Trouble with numbers

So, Jeff sold his condo. “I finally got it done,” he wrote me last night. Now he’s moved into his in-laws’ place (dude… ouch!), so he can “ride out the shit storm that awaits. I was happy to have gotten out without a loss, and am even happier to be mortgage free. It feels great!” Apparently Jeff didn’t get the memo from GlobalTV that Hot Asian Money spreading like a fungus into Burnaby. But what the heck. He’s a free man living in wife’s parents’ basement. Liberty don’t come cheap.

Now the problem. “I know you’ve had it in your columns before, but having a big chunk of money in my bank account ($200,000+) making me no interest pisses me off. I want to invest this wisely, something with little risk, as this is my “house money”. I’m not looking for a homerun. Just something to beat the inflation rate. What would you do with it and what percentage would you put where? Thank you for all your columns and keep giving it back to all those haters out there!”

Haters? I’d say it’s being elevated more to pursuers. My email inbox is now a hazardous waste zone, and today I heard about another anti-Garth blog promising salacious revelations in future posts. I’m looking forward to long reads about bastard children, the homeless guy I lit up, missing hookers, my full-patch brethren, puppies with Hummer damage, and the shocking reason I really write this depraved blog.

But, yes, Jeff’s question is one more people share, as they decide to bail ahead of the coming wave. A few thoughts on that in a moment.

Meanwhile, let me clear up some confusion surrounding the godless GTA’s real estate market. The mid-month numbers just came out and pumpers are pointing to their ‘evidence’ of a manly market – an 8% year-over-year increase in prices. That has the average 416 house at $543,787 and a 905 special at $449,252.

But that’s not the news. More telling is a year-over-year decline in sales (2%) from last May, because May of last year had fewer sales than the same month in 2009. This constitutes the 11th month running of fewer deals than the previous year. Also important: last May listings had surged 48%. This year they’ve shrunk 20%. Translation: weak demand is chasing even weaker supply. Prices are rising on thinning volume. If Toronto real estate were a stock, you’d dump it. Fast.

As for prices, how can it be good news when the average SFH in 416 now costs $774,046? That’s close to the $879,039 average for detached houses in deluded little Vancouver. In Toronto, this equals 8 times the average local household income. In Vancouver it’s 10.5 times.

More important, the ability of Canadians to continue to borrow’s been badly compromised by our recent debt binge. Rampaging prices and stagnant incomes are behind shrinking down payments and swelling mortgages. And don’t even get me started on the impact of millions of Cialis-laced, oxygen-sucking, house-heavy Boomers who squandered their big years on energy-snorfling McMansions. They’re about to learn (along with much of BC) that having real estate’s not the same as a financial plan. Should be a riot.

Anyway, back to Jeff. What to do with two hundred large?

First, forget this “little risk” mantra. In a world where inflation has returned with a vengeance and HST is poured over everything, putting money into riskless interest-bearing deposits is a losing game. To make even a 1% net return, after inflation and the average personal tax, you need to receive 4% interest. Sure, the Lower Kootenays Ukrainian Sisters’ Credit Union pierogi-class laddered GIC might fit the bill, but who wants 1% on their money?

However, eschewing crappy returns on boring savings instruments doesn’t mean you end up with a fistful of stocks. This pathetic blog has carried many articles on the merits of alternative investments, namely government and corporate bonds, high-yield bonds, real return bonds, real estate investment trusts and sector and index exchange-traded funds. I’ve also written about the need for diversification over Canadian, US and international markets, across sectors of the economy (banks, energy, health care, commodities, for example) and between large, medium and small-cap companies.

Getting the right asset allocation is totally important. Smart people have proven that over 90% of the return you get is attributable to the mix of assets owned. But even more crucial in a world full of natural disasters, wars, bed bugs, defaults and Dominique Strauss-Kahn, is balance. You need growth assets to keep ahead of taxes and inflation, and fixed income to provide an anchor against volatility while turning out cash flow.

My favourite mix for most people is 40% fixed income and 60% growth. Within both of those groups, you should have a broad array of the assets I have mentioned above. The risk level is moderate (lower if it’s actively managed), and the return should be about three or four times the inflation rate. If you can’t set it up, or find the time to run it, get a guy who can.

And do it now, dude. Eight per cent on two hundred grand is close to $1,400 a month.

Buy your way out of that damn basement.


#1 T.O. Bubble Boy on 05.18.11 at 9:14 pm

Somebody needs to invest in pants.

#2 randman on 05.18.11 at 9:17 pm

Sighhh…here come the inevitable feminist PC’ers

Such a nice pic too!

#3 JesseJames on 05.18.11 at 9:18 pm

Finally some AZZZZ!
Pics like this make me a huge fan of yours Garth Turner.

It’s metaphoric. — Garth

#4 No way on 05.18.11 at 9:20 pm

8% ha ha … If it seems too good to be true, then it usually is too good to be true!!!

Care for a pierogi? — Garth

#5 Randis on 05.18.11 at 9:22 pm

A “friend” of mine who has the biggest ego thinks the RE market is bound for more increase because of higher and higher price … even better she spreads her insight to everyone and when I express my worries now bascially everyone thinks I am nuts … I am soo lonely now I have no friends because I think RE is bound for crash …

As for Jeff, my personal favorite is corporate bond … talked to a portfolio manager last week from Mclean Budden and he basically confirms my view on corporate bond … anyhow if you are looking for safe and steady investment which would post decent return at this time corporate bond will do the trick. My other option would be income funds that loads up on corporate bonds, prefers and reits … Translation: fixed income saves the day, balance is the key word

#6 Cory on 05.18.11 at 9:27 pm

I don’t know Garth. I completely agree with your real estate comments and analysis. But it is like a religion and we all know religion goes deep.

I had coffee with somone today I have known for awhile. She is leveraged with 5 or 6 rental properties, all with mortgages. I asked if she was cash flow positive or negative at the moment…..negative ~$200/month. I said I would be dumping all of it right now because it will be a death by a thousand cuts in real estate going forward. I talked about liquidity and real money etc…..I said in the end you will lose money…..she thought I was completely nuts and that we obviously have different ideas on “investing”.

I was stunned. I have never had to pay ~200/month cash to sustain an investment!!! That is called averaging down in the equity world….same thing. She also said she doesnt consider a mortgage debt!!! I was stunned again.

The point is, that real estate desire, right, entitlement, and delusion runs extremely deep now……much much deeper than I ever thought…until today!

#7 Siddelly on 05.18.11 at 9:28 pm

Trading from the basement can be a lot of fun Garth!
Research in Motion may be an intriguing growth/ value story if your money has a couple years to wait. My biggest lesson with investing since selling the house over 2 years ago is you have to have patience and know what kind of an investor you are and also which risk level you can tolerate.

#8 Hump Day on 05.18.11 at 9:37 pm

So that is what you mean by diversified assets!

A few of them. — Garth

#9 Randis on 05.18.11 at 9:40 pm

For me, I try to invest like Warren Buffet … In simplest term, do your homework before you deploy the cash, set yourself targets and most important of all, discipline.

#10 nonplused on 05.18.11 at 9:43 pm

Ukrainian what??? Don’t matter if those girls are the sales team I am in.

Something is whacked in this market. Declining sales, declining listings, and rising prices? What gives? I can understand sales declining if prices are rising, but if sellers aren’t selling into rising prices we must be in a Nortel moment, when the asset has to be held so you don’t miss out on all the gains to come.

#11 BigD_LittleD on 05.18.11 at 9:44 pm

The drop in home sales is definite indication demand is waning. A more telling sign however, is the drop in home listings. The largest pool of buyers – the move-up buyer – have lost confidence in the market or their ability to take on a bigger mortgage for a larger/newer home. This point gets lost on most economists and real estate prognosticator who claim those that list homes for sale are sellers. They in fact are buyers!

Garth. Your assessment is accurate.
Home sales drop…
Listings drop…
Prices will soon follow.

Nice pic by the way.

#12 Scalgary on 05.18.11 at 9:59 pm


I visited one of those blogs you mentioned, bashing you left and right even for a typo… All i can see is their greed for your failure or whatever…

Their comments directly related their business but yours not…

Keep up the great work Garth…


#13 VICTORIA TEA PARTY on 05.18.11 at 10:00 pm

#142 Junius (Prelude)

Your item should be required reading by all involved in Vancouver’s real estate insanity. Well done!

While i agree with your opinions, I’m ALSO sticking to my guns over the larger picture of China’s relationship wityh US debt. It is a trap, ultimately, for China. Hence the Chinese desire to unload as many Greenbacks ASAP.

Imagine what kind of economic Perfect Storm would erupt should China’s RE bubble burst along with the advent of a US debt default/crisis. Think it can’t happen? We’ll see.

My God. We’d all be nuts and raisins by then, wouldn’t we? Squirrel would be the delicacy of the day served by our favourite waiter, a certain Mr. Strauss Kahn.

What an entree to The Final Depression!

#14 Interesting observation on 05.18.11 at 10:02 pm

Has any one noticed that mid month GTA numbers are always not that much lower than the month before it and then the end of month numbers are significantly worse?
Btw, many price reductions here in mississauga lately. But of course still not where they should be. Particularly screwed are those that bought from diblasio. Very overpriced and they can barely make a profit 5 years after.
Still patiently waiting.
What do you think of the subprime market here, Garth? Some posters have posted links about it. Could they pick up the cmhc slack and keep the market moving?

#15 Cato on 05.18.11 at 10:03 pm

Greatest risk is never taking a risk – fortes fortuna adiuvat.

Many people miss the greatest financial investment of all, investment in their earning potential. Anyone under 40 in an occupation that is at risk in prolonged recession would do well to transition now. Life is going to prove impossible for anyone in a McJob.

Unfortunately for anyone Gen-X and younger risk exposure is going to have to be far higher then that of our parents. Beating inflation by a few points just won’t cut it. There are no easy shortcuts left , no buying a house and watching equity outpace inflation. Anyone expecting a retirement not filled with austerity and toil will need a substantial nest egg, and gut feeling is most won’t make the cut.

On the plus side we’ll probably see medical technologies extend life expectancy 20 years, but only for those who can afford it. So step up, buy a ticket and join the rest of the rabble trying to grab the brass ring.

#16 Mr. Lee on 05.18.11 at 10:03 pm

Investment always reach their highest price point before the correct…….this is a tenent that seems to go un-noticed be the MSM and cheerleaders.

What lead to Canada’s housing boom, well it wasn’t an increase in real personal wealth, it was the 0/40 and the all time low interest rates. Well folks the 0/40 is gone and it is a matter of time before Mr. Carney raises the over night rate to 2%. Let us see what the Presstitutes have to say then.

#17 ayn rand on 05.18.11 at 10:04 pm

“Lower Kootenays Ukrainian Sisters’ Credit Union pierogi-class…”

“pierogi” is Polish; “pedaheh” is Ukrainian (real Ukrainian from the “old country” – well that is what my father taught me.

I have 200 frozen in my freezer….

#18 Was Supermodel - Now Nun on 05.18.11 at 10:06 pm

Hi Garth,
Is it possible to buy those seg funds you talk about in Money Road through TD Waterhouse and such? Any fund names I should be looking for? Thanks for the great blog!

Seg funds are life insurance products, sold by licensed insurance guys. Beware the MERs! — Garth

#19 Hump Day on 05.18.11 at 10:07 pm

Garth, you do realize I was taking about the photo of the day, right?

By the way, I love your blog and read it every day.

#20 Goodfellas union on 05.18.11 at 10:14 pm

. Sure, the Lower Kootenays Ukrainian Sisters’ Credit Union pierogi-class laddered GIC might fit the bill, but who wants 1% on their money?

Uh…..well…uh you get a free borsch maker with new deposits..or else

#21 Hovering on 05.18.11 at 10:16 pm

come on Garth, any one who actually read your last book knows you are now an investment adviser/rainmaker.

I even dug up the website to the investent firm you are affliated with and showed it a fellow blog dog.

He said it was like I had told him Santa didn’t exist. But frankly I don’t see the greaterfool blog and the investment advisor/rainmaker role as being incompatible.

I still think you speaketh the truth. I’d like to see empirical evidence of your firms results before investing with you though

News of my day job is posted on this site and disclosed in my book. Yes, I actually practice what I preach. (And I don’t care where you invest.) — Garth

#22 SMOKING MAN on 05.18.11 at 10:17 pm

Garth Love the pic………..inspired me to go to a rub and tug. Ya baby :)

But you are not taking into account the dumb ass mob.

Sales 2% off a record year. The mob or more important the garnet hardwood floor loving wife of the mob, is looking and waiting for some minuscule sign of hell lets buy this.


Because a bigger breasted rival bought, wife says that dumb beotch, I will shurly show her.

Main street media will spoon feed her till she says to hubby sign zee papers or you can have an affair with your left hand.

Smoking Man always in the know. Sorry bubble heads. But you got to wait a wee bit longer for your dream of up one man ship to those that bought.

Note: Smoking man (3rd person here) has won more jack pots playing poker with 7 duce, than pocket aces.

Fk I am good. Sorry spelling and grammar police it is what it is.

#23 len on 05.18.11 at 10:18 pm

I wanted to share my 2 cents on declining sales and rising prices
As calculated risk often points out the story is in the different mix. If I look in Calgary, to compare apples with apples, check the price per square foot which is falling. I think this is a better way to think about it rather than diminishing demand chasing more quickly diminishing supply. Bigger houses are selling for less than they used to is what seems to be going on.

#24 Jack the Lad on 05.18.11 at 10:20 pm

“Sure, the Lower Kootenays Ukrainian Sisters’ Credit Union pierogi-class laddered GIC might fit the bill, but who wants 1% on their money?”

They’re also offering the same deal in Edmonton (with the added bonus of a 50 percent off coupon at Hunky’s Bill’s Perogie Shop”

#25 Randis on 05.18.11 at 10:22 pm

#18 Was Supermodel – Now Nun

Let’s connect, maybe I can help you with it

[email protected]

#26 Tom from Mississauga on 05.18.11 at 10:23 pm

and the shocking reason I really write this depraved blog – Garth
It is for the misinformed little guy I always figured. Keep it up dude, there is lots of us getting it. Some quickly, some slowly but the information is here for those with an open mind.

#27 squidly77 on 05.18.11 at 10:27 pm

Here in Calgary with sales so low, realtors have little to blog about so they attack anyone that speaks common sense.

#28 HouseBuster on 05.18.11 at 10:29 pm

I’ll take #5.

#29 Devore on 05.18.11 at 10:32 pm

Haha, FOMC minutes, blaming the weather as usual. Same excuses as last few months, same excuses as same time last year.

Participants viewed the weakness in first-quarter economic growth as likely to be largely transitory, influenced by unusually severe weather

#30 Newbie on 05.18.11 at 10:34 pm

Are REITs considered fixed income or equities?

#31 Jimmy on 05.18.11 at 10:34 pm

Awesome site, finally located someone that isn’t living in a fantasy. Tell any Canadian that real estate is overvalued and they will chop your head off, its blasphemy! There is going to be MASSIVE deflation in Canada and across the world once this credit bubble begins to really deflate. 2008 was nothing. Thanks for spreading the truth.

#32 Jimmy on 05.18.11 at 10:37 pm

People should be sticking to CASH and CASH equivalents right now, forget about traditional investments everything is HUGELY overvalued. Spread your $$ out over a basket of safe currencies, 25% USD 25% Swiss France 25% CDN Dollar 25% Singapore dollar and just wait for the global credit boom to completely deflate, its going to be BAD. Canadian banks are NOT safe. Keep some cash at home as well.

#33 S.B. on 05.18.11 at 10:46 pm

Garth – this is one of your best-written posts yet (not that the other ones are lacking in their literary prowess).
While most of us bumble around in colloquialisms, you seem to nail the “je ne sais quoi” guts of the English language.

And we stay for the one line zingers (“It’s metaphorical)”. Too much! :lol: :lol:

This dishevelled, frumpy blog is still showing some life. I may even renew my subscription (trusting this is what the monthly credit card lines for Turner Enterprises are from? ;) )

We eagerly await Blog Dog Carney’s next pronouncement.

#34 Hoof - Hearted on 05.18.11 at 10:47 pm


Rising wealth, foreign investment drives demand for luxury homes; Metro Vancouver leading the way

VANCOUVER – Demand for luxury homes across Canada – especially in Metro Vancouver – is rising, with the improved financial standing of wealthy Canadians the main factor, according to a report released Wednesday by Re/Max.

“The strength of the upper-end segment continues to defy expectations,” Elton Ash, regional executive vice-president, Re/Max of Western Canada, said in a statement.

“That demand remains largely domestic speaks to the solid underpinnings of the market, while underscoring the appeal of Canadian real estate on an international stage.

Western Canada, in particular, will continue to see the upside benefit of investment from abroad.”

Read more:

#35 Hoof - Hearted on 05.18.11 at 10:50 pm


All’s well in Lotus land

Sales at former Vancouver Olympic Village far exceed original estimates, new report says

VANCOUVER — The financial health of the former Olympic Village project is improving, according to a second receiver’s report released today.

The report by Ernst & Young says there is occupancy of more than 60 per cent of the residential units at the Village on False Creek.

The receiver has estimated an occupancy of 70 per cent by July 31 “given the strong sales and rental activity now underway.”

As of Monday, 124 strata units have been sold at a value of more than $84 million, with most of the sales expected to close by the end of this month, the report said.

Sales have far exceeded the receiver’s expectation, resulting in 33 additional units at the Compass building being released for sale 10 days ago, the receiver said.

It also says the 119 units in the three market rental buildings are now completely leased and 22 of the units in the Bridge building were leased within three weeks of being offered.

Occupancy now is at 98 per cent of the original estimate to be achieved by July 31, the report said.

Read more:

#36 Seeker on 05.18.11 at 10:55 pm

Talked to a colleague of mine about the inevitable drop in real estate in Calgary, and he very defiantly said “no one is going to lose money on their house here!”…he bought high and paid too much. He was going to sell, but now is waiting for prices to go up, and he is thinking of doing more renovations. I tried…

#37 Tim on 05.18.11 at 10:57 pm

40% fixed income and your toast. The only ones that should have 40% in fixed income in this interest rate environment are 65 year olds with heart conditions. Stay away from bonds if you have at least a five year time horizon. The interest bonds are paying now, all you get is less volatility in your portfolio- you won’t end up with a higher return. Eventually rates have to go up, just like Vancouver Real estate has to go down, or at least according to Garth…If you must by bonds, stay with short durations of two years or less. Focus on dividend paying blue chips for income

Nonsense. Bonds are as capable of giving a capital gain as any stock. Demand is far more influential a factor than rates. — Garth

#38 nonplused on 05.18.11 at 11:04 pm

PS back to the long abandoned Xurbia theme, here is a random photo video about what is going on in Slave Lake Alberta:

Word is 1/3 of the town has been burned to the ground. A lot of people in that area have travel trailers of one sort or another. Word is by the time they started loading them with food the police came by and told them to “leave within ten minutes”.

A bug out bag (or trailer) is still a good idea. But it turns out you have to keep it ready to go. Those of you who have bug out trailers (or bags) should keep them stocked at all times with fuel and dehydrated food (or other non-perishables that survive freezing, and enough for the bug out, not a year’s supply or anything). There simply might not be time to do anything but hook on and bolt when the bug out time comes. The folks in Slave Lake didn’t all have time to hook on, and many are no in shelters.

#39 Bingo Babe on 05.18.11 at 11:07 pm

I believe the sisters you are alluding to would be Doukhobor…Russian…and make the yummiest ‘vareniki’ ever!

#40 RockO on 05.18.11 at 11:11 pm

Man I want to see the change. Every news article today sited the rise in prices as only a positive and made very little mention of the y/y sales declines.

Been renting for quite some time now. Everyone thinks I’m nuts. “Why rent at those prices when you could just be paying off a mortgage…you are just throwing your money away!”

Right…Currently I bank 60% of my after tax salary.

What an effing joke. Maybe I should buy some silver while I’m at it.

I don’t know how you do it Garth, but keep up the good work.

#41 fiendish Thingy on 05.18.11 at 11:13 pm

Could you possibly post links (maybe permanently on the side of the page) to those specific columns explaining/discussing ETF’s, REIT’s, Preferred stocks, etc.?
It would make it easier than clicking through dozens of humorously named blogs without a clue to their contents…

#42 not 1st on 05.18.11 at 11:21 pm

Garth, what growth assets are you talking about? Frankly there aren’t any unless you count chinese sweatshops. You don’t mean oil do you, thats a dreaded commodity industry.

Walmart just reported multiple quarters of dropping revenue which tells you people can’t afford anything anymore. When the first world debt burden comes to rest, people are going to be cutting back big time.

#43 Pat on 05.19.11 at 12:01 am

Garth: “…over 90% of the return you get is attributable to the mix of assets owned.”

This statement is incorrect. You are repeating a popular misinterpretation of a well-known research paper. Have you read it?

Yes, and it is not the source. — Garth

#44 The InvestorsFriend (Shawn Allen) on 05.19.11 at 12:04 am


Garth said: Smart people have proven that over 90% of the return you get is attributable to the mix of assets owned.

Well, yes and no…

That only applies when the investment in each asset class is fully diversified. The 90% figure came from a study of pension funds that tend to be pretty fully diversified within each asset class. If you have 100 diversified stocks, then of course the particular 100 you choose has little impact on return.

It is false to conclude from those studies that you cannot lose or gain a lot based on individual stock picks if you have a non-diversified stock portfolio.

i.e. Those Nortel Investors who lost big on that one stock, did not lose big because they were in stocks rather than fixed income or even because they were 100% in stocks. It was because they were too heavily exposed to Nortel.

Still, I do not argue that a mixed of fixed income and stocks is a good idea. I just quibble with the “90% of returns is from asset allocation” claim. It is a claim that is often made but is false absent a diversified portfolio in each asset class.

The number did not come from a pension fund study. I also made it clear diversification is a prerequisite. We agree on that. — Garth

#45 Pat on 05.19.11 at 12:06 am

#12 Scalgary wrote:

“Their comments directly related their business but yours not…”

Are you being sarcastic?

#46 Brad in Cowtown on 05.19.11 at 12:06 am

My boss tells me with absolute confidence that, worst-case scenario, housing values here in Calgary might continue to go sideways for awhile to let the ratios normalize (e.g home prices to average income) and to allow people to get their debt under control.
Some people call that the soft landing theory, a theory which I have to admit… I have no argument against. Of all the overwhelming evidence out there that houses are overvalued, none of it suggests house prices must fall. After all, the ratios could normalize from rents and incomes rising slowly over the next several years while home prices go sideways.
Key word is “could.” The only thing we know for sure is one side of the equation has to adjust.

Meanwhile, if I do find evidence of this soft landing theory being bunk… does anyone know of a Bear Cdn real estate ETF on the TSX? I can’t find one.

And thanks for continuing this blog, Garth. Terrific content.

#47 Dirt Dog on 05.19.11 at 12:16 am

Put me down for # 7…no wait a minute…ummm…
jeez…man…yeah 7…I think!!!


#48 Duke on 05.19.11 at 12:19 am

“Seg funds are life insurance products, sold by licensed insurance guys. Beware the MERs! — Garth”

In a past career I was one of those insurance guys you speak of Garth. For anyone out there looking for segregated funds in fix income, DON’T! The MERS will eat your breakfast, lunch and dinner. Instead look at XGB. Canadian dividend fund that pays 3.6% per year. But you have to worry about rising interest rates. Haven’t done the whole “financial advisor thing” in a few years so I’m not selling anything. And don’t take my advice to heart.

The insurance business is a racket and if you think the insurance salespeople are aggressive you should see what their managers or “handlers” put them through!

#49 SE Asian Expat on 05.19.11 at 12:57 am

Hi Garth,

I just sold a “flat” in HK at the height of that crazy market with a 500% capital gain, tax free, on my down payment + mortgage payments over the last four years. I’m relieved to get out at the top, or close to the top. Didn’t want to be too greedy.

Do you advise non-resident expats on how to invest money in an overseas market like HK? . There is no capital gains tax on profit from buying and selling houses, flats, stocks or Unit trusts (mutual funds).

I had a mutual fund portfolio in Canada, but liquidated it and paid a bag full of capital gains when I became an expat. I won’t be returning to Canada and all the taxes anytime soon.

I enjoy your blog. It’s a daily source of entertainment and a remote connection to the Motherland.

#50 Warren Buffet = Cocaine Terrorist on 05.19.11 at 12:59 am

#9 Randis:

You must also like cocaine and underground crime:

Did the illegal drug business cause the 2008 crash?

See for yourself in this short clip: “Cocaine Economy”

#51 Michelle on 05.19.11 at 1:59 am

#17-Ayn Rand

“pierogi” is Polish; “pedaheh” is Ukrainian (real Ukrainian from the “old country” – well that is what my father taught me.

My Baba used the same pronounciation! She always talked about how if the family hadn’t left “the old country” before WWII, they’d all be dead…
(I think because her maiden name was “Litwin” though she adamantly denied being Jewish).

Her favourite saying was “Eat, eat. You’re too thin!”

#52 D E M-O-G R A P H I C S on 05.19.11 at 2:12 am

Anyone curious how demographics will change Canada’s housing this decade..

Here’s the BEST explanation I’ve read (next to Garth’s of course)

#53 Hosehead on 05.19.11 at 2:19 am

Hi Garth – at one point in the post you say “… the average 416 house at $543,787…” and then a few parapgraph’s down you say “As for prices, how can it be good news when the average SFH in 416 now costs $774,046?” What’s the deal? Can you clarify? Thanks

First number, all properties. Second, SFH only. — Garth

#54 Canajun on 05.19.11 at 2:20 am

I am reading this blog from Ukraine while eating perogies for breakfast with my coffee… great timing!

Garth, you’ve gone global.

#55 Aussie Roy on 05.19.11 at 2:32 am

Aussie Update

MMM we call this double dutch.

“I don’t regard Australian house prices as a bubble.”


” That said, I still regard high house prices as Australia’s Achilles heel. And the reason is simple. Reflecting a huge surge in house prices into 2003/2004 and solid gains since, Australian housing is way overvalued. This has gone hand in hand with a massive increase in household debt.

Signs of overvaluation are evident virtually everywhere.”

COST-of-living increases are the main reason for a drop in the number of new home loans, according to one of the country’s largest mortgage brokers.
LoanMarket chief operating officer Dean Rushton said yesterday that cost-of-living pressures, and not the prospect of rising interest rates, are the No.1 reason to delay buying a home.

BUT then this little classic, remembering that ABS data puts average rental yields at 4% while interest rates are close to 9%.

However, fewer borrowers means lenders have to compete more for customers, including holding down borrowing costs and adjusting their application criteria.

“With rental yields at unprecedented highs, many tenants in Australia are paying more in rent than they would be for a mortgage,” Mr Rushton said.

So the way to perk up business is to lower lending standards – GREAT.

Bubble wake up call – Aussies are not listening – its different here..

Very good point – Correlation or causation?.

When is a shortage not a shortage, when sellers out number willing able buyers.

It had to happen, with the big 4 banks stuffed to the gills with mortgages, relying on overseas borrowing. Moodys cut their credit ratings.

So the bubble slowly deflates while the bulls talk bulls&*t. So, nothing has changed here in the land downunder.

#56 dosouth on 05.19.11 at 3:59 am

So it’s no surprise that even though some of
Manitoba is under water…their real estate is heading for higher ground…

#57 45north on 05.19.11 at 6:24 am

SE Asian Expat: enjoy your blog. It’s a daily source of entertainment and a remote connection to the Motherland.


#58 T.O. Bubble Boy on 05.19.11 at 6:58 am

The good old Metro paper spreads the truth on condo “investments”:–a-square-deal-for-city-renters

16,000 more condo units coming on the market by year’s end… look for a whole bunch of red dots coming to any downtown Toronto search!

#59 BlorgDorg on 05.19.11 at 7:00 am

#51, #17 — came here to say this, thank you! Canadian Ukranians call them pedaheh.

Now I’m hungry.

#60 Live Under Your Means on 05.19.11 at 7:00 am

Cute one.

#61 Diana on 05.19.11 at 7:41 am

“… and the shocking reason I really write this depraved blog.”

Well, your day job keeps you in cans of squirrel meat and stuff to buff the puppy off your bumper, so in a wildly speculative moment, I’d have to say stupidity amuses you and ignorance irritates you.

The blog lets you address the second and laugh at the first.

#62 The American on 05.19.11 at 8:03 am

Canadian 23% of Canadian GDP is from the housing market. That in itself is pure insanity. Keep in mind this is the same percentage as when the collapse hit in the U.S. Affordability ratios in Canada actually far exceed affordability ratios at the height of the U.S. bubble. Other similarities with Canada as the U.S. passed absolute peak were including, but not limited to: rising values, fewer sales, pumpers coming out of the woodwork, ever-increasing defensive attitudes that “it won’t happen here,” funky/creative loan programs (such as the many I am seeing hitting the streets in Canada now), mainstream media taking bad news and putting a spin to resemble good news, $0-$little down, insanely low initial “teaser” rates (actually Canada has even lower rates than the U.S., coupled with the equivalent of ARMs in the U.S./5-year money that resets to a higher rate which creates for an even larger bubble), and the offsetting of responsible lending practices of the banks onto FNMA and FHMLC (the CMHC in Canada). Canadian households now exceed even American households in personal debt, Canadians have savings on -2% (yes, negative) while Americans are saving 7%, Canadians are taxed higher and earn less (meaning Canadians have even less expendable income than Americans for monthly payments to be made on things like homes). Clearly this is a recipe for disaster and it is abundantly obvious the exact same thing is happening in Canada. Each day that passes makes it even more clear. Believe me, when you have lived through one of these things you can spot it miles away.

I understand the argument for HAM (hot Asian money) propping the market and sustaining values. It is, at its core, fundamentally flawed. One must first understand where the wealth is generated with HAM. In this case, the wealth was created almost wholly from the RE industry’s surge in China. So, one must also consider that as China’s RE industry begins its very own implosion that the HAM will naturally cease to exist.

As crazy as it may sound for both the U.S. and Canada to have 23% of their GDP coming from the RE industry, you may want to consider that China’s is nearly 60%. That’s right, nearly 60% of GDP in China is from the RE industry with construction as a sub-component. Estimates now demonstrate that China’s surplus of housing would house over HALF of the U.S. population. Any country can cause its GDP to soar if you just keep building and building. It isn’t rocket science. The question is, however, building for who? A population that does not even exist? There WILL come a day of reckoning when the “brick wall” has been hit and it can no longer be ignored as only a hickup or problem. That day has come for China as is evidenced by China’s “ghost cities.” Yet, they still continue to build. Prices are falling fast and inventory is rising and sales are fast declining.

Simply put, HAM is stopping and stopping soon. Once this happens, what will be the next excuse as to why “it won’t happen here?” What excuses will be left?

#63 bigrider on 05.19.11 at 8:06 am

I think I like the fourth one from the left the best, the girl holding up the number 1 sign with reference to today’s pick.

I would be curious what the “greek’ community on this blog thinks is best one..LOl…they are the experts !

#64 T on 05.19.11 at 8:21 am

The repeated mistake you are making Garth is you are focusing on the “average income”

You have now clue what the incomes are in downtown proper which is driving the numbers.

You are rolling in the incomes of places like noelville ontario, where the incomes are pitiful.

lowering your averages.

Ps, hows that 2% interest rate by year end prediction going?

The average income in 416 is $96,040, which is $13,000 higher than the Ontario average. Do you live in Noelville? If so, I understand your confusion. — Garth

#65 GtoTha B.L.A. on 05.19.11 at 8:31 am

My vote goes to #5

#66 Boom boom bust on 05.19.11 at 8:32 am

Garth, you said 90% of the return you get is attributable to the mix of assets owned. 90% of your loss is also attributable to the mix of assets owned…boooong.

100% of the return you get is attributable to timing the market. Your a goof telling people to put money in growth stocks during the Month of May. There are bulls bears and pigs. Those buying right now are either stupid or pigs. The bulls are taking profit, and the bears are shorting or keeping their money in fixed income securities until the fall. Shame on you for such poor advice.

You really should get a subsription to VectorVest to keep your foot out of your mouth. They rank every stock in Toronto and Vancouver and currently they have 204 buys in Canada, 1346 sells, and 1818 holds. Do those sound like very good odds Garth for buying “Growth Stocks”? Momentum has been breaking down for months on the exchanges and what you are seeing in Vancouver is exactly what is happening on Canadian Exchanges.

This poor kid with 200K has a 6% chance of getting it right with his house money, a 40% chance of losing it, and a 60% chance of getting the ride of his life.

Any kid living in his wifes parents basements should not be investing in the stock market as he can’t afford to lose anything.

Where did I say to buy stocks? — Garth

#67 cxcroney on 05.19.11 at 8:39 am

Some good investment advice for everyone. Go down into your workshop, take some left-over plywood and paint and make a sign that says
” I’m a loyal Tory too! Make me a Senator.”
and go stand out in front of the local Tory streetfront office. Harper is in a giving mood. Might as well get some. Hear the pay and benefits exceed 8% return on your effort.

#68 bigrider on 05.19.11 at 8:45 am

What happens to T.O RE prices if all the Italians and Asians decide to leave the city.

Buffalo prices thats what.

#69 Fort Macswain on 05.19.11 at 8:50 am

Only the blonde girls have their numbers upside down!
Is that a cliche or a truism?

#70 Herb on 05.19.11 at 9:08 am

If it makes the Conservative pages of the National Post, it must really be bad:

It was believable, once, that it was unfair to judge Mr. Harper on his minority-government record. Sometimes a strong leader must choose pragmatism over principles.

But if this is the way the Prime Minister chooses to begin his majority rule, in one hypocritical, undemocratic, and unaccountable swoop, then there’s another conclusion to reach: maybe these are his principles.

#71 garvan on 05.19.11 at 9:27 am

The more I try to stumble through the investment world, the more I realize I don’t have any time or any clue on what I’m doing.

I set up a TFSA, but I don’t have any clue how to invest with it, or even what a DRIP is. I don’t know if I’m clicking the right or wrong things. It’s complete madness.

But at least I know not to trust the banks.

#72 Evangeline on 05.19.11 at 9:27 am

((Are REITs considered fixed income or equities?))

the monthly income will be taxed as if it were interest income, so that is like fixed income (not to worry if it is in a TFSA)

but REITs are like equities in that when you sell the shares or “units”, you will make either a capital gain or loss

note, that if you get an annual yield (income) of 5% from your investment, and the shares grow in value by 3%, that would be total return of 8%.

(to figure out your net profit, subtract all fees, taxes, etc. from your total return. Then subtract from that the rate of inflation which is kind of a hidden tax.)

#73 Daisy Mae on 05.19.11 at 9:31 am

“…HST poured over everything.”

Yep, and soon in BC we’ll be going to referendum over this issue. It’s costing the average family $350 a year.

Lowering the rate, as is being bandied about — what a joke — won’t convince me to vote ‘yes’.

#74 Tim on 05.19.11 at 9:31 am

Harper Appoints three losing Conservatives to Senate

What a slap in the face for democracy. You lose and election and then you get to become a senator. THere is no stopping this &$^###*

#75 JoshL on 05.19.11 at 9:31 am

To all of those “do it yourself” investors asking about ETFs:
Most of the self directed trading accounts have an ETF research centre, especially the ones offered by the big banks. Mine (RBC) even gives you a blue-print for a balanced portfolio if your research time is limited. If you don’t have access to this sort of data then i-shares is a great place to start. They’re one of the largest and longest standing ETF companies. Go to their website ( and you should be able to find all the funds you need. They’ve even started offering grouped funds that provide a one stop shop for a balanced portfolio of their other funds (great for smaller investments so the commisions don’t hit your bottom line as much). You will also be able to see all of the holdings in each fund on this site so you know what you’re investing in. For example, XIU is a TSX index fund and will invest you in the big Canadian Banks, big energy companies, big gold companies, potash, CNRC, etc. It also kicks out approx 2% in distributions.

Claymore is another company that comes as part of the “blue-print”.

I have no affiliation with any of these companies, this is just a recommendation of where you can get the info you seek. As always, the rest is up to you.

#76 Evangeline on 05.19.11 at 9:34 am

((Canadian banks are NOT safe.))

Back up a couple of days and read Garth’s excellent post about Canadian banks. Since I don’t want to end up eating squirrel instead of steak, I think I’ll follow his investment advice, not yours.

#77 GotDeceived on 05.19.11 at 9:35 am

Three years back, Garth was watching house porn and thought

DELETED. Language.

#78 trinotuta on 05.19.11 at 9:36 am

Asset diversification dawgs. A picture is worth a thousand words. I’ll take asset numero cinco :-D

By the way, a co-worker just moved to his new house in Moose Jaw. Still paying for the “old” one in Regina Beach. Old one has been sitting on the market for two months (@ 350K)… I hope that he can sell soon. He’s a good guy.

People in this province (as in any other) have a huge crush on RE, and I’ve also got those very well known looks whenever I’ve dared to speak against his Holiness Real Estate. You don’t do that around here, risk of embarrasing yourself in front of your friends as they gang up to remind you how stupid you are for paying someone elses mortgage. One of them told me one day: “I hope that in the near future you don’t regret your decision when you realize how much money you could’ve made”. I had nothing to say to that. And to gain back the cheerful mood, I started talking about the Riders.

Enjoy the long weekend dawgs.

#79 Utopia on 05.19.11 at 9:57 am

“It’s metaphoric”. — Garth


Damn, and I was sure it was figurative. Put me down for number 4 who is upside down on her numbers. I like her style. By the way, how did these girls get to be Ukranian anyway? All of a sudden poodahay sounds like a dirty word to me even though they tell me its just a dumpling.

#46 Brad in Cowtown: The part of the Real estate soft-landing theory coming about as a result of income appreciation is problematic as I see it.

Incomes are flat. Inflation adjusted, incomes are in long term decline. We also need to be concerned that in general incomes are under pressure due to globalization and that leveling will accelerate as we go forward.

We see clear evidence of this every day as part time and service sector jobs take a larger share of our employment picture while quality high paid (often unionized) and pensionable employment is shifted to lower cost jurisdictions.

We also see this in professional categories where programming and code writing for example is more commonly done in India and China these days and contracts are let for cheaper code to the lowest bidders.

Teachers, nurses, police, the bureaucracy and medical professionals may all be doing well for the moment. They are paid from the public purse. Look how that is turning out today in the US though. The salaries might be good but if your job gets eliminated due to austerity cutting then that good income has zero value.

I am not optimistic that a soft landing will come about because of income growth though for the most important reason of all….R/E price acceleration has simply blown the doors off that possibility for the last three years already.

Unless we are soon to see some explosive wage gains to make all of this home buying orgy OK then we cannot relax. Labour market demands cannot catch up to speculation and the feverish pace of rising prices. It can only mean that tears lie ahead. And many years of declining prices as reality finally sinks in and the party ends. It is ending now. Not with a bang, but a whimper.

Is that a soft landing though if the agony gets stretched out for a decade or more? I cannot plot on a graph (with any confidence), a realistic scenario where incomes catch up with R/E price appreciation in time to stop the market rolling over. It cannot be done. Not honestly anyway.

Sadly, people who have not bought homes already may find that such purchases continue to remain out of their reach for many more years yet before the markets see an acceptable price resolution and return to the mean.

These people will not experience the worst of the decline fortunately as they watch from outside, nor will they enjoy the benefits of home ownership in the mentime.

Many will never own as they will discover that at the moment homes are affordable again, credit is once again difficult to obtain. Americans are now discovering this, much to their disgust. If houses are cheap again but banks won’t lend to buy them then those seeking to become home owners continue to be excluded from the market.

I do not see a magic moment of opportunity for anyone to be honest. Well, except for those lucky enough to have cashed out large and invested the loot as they await the next big opportunities arrival date.

At one time there were a lot of people from the “crash school” of thinking who populated this site. They are quieter now. Little mention is made of the chance for vultching property cheap as most have slowly come to recognize that a correction, while inevitable, will also be a fairly long drawn out event. Years, not months.

Being invested for the duration is essential if anyone with means wants to be in a position to take advantage of cheap homes when that day does finally arrive.

I don’t think this can be stated strongly enough.

#80 Fuzzy on 05.19.11 at 10:14 am

For those who don’t get it, Garth is referring to ETFs consisting of gov/corp bonds, REITs and Blue Chip dividends (or a mix of all) as medium-to-low risk investments. Choose the ones with high NAV ($500M or more) and trade-volume (close or higher than 1M) and you’re set.

I just don’t think consistently yielding 8% in the next decade is going to be as easy as Garth is making it out to be … but 6% should be quite do-able for medium-to-low risk.

Where did I predict a 10-year return? This is why active management rules. — Garth

#81 kai on 05.19.11 at 10:14 am

easy – index ETFs. low cost, absolutely diversified.

call up your friendly neighbourhood discount brokerage and dump them into the following iShares:

XIC – S&P/TSX Capped Composite (Cdn Equity)
XSP – S&P 500 (US Equity)
XIN – MSCI EAFE (Int’l Equity)
XBB – DEX Universe Bond (Cdn Bonds)

or if you’re feeling particularly patriotic, you could do 60% xic, 40% xbb ^_^

#82 Utopia on 05.19.11 at 10:24 am

#52 D E M-O-G R A P H I C S on 05.19.11 at 2:12 am

“Anyone curious how demographics will change Canada’s housing this decade”.

Thanks for the link. I always enjoy Bens work. My only disappointment was that he did not address how the tools of immigration policy are designed to offset some of the downside of the Boomer bulge.

This has been a problem for government since more open immigration policy was first established as immigrants tend to gravitate to the larger centers.

The idea that allowing in large numbers of younger foreign workers to diminish the impacts of our aging society is a good one. It has become unbalanced though.

What we now see instead is that smaller and rural communities have a very disproportionate number of seniors and labour market issues while large cities are faced with too much competition for work and home prices that have escalated well beyond the norms.

With luck, the distortions will work themselves out over time. What Ben is pointing out though is that we could be faced with average price declines lasting for decades simply as a result of retirements. Garth has also addressed this in detail in past books. It is a big deal for anyone expecting long term price appreciation in houses.

These are not going to be investment class if each year they see relative declines in value, in effect mirroring the opposing rise in values that began in the 1950’s and ran through today.

On the large chart (the one covering decades) this should tell us we need to be very selective about where and what we buy when it comes to housing and land as the curve will be headed into decline for many, many years to come.

#83 Contrarian on 05.19.11 at 10:38 am

#37 Tim

>40% fixed income and your toast.

Bonds (like gold) are a hedge against craziness. The market is an unpredictable place. A crash can happen at any minute. Guess what prices go up when stock prices plummet?

You can always sell (bonds are liquid) if you become fairly confident of a bull market. Might wanna wait until gold’s under $1000 again, though…

#84 HZ on 05.19.11 at 10:43 am

Hi Garth, need to see your post every night to strengthen my belief. Let me share my story to everyone. I am in my mid thirties living in Markham for 2 years. I am no different than the mass, want to jump to the RE market and don’t care the consequence, due to peer pressure and my wife blaming me why we are still renting in the 30’s. Yet my personal experience keep telling me this is not a good time.

Dating back in the 1992 – 1996, I was just a teenager and living in Hong Kong. It was a RE booming time in HK, my parents tasted the easy money (capital gain) from RE…Life was awesome, we moved to a nicer condo every year and keep hearing them they got another property in a few months. And parents send me to study in US with all the fancy stuff, new car, nice furnished apartment, and a lot of pocket money every month. Spoiled.

Yet things took a quick turn and caught my parents unexpectedly in 1997, the RE gone bust and all the properties could not sold of the asking price. They don’t want to let go and don’t want to cut the lost, thinking the RE would go up again (denial) soon. Borrowed a lot of money from friends and relatives to pay all the big mortgage payment every month. Yet the market did not recover and have to declare bankruptcy, lost everything and carry a lot of debt from friends and relatives. My family changed forever…

In 2001, I graduated and got an intern job in Detroit metro area in Michigan. Knew a bunch of new friends in the same age, this is the first time to experience why people are so horny about RE. I could tell you all the pressure from friends that teasing you live in an one bedroom apartment was unbearable. In 2002 – 2004, most of my friends suddenly jump to RE, and went crazy and I could not count how many house warming parties I went.

One of the best side story claimed from my friend how he secured the house at that time….he casually went to a open house one day and saw the house what he dreaming of, he just have $20.00 bill in the wallet…he pull out the only $20.00 bill and asked the owner to hold it for him, then he rushed back and grab the cheque and get the house he wanted. Fast forward to 2008, RE in US melt down, all my friends dream houses lost 40% of their value and properly their equity wiped out already due to ARM and interest only loan (or they never build any equity). Some took the lost and leave Michigan to pursue another opportunity, some got stuck…enjoy to live their house and thinking their house value will go back up.

Now moved to Markham, ON and I could tell you the price and people in here are much much crazier than I was in US. Knew another bunch of new friends, and story repeating itself. Friends jump to this hot hot market cause of peer pressure and families…and took 2 or 3 times more mortgage debt than friends in US, and they earn pretty much the same. When RE price go up, they feel rich…I have never seen so many BMW, Mercedes and Lexus on the road…May be this is different in here!

Deep in my mind, same thing keep repeating itself. 9 out of 10 people say RE is the best investment, yet I never seem one person in my life get rich in real estate. By the way, my parents divorced and my mom still talking how great we were in the past. A spoiled kid was woke up why others don’t.

#85 MB on 05.19.11 at 10:45 am

Here is Garth Turner’s Portfolio reversed engineered:

Using an article from the Globe and Mail from a year ago, his asset allocation was:

33% Global/Canadian Stocks
30% Residential Real Estate
22% Government/Corporate Bonds
10% Preferred Shares
5% Gold ETFs

So this gives us 32% fixed income, 68% growth assuming the real estate is his and not rented out for income, but from little that I know Garth, I would bet most of that is income properties. So it’s probably closer to 45% income, 55% growth.

He also said several times that he got a return of 15% last year.

Using Claymore’s porfolio index allocator, we are able to construct something like this:

20% Canadian Large Dividend Stocks
7% US Broad Market Stocks
6% International Stocks

30% Canadian REIT

8% Broad canadian Bonds
8% Corporate Bonds
6% US high yield bonds

10% Preferred shares

5% Gold

This diversified porfolio returned 15.4% last year, and is currently up 6.5% this year. Also the 8-year annualized return has been 9.5%, while having 2/3 of the volatility of the TSX.

This porfolio might not be for everyone but you can’t really go wrong in the long run. If you’re investing for less than 3 years, then more allocation would be toward bonds.

#86 X on 05.19.11 at 10:46 am

re #71 garvan – Hey, thats why you come to this site to learn more.

Another great site for general financial information sharing for the layman is You won’t find anyone selling you any financial products there. Just soak up the collective knowledge.

#87 BrianT on 05.19.11 at 10:47 am

#79Utopia-Yes-what people don’t understand is that GDP is a REVENUE number, not a profit number. There is credible evidence that the USA economy is a MONEY LOSING economy at this point, which does not bode well for Canada. An increase in debt and credit for any purpose, however wasteful or ill advised, increases GDP and is hailed as growth by MSM economists but in the long term the chickens come home to roost and that is what is unfolding.

#88 smw on 05.19.11 at 10:48 am

#4 No way

I’m really tired of listening to your ilk whine and complain about this impossible 8% return. Even debt diva Gail Vaz-Oxlade uses 7% as a figure for retirement gains on her television program.

If you can’t figure out how to hammer out 10% a year gains than as Garth states, let somebody do it for you.

It simply amazes me that people will drive miles out of their way to catch a couple cents off a litre of gasoline, yet when stocks are on sale, have their assholes pucker up and sell their equities and plow into cash.

There are a lot of energy and commodities ( like CCO & POT) that are currently on sale, will probably gain 10% before the end of July.

However, this spring smells like 2008, be careful.

#89 JD2000 on 05.19.11 at 10:56 am

I read this blog since 2008, Thank you Garth for the opinion that resonates with me.
I am trying to follow some of your prime points to set up our financial plan.
My road blocks are: Cannot find a professional who is willing and capable to select the meat that would fit to the bones of the smart balanced portfolio you are speaking about (40/60 type).
We have met with 6 individuals and all of them offering the same; they offer to consolidate our existing “bank managed RRSPs Locked in RPP and RESP’s” in to the company fund they represent. Typical offer is: “here are the mutual funds selections we propose based on your risk assessment”. Our question to all of them usually is: What is the difference between newly proposed mutual fund and the one we are in already? And why you are not addressing the fact that we want you to select the meat for the bones (skeleton) that was already designed and proved functional by master of the field!? People let me tell you that I cannot replicate or describe comprehensively the answers we are getting. Nothing straight forward in their reply finished with some talk about some Nobel prize winning application that calculates present and future equilibrium state parameters for the financial and geopolitical worlds….we end up feeling lost and have no confidence to hand over anything to them.
And for some reason we feel they are similar to the realtors we dealt with 5 years ago when we bought our place. All what they care is the % of the commission they get by directing us to the new mutual fund. But we might be wrong and hence still hope to find one that can help us to create the plan to work with.
Having 2 little kids and full time jobs with no relatives around makes it difficult to find the spare time to study the subject to a necessary degree that shall enable us to select the right asset allocation.
So what are we doing wrong?
Is the size of the RRSP/RESP/LIRA’s matter to the advisor/professional?
Why are our direct questions avoided?
What an astute person would do to find solution for our situation?
Referral would be much appreciated!
Many thanks in advance

Seek an advisor who is paid by you, not a mutual fund company, who does not accept commissions and will work with you on all aspects of your financial life. This should cost 1% or so annually of what you have to invest. — Garth

#90 Quarmby on 05.19.11 at 11:12 am

Bash Garth blogs…you should be flattered G. Obviously you’ve finally hit a nerve that the house-horny, single digit IQ crowd is feeling. Just wait until it gets bad enough, that even the “smoke & mirror” lizards at CREA have to stop calling it a correction and change the snake oil pitch to “buy now at the bottom”. By then, the bloggers will be blaming you for not be forceful enough with your opinions to save their “entitlements”. Good article today and just remember…he who laughs last…

#91 JoshL on 05.19.11 at 11:13 am

#46 Brad in Cowtown,
The argument against a “soft landing” is that time and time again bubbles do not correct sideways. I’ve seen graphs (sorry I’m not digging out a link) that show housing corrections to be sharp drops, usually below historic metrics before coming back to the norm. This same phenomenon can be shown in just about every type of bubble. Theoretically the sideways correction can occur … human psychology is what prevents this.

#92 Derek on 05.19.11 at 11:25 am

For those who haven’t seen it, here’s some great work from Steve Keen on the causes of the rise and fall in house prices. He basically demonstrates an indicator which leads house prices by 6 to 9 months using Australian data. The same technique could easily be applied to Canadian data to get some idea of what’s coming down the ‘pike and when.

#93 Melts around the edges first! on 05.19.11 at 11:35 am

Went to check out a new development we saw last year. Nice site “Seclusion Valley” about 30 minutes SW of Calgary set in the foothills beside Turner Valley. It is now in receivership.
There was 68 lots to begin with.

#94 Dark Wettler on 05.19.11 at 11:47 am

Did anyone else notice that it happened to be the two blondes?

That took a while. — Garth

#95 supermike on 05.19.11 at 11:50 am

Hi Garth,
You have been telling us how big the bulb is, how bad the situation is ahead, and we are not different from US.

As we all know, Housing market collapsed in US.

How ever, every time you are questioned, you say you don’t think Canadian market will collappse. You can only see corrections in some areas.

This really makes me feel you are just flip-flopping like a politician.

Every market corrects. And everybody knows it. The reason why so many people are still buying because they believe the market will increase 30%, then a 10% correction. So they don’t worry about the correction ahead.

If there will be only corrections in Canada, then we are different. Why people need to worry about the correction? This is just against your point.

I’ve said often enough a correction is the start, followed by what could be a lengthy and steady decline, wiping out equity and making houses illiquid. My only error was apparently in not using crayons. –Garth

#96 disciple on 05.19.11 at 12:21 pm

Bonds are only as good as who issues them. Default can occur at any time. Why would anyone buy your bonds in a post-inflationary environment, when they could buy cheaper bonds with a higher return? Bonds are not as liquid as one believes. Liquidity of the debt-currency fiat system is based on drug money in the US, I wonder, what is sustaining it here in Canada?

#97 avanguy44 on 05.19.11 at 12:25 pm

You could earn, for example, on Shaw’s new rate-reset preferred shares, which have coupon of 4.5%, which will reset or get redeemed in 5yrs.

That is way better than a GIC, especially when you throw in the dividend tax credit. (with the dividend tax credit, it would be like earning approx. 6% interest). And I pretty sure SHAW will be around in 5yrs.

#98 disciple on 05.19.11 at 12:37 pm

To maintain your illusion of wealth, you always have to beat inflation. But that is not possible. It will git ya one way or another, usually at the end of a gun held by someone else. There are an abundance of kids of boomers in Canada who are childless and yet childish, spiritually inept, relationship-broken, fluoridated and mildly autistic thanks to Big Pharma, who will one day realize that the greatest thrill should not have been doing 160 in a 70 zone in their German tractors, but in their coming austerity they will wish they had been working to create a better world for their posterity rather than working to build their portfolio to try to beat inflation.

#99 ASStastic on 05.19.11 at 12:47 pm

ASS far ASS I am concerned it is ASSenine to think that these high prices can go on. ASS soon ASS people realize that this type of ASSet hold too much risk, we will see some ASS kicking with overleveraged individuals. I ASSk only one question? Do you want to be the ASS holding the bag?
ASS far ASS I am concerned ASSking prices will have to be BEHIND the CURVE.
I am dizzy……..and horny.

#100 AG Sage on 05.19.11 at 12:52 pm

>#10 nonplused on 05.18.11 at 9:43 pm
>Something is whacked in this market. Declining sales, declining listings, and rising prices? What gives? I can understand sales declining if prices are rising, but if sellers aren’t selling into rising prices we must be in a Nortel moment, when the asset has to be held so you don’t miss out on all the gains to come.

The move-in buyers have been priced out, so the move-up buyers are stuck. That’s the problem. No homes qualify as starter anymore.

#101 BrianT on 05.19.11 at 12:56 pm

Hard to be a conspiracy theory-this is CNN Money-kinda sad all around

#102 disciple on 05.19.11 at 12:57 pm

Shall I do lesson #7 The Myth of Scarcity, or have you had enough of me for today? Lemme know…

#103 bigrider on 05.19.11 at 12:59 pm

house on bel size just sold, south of davisville off yonge. Asking 1.2 mill and neighbors felt that was about right given market, maybe 100k or so over listed.

Here is the rub, it went for 300k over asking in a bidding war, 1.5 mill .Lot size 30 by 110.

Housing bubble in T.O makes me f-in sick

#104 maxx on 05.19.11 at 1:01 pm

#11 BigD LittleD-
” The largest pool of buyers – the move-up buyer – have lost confidence in the market or their ability to take on a bigger mortgage for a larger/newer home. This point gets lost on most economists and real estate prognosticator who claim those that list homes for sale are sellers. They in fact are buyers!”

Quite true….and huge numbers of potential buyers/upgraders realize that, with the spiraling costs of taxes and essentials, money is now not just difficult to earn but extremely difficult to save.
Buying “up” to service our egos is no longer cost efficient. We have other, more important things to put our money to, like education, life contingencies, charity and retirement. I know many people knocking on 60 with trophy homes but no idea whether they can meet the basics three months down the road. Ouch!!!

#105 Live Under Your Means on 05.19.11 at 1:07 pm

Hubby thanks you for the pic Garth :-)

#106 Alex on 05.19.11 at 1:20 pm

supermike: Dude, look around. Take a gander outside the big cities. Seriously, and at the risk of sounding repetetive, there are tons of markets where value is already way off.

Out this way, I can point to most of Vancouver Island, most of the Fraser Valley, all of the Okanagan, and pretty much all the peripheral areas beyond those spots and up north. In truth, the only areas that haven’t already experienced either a perceptible or serious correction are Vancouver itself, Richmond and a few other communities bordering directly upon them.

Get out as far as Langley or Coquitlam though and the cracks are quite evident. Don’t know exactly where you are, but I imagine the situation is similar there.

#107 Taiwan is not China on 05.19.11 at 1:25 pm

Oh Oh… Damn Carney
Looks like rates aren’t going to rise anytime sooner

#108 HouseBuster on 05.19.11 at 1:29 pm

#94 Dark Wettler on 05.19.11 at 11:47 am
Did anyone else notice that it happened to be the two blondes?

That took a while. — Garth
Yeah, but they are not real blondes.

#109 Cash is King on 05.19.11 at 1:29 pm

Sorry, but the number holders look like GIC returns….kinda scrawny. Don’t be afraid to mix in a steak ladies.

#110 Live Under Your Means on 05.19.11 at 1:34 pm

#75 JoshL on 05.19.11 at 9:31 am

Thanks for posting that ishares site. Very comprehensive. We’d never be capable of “do it yourself” investing. We prefer to leave that to Garth and his associates.

#111 Devore on 05.19.11 at 1:51 pm

#75 Josh

Claymore is another company that comes as part of the “blue-print”.

I have some worries about Claymore funds. Their funds are closed end, unlike the popular ETFs (they issue a certain number of units, so they are more like equities), and so their funds are very sensitive to demand. In normal times the discount/premium tracks the NAV closely, but their volume is very thin, and investors should consider liquidity of such funds in adverse market conditions as a risk.

A good example, for the metalheads, is CEF (although not a Claymore fund). Typically it trades at 8% premium over NAV, reflecting strong gold demand, but at times (like recently) it will drop to an 5-10% discount (that’s when I buy it if I am look to add to my position).

#112 Daniel on 05.19.11 at 1:52 pm

#5, perhaps #3 – a test drive would tell me for sure.

#113 Devore on 05.19.11 at 2:03 pm

#87 BrianT

That is a fact of our economic system. It is built, top to bottom, on debt and credit. There can be, and will be, no economic growth, without growth in debt. As long as credit is contracting, so is economic activity.

Compound interest or bust!

#114 penpal on 05.19.11 at 2:06 pm

# 103 bigrider

Why would the Toronto RE market make you sick?

Everytime somone stupid enough to pay the top price in a bidding war wins, so do prudent people.

It not only parts one more Greater Fool from his cash, but ensures that another ‘qualified buyer’ will be no where to be found to provide demand on the way down.

With an over 70% home ‘ownership’ ratio, Canada has achieved what NO OTHER COUNTRY HAS ( to my extensive knowledge) despite every other country that has even come close to the 70% ownership ratio has seen their RE markets decline markedly.

In addition, the costs of that same house will guarantee that the new owners’ will be contributing less to the economy in many other ways, thereby helping to rdeuce demand, which as you know means fewer jobs, etc., etc. – which of course is not supportive of current pricing.

If you own and are in a position to sell, then sell.
If you don’t own, don’t even think about buying until this fever breaks, which from the comments found on this blog, should not be too long in coming now.

#115 Victoria on 05.19.11 at 2:36 pm

What I don’t understand if people in TO and Vancouver are paying 8-10 times their salary in housing how do the actually live.
We are paying 3.5 times – have kids – and still have to watch everything we spend. However the house we bought that my husband refuses to sell is a money pit and not even worth what we paid for it – in my book.

#116 trinotuta on 05.19.11 at 2:43 pm

ASStastic: lol. Your post made my day. This blog is awesome.

#117 Meatheadmike on 05.19.11 at 2:47 pm

Anyone know of a financial adviser in Van that could help set these investments up for me?

#118 disciple on 05.19.11 at 2:57 pm

Economics they don’t teach you in school, lesson #7:
Scarcity is a myth. A lie. A distortion of the truth. Here’s the truth: The second law of thermodynamics is not absolute in our closed system of three dimensions. We can prove this easily by observing how LIFE organizes itself, in defiance of our religion of entropy. The existence of life should be impossible but here we are. A point charge gets its positive or negative charge from the fourth or higher dimension, an electron or proton doesn’t just sit there being positive or negative by nature, someTHING is giving it a vortex or cloud of charge, the flow of which we call electricity.

How does this relate to economics? Easily. Natural resources are virtually infinite, because ultimately all matter and energy comes from the black hole centred sun rooted in higher dimensions. The very idea that products can go up in price is ludicrous, they should be always going down through our technological advances, until eventually they are FREE!

If you are having trouble grasping the above, I would suggest your mind has been effectively wiped by your “free” education. No wonder it’s free…Like I tell my kids, “Listen to your teachers, but don’t believe them.”

#119 Sunny on 05.19.11 at 2:57 pm

bonds suck right now, ETF’s are a lot trickier than they appear to the average investor. Dividend paying stocks are where it’s at.

I’m at an all time high today in my portfolio, and I’m yielding over 6% a year in dividend income, roughly $4700 a month. And a bunch of my companies just raised dividends this month! woot woot!

You won’t think bonds suck when equities correct. — Garth

#120 disciple on 05.19.11 at 3:05 pm

Yes Devore! You’ve got it! In a debt-credit-fiat system, GROWTH = INCREASED DEBT! In other words, no future for our kids and grandkids. Your “profits” are totally meaningless. Yes, you spend those ROI’s into the economy and drive a Hummer H2, or a really nice Audi A6 (I like those R8’s too), but you are intellectually and spiritually bankrupt, not understanding what is truly valuable.

All these CONservatives and liverals who think that gov’t can be fiscally responsible by cutting social NEEDS are complete fools, or banker whores. There can be NO economic growth without going into debt. Unless of course, you change the system. Let’s get on with it…

#121 SMOKING MAN on 05.19.11 at 3:28 pm

As I have been predicting for a while BOC will not rase rates… In fact the little crazy voice inside my head is screaming rates may even come down……

BondMarket here:

#122 Devore on 05.19.11 at 3:28 pm

#115 Victoria

Agreed. The metric seems almost ludicrous.

A little over a year ago I used to own, about 3.5 times my income, 20% down, low maintenance single guy, and I found it tough. Granted it was a 25 year mortgage. Throw in kids, other debt (student loans, car), fancy lifestyle, and I don’t see how anyone can support anything over 4 times.

#123 Hoof Hearted on 05.19.11 at 3:30 pm

The Secret of Oz

This is a documentary(almost 2 hours) which I highly recommend.

It explains the banking system in very easy to understand terms….back to the Roman times
, and makes note of THE most famous “historical assassination”…ie the bible notes Christ’s only true moment of anger was bankers in the Temple and the details of how the bankers were ripping off the Jewish peasant.

It goes through history and wars etc as guedied by the black hands of bankers

The ORIGINAL Wizard Of Oz was a symbol/paparable of the economic wars waged by the power elite at the time .

Dorothy’s ruby slippers were originally silver walking on the yellow brick road hint hint “gold”…was symbolism re the monetray system and how private bankers were trying to force the issue…and the wicked witches were JP Morgan and Rockefeller…and who the other characters represented.

Anyway…its a great 2 hours…and ties in tiomodern times (ie Iceland oldest democracy…very solvent…then its leaders selling out its local banks allowed laundered Russian money in…and how Iceland citizens do no want to join the EU so they can access baliout…they see it as further enslavement..which of course leads one to conlcude the EU was designed to look at Ireland etc.

Finally one interesting post on this one

” @tepstolog in the 12 century and the 600 years thereafter, China created and used fiat currency. In every instance of its use the end result was hyperinflation as a result of the government involved printing too much and blowing up the system. Paper money was outlawed at the end of the 600 years, and was not reinstated until British traders (at the peak of the empire) insisted on using paper money to trade with China. Buyers always want to pay with paper, sellers always want to settle with gold ”

So…HonkKongers learned fom Brits..or vice versa…

If one views this OZ video….one can see how wars are created and how Euor’s created US Civil War as a means to maintain their grasp on US, and “coincidences” in presidential assassinations when new monetary policies were invoked.

#124 poco on 05.19.11 at 3:51 pm

I think everyone who can’t see the light of day regarding the housing market should re-read #106 Alex—he is dead on with what is really happening—prices have been falling for quite some time

#125 Mikey the Realtor on 05.19.11 at 4:11 pm


yes, rates are here to stay for a lot longer. I have been saying this for a while now. Until rates actually move not just Carney’s lips forget about a RE correction.

One more thing, pass on some of that purple skunk, will ya!

#126 Devore on 05.19.11 at 4:18 pm

Hey guys! .com days are back!

LinkedIn IPOs today at $83, raising some $350M, reached a high over $120 and looks to close around $94.

One has to wonder what a web site, whose operating expenses can’t be higher than $1M annually, will do with that much cash. Oh yeah, P/E ratio nearly 1000x. Who are all these lemmings buying this?

#127 Utopia on 05.19.11 at 4:29 pm

I just heard Mark Carney is being considered to lead the IMF. That did not surprise me one bit. They could not find a better guy for the job really and I hope he gets it. The financial world is in a mess right now and it is going to be a big job to start sorting out the risks and coming up with some good creative solutions to all the issues that keep percolating in the background. The downside is we would lose him as Governor of the Bank of Canada.

#128 BrianT on 05.19.11 at 4:43 pm

#127Ut-I wouldn’t be surprised at all that the guy wants to jump ship before the mess he caused blows up-par for the course.

#129 Junius on 05.19.11 at 4:44 pm

#125 Mikey the Realtor,

The Re: crash will still happen without rates going up. It will not happen as quickly but it will still happen.

Look at the US.

#130 Devore on 05.19.11 at 4:46 pm

#124 poco

Even Richmond’s 3 month boom is now decidedly over.

Just keep focusing on the average price, so you too can miss the forest.

#131 Sunny on 05.19.11 at 4:57 pm

“You won’t think bonds suck when equities correct. — Garth”

in your own words- I don’t give a crap if the equities I hold correct, I’ll still be collecting my dividends every month.

Not one of my companies has ever decreased their dividend, not even with the crash a few years ago. And a lot of them have a history of raising every year.

be consistent here Garth, It’s not always “your way or the highway”
Most advisers would steer anyone away from buying bonds right now, and your answer to always buy preferreds and etf’s could be heavily argued.
A portfolio of the biggest and the best dividend paying companies in ALL the sectors is where it’s at right now!
Some cash on the sidelines for really down days is a good rule of thumb as well.

I creamed the return that you got last year! and I bet this year as well.

In investing, as in love, the guys who last longest, win. — Garth

#132 kilby on 05.19.11 at 4:58 pm

#46…Your boss must be giving good raises, all I have had in the last 5 years is no more increases or 1% a year. Many public and private sector jobs are rolling back wages and creating new starter wages. To be a gardener these days you need a degree,. Don’t see any “soft” landing for the 20 to 40 year olds….I worry about my kids, 23 and 26. Doesn’t seem like they will have much no matter how hardworking and diligent they are.

#133 Dan in Victoria on 05.19.11 at 5:03 pm

Hoof Hearted @123

I second watching The Secret of Oz video, well worth the time spent.
For people with not as much time “The American Dream” animation on you tube is okay. Just think a bit though.
And Chris Martensons “Crash Course”on you tube is a good primer.

#134 brainsail on 05.19.11 at 5:09 pm

#125 Mikey the Realtor

Rates are coming down because of a slowing economy! Canada is so different!

“May 19, 2011 13:21 ET

BMO Bank of Montreal Decreases Mortgage Rates

TORONTO, ONTARIO–(Marketwire – May 19, 2011) – BMO Bank of Montreal today announced it is decreasing its residential mortgage rates.

Michael Gregory, Senior Economist at BMO Capital Markets, said: “Interest rates are hovering around historic lows, and due to a slowing economy, prospects for the Bank of Canada to raise interest rates is being pushed back from the summer to the autumn months. These factors combined are providing more opportunities for those looking to buy a home during the busy spring season.”

The new rates effective May 20, 2011 are:

Special Offers* To: Change:
5 year Eco Smart fixed closed ™ 3.99% -0.05%
5 year fixed closed 4.34% -0.10%

Fixed Rates: To: Change:
5 year low rate fixed closed 3.99% -0.05%
5 year fixed closed 5.59% -0.10%
5 year Eco Smart fixed closed ™ 5.59% -0.10%
The interest rate for a fixed rate mortgage is calculated half-yearly not in advance.”

You are a marketer’s wet dream. — Garth

#135 Goodfellas union on 05.19.11 at 5:15 pm

I think this blog topic guy Jeff is Italian…

Y’know….made big $$’s while young…but still feels the cultural obligation to live as a paesano in Mama’s basement.

He can further his studies in the history of cement and John Gotti .

Makes one feel proud to be an I.T.

Pass the parmesan and the pasta better be ‘ il dente”

#136 new_era on 05.19.11 at 5:21 pm

re: 115 Victoria on 05.19.11 at 2:36 pm

What I don’t understand if people in TO and Vancouver are paying 8-10 times their salary in housing how do the actually live.
We are paying 3.5 times – have kids – and still have to watch everything we spend. However the house we bought that my husband refuses to sell is a money pit and not even worth what we paid for it – in my book.

A bunch of my friends were in vancouver were living off of credit via line of credit. The banks gave them more and more as long as housing kept on going up. But now they actually have to take out a loan and are pissed off because the banks are not giving them interest rates of price , but rather prime + 2 or 2.5. So they now have a huge mortgage, huge line of credit which is stretch to the max, one loan from a year ago and now on their third loan.

They have 2 kids, drive a BMW (which on on credit), likes their starbucks, big screen TV, eat out at least once a week and have money for the Canucks games.

Oh yeah their combine salary may be about 100,000 before taxes. Which is about half as ours, but they somehow am able to afford it. We double their salary , with one salary under a corporation which pays very little taxes. And find it hard to afford anything in Vancouver.

–> BTW garth we are living in our parents 1000sf basement. Until the dusk settles. (you are loving it aren’t you!!!)

#137 Vancouver_Bear on 05.19.11 at 5:37 pm

#191 tim toddler on 05.17.11 at 7:16 pm

#167 vancouver_bear
The wikipedia link is a virus. Dont click

It’s time to grow up Mr. Toddler alright?
The link was not a virus, if you have lack of knowledge use google ….or wait google is a virus too.. Ha-ha.
Posting the link to the liquefaction article again –

If you still think it has a virus, consult with your psychiatrist.

#138 Vancouver_Bear on 05.19.11 at 5:45 pm

#125 Mikey the Realtor on 05.19.11 at 4:11 pm

Look a relt*rd knows better then Mark Carney what will be the next move of BoC…..This is just beyond hilarious.

#139 penpal on 05.19.11 at 5:48 pm

# 125 Mikey the Realtor

The American housing market started its collapse when interest were already low. Rates DROPPED from those levels, they did not increase, during the entire decline and they remain low.

Try another lie.

In fact , not only were interest rates lowered, but the US Federal Gov’t handed out $ US 8 K to new home buyers and tried everything they could to forestall the collapse.

Didn’t work, did it?

When this RE market fully turns, you will be shocked at the drops in year over year sales volume comparisons and as the buyers become scarce you will see how the prices come apart as the new lower comparbles crush

Count on it.

#140 Nostradamus Le Mad Vlad on 05.19.11 at 6:00 pm

Horses ass or Asses horse?
Five rules for men to follow for a happy life.

1. It’s important to have a woman who helps at home, cooks from time to time, cleans up and has a job.

2. It’s important to have a woman who can make you laugh.

3. It’s important to have a woman who you can trust and who doesn’t lie to you.

4. It’s important to have a woman who is good in bed and who likes to be with you.

5. It’s very, very important that these four women do not know each other.

Sincerely, Tiger Woods, Bill Clinton (and many others of like ilk)
#35 Hoof – Hearted — “See, All’s well in Lotus land”

Agree. Yesterday in the KDC was a headline saying home prices were increasing, but there were fewer buyers.

This is LaLaLotusLand in full, glorious, monochromatic technicolor!

#84 HZ — “Yet things took a quick turn . . .” — An excellent point worth remembering.

Things happen so quickly nowadays, an interest rate hike, combined with a false flag op. somewhere else can turn the RE and fiscal markets upside down quicker than anyone can say RUN! Good post.

“You won’t think bonds suck when equities correct. — Garth”
— and —
#126 Devore — “Hey guys! .com days are back!”

I recall days well. The same mantra repeated — BUY NOW OR BE PRICED OUT FOREVER!” — ended well for those investors. Humanity never learns!
Princeton Yes, we do have our own ‘quakes here in the Snoozekanagan!

North Pole One and North Pole Two. After the Deepwater fiasco, it would be better if it were off-limits to everyone.

Panic Stations Obama doesn’t like a small small, new book.

All the king’s horses, and all the king’s men line up against DSK, but Frame Up What is the difference between Bill Clinton and DSK? Answer: Clinton serves TPTB, the latter doesn’t.

Disintegration This may be what the Russian professor meant when he said the US would be carved up into six states, and NAU plans.

Hungry Seniors One of the after-effects of the economic downturn.

Election Stupid is as stupid does, and US man celebrates eating 25K Big Macs over 39 years, and he’s still alive.

#141 tonguestump on 05.19.11 at 6:32 pm

Alex 106 thanks for your comments buying a farm in the interior of bc to build recording studio values and realtors are completely out of wack thanks for observations

#142 Victoria on 05.19.11 at 6:33 pm


We don’t even have a fancy lifestyle. We go out for dinner maybe 3 times a year – with the kids. Don’t travel. Buy most clothes at Costco. Private school did kill us but now that is no longer in the radar. I just want to get out of Vitoria but there are other people to consider.

#143 April on 05.19.11 at 7:03 pm

#125 Mike the Realtor. Prices are dropping regardless of low rates.

#144 Behavioral Finance on 05.19.11 at 7:15 pm


Who are all these lemmings buying this?

They are called HFTs….

#145 Nostradamus Le Mad Vlad on 05.19.11 at 7:18 pm

China has requested the playing field be changed.

Silver Crash? Possible Soros knew what he was doing when he sold his entire gold holdings a few days ago. The elite and silver. Inspiration The fed. is not exactly helping matters.

Finance Mtgs. vs. Credit Cards. We’re beyond help.

Bovine Excrometer Iraq, Iran, Tierra del Fuego and The Tropic of Cancer had nothing to do with 9-11, but most already know that. Cartoon Of The Day Money running away. Plutonium Levels Karma?

1:30 clip Eu wants to become a state? Obama At least there is one spark of decency in him, but Obama TPTB are driving the war in the ME, using politicians.

6:27 clip “Rosner and Taibbi say this could destroy the big banks.”

Beyond The Stratosphere “And all of it an illusion built with just paper and ink, to enslave you and your children to the private central bank.”

1:43 clip Alternative media. Beats the bought and paid for m$m.

Fake Terror at Minneapolis – St. Paul airport. As the reporter suggests, who is creating this terror?

USSR Not just Amerika, Kannnaduh too. Brookings Institute The path to Persia. It will be interesting to see when all this blows right up in their faces.

CANAMEX No borders needed anymore, as we’re all one country now!

False Prophet Yet again, for the umpteenth time, he is so far out in left field he’s not on the same continent anymore. All meatheads have their day, and he is no different.

#146 Industrial Guy on 05.19.11 at 7:51 pm

Interesting news about LinkedIn.
The Dot.Com bubble is back!

“Those who don’t know history are destined to repeat it.” Edmund Burke.

BMO lowers residential mortgage rates. The customers are vanishing! The customers are vanishing!

This housing market is going through Elisabeth Kübler-Ross’s stages of dying:

Denial — “I feel fine.”; “This can’t be happening, not to me.”
Denial is usually only a temporary defence for the individual. This feeling is generally replaced with heightened awareness of possessions and individuals that will be left behind after death.

Anger — “Why me? It’s not fair!”; “How can this happen to me?”; ‘”Who is to blame?”
Once in the second stage, the individual recognizes that denial cannot continue. Because of anger, the person is very difficult to care for due to misplaced feelings of rage and envy.

Bargaining — “Just let me live to see my children graduate.”; “I’ll do anything for a few more years.”; “I will give my life savings if…”
The third stage involves the hope that the individual can somehow postpone or delay death. Usually, the negotiation for an extended life is made with a higher power in exchange for a reformed lifestyle. Psychologically, the individual is saying, “I understand I will die, but if I could just have more time…”

Depression — “I’m so sad, why bother with anything?”; “I’m going to die… What’s the point?”; “I miss my loved one, why go on?”
During the fourth stage, the dying person begins to understand the certainty of death. Because of this, the individual may become silent, refuse visitors and spend much of the time crying and grieving. This process allows the dying person to disconnect from things of love and affection. It is not recommended to attempt to cheer up an individual who is in this stage. It is an important time for grieving that must be processed.

Acceptance — “It’s going to be okay.”; “I can’t fight it, I may as well prepare for it.”
In this last stage, the individual begins to come to terms with her/his mortality or that of a loved one.

#147 Will on 05.19.11 at 7:54 pm

A housing crash is deflationary not inflationary, ie when we see steep declines your money in the bank will be able to purchase a lot more of a house than it did previously. This of course will run onto other parts of the economy and greatly reduce demand (IE how many people will be going to Home Depot to fix up there house if its badly underwater). How many people will be going out to eat? etc.

Expect much higher unemployment, and low to negative inflation.

#148 Kits on 05.19.11 at 8:05 pm

Nonsense. Bonds are as capable of giving a capital gain as any stock. Demand is far more influential a factor than rates. — Garth

Note: In an interest increasing environment, bonds are likely to post negative returns (total return, capital loss plus interest, likely to be negative)

Correction: Bonds pay investors a steady and predetermined stream of income and return 100% of the capital upon maturity. If a bond is sold prior to maturity it may yield a capital gain or loss depending on prevailing rates. — Garth

#149 Daisy Mae on 05.19.11 at 8:24 pm

Dark Wettler on 05.19.11 at 11:47 am “Did anyone else notice that it happened to be the two blondes?”

“That took a while.” — Garth

So funny! I’ll bet EVERYONE referred back to the picture! LOL

#150 brainsail on 05.19.11 at 9:15 pm

You are a marketer’s wet dream. — Garth

Great response! BMO is so desperate for new paper they are trying to get the last of the suckers by announcing almost meaningless rate reductions.

My wife took a trunk load of usable stuff to Goodwill today. They document a value and it’s tax deductible as we live in the US. Can’t remember if we could do that in Canada. She came back LOL because this time they gave her a 30% discount coupon for GAP store purchases. Another marketer’s wet dream!

#151 disciple on 05.19.11 at 9:18 pm

Housing will deflate, but commodities will inflate. The worst-case scenario. hell on earth. there is no escape judgement day.

#152 Drew on 05.19.11 at 9:22 pm

Inflation cannot be sustained without wage or credit increases. The commodity increases are temporary.
read “The Inflation Question” by Dr. David Kelly…brilliant

cash will be king in a year

#153 Evangeline on 05.19.11 at 9:22 pm

((in your own words- I don’t give a crap if the equities I hold correct, I’ll still be collecting my dividends every month.))

I’d highly recommend a DRIP to take advantage of the magic of compounding. That way your portolio grows like topsy without any transaction fees, and when the markets correct or are down, do a happy dance because then you can add even more shares due to the lower price per share.

#154 Ignorance Is Bliss on 05.19.11 at 9:34 pm

HZ #84
I enjoyed your post. Hopefully the bad luck in your family’s and friends’ pasts will prevent you from making the same mistake.

#155 steve p on 05.19.11 at 9:36 pm

bank of canada 10 year bonds around 3.5 percent
$7000 year interest. $600 month interest.that should cover the $0.50 increase in a dozen eggs costs.

or for a tad higher risk go triple a bonds like ibm or microsoft and get 4% for 10 years. the extra $700 month should cover the $0.60 increase in 3 bags of milk

#156 Siddelly on 05.19.11 at 9:46 pm

#66 Boom boom bust

You outed yourself when you mentioned ” Vector Vest” as someone who relies on technical analysis. That may not be the best way to approach investing. Value investors don’t panic when the market corrects, instead they may buy some more stock at a firesale price. Stocks that have a history of paying dividends with a reasonable payout ratio and fair book to value as well as P/E will be OK over the long hall. Don’t forget about how irrational Mr. Market is. He’ll come back tomorrow with a better price.

#157 Sunny on 05.19.11 at 9:49 pm

“I’d highly recommend a DRIP to take advantage of the magic of compounding. That way your portolio grows like topsy without any transaction fees, and when the markets correct or are down, do a happy dance because then you can add even more shares due to the lower price per share.”

yup I’m already on that! but thanks..

#158 An Cat Dubh on 05.19.11 at 10:12 pm

How many of these recent buyers are going to have a Wile E. Coyote moment when they realise their house will be in negative equity. Here is a funny short 58 second clip starring Wile E. Coyote.

#159 Jim Smith on 05.20.11 at 10:29 am

This is bound to revert to the mean!

#160 Live Under Your Means on 05.20.11 at 2:42 pm

#146 Industrial Guy on 05.19.11 at 7:51 pm

This housing market is going through Elisabeth Kübler-Ross’s stages of dying:


Touchy subject for me. I was diagnosed with Stage IV cancer in 2003 (according to my notes) – have underwent 2 rounds of chemo over the years. Have lived a good life since then and hope I’ll live for several more. I just wish we had the right to euthanasia. We put our beloved dog, Echo, down – to ease her suffering.