The guy that sold me my house when I moved out to Calgary is going to be the next guy running CREB. Sano Stante claims in the Herald that Calgary will not see the housing melt down that the U.S. has seen. Funny, almost 3.5 years ago, I recall being on the phone with the guy and asking, what do you think (regarding an 1800 sq. ft. SFH for 600K). His response, which I will never forget was, “I really don’t know what to tell you. Things are out of control and they could get an offer 10% higher than yours”. Somehow he all of a sudden has full comprehension of the Calgary market and can tell us that its different here. These Real Estate pumpers are no better than the banksters that robbed the middle class blind.

I rent, I wait, I pray.

#117 kitchener1 on 01.15.11 at 5:16 pm

#76 BDG-YYC

Nope, i am being dead serious that it will be a posistive force in the economy.

We need recessions to shake out the weak hands and bad companies, that way the strong survive, making for a better all around economy.

2003 prices would hurt a lot of people and yes it would devasate a lot of folks, but its not the end of the world.

Was it the end of the world to those that purchased in 1990 and sold in 96-96-00-03 (finally broke even)? No, not everyone will sell.

It will allow many young folks to have a decent go and still be able to buy a house. Seriously, if people are dumb enought to buy with 0 or 5% down and leverage to the max, thats there problem.

Those that were responsible will be just fine, those that gambled will lose it all. You know what they say about pigs, they get slaughtered.

#118 Abitibidoug on 01.15.11 at 5:25 pm

That’s the benevolent government for you, always putting our interests and what’s best for us first!

#119 LHHW on 01.15.11 at 5:38 pm

Spoke to a friend who works at BMO. Mentioned that the 5/35 is a small percentage of thier overall portfolio and they don’t seek much risk. I don’t buy it.

Antoher friend with a new born and 4 year old wants to buy a condo, rent it out, then sell it when their kids go to school to pay for their education. Speculation is the new strategy. They are both teachers and this would put all their money in real estate. I told them to be very very careful and to look into RESPs…something which they don’t have.

#120 Jeff Smith on 01.15.11 at 5:48 pm

>#74 Utopia on 01.15.11 at 11:21 am
>@ #52 Jeff Smith
>China’s new stealth fighter has caught a lot of countries
>by surprise.
>——————————————————–
>Surprise is right. And worry too. If those guys can build
>and deploy fighter jets with the same level of ambition
>that they apply to making any other manufactured good
>then the world had better start shoulder-checking the
>passing lanes and expecting to be overtaken. Fast.
>There is nothing quite like nationalistic fervor, mixed
>with optimism, competition, pride and a strong belief in
>your own nations goals when it comes to getting the >
>really big jobs done.
>Remember, that’s how the Americans got to the moon

Judging by the qualities of most products manufactured in China that I can find from Walwart and other discount retails, I am pretty sure their technologies are no where even close to being as good as ours. So I think you don’t have to worry about that J-20 being able to pose much of a threat to the west. I mean the stuffs I bought from Walwart & such are good enough to use, and I do buy them, but it’s just not the best if you compare to stuffs made in USA or Europe or Japan. So if you are to have a fleet of J-20 going up against a fleet of F-22 over the sky. I am pretty sure I know who will win. By the way, Canada’s probably gonna be armed to the teeth with a fleet of JSF (F-35) pretty soon. Alright! Go Canada! We are a superpower too!

#121 Jeff Smith on 01.15.11 at 5:56 pm

>#102 Jeff Smith on 01.15.11 at 5:48 pm
>#74 Utopia on 01.15.11 at 11:21 am
>@ #52 Jeff Smith

By the way. Canada’s proposal to buy the F-35 should be modified such that we only buy the airframe and leave the engine out so that we can put our own engine instead, the current engine designed for the F-35 is way underpowered. Meaning once your loaded up enough fuel in the aircraft for extended long distance there ain’t much space left over for weapons such as missiles & bombs. Ok maybe just enough extra space for us to mount a C-7 rifle (http://en.wikipedia.org/wiki/Colt_Canada_C7_rifle) underneath. Pow..Tat Tat Tat, rat tat. So what’s the point. At least if you just get just the airframe from them , then contract Bombardier or somebody to put in one of their jet engines , and we get a nice cool powerful plane for our use.

#122 jim on 01.15.11 at 6:07 pm

Michael Wilson had no problem raising taxes but a big problem in cutting spending. I remember those miserable budget days where there was no hope and no sign of a balanced budget down the line. The pain to balance the budget achieved by Paul Martin was real.It makes the record budget defecits of Harper so shameful and hard to accept, but the Canadian public seems not to care and our pathetic oppositition cannot handle one of the worst governments ever.

#123 Jeff Smith on 01.15.11 at 6:22 pm

Dude is peddling some fancy dream of owning a house with no down payment! *Yawn

http://www.moneyville.ca/article/921774–why-no-money-down-mortgages-can-work?bn=1

#124 April on 01.15.11 at 6:48 pm

#101 – race against time.
Garth this is unsettling us. Not sure if this is saying the decline may not happen as sellers will refuse to lower their prices for some time yet, or after a decline they may refuse to lower prices any further for some time after that?

It’s human nature, babe. Hard to tell how stupid people will be. — Garth

#125 DHJ on 01.15.11 at 6:48 pm

“Sure, MPs are made busy forming committees and traveling the country to hear briefs laboriously prepared by citizens and special interest groups, but the guys who actually write budgets never even see them. It’s political theatre. If any real influence-peddling is done, it’s to key MPs and ministers directly. It happens in their offices, and behind closed doors. And it is never written down.” Garth

Thanks for the confirmation.

#126 Devore on 01.15.11 at 7:09 pm

#119 Jeff Smith

Judging by the qualities of most products manufactured in China that I can find from Walwart and other discount retails, I am pretty sure their technologies are no where even close to being as good as ours.

That’s what they were saying about Japanese cars back in the day too.

The fact is quality of Chinese manufacturing has been improving leaps and bounds every year, it can easily be as good as you require it to be, and would still be a fraction of the price we can do it at. China has become very good at bending multinationals over the table and getting them to locate all kinds of processing, design, and manufacturing within their borders. For evidence take a deeper look (and I don’t mean search CNBC) at the rare earths fiasco which unfolded last year. What do you think that was about?

Underestimate this country at your own peril, until they eat your lunch and leave you wondering wtf happened.

#127 Mark on 01.15.11 at 7:19 pm

#120, “At least if you just get just the airframe from them , then contract Bombardier or somebody to put in one of their jet engines , and we get a nice cool powerful plane for our use.”

Is this some kind of joke? Bombardier does not manufacture jet engines. All of the jet engines used on Bombardier’s aircraft come from US manufactures such as General Electric or Pratt and Whitney. Developing a new ‘Canadian’ engine from scratch would cost tens of billions.

#128 Stevermt on 01.15.11 at 7:25 pm

I’m not totally convinced that they realize what they have done or what is about to happen, despite watching CNN. Denial is still strong, with a hint that things must cool a bit and then we’ll be OK !( our banks are solid and no bailouts here.hogwash)
Maybe after 2 or 3 years of price melting will things become evident in the rear view mirror. Many will exclaim at times that we’ve reached the bottom !!
Then the blame game will be going on. another government may be in power and handling the mess in a different way.

#129 Mark on 01.15.11 at 7:25 pm

#114, don’t forget that people tend to have income that is either highly correlated (positively or negatively) with the interest rate cycle, or not correlated at all.

For instance, engineers do best when interest rates are rising or high — as the cost of capital is high, and firms are eager to cut costs.

Realtors obviously do best when interest rates are low and falling — for obvious reasons.

Government workers are vulnerable in rising interest rate environments, whereby, heavily indebted governments will need to engage in significant cutbacks.

etc., etc.

The huge problem in real estate today is that the government workers and Realtors are *heavily* overweight real estate in their portfolios, while engineers, the people who are probably most able to afford real estate in the future, are, at least in my experience, quite underweight.

Now, if you’re a civil servant/engineer, then that presents a difficult case, most certainly. Can you easily make a transition to the private sector or not? If you still have skills, sure. If you’ve spent the past 15 years as an incompetent middle manager in government, pushing paper, probably not.

#130 The Great Gazoo on 01.15.11 at 7:29 pm

#122 Jeff Smith

I love how in “progressive” newspaper Toronto Star Mr. Weisdeler in his rebuttal article about zero down mortgages ends his piece of literature with:

“The dream of Canadian home ownership should be within reach for anyone who can truly afford it.”

Sounds very George Bush-ian pre-crash, but thats just me, its “different up here”…

#131 jess on 01.15.11 at 7:46 pm

88 Erasmus
…. especially the executive of that irish bank who declared bankruptcy in new york ….good thing he stashed the moola with his wifey beforehand .Thinking ahead like that has enabled him to create his new career move as a private investment fund …..as he is restructuring or is it called transformal .

=============
Bank walk away?
J.P. Morgan’s earnings report lifts the banks
hum… but empty houses …how many has jp “written” off?
SAN FRANCISCO (MarketWatch) — J.P. Morgan Chase & Co. Chief Executive Jamie Dimon said Friday that the foreclosure process is a “mess” that’s cost the financial-services giant a lot of money.

the problem of the abandoned bank homes are left for communities to deal with west / south side
http://www.chicagotribune.com/classified/realestate/foreclosure/ct-biz-0113-walkaway–20110113,0,7716930.story?page=1

In November, a U.S. Government Accountability Office report on the frequency and impact of abandoned foreclosures noted that Midwestern industrial cities, including Chicago, seem to bear the brunt of bank walkaways, leaving neighborhoods in deeper distress and cities left to shoulder the associated costs of dealing with unsafe, often unsecured homes. ”

=================

http://chicagobreakingbusiness.com/2010/10/foreclosures-chill-lincoln-park-near-south-markets.html

#132 Ricky on 01.15.11 at 7:48 pm

Garth,

Would you/could you write a blog for boomer peeps who ARE wanting to buy this spring/summer? My question is simple: retiring up in the Kawarthas, so should I buy in a brand new development or should I buy a re-sale?

Have never owned or lived in brand new, not thrilled about it, altho the fence is in. But there are no new energy-efficient appliances either. OTOH, not thrilled to own other peeps problems. What you say?

Can put down 50% on something in the $300-325 range.

#133 mattbg on 01.15.11 at 7:50 pm

Wow — CFRB is now running early evening real estate infomercials:

http://www.newstalk1010.com/shows/TheLifeRichRealEstateShow.aspx

I normally only hear this kind of thing in the very early hours of the morning.

#134 mattbg on 01.15.11 at 7:53 pm

#129,

Weisdeler doesn’t seem to even understand some of what he’s talking about. In the part where he talks about US underwater mortgages, he makes it sound as if homeowners should be LESS underwater when property values go down.

Really, I don’t think he is interested informing anyone. It is a rushed article that sounds like it is meant to plug a leak… I am hearing more and more about real estate these past few weeks without asking for it in any way, so I assume some kind of concerted marketing effort is underway.

#135 Devil's Advocate on 01.15.11 at 7:59 pm

#128 Mark on 01.15.11 at 7:25 pm
Realtors obviously do best when interest rates are low and falling — for obvious reasons.

REALLY? Please do elaborate and tell us why because I can surely prove to you that this REALTOR’S® income has not changed for better or worse with the fluctuations in the interest rate over the last two decades.

#136 cb on 01.15.11 at 8:04 pm

I sold my house in Ajax, ON, and moved to Calgary a few months ago, having had to move for family reasons.

Home prices in Calgary are generally higher than Ajax, least that what I’m finding so far.

anyways, they’ve been promoting this on the radio all day today, and it was featured on Globals morning show a couple days ago:

Basically, its a 1200sq ft out of town light industrial unit being marketed as a condo for you and your car, motorcycle etc. dont remember the price, but it was over $300k

http://www.thedens.ca/

pricey real estate indeed, for what appears to be a dolled up self storage unit. I guess I really am priced out forever, which is too bad, cause I just want a half decent affordable modest ~1300 sqft SFH to live in, not to invest in, just a home to live in and call my own.

But not at these prices.

#137 604genX on 01.15.11 at 8:06 pm

No changes to TDS/GDS ratios? That is what is needed.

Based on CMHC and MoF performance earlier this year they are more interested in the optics of their action rather than actually fixing anything. And the Liberals stand silently not criticizing CMHC – they should share some responsibility for what is going to unfold.

#138 gmcccc on 01.15.11 at 8:22 pm

Garth you are the man
Thx for the Tfsa, I hope it will be around for years to come and will help those of us that want a vehicle that will take care of us in the future and not depend on the government for our financial security.
Ex: I purchased some oils and gas stock and Junior Gold and Silver mining share .
Just my one junior miner .06 cent/share, $5000 got me 80000 shares, I sold Troymet at 28 cents, wow not bad for the first year, This has allowed me to take a chance and now I have moved up and purchased several producers. Avino, Alexco, Ocean gold, San gold , Lakeshore etc…
What this TFSA has done is allowed me to use those funds to help other good Canadian companies get funds to advance their project, at the same time enrich ME ME ME.hahaha
Question why do you not encourage or promote the mining industry more, you seem to be negative on Gold and Silver resources.
I now own Avino , and Alexco, both producers and I suspect will do very good for me in the future, once they get their production cost down, and who knows how high the price of gold and silver will go, I read an article that Ben wants to print some 4 trillion more!!!, and that the derivative game is up to 1.5 quadrillion….
me to dum to understand these numbers and the master plan behind this, but I do read stuff like “Extraordinary Popular Delusions The madness of the crowd”, do you not see a MANIA coming????
and what is the implication of last years move to increase the CMHC limit to ONE TRILLION DOLLARS, holy cow we are all doomed, AS a Canadian Tax payer I am mad as hell.
One TRILLION DOLLARS is :if you stack one hundred bills one on top of each other, it will circle the globe 2.8 times!!!!!! 1.5 QUADRILLION MEANS WHAT TO THE WORLD FINANCES???? CAN YOU SAY PONZI
cheers gmc

#139 kitchener1 on 01.15.11 at 8:41 pm

#114 InvestorsFriend (Shawn Allen)

Your theory is nonsense. Here’s why

The corporation that decides wiether or not you are a credit worthy risk will TELL you exactly the amount that you can pay. Weither you like it or not.

Its not up to the borrower at all. The 1/3 times index is a good rule. As a matter of policy- CMHC should follow, but we both know there are ways around those rules.

Its the Kraft dinner index– how many times a week are you willing to eat kraft dinner? did you say 7 days a week– thats worth an extra 100k on the mortgage right there. LOL

Yes every one has individual spending habits, however, its not the lenders problem weither or not you are willing to eat dog food and use a sleeping bag instead of your furnance.

The lender will decide what credit risk they want to take and forward that amount to you.

#140 InvestorsFriend (Shawn Allen) on 01.15.11 at 9:17 pm

Kitchener 1 at 138 responded to my post at 114 and had the unmitigated audacity to suggest my “theory” was nonsense (that what a couple can afford on a mortgage is unique to their circumstances rather than being say 30% of income or “X” times income).

My “theory” was as I stated an irrefutable observation.

What you seem to miss Kitchener1 is that no couple is FORCED to take on the maximum mortgage payment that the bank will allow.

Just becasue the bank says you can afford it (based on crude rules of thumb) does not mean you can actually afford it.

Most couples that would borrow the maximum allowed are commiting financial self flagellation.

My point was that rules of thumb are nonsense and there is a whole host of factors that limit what you can afford.

‘course you are right that if you can afford more than the bank says then you are still limited by what the bank will lend.

So… the Mortgage you take on cannot exceed what the bank allows and SHOULD not exceed what you can actually afford (which only YOU can decide).

You have done your homework that I assigned to you Kitchener 1. But I must ask for you to do it over. Think some more… You are not yet able to snatch the pebble of knowledge from my hand.

And what is good about a rule that allows (nay encourages) people to spend 30% of their income on a mortgage payment that is almost 100% interest at the out-set and with taxpayers on the hook if they mess up? Good for whom?

I for one, did not end up with an $800k portfolio by paying out 30% of my income in interest. I bought (a house) well below my means and paid it off in 8 years.

#141 Nostradamus Le Mad Vlad on 01.15.11 at 9:51 pm


An inspirational beer commercial, followed by an outstanding Pepsi ad. Humanity is showing signs of life!
*
#52 Jeff Smith and #74 Utopia — Indeed. A year or more ago, there was a link which said that a Chinese nuke sub., fully loaded surfaced less than one mile from a US carrier.

If war was happening, that carrier would be on the sea bed. Sheeple are deliberately kept in the dark for good reason. There’s enough taking place without the war hawks.
*
0:48 clip Greenspan admits the US Fed is above the law. “Which is why Wall Street wallows in record bonuses while the Americans made homeless by the money-addiction are eating dead birds they find in the streets.” wrh.com. The Fed is still a private company and citizens are not responsible for their debts.

Common thread running between these two. Not hard to figure out! “Fascism should more properly be called corporatism because it is the merger of state and corporate power.” — Benito Mussolini” — wrh.com.

3:54 clip A most powerful speech, by Charlie Chaplin. Still holds true today.

This will wake the west up!

We’re running out of food. “Mountain House Foods is reportedly running short on most of their food supplies due to an unknown government agency purchasing a huge amount of their product. Our government is clearly stocking up, are you?” Also — Two min. clip.

4:35 clip Bogus gold hits China.

Eating Not sure if this is particularly appetizing.

Feudal System “The new feudalism is not being built openly but in secret; society is to be reorganized gradually and without any fanfare.”

‘Quake Swarm “I know a lot of people like to talk about a potential supervolcano erupting at Yellowstone, and no doubt it will eventually happen again, but it looks to me like the most likely location for the next big blow is Indonesia. Mount Merapi in the south has been acting up, while South Anak Krakatau (Son of Krakatoa) is causing evacuations. Now we have this swarm of quakes in the same area that generated the infamous boxing day quake, and to the east we see the scar of Toba, the remains of a supervolcano that laid waste to the entire Earth 73,500 years ago.” wrh.com.

DSP and Greg W. — Of note. Chances are good that CSIS comes here quite regularly.

Iran Achievement

When was the last time Israel announced what they were doing at Dimona, and held a press conference that included envoys from the IAEA?” wrh.com.
Brits. “Jolly good! We can take their homes now!” — The Bank of English Money-Addicts — British for YEE-HAAA”. wrh.com. Plus — Brits. One Possible crash. “Any nation that has a private central bank issuing the public currency at interest is headed for a crash and though they might delay it, they cannot escape that eventual fate.” wrh.com.

Perpetual War for perpetual employment.

Interesting. Seems other (Arab) countries are watching Tunisia. Revolutions ‘R’ Us?

RE Spin from AP (m$m).

BP straddles the Atlantic!

#142 Anotherlowlyrenter on 01.15.11 at 10:34 pm

Garth,

As a suggestion for a future topic, if you have knowledge in this area, I for one would be interested in your take on how easy it is to declare bankruptcy in Canada.

My perception is that it is easy and that should the property market suffer a large decline, people who are underwater on mortgages will simply take the bankruptcy option — particularly young folk — leaving the CMHC holding the bag. I haven’t done any real research so don’t know if my perception is realistic…

The Star article on declaring bankrutpcy:
http://www.moneyville.ca/article/918442

#143 Devore on 01.15.11 at 10:37 pm

#98 Jsan

We have seen this already in the local news where new home buyers that qualified under very easy standards even today cannot qualify and cannot renew their mortgages. Expect allot more of this.

Don’t think so. Renew? As long as they can keep making payments, there will be no problem renewing. Refinancing or moving to another bank, almost certainly no.

With a 35 year mortgage, debt slaves to their bank forever.

#144 Devore on 01.15.11 at 10:51 pm

#138 gmcccc

What this TFSA has done is allowed me to use those funds to help other good Canadian companies get funds to advance their project, at the same time enrich ME ME ME.

Unless you bought into an offering, the secondary market does not provide the companies any funds. It’s just existing shares changing hands.

#145 Utopia on 01.15.11 at 10:59 pm

#99 Jsan wrote…..

Heard Ozzie Jurock on Moneytalks this am. He was saying how there is a lot of talk about tougher mortgage lending rules coming this year. Of course he then said if you need to qualify you better do it now as you may not qualify after the tougher rules.
——————————————————-

Does that not just make you burn! The thing is he is right that some people may not qualify based on tougher mortgage lending rules. Especially as they may coincde with interest rate increases.

I will bet though that Ozzie did not add that those same changes will almost undoubtedly cause housing prices to fall. That higher interest rates virtually always take the steam out of real estate. That this is especially so when a market has peaked…..

In other words, that first time buyers have nothing materially to fear from changes to the rules nor from higher rates.

I bet he did not say any of those things that would have actually give buyers hope. Instead his words likely just spread fear and panic amongst those poor souls who really do believe they will be that if they don’t get qualified now they will be priced out forever.

#146 Mark on 01.15.11 at 11:02 pm

interesting…

EIJING — Chen Weidong, an influential policy guru at government-controlled China National Offshore Oil Corp., has a blunt message for oil sands companies and investors: get out.

The future, he says, is natural gas trapped in shale rocks.

http://www.financialpost.com/news/energy/CNOOCs+chief+researcher+paints+grim+picture+sands/4111522/story.html#ixzz1B8gUgUal

#147 Utopia on 01.15.11 at 11:05 pm

Oops, let me just retract my prior post. Seems Ozzie may have done a fair interview after all. Just a case of me shooting first and asking questions later….Sorry Ozzie.

#148 NoTimeForTheKids on 01.15.11 at 11:18 pm

RE: Your article

Garth….why did they push so hard on the economic gas pedal in the first place? Now a wave of new young families face a debt-fueled wall of high prices brought on by those before them. Doesn’t sound like a “family friendly” country to me.

#149 Kaganovich on 01.15.11 at 11:23 pm

Cassandra

Thanks for correcting my mistake. I should have paid closer attention.

#150 Gerry B on 01.15.11 at 11:24 pm

I live in Singapore, and here the government has just introduced its harshest measures yet to curb property speculation, and prevent the bubble from getting too big. The measures were announced the evening of 13 Jan 2011, and were effective immediately. Caught everyone by surprise.

If you already own property with an outstanding mortgage, if you buy another property you now need to put down 40% in cash (i.e. the maximum mortgage is 60%). To prevent flipping, there’s a seller’s “stamp duty” (i.e. a tax) of 16/12/8/4% for sales within 1/2/3/4 years of purchase.

Pretty harsh, but necessary. As a renter thinking of buying, I’m hoping the measures will do more than just “stabilize” this over-heated market.

#151 Utopia on 01.15.11 at 11:51 pm

#120 Jeff Smith

“Judging by the quality of most products manufactured in China that I can find from Walwart and other discount retails, I am pretty sure their technologies are no where even close to being as good as ours”.
———————————————————

Try shopping elsewhere Jeff.

The myth of Chinese products being “junk” is just that,..a myth. Just because Walmart and other dscount retailers bring low-cost products to retail in our market,… that is more a reflection of the buying decisions of the retailers than the production excellence of the Chinese.

Look around your house too. It is full of products that were made in Asia and primarily China. Everything from your kitchenware to the locks on your house and a thousand things in between.

Hell, the US military contracts with Chinese companies for footwear and uniforms, bullets and laser guidance equipment.

If you own an American car or truck it has Chinese parts in it. If you own tools, a computer, MP3 player or any of a multitude of other high tech gadgets (cell phones included), they were either made partially or wholly in China. I bet you LOVE some of the stuff you got too. Just did not know it’s origin.

This is an outgrowth of hiring low cost labour overseas and shipping plant and equipment into countries with high levels of education, a willing labor force and a government anxious to get its people busy. And it should suggest to you just how interconnected our world really is.

Our own soldiers in Afganistan would be unable to zip up thier own pants if it was not for the zippers made in China (97% of all the zippers on earth come from just two cities and a handful of Asian manufacturers).

Like I said. Try shopping elsewhere. Asian products come in a wide range of qualities from the average to those that exceed standards everywhere else.

Same as here.

#152 kitchener1 on 01.16.11 at 12:03 am

#140 InvestorsFriend (Shawn Allen)

Wow, big ego there bro “pebble of knowledge” LOL

Some of us are well versed in investments.

Point was that the lender that underwrites the loan is the one that decides what you can borrow.

I dont think that anyone should ever leverage to the max, irregardless of weither its a home/stock/FX/car etc..

Of course everyone is different. Some people spend, some people save, some people just get by.

I still dont beleive in your theory, its personal factors that actually determine spending habits– those factors are always in flux. A couple that both work might enjoy movies, dinners and some leased vehicles. When one person loses their job, those factors change and now a used beater car will do and so will kraft dinner.

Since you invest, you know its all about timing. Makes a world of difference. A lot easier to pay of a house when its value is at 3.5 times income vs 5.1

To answer your question about what good is the rule of 3 x income. Its good for the lender. So is the ammort table. Hey, those that lend the $ make the rules. no one is forcing anyone to take a mortgage. ever.

#153 Utopia on 01.16.11 at 12:09 am

#126 Devore

That’s what they were saying about Japanese cars back in the day too.
———————————————————-

Great point Devore. And then along came Honda,Toyota and Sony and a multitude of other great companies that had been dismissed as hacks in past years only to kick our sorry butts.

As far as this new fighter jet goes I expect production will ramp up fairly quickly once the machine is tested and airworthy. And there will not be the massive cost over-runs and errors on bills (recall the 1200 dollar hammer’s fiasco) nor the piggish defence contractors sucking the air out of the economy.

Hardly. The Chinese will be starting with labor costs at a small fraction of those in North America to begin with, a very motivated workforce, companies that would not dare cross the government and pad the bills too excessively without being in fear of doing some hard time and a government swimming in revenues that need a home.

Recall that Soros was estimating 60% of the Chinese economy is currently revolving around infrastructure build and real estate contruction. What should we bet a good part of the funds are also fully devoted to arming the country too with an emphasis on naval expansion, air power and sattelite systems.

I would be willing to bet they can produce similarly capable fighters for less than 20% the costs over here and then build twice the number without breaking a sweat.

How do you compete with that?

#154 hobbitt on 01.16.11 at 12:11 am

Another youngster about to wind up underwater. Lucky his parents are near to help.

http://tinyurl.com/379tfpd

#155 BC Bring Cash on 01.16.11 at 12:31 am

RE # 148 NoTimeForTheKids

Its all about short term politics. Keep the party going and hope the melt down and crash doesn’t happen during my watch. A delaying tactic for eCONomist Harper to get his Majority Govt.
Oh yeah he is your PAL in the blue sweater thats fighting for you!!! Your fuzzy feel good friend. Doesn’t it make you feel all warm and fuzzy inside when you have him on your side? NOT!…….. what a scam. The eCONomist Harper wants your vote, don’t fall for the blue sweater and shaking hands with his boy being brought to school photo OP.
His friends are the Private Sector Lobbyist, Banks, Multi Nationals, ETC. Does my comment help?

#156 UrbanCowboy on 01.16.11 at 12:44 am

#148 NoTimeForTheKids on 01.15.11 at 11:18 pm
RE: Your article

Garth….why did they push so hard on the economic gas pedal in the first place? Now a wave of new young families face a debt-fueled wall of high prices brought on by those before them. Doesn’t sound like a “family friendly” country to me.

#18 Rich Renter on 01.15.11 at 12:51 am
I think you can leave your “I told you so t-shirt” in the closet for a tad longer master Turner.
F, C and H will manipulate things so much in the next few months, that you’ll never be a hero.

My dog thinks so. I am fulfilled. — Garth

———————————————————-
Precisley my question. The only answer I can come up with is because they are puppets of the banks, and they want to own you and your property. This video hits it right on the buttom.
Is it wrong to think this?

Thats why its not up to them (F,C, H) if Garth gets his “I told you so T-shirt”. They don’t care about that.

http://www.youtube.com/watch?v=ZPWH5TlbloU&feature=player_embedded#!

#157 Aussie Roy on 01.16.11 at 12:50 am

SA – Some else cant do math

“what good is the rule of 3 x income.”

This is the long term average across an historical RANGE of economic states (high interest rates – recession etc).

Have a look at the math the greater the income to price ratio the harder it is to recoup rental return to cover costs.

ave income 60k
Interest rates 3% 12.6k
Ave home 7 times income 420k
Rental return (based on 30% of ave income) 18k – 4.5%

Interest rates 6% 25.2k (only 3%)
Ave home 7 times income 420k
Rent would need to increase from 18k to 25.2k or 40% to cover costs. Good luck trying to increase rents by 40%.

I’ve said many times before its the differential between the large increase in payments should rates rise and the LACK of being able to increase rents enough to cover it. Why, because the ratio (income to price) is too large. Do the above example at 3 times income (and rising rates), see for yourself with this lower ratio its much easier to increase rent to cover as interest rates rises.

Wages drive rents, why do you think rental yields havent kept pace with prices (falling % returns based on price). Its because prices are driven by credit and emotion, value (return) is driven by wages.

Why is this so hard for some to understand, its only math.

#158 NFN_NLN on 01.16.11 at 1:03 am

InvestorsFriend (Shawn Allen) on 01.15.11 at 9:17 pm

Kitchener 1 at 138 responded to my post at 114 and had the unmitigated audacity to suggest my “theory” was nonsense (that what a couple can afford on a mortgage is unique to their circumstances rather than being say 30% of income or “X” times income).

My “theory” was as I stated an irrefutable observation.

What you seem to miss Kitchener1 is that no couple is FORCED to take on the maximum mortgage payment that the bank will allow.

You’re both fools. Everyone knows that real estate always goes up. So you simply take the maximum amount the bank is willing to lend and buy the most expensive property you can.

Tada.

As long as everyone always believes RE will always go up there really no reason to crunch the numbers or reason. Simply borrow and purchase.

#159 Nostradamus Le Mad Vlad on 01.16.11 at 1:20 am


China and Russia.

UK and Greece.

China following Bernanke’s lead and Europe balding quickly.

4:43 clip The Hubble’s pix set to Mahler’s Second Symphony. interesting take.

HAARP Ring around Oz.

America Imitating Japan “The (current) financial and economic crisis….marks the end of the world order established after 1945.” In 1991, the Soviet Union dissolved, and since fall 2007, we’ve “witness(ed) the accelerated decomposition of the ‘Western pillar’ with” America advancing disintegration.”

If or when this happens, as in cases like 9-11 or 7-7-7 it will be an inside job, but the blame will be shifted to other ‘radicals’.

2:58 clip Turn off the TV! There is a reason why it is called the Idiot Box!

Huge CMEs This may go with the ‘quake swarm I alluded to earlier, in Indonesia.

Where will Canada be? If the NAU / SPP is brought in, Canada, Mexico and the US may be one country anyway.

Slightly twisted walk-in fridge.

#160 Junius on 01.16.11 at 1:52 am

#142 Anotherlowlyrenter,

The bankruptcy discussion for the young was a popular subject here last year when we bashing the Cons for opening up the CMHC.

I agree. I think it will be the option for many who are under 40 who find themselves in significant negative equity. I recall how many made the decision just avoid student loans a few decades ago. It will not be for everyone but no question those who think recourse loans will stop people from defaulting are fooling themselves.

And yes. The CMHC is going to make millions of dollars of pay outs and cost us tax payers for decades.

Thanks F.

#161 nonplused on 01.16.11 at 2:08 am

#57 kansia_92

I’m with you there, eliminate CMHC! But if we get a downturn the market might do it for us the same way it killed Fannie and Freddie in the US. (I know they are still operating but the are effectively wards of the state now.)

After that, eliminate the central banks and let the markets set interest rates too!

Yes, it’s possible. Here is how things might work afterword:

The mint would make money, like they do now. They can make it in all necessary denominations. A $1000 dollar coin would actually be pretty small if it had ¾ of an ounce of gold and then a copper alloy to toughen it up.

Regular banks would operate much like they do now including credit cards, debit cards, cheques, electronic transfers, etc. The only difference is their reserves would be in coin.

Even stocks and bonds could trade exactly as they do now, except when it said so and so owed you 100 dollars, you’d have some idea what they meant by “dollar”. Right now if you want to figure out what a dollar is you need to inflation adjust it and assess the credit ratings of at least the issuing bank and the government, and probably make predictions regarding the supply (printing rate) and demand (economic activity), and even then you still only have a piece of paper if something goes really wrong.

If we really needed to have paper money, the treasury could issue it itself, or banks could issue their own notes. This has been common practice at many times in history. The big problem with letting banks issue their own paper money is that a bank failure drops the value of those notes to zero, and the market tends to discount them to coin based on the perceived strength of the bank. But really, who carries much cash any more? 3 or 4 silver coins in your pocket would be worth as much as $100 now, and the rest can be done electronically.

The electronic transaction system makes the return to a tangible asset money system more plausible than it was at any time in history. And for most of history, people used tangible asset money even without the convenience of the electronic system because you just can’t trust paper money.

But I don’t see it happening. This generation is so far confused about what money is that even when a paper system fails, the government is usually able to create a new paper money system the very next day and people will pick it up. South America has a couple recent examples.

But it would be possible. That’s my only point.)

#74 Utopia

Why would anyone want a stealth fighter jet? Huge waste of money, and I’m sure somebody will figure out how to see them before long.

They are good for evading civilian radar and the old soviet systems used by many Middle Eastern countries, but I doubt even the US would want to fly one over an S-400 system.

It’s like having an aircraft carrier in the age of supersonic cruise missiles. They may be invincible for now, but they won’t stay that way.

#120 Jeff Smith

What is Canada going to do with a bunch of F35’s? Waste of money. Our fleet of old F18’s are plenty good for taking photos of old soviet era bombers training over the arctic and doing military fly bys of the Grey Cup game, when it’s outdoors.

Besides, we could probably buy the new Chinese J-20 a lot cheaper. Or Eurofighters. Heck, we could probably get brand new M35’s for half the cost! Be good plane for the Canadian military, who normally has to spray paint their uniforms to match the terrain.

#162 nonplused on 01.16.11 at 2:33 am

One more comment on stealth fighters and high tech military equipment in general.

One of the major features of the second world war was that the US & Canada, relatively unimpacted domestically, produced their way through the war. To a great extent so did Germany, Britain, and the Soviet Union. The planes and tanks they finished the war with were greatly different in quality and quantity than the ones they started the war with. In the case of the US, that also applied to the navy.

A modern all out war will be different. In terms of stealth fighters, they are too expensive and too slow to build to add much in terms of new supply once hostilities commence. So you will finish the war with the number of planes you started with minus those shot down. This is regardless of the duration of the war. The supply chain is too complicated and sensitive to individual component disruption. China cuts rare earth exports? No electronics until new mines are established.

If it’s an extended war, I don’t know what planes we will be building to fight it at 10,000 units per year, but it won’t be F35’s. It won’t even be F18’s. But it will be a pretty good plane that can be flown without an LDC display (since we don’t make those here).

It might, in fact, look a lot like the Avro Arrow, modernized. We could probably punch those out for $5 million a unit under mass production now.

The Mustangs won the skies for the US in WW2. But these were not, technically, difficult planes to build. Nor were they that expensive. And you didn’t need rare earths and 1,000,000 man hours of computer programming to make it fly.

In times of war, you have to be gettting better bang for your buck than the other guy.

#163 ExEpat on 01.16.11 at 2:40 am

Someone could probably make a good profit putting together some sort of Misery ETF for the bears to put their money in this year. Collection agencies, repo businesses, fee based credit counseling operations, psychologists, marriage councilors, bankruptcy agencies, etc.

Depressing, I should probably get more rest.

#164 Bruce on 01.16.11 at 2:45 am

Nothing is Changing Garth. Not one DAMN thing. We’re setting ourselves up for disaster, like blind sheep being led to the slaughter, and so on we go. It’s really remarkable how this shell game is going on in plain site and one “sees it”. Oh believe me you, they know what’s coming–same thing with the US. I don’t buy the “recovery” and “green shoots” lollipops and candy cane stories either. There’s so much misinformation out there, so much contradictory evidence, so many financial wizards and “experts” who all profess to have the answers that it’s no wonder most of us are walking financial failures–the victims of our own stupidity and the era of cheap credit as well as our culture of instant gratification. I’ve never seen people so consumed by money & greed as I do today. In any event, carnival Carney certainly knows this circus is not going to have a fun ending… Nothing surprises anymore. Not a thing.

#165 David B on 01.16.11 at 8:19 am

Some good pre football reading to digest!

INVESTING JANUARY 16, 2011.

Don’t Get Carried Away by the Market Rally

http://online.wsj.com/article/SB10001424052748704323204576084283773099512.html?mod=WSJ_hp_MIDDLETopStories

#166 Live Within Your Means on 01.16.11 at 9:11 am

#140 InvestorsFriend (Shawn Allen) on 01.15.11 at 9:17 pm

We were approved for a higher mtg. as well but wanted to put 25% down and took a loan based on one of us losing a job, which did happen a few years later. We managed to pay it off in 7 yrs.

#167 Tim on 01.16.11 at 9:18 am

Bankruptcy is very easy as long as you can come up with the trustee fees, are willing to do a monthly budget report and sit through 2 short counselling sessions. Been there, done that.

#168 Ret on 01.16.11 at 9:35 am

Re:#151 -“If you own an American car or truck it has Chinese parts in it.”

Have a looksee around the back of any auto plant, say at Ford’s Oakville complex. You will see thousands of shipping containers stacked out back. Those containers brought in radios, wiring harnesses, power window motors, power mirrors, gas caps, tail light lenses etc. etc. etc., all from China and India. All “Ford tough” components I’m sure.

You won’t hear much from the sanctimonius CAW/UAW crowd. They are too busy making $55-65 an hour, all in, putting those foreign parts on your “new and improved” GM, Ford or Chrysler product.

I’ll be LMAO when China starts to bring cars into Canada and the CAW starts screaming about what junk the cars are and how it is all so unfair … blah, blah blah, just as they did when the Japanese and then the Korean cars showed up.

China’s auto parts plants are no doubt extremely grateful to Canada and the US for the huge government bailouts to GM/Chrysler.

#169 Back East on 01.16.11 at 9:48 am

How about eliminating CMHC? Why is the tax payer insuring the banks anyway? The lending practices would tighten then!

#170 Oasis on 01.16.11 at 10:34 am

my my my

would you look at the explosion in M1 , M2 yoy. consumer credit now, stable. non revolving credit is actaully expanding. commercial bank assets are.. growing. seems like the US economy is starting to gain some momentum again.

i wonder what all these new trillions of dollars bernanke has printed will find themselves doing this year.

lol

#171 Utopia on 01.16.11 at 10:52 am

@#162 nonplused said….

“In times of war, you have to be gettting better bang for your buck than the other guy”.
———————————————————-

Great. Let’s just invest in gravel pits then. We can throw rocks at the incoming jets. Maybe we will even hit one or two. And it is cheap. A good investment in your eyes perhaps and no big technology advances are necessary. We could do it for ..um…say, 1.00 per rock.

There is a good investment. Who needs air supremacy anyway? Right? Like David and Goliath. All we need is slingshots and big sharp rocks.

Hooray for our side!!

#172 is it to late to change my vote? on 01.16.11 at 11:13 am

I voted for Devil’s Advocate as the biggest jerk last year.

I’d like to change that to InvestorsFriend (Shawn Allen)

They are equally full of themselves and tiring to read.

That is all.

#173 Oops, make that "is it too late to change my vote?" on 01.16.11 at 11:15 am

I actually am a decent speller who cares.

Don’t want to get the spell-check folks all upset :)

#174 jess on 01.16.11 at 11:27 am

Mark:
“The future, he says, is natural gas trapped in shale rocks.”
=
Interior Minister Ken Salazar:
“Communities across America have seen their water contaminated by the chemicals used in the hydraulic fracturing process,” said Hinchey. “When big energy companies decide they want to drill on public lands, they should have to tell the public exactly what chemicals they’re pumping into the ground. We already know of several carcinogens and neurotoxins that are used in drilling process. If the industry had their way, we wouldn’t find out about the other chemicals being used until they show up in the water supply. The people have a right to know what is being done to their land and what risks that may carry.”

“Oil and gas companies continue to assure us that their drilling projects are safe,” said DeGette, “but those same companies refuse to back up their assertions by disclosing the chemicals used in the hydraulic fracturing process. Without disclosure, authorities investigating incidents of concern to communities and residents are unable to prove one way or another the role hydraulic fracturing might have played in the contamination.

Buried Secrets
Gas Drilling’s Environmental Threat

Vast deposits of natural gas have brought a drilling boom across much of the country, but the technique being used, called hydraulic fracturing, is suspected of causing hundreds of cases of water contamination. Now environmentalists and lawmakers are pushing for closer oversight of the gas industry, which is pushing back.

Opponents to Fracking Disclosure Take Big Money From Industry
by Abrahm Lustgarten
ProPublica, Jan. 14, 2:46 p.m.

http://hinchey.house.gov/index.php?option=com_content&view=article&id=1544:hinchey-degette-and-polis-lead-46-house-members-in-support-of-fracking-chemical-disclosure-requirements-on-public-land&catid=71:2011-press-releases
====================================
Saturday, January 15, 2011
Spruce No. 1 Mine W. Virginia
(St. Louis-based Arch Coal is the second largest U.S. coal producer.) had their permit vetoed by EPA

EPA officials decided the project would use destructive and unsustainable mining practices that jeopardized clean water sources for local communities.

Federal scientists determined that Spruce Mountain would have disposed of 110 million cubic yards of coal mine waste into streams; buried more than six miles of high-quality streams in one county; polluted downstream waters as a result of buried streams; and degraded area watersheds, thus killing wildlife and adversely impacting other species

#175 Live Within Your Means on 01.16.11 at 11:31 am

Interesting – Swiss whistleblower Rudolf Elmer plans to hand over offshore banking secrets of the rich and famous to WikiLeaks
He will disclose the details of ‘massive potential tax evasion’ before he flies home to stand trial over his actions

http://www.guardian.co.uk/media/2011/jan/16/swiss-whistleblower-rudolf-elmer-banks

#176 Popeye the sailer man on 01.16.11 at 11:50 am

speaks for its self;

http://edmonton.kijiji.ca/c-housing-real-estate-services-Give-Her-What-She-Wants-For-The-New-Year-W0QQAdIdZ254283015

#177 jess on 01.16.11 at 12:08 pm

Another grim and growing indicator

The Ontario government no longer collects province-wide waiting list statistics since social housing was downloaded to 47 municipal Service Managers in 2001. ONPHA’s survey collected data from each Service Manager and the statistics presented represent waiting list numbers as of January, 2009.

The ONPHA 2010 Report on Waiting List Statistics for Ontario shows that the number of active households waiting for social housing in the province grew from 129,253 to 141,635 between January 2009 and 2010 – an increase of almost ten percent in just one year.

Map and Chart of Ontario households waiting list for social housing
http://www.onpha.on.ca/AM/Template.cfm?Section=Waiting_Lists_2010&Template=/CM/ContentDisplay.cfm&ContentID=7547
http://www.onpha.on.ca/AM/Template.cfm?Section=Waiting_Lists_2010&Template=/CM/ContentDisplay.cfm&ContentID=7548

#178 Joe on 01.16.11 at 12:10 pm

Garth, I think F, CMHC and the banks/lenders should have a new rule for mortgage applicants buying with 5% down. They need to have at least an additional 5% in liquid assets for emergencies such as job loss, medical, etc. How is it that our government lets people buy houses with absolutely no backup funds for emergencies or prolonged job losses?

For example, a lender out there right now (CIBC Firstline) requires that if you are buying a rental property , you need to have 12 months of principal, interest and tax payments in liquid assets, as a backup. The same should apply for owner occupied buyers in this country.

#179 Daystar on 01.16.11 at 12:17 pm

Interestingly, F and Carney might be trying to engineer one last brief rally in RE with CMHC regs. They will tighten but not effective immediately, giving realtors a sell line to “buy in or forever miss out on cheap rates, zero down and 35 year mortgages”. This will tease greater fools who are sitting on the fence to buy… one last time… to their own peril.

Its been well noted that the middle to lower end homes aren’t selling in droves and that national sales are essentially supported from high end sales or the “rich” who have, in this nation, done quite well.

Thats all about to change. As interest rates rise, consumption will slow, construction will drop and unemployment will rise. So too, will the markets drop as speculation disappears and shareholders look for profit which will also drop. Rising interest rates are all but assured as the feds, provinces and municipalities dumbly rack up another 100 plus billion in borrowing this year (like last year) on a mere 1.45 trillion (nominal GDP) economy. Again, at such blistering rates of borrowing, in a mere few years, Canada will face yet another currency crisis as intergovernmental debt to GDP levels approach 100%. Currently, we are at 73% intergovernmental debt to GDP. By this time next year, we will be at 80 – 81 %. If governments continue to run red ink, within 4 years Canadian public debt will be at 100% intergovernmental debt to GDP and the bond vigilantes will begin to circle Canada but not before interest rates already rise due to the pressures our governments are putting on the bond markets for borrowed money.

As risk rises, rates rise and as rates rise, our economy will fall. Asset deflation is almost here. Most certainly it will come with higher rates regardless of CMHC tightening which explains why F may tighten CMHC regs. Essentially, the consumer is tapped out. The banks have tapped market share and they know it. Essentially, there is nothing left to gain, so nothing left to lose… at least… for them.

RE has hit the wall. The middle class now shrinking, will be decimated within 5 years. The rich, able to buy homes without a second thought, will think twice as the markets correct and rates rise. Asset deflation is almost here and nothing, save complete and utter total wrecklessness (i.e. 50 year amortizations, extended near zero fed rates) will save (scratch that, pospone) it.

And what is Flarhety’s great hail mary besides more highly unsustainable public debt which is sure to soar interest rates and crash our currency in the future? Lower corporate tax rates. Shrink government revenue yet further, weakening our federal ability to provide essential services… Our current minority government is dangerous, weak, unpatriotic and stupid to be truthful and needs to be replaced to control the damage they’ve already created. If this nation leaves it “as is”, our economic sovereignty will be at risk and as such, our very identity will disappear.

I believe in a border at the 49th parellel. I suggest others do the same before it disappears and I can guarantee it will not be good for either Canada or the U.S. if it happens. The true North of North america needs a model that is separate from the U.S. model, not one that is identical and if I actually need to explain why that is, then we are all in serious trouble but to oversimplify, the U.S. systemic model is far… far from perfect and the examples of widespread failure, way to easy to spot. They themselves need a better example to follow, not one who merely clones as Harper intends. Get it?

#180 bigrider on 01.16.11 at 12:54 pm

Still enjoying the reference to Woodbridge Garth made in reference to basement renovations.

Woodbridge Ontario.The biggest home,ground f_in zero to the all the builders, home flippers, RE agents, mortgage brokers and real estate humping porn purveyors the country has ever seen.

Take a look at largest ethnic cohort in the town…can you say Buon Giorno.

#181 Popeye the sailer man on 01.16.11 at 12:58 pm

#156 UrbanCowboy

http://www.youtube.com/watch?v=ZPWH5TlbloU&feature=player_embedded#!

Great Utube video, the Narrator looks and sounds like Garth, and at the end of the video you get to see his boots, cape and sixpack. LOL

#182 Business Unusual - the BUN on 01.16.11 at 1:49 pm

Random factoid…

Property Taxes Have Risen 56% percent in 9 years in Vancouver.

56%!!! BUT if you listen to the news inflation is in check and not a factor.

#183 Wilde_at_heart on 01.16.11 at 1:50 pm

Sure, MPs are made busy forming committees and traveling the country to hear briefs laboriously prepared by citizens and special interest groups, but the guys who actually write budgets never even see them. It’s political theatre. If any real influence-peddling is done, it’s to key MPs and ministers directly. It happens in their offices, and behind closed doors. And it is never written down.

Funny that’s what a lot of people who have been no where near ‘the inside’ claim too – only when they say that out loud they get derided as ‘conspiracy theorists’.

#184 The Original Dave on 01.16.11 at 1:58 pm

Don Campbell did an online interview with the globe and mail.

It was a pump session.

some of the things he said are:

Interest rates will begin to creep up in late 2011, which will bring a bit of fear into the market, pushing those on the fence into buying. The best time to be buying detached (resale will provide best bang for buck) will be in summer up to October

The cries of Bubble have been occuring for literally decades. They are great attention getters (just check out the headlines) as fear always grabs attention. That being said, we need to go back to regional discussion. #1 A bubble doesn’t exist if you actually analyze the underlying economic fundamentals (rather than screeching about housing market numbers)…….

The popping sound you will hear, will be the popping of the ‘chicken littles” predictions exploding. I just wish that people/pundits wouldn’t say things just for attention. It is like some care turning real estate and investing into U.F.C. rhetoric, where opinions are win or lose. Commentators are suppsed to educate based on fact, then give direction where they can. Not scream at each other. So, long winded answer is, check your specific region, buy in areas that are transit oriented (demand will be strongest in those areas)

#185 goldenfox on 01.16.11 at 2:35 pm

cecilhenry on 01.15.11 at 2:30 pm

“Why should I be taxed twice plus for my origincial earnings? If I spend it on alcohol and debauchery it’s just fine. But if I invest it wisely and take risks, the government thinks it deserves a cut (a 2nd time). This is wrong.

WE are not free.”

………………………………………………………………………
Truer words were never spoken. If I take my hard earned cash and spend it in las vagas thats just fine. However if I spend it on improving my house, the cash is spent helping out the local economy, and what is my reward. I get to pay higher house taxes. Before the 1st WW there was no income tax and govts. survived just fine. It was one of the most prosperous and innovative times in history. Before WW2 the public sector was 10% of the economy and now it is approaching 50% and rising. There is never enough money for all the govt. special interest groups. Why do you think the underground economy is booming. Govt. do not produce any wealth, they only take it and redistribute it to their friends and pet projects. It used to take one man to support a family. Then it took man and wife to support the family. Then the children needed part-time jobs too. Now they have to further pile debt on debt to survive. Where do we go from here? Look around, do you start to see the cracks starting to surface?

#186 jess on 01.16.11 at 2:58 pm

#151 Utopia
Have you seen this plant?
http://wikimapia.org/367549/General-Motors-GM-Brazil

In July 2000 launched the Industrial Complex of Gravataí in Rio Grande do Sul, one of the world’s most modern factories, where the line is produced and Celta, which receives visits from experts in manufacturing of vehicles from around the world who want to know the system’s assembly model, which is done in partnership with suppliers of systems, installed within the industrial complex.

The Celta was also the pioneer in the Brazilian market in the area of electronic commerce, becoming the best-selling model in the world via the Internet. Currently, the GMB sells the entire line Corsa, Meriva and Montana to truck in this way. (wiki)

Industrial Automotive Complex of Gravatai

In July 2000 was inaugurated the Industrial Complex of Gravatai, in Rio Grande do Sul, one of the most modern factories of the world, where is produced Celta, which receives visits from experts in vehicles manufacturing from all around the world, who want to know the system’s assembly, which is done with the partnership of suppliers, installed inside the industrial complex.

In the social area, the GM of Brazil focused activities through the General Motors Institute, which was created in 1993. Its mission is to rescue the citizenship of children, youths and adults from poor communities, which are located especially close to industrial plants of the company. Its shares are primarily in education.

#187 dark sad person on 01.16.11 at 3:47 pm

#170 Oasis on 01.16.11 at 10:34 am

my my my

would you look at the explosion in M1 , M2 yoy. consumer credit now, stable. non revolving credit is actaully expanding. commercial bank assets are.. growing. seems like the US economy is starting to gain some momentum again

i wonder what all these new trillions of dollars bernanke has printed will find themselves doing this year.

lol

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

Typical misinformed hyper-inflationist–looks at a few charts and totally misinterprets what it all means- lol

M1 is “soaring” http://research.stlouisfed.org/fred2/series/M1

Why yes it is-so lets look at why it’s “soaring and what exactly “is” M1 and what makes up M1? http://research.stlouisfed.org/fred2/categories/25

Here’s some components of M-1—please explain how these count as an increase or decrease in money/credit supply-

Total checkable deposits+Demand deposits at commercial banks+Travelers checks outstanding+Other checkable deposits

Of course the M-1 components also include cash and credit components-so lets see how well that’s going concerning out flows-

http://research.stlouisfed.org/fred2/series/MULT?cid=25

ummmm–don’t look too good for your case

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

M 2 is “soaring” http://research.stlouisfed.org/fred2/series/M2

Why yes it is-

So–what is M2? http://research.stlouisfed.org/fred2/categories/29

M2—includes savings accounts + small time deposits (CDs) + money market accounts(MMMF)+Retail money funds+Savings deposits at commercial banks+Total savings deposits–which btw-are all “soaring”–of course there is a money component too-so lets see how well that’s flowing-

so–if all these components-which have zip to do with the increase or decrease in money/credit supply-you need to tell me-how do massive MMMF’s moves in and out of M2/deposits and transfers–count as increase in credit or cash??

How does taking my money from my pocket and handing it over to a MMF or the reverse-increase or decrease money supply??

Let’s see how the end result of expanding money supply is working out-

http://research.stlouisfed.org/fred2/series/M2V = ugly

Here’s something else you completely miss in your wide eyed explanation of “soaring” money and credit –

You forgot-or maybe you don’t understand what sweeps are and how deposits into checking accounts are swept nightly into savings deposits in order to over ride the 12-1 reserve requirements–which is a component of M2 and it causes M-2 to “soar” without increasing or decreasing money supply-it simply moves (sweeps) checking deposits into savings and it too is soaring- http://research.stlouisfed.org/fred2/series/DEMDEPNS

http://bit.ly/fwSixb

All you’re basically looking at-is money moving from one place to another-

So-total consumer credit is decreasing “big” and last i looked-that is deflationary

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

I already killed you on your MZM theory– lol

#188 Bill Grable on 01.16.11 at 4:46 pm

From a GMO white paper, quoted by Mish (* along with Mr. Turner, one of the few people that have been trying to warn the sheeple what is really going on.)

This Death Spiral we are in can be summed up in point 10, from this quoted GMO white paper:

10. Dodgy loans are generally secured against collateral, most commonly, Real Estate. This, a combination of strong credit growth and rapidly rising property prices are a reliable leading indicator of very painful busts…”

Oh, and in case you think CHINA is going to bail us out? Gimme a break.

Consider – “Chinese Bank lending spree continues; $75 BILLION new loans in first week of January alone; inflation run amok.”

One week’s lending equalled all of December’s total.

Whole Ghost Cities dot the landscape, in China.

Cities that just makes CLOTHING are running at less than 30% capacity and dropping.

Chinese property speculation has pushed prices to New York levels in crap cities like Shanghai and Guangdong.

So, strap on the Helmet – read everything you can, and pay attention – because 2011 and beyond is going to be incredibly interesting.

John S. Mill was right all those years ago. Just like spending money on Tulips in the 1600’s = people are going to wind up wishing they had never heard of granite countertops and 5 thousand dollar stoves.

Oy, gevalt.

#189 Devil's Advocate on 01.16.11 at 5:19 pm

BTW, if you think a blog with 5 million visits a year is meaningless, I guess that makes you inconsequential. — Garth

Precisely why CREA pays me to participate and counteract the prevalent tone of this blog. ;-)

#190 Live Within Your Means on 01.16.11 at 5:36 pm

#182 sail1 on 01.16.11 at 1:41 pm
Garth wrote:

It’s political theatre. If any real influence-peddling is done, it’s to key MPs and ministers directly. It happens in their offices, and behind closed doors. And it is never written down.

To bad you didn’t know how to play the game. Your influence could have made a difference in guiding the financial direction of the country. Much easier or frustrating to criticize from a blog.

Actually I was an MP for six years prior, ran influential committees and made it into the federal cabinet. Don’t need advice from you. My decision with Stephen Harper was to stand my ground on principles. I regret nothing. BTW, if you think a blog with 5 million visits a year is meaningless, I guess that makes you inconsequential. — Garth
…………..

Good on you Garth. In our family we suffered financially due to my Dad’s principles, but we respected him for having done so.

#191 Kuwaiti on 01.16.11 at 5:48 pm

all the people talking about Chinese stealth fighters… How on Earth does it relate to Canada’s housing bubble? Also, who cares, would you ever risk your life flying in a plane made in China? 1 stealth fighter versus how many carrier groups of the US? I’ve personally seen what the US airforce is capable of, and it’s pretty awesome, so chill out! You should be more alarmed of the fact that everything in your house is made in China versus a jet that will never see Canadian airspace. Anyways, back to real estate!

#192 Junius on 01.16.11 at 5:54 pm

#179 Daystar,

You said, “Interestingly, F and Carney might be trying to engineer one last brief rally in RE with CMHC regs. They will tighten but not effective immediately, giving realtors a sell line to “buy in or forever miss out on cheap rates, zero down and 35 year mortgages”.”

Perhaps but that is not the big picture. We already had this last year. A slight tightening would provide a minor jump in sales but would again be followed by a slower season afterwards. You can only pull forward from the future so much.

#193 Devore on 01.16.11 at 5:57 pm

cecilhenry on 01.15.11 at 2:30 pm

Why should I be taxed twice plus for my origincial earnings? If I spend it on alcohol and debauchery it’s just fine. But if I invest it wisely and take risks, the government thinks it deserves a cut (a 2nd time). This is wrong.

Have you seen the taxes on alcohol recently? They’re over 100% in BC.

#194 Dark Sad Monster Bunny on 01.16.11 at 6:00 pm

178 Joe – the arguement against that would be why not let me put in a higher downpayment? Why have the “extra” money sitting in a low bearing “guranteed” investment and the lender get to charge interest on that extra 5% they are loaning to you? All on a chance that
you may need the emergency fund?

Popeye/Cowboy – I noticed the similarities to Garth too
esp the 6 pack!

14″ of snow in Shawnigan Tues night Popeye……just a
sciff left yesterday and all gone now I think.

#195 David B on 01.16.11 at 6:00 pm

With Mr. H. & Co policies that has increased our dollar value coupled to a loosing battle in Afhganistan we can only suspect these numbers to rise.

BY SHAI OSTER
HONG KONG—A record 140,000 new companies were registered here last year, a 28% increase over 2009 that underscores the city’s vibrant recovery from the global recession
—————-

And what has been Harper’s priority?

The House that Stephen Harper built
JOHN IBBITSON
From Saturday’s Globe and Mail
Published Friday, Jan. 14, 2011 5:11PM EST
Last updated Sunday, Jan. 16, 2011 9:20AM EST

———————–

Good Canadian manufacturing jobs means families can live in good family homes en route to a better Canada for one and for all. After 4+ years of a Super Reform Coalition government I suspect we are not.

#196 Live Within Your Means on 01.16.11 at 6:04 pm

IF you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:
If you can dream – and not make dreams your master;
If you can think – and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,
‘ Or walk with Kings – nor lose the common touch,
if neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And – which is more – you’ll be a Man, my son!

Rydyard Kipling

In our home, my Dad actually had the above framed.
Growing up, and later, my Dad & I had a love/hate relationship. We were like water and oil after 2/3 days under the same roof. But I still miss him & my Mom. I obviously didn’t meet RK’s high expectations.

#197 john m on 01.16.11 at 6:39 pm

Well our present Government assumed power with billions in surplus (which they spent in a few months promoting them selves)………now look at us—- no one could f..k up a good thing better than they did——–they did everything wrong and bragged about it ???????? Look where we are now.why its even none of our business how much or where they spend OUR money…Christ wake up people!

#198 Bill Grable on 01.16.11 at 6:47 pm

Can I change my vote for the most annoying blog dawg to Devil’s Advocate?

I love how nincompoops take shots at Mr. Turner.

Jealous, are we, DA?

What have you done for your Country?

Give your pension to charity, like Mr. Turner?

Sure.

#199 No crystal ball... on 01.16.11 at 6:50 pm

It is all fine and dandy that there likely will be tightening of mortgage lending regulations, but that will not change the big problem that puts so many people on the brink of bankruptcy. This is people’s lust for shopping. Just look at any mall parking lot if you disagree.

Retailers and banks feed off our society’s desire to replace (why not fix stuff when it’s broken?), upgrade (why not live with perfectly good things instead of having to have the latest model?) and buy, buy, buy beyond what they can afford and need.

There is this insane illusionary mentality of “He who has the most stuff wins”. People need to stop being lured by “sale” signs and stop viewing the mall as a family activity place. They work all week and go out and blow the paycheck on some ‘retail therapy’ when the weekend rolls around.

Few people budget anymore or worry about the consequences of their over-spending.

We ran the figures for our 23 year old daughter. Based on her debt-load she needs to earn about 20% more than she earns a year in order to pay for her current living expenses and pay down some of what she owes.

That is really scary. Thank god she doesn’t have a mortgage on top of it all or she would be screwed. And guess what? The bank sent her a credit card as soon as she graduated from high school and they have been increasing her limit every year since. They are like drug dealers to young people. It sickens me.

#200 No crystal ball... on 01.16.11 at 7:00 pm

#197 Live Within Your Means

Wonderful poem. Too bad honor is not valued the way it used to be. Your Dad was on to something…

#201 Stevermt on 01.16.11 at 7:20 pm

#180 bigrider
no need to go racist on us . who will you attack next?
by the way , I’m WASP and there are plenty of our kind driving this mess too.

#202 Utopia on 01.16.11 at 8:23 pm

#186 Goldenfox

“Before the 1st WW there was no income tax and govts. survived just fine. It was one of the most prosperous and innovative times in history”
———————————————————-

Before the First World War the majority of Canadians lived on farms and small rural communities. Most people produced much of thier own food. We still ran around in horses and biuggies and the idea of pensions and the social safety net did not yet exist.

The nuclear family was a real thing then too. There were poor houses for the destitute, the sick and the elderly without family support. Beggars were not bums who needed cash for booze and drugs. They actually were people who could not buy coal and food.

Before the first war virtually none of the roads in this country were paved. We relied on railways for the big trips. If the family breadwinner was injured or killed on the job the family often fell into destitution and widows turned out of their homes sometimes became prostitutes just to survive.

There was no Workers compensation programs, no insurance payouts for injuries, little recourse in courts if you did not have means and the law in small towns often amounted to no more than the town bully or the strongest family clan.

Yeah, let’s all go back to the good old days before taxation. Wonder how we will make out now that 96% of Canadians live in cities and the few who do farm are often little more than land barons or corporate interests.

Quite the future. I wonder how innovative and prosperous we will be then? I am betting we can pretty much kiss civilization goodbye at that point because there are only a handful of people around who really have the skills to revert back to the society you imagine.

Social Darwinism is a certainty in the coming Dark Ages.

#203 Oasis on 01.16.11 at 8:28 pm

So-total consumer credit is decreasing “big” and last i looked-that is deflationary
___________________________________________

http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5B1%5D%5Bid%5D=TOTALSL&log_scales=Left

credit is NOT decreasing “big”… last you looked, since you’re obvioulsy pretty blind. where’s the collapse? the “collpase” has already ended.

http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5B1%5D%5Bid%5D=TOTALSL&s%5B1%5D%5Btransformation%5D=pc1

where’s the deflation. why are stock prices skyrocketing? margin debt rising. oil at $92, gold at $1350? Soy, corn, wheat, coffee, all exploding. copper at all time highs.

if we were in a deflation, oil would be at $10, gold at $200, and copper at $0.50.

sorry……. no deflation. just lots and lots of money printing and inflation. better luck next life time. maybe you’ll have learned something this time around.

#204 Nostradamus Le Mad Vlad on 01.16.11 at 8:46 pm


CPC Planning Strategy The populace voted this sadsack bunch of whining yahoos in?

Splendid day today. Saw the GKids sprouting like weeds. Gawd it’s good to be old and past that stage of life!

Silver “However, upon receiving a sample, it turned out not to be made of silver, and is most likely lead.”
Webmaster’s Commentary: “I think we may have discovered how COMEX and JPMorgan escaped their naked short positions!” wrh.com. Similar to tungsten in gold bars.

1:10 clip The US Fed could be gone in 25 years. About the same length of time the cycles will change and the poles shift!

The mortgage fiasco is gonna be ongoing for quite some time.

Oh dear The US is running out of small countries to start wars with, so it has to start with bigger ones. However, this raises an interesting view.

“Hizbullah is supported by both Iran and Syria. Syria and Iran do have a mutual defense pact. This may well be Israel’s ploy; to attack Lebanon, have Hizbullah counter-attack, bring in Syria and Iran, and then the US has to strike Iran and Syria due to our defense treaties with Israel.

“However, there is one issue that seems to get no real coverage in Israeli or US news outlets, and that is the following: Russia and China may well join the fray on the side of Iran, and both countries are nuclear armed.” wrh.com. One more — More warmongering Except it’s in a different part of the world.

1929 — Secret societies and all that. Gotta learn from history.

Greek PM “Make that an INTERnational hero, because I applaud what he has done.” wrh.com.

Going Up In Price “Arrest the money addicts and put them in mental hospitals for their own good.” wrh.com.

Property Taxes Increase Here too as well. “This is as close to an admission as you will ever get. The Federal Reserve and the US Government screwed up the economy and their only solution to fix it is to loot the public. They will never stop. They have no reason to stop. Until the people give them a reason to stop. Iceland did it. Tunisia just did it. Greece is about to do it. So is Ireland. So is the rest of the world. Freedom or slavery. Time to choose.” wrh.com.

Food vs. Gold Food is eaten; gold is melted down, then drunk!

Most natural disasters aren’t. They’re probably aliens fondling each other!

#205 VICTORIA TEA PARTY on 01.16.11 at 9:01 pm

WHO’S WHO IN THE ZOO? OR MORE LIKELY, HU’S IN WHOSE ZOO? HIS? YUP.

So China’s president comes to Washington this week to kick the tires of the old broken down US Empire’s centre of power.

Mr. Hu must wonder if he bought a badly-made used car, a chunk of Detroit Iron from a by-gone age, with all of that US currency he continues to acquire in exchange for the stuff his fellow countrymen/women grind out and flog to the Yanks.

He’ll probably think he has landed in a Third World place, where one might find a sorry looking old Ford Pinto in a gutter; a flat tire, a smashed window, fast food trash on the centre console. All par for the course these days in the economically un-well Land of the Free and Home of the Brave.

Maybe he’ll take sympathy and offer to rebuild America’s infrastructure so that one day the USA will resemble a rebuilt-by-China East Africa. Not!

The Wall Street Journal of this date scribbles:

‘Chinese President Hu Jintao emphasized the need for cooperation with the U.S. in areas from new energy…ahead of his visit to Washington this week, but he called the present U.S. dollar-dominated currency system a “product of the past” and highlighted moves to turn the yuan into a global currency.’

Aha, down to cases in the lead sentence, here. Does the WSJ, Wall Street’s tame mouthpiece, recognize serfdom when it smacks it upside the head? Unlikely, because there is plenty of arrogance to soften the blow.

The article now switches to warm and fuzzy…

‘…”We both stand to gain from a sound China-U.S. relationship, and lose from confrontation,” Mr. Hu said in written answers to questions from The Wall Street Journal and the Washington Post.

Hu acknowledged “some differences and sensitive issues between us,” but his tone was generally compromising, and he avoided specific mention of some of the controversial issues that have dogged relations with the U.S. over the past year or so—including U.S. arms sales to Taiwan…’

Now a really BIG issue: Yuan/USD competition

‘On the economic front, Mr. Hu played down one of the main U.S. arguments for why China should appreciate its currency—that it will help China tame inflation. That is likely to disappoint Washington, which accuses China of unfairly boosting its exports by undervaluing the yuan, making its products cheaper overseas…’

Boondoggles: QE Programs…

‘Mr. Hu also offered a veiled criticism of efforts by the U.S. Federal Reserve to stimulate growth through huge bond purchases to keep down long-term interest rates, a strategy that China has loudly complained about in the past as fueling inflation…the liquidity of the U.S. dollar should be kept at a reasonable and stable level.”’

In amongst the dinners, photo-ops and smiley handshakes, the Washington Press Crops will still not get it. Mr. Hu owns them, lock, stock and barrel. He just hasn’t yet picked up the doors keys and title documents.

Why? China can’t quite make the full transition to new empire, because its home economy and geopolitical influence is still relatively small and recent. It needs more seasoning along with more size.

That is happening at warp-speed, in spite of Chinese inflation talk and bubbles.

I get the feeling the so-called Middle Kingdom has a very long view of itself and history. Very long indeed. Decisions will be made when they’re needed.

Meanwhile back at Rancho USA, it’s Golden Globe time! Looking at that parade of aging Hollywood fibreglass and metal prongs is a definite look deep into yesterday:

“Hey, Oprah! What’s shakin’ baby? Hu’s ahead of you in the line-up!”

#206 Pathrik on 01.16.11 at 9:07 pm

Too little too late I am afraid. Just like the US and Europe, there comes a point where even low interest rates and better regulation dont help much because of the debt wall already faced by consumers. You cant prevent a disaster that is already happening.

The questions now are:
Are any of these people in Ottawa contemplating what to do about this housing mess to mitigate the end effects (e.g. future writedowns for mortgage owners, will the government try to bail out insolvent mortgage lenders and potentially even banks to prevent interconnected institutions from toppling each other etc)? Or are we just going to play it by ear like other countries, wait for the carnage and generally be deer in headlights when prices fall?

Its hard not to be a little scared considering these questions because we are following the same path quite literally as every other country that has had a housing bubble. We all know how prepared these jurisdictions were.

#207 Nemesis on 01.16.11 at 9:11 pm

Commenter 190… “counteract the prevalent tone…”

I know I’m going to regret this … but as regards the ‘tone’ of Mr. Turner’s blog… the ‘ground truth’ is actually far worse/more revealing. Or at least in so far as Kelowna is concerned… ;)

http://tinyurl.com/4kyrnmv

And as for Mr. Turner’s politically principled stance (which I personally applaud) here’s a little something which will doubtless give his erstwhile colleagues pause for thought…

“A return to first principles in a republic is sometimes caused by the simple virtues of one man. His good example has such an influence that the good men strive to imitate him, and the wicked are ashamed to lead a life so contrary to his example.”

Niccolo Machiavelli

#208 Daisy Mae on 01.16.11 at 9:23 pm

“My decision with Stephen Harper was to stand my ground on principles…”

As it always should be.

#209 Devil's Advocate on 01.16.11 at 10:02 pm

#199 Bill Grable

LOL… where did that come from?

Was it my last post…

#190 Devil’s Advocate on 01.16.11 at 5:19 pm

BTW, if you think a blog with 5 million visits a year is meaningless, I guess that makes you inconsequential. — Garth

Precisely why CREA pays me to participate and counteract the prevalent tone of this blog.

???

Garths comment was not directed at me Bill. I pulled it from his comment at the bottom of another’s posters post and responded with a “quid pro quo” of sorts acknowledging with a hint of sarcasm that yes indeed this is a most influential blog which CREA is most annoyed with. ;-) (sarcasm font sorrowfully lacking)

I never said this blog of Garths was meaningless; that was another poster who implied it. If I thought it so I doubt I would frequent it as I do.

And on respect of Mr. Turner I think he knows where I stand on that. But there is a difference between respect and blind idolization. No I am not afraid to take Garth to task from time to time. If that is such a sin here on his blog then I would gladly take my leave. But I think Bill that your God is more merciful of free speech than that.

#210 Pat on 01.16.11 at 10:09 pm

Garth: “…a blog with 5 million visits a year…”

I’ve been wondering about this – your blog is unique in Canada and has excellent content. Can you tell us some more statistics about the visits?

We have you. What else matters? — Garth

#211 S.B. on 01.16.11 at 10:58 pm

The peasents are becoming uppity against their masters, pictures of Kelowna anti-brutality protest.
As Harper said, you will not recognize Canada when he’s done with it…NWO lockdown is coming and I’m not even a tinfoiler…
Police & army work for corporations and governments, not for us.

http://www.flickr.com/photos/instamarv/5361706237/in/pool-policeprotestkelowna

#212 S.B. on 01.16.11 at 11:28 pm

CRTC may ease ban on broadcasting false or misleading news

http://www.thestar.com/news/canada/article/922697–crtc-may-ease-ban-on-broadcasting-false-or-misleading-news?bn=1

Housing market is fine! Baghdad Bob said so.
If Harper and the globalists tell us that 2 + 2 = 5, then it is so.
Hard Work Brings Freedom. War is peace. Ignorance is knowledge.