Doomer 2

Two days ago a friend emailed me in anguish. “Do you think the stock market is going to crash again? I’m getting that feeling. How can we be protected if it does?” Turns out he was sneaking into doomer web sites, where gold and silver pumpers scared the crap out of him.

In fairness, you don’t need slimy sites like The Economic Collapse to render you impotent and slobbery. The TV news or a daily paper is more than enough. Greece. US debt. Wars. Disasters, Riots. Falling markets. It’s all there waiting for the dots to be connected.

Hell, you can even smell the napalm here. While I warn people away from borrowing to invest in a gasbag asset bound to fall in value, others use this pathetic site as a podium to preach mayhem. They tell you daily of a conspiracy to rig stock markets, a successful plot by the global elite to enslave you and how (a) Goldman Sachs, (b) banksters, (c) Jews, (d) liberals or (e) the Chinese will consolidate wealth and influence by stealing yours.

Some here praise guns and self-reliance. Others tell you to put 100% in precious metals in your garage (which is why you need guns). Many exhort you to hide in cash. And every time I write about assets you should consider – like bonds, REITs, preferreds or ETFs – the weeds come alive with those who equate them with perdition and bladder failure.

In fact, doomer is sexy. Dark’s the new black. It’s infectious and narcotic. But also misleading, debilitating and probably wrong. While I completely expect a real estate correction, ranging from the mild to the Biblical (depending on the economy and location) there’s no rerun of 2008 on the horizon – despite the risks and challenges. A housing crunch in Canada will not bring a financial collapse, as happened in the US. Greek default does not mean German banks keel over. Trillion-dollar US deficits will not cause hyper-inflation and a currency crisis. There are no FEMA camps being set up to pen millions of rioting Americans. Gold will not replace money. Jesus is not coming.

Let’s just talk stocks for a minute.

Equity markets are the most sensitive barometer we have of economic health, investor sentiment, trade, credit, liquidity and confidence. After rising 88% since the panic month of March 2009, US markets have now fallen about 7% and the TSX is off a dime. So does this mean they’ll lose another 40% or (as some people on this godforsaken site attest) 90% of their value?

Not if you believe stock prices are most influenced by corporate profits. The latest survey (Bloomberg) shows US companies expect to earn 18% more this year than in 2010 – which means stocks are cheap. How cheap at these levels? The lowest price-earnings ratio in 26 years.

Actually, if profit projections are right, the S&P 500 would, as Bloomberg reports, trade at 12.8 times income – the lowest level since 1985, save for the 100 days after Lehman collapsed in 2008, and the doomer cult was born. If this is true, then equity markets will likely rebound later in 2011, making those who buy the dip look like ballsy capitalist heroes.

But how can this be when the world is disintegrating, and nutbar sites like The Coming Depression keep soiling themselves in terrified anticipation?

Because by the time the doomers finish putting on their Depends and licking their gold bars each morning, markets have already assessed the risks of sovereign defaults, climate change, deficit financing and US real estate collapse. Crappy economic news has already been factored into current prices, along with the Japanese earthquake and bombing raids in Tripoli.

Markets are bolstered not only by government stimulus spending, but the conviction that the US economy will prove resilient, technology will advance, smart people will find new ways of making money and global fiscal and monetary policy will be coordinated as never before. Markets think a 2008 rerun is impossible. Now I agree.

Of course, idiot people who jumped giant houses with 5% down, buying at the top and borrowing at the bottom, could be wiped out here as they were Stateside. For them, depression. But not for the system. Every Canadian bank has a failsafe housing meltdown plan in place, not to mention a taxpayer backstop. You can’t stop stupid. But you can escape the splatter.

As for investors, nothing’s changed these past weeks, save one detail. You should still have a balanced portfolio with a fixed income anchor giving revenue and gains potential. You should avoid taxes with dividends and cap gains. You should reduce real estate exposure. You should have assets which are negatively correlated. You should avoid direct equity market risk and use exchange-traded funds. You should run from mutual fund fees. And if you don’t know how, find a smart person to help you.

Oh yeah, one more. Avoid the dipsticks. Buy the dips.

198 comments ↓

#1 The Professor on 06.20.11 at 9:22 pm

I don’t understand if it’s the HAM chinese buying properties with cash then why do Canadian household debt levels keep skyrocketing?

http://www.calgaryherald.com/business/Canadian+household+debt+record+high/4977116/story.html

#2 mendel on 06.20.11 at 9:28 pm

Nice one..Keep up the good words…
I am first…

#3 Lewis on 06.20.11 at 9:31 pm

NUMERO UNO!!!

#4 Stoke on 06.20.11 at 9:43 pm

A little sunshine. Nice.

#5 Rosebery on 06.20.11 at 9:43 pm

You’re the guide. Keep it coming.

#6 Out of the Shadows on 06.20.11 at 9:45 pm

Garth,

You’ve previously written that once the initial house price decline occurs, you expect a sucker’s rally and then the long, slow melt. I agree with you, it seems like a fairly typical pattern in most markets. My question is, how do you account for the drop in prices back in 2008/2009?

Could the current rise in prices be the sucker’s rally that followed the initial drop, though that drop was cut short by the BoC? Or since prices have hit a new peak does this disqualify it from being a sucker’s rally?

Thank you for taking the time to respond if you do.

You have it exactly right. The real estate market only rallied in 2009-11 on emergency rates. It is unsustainable, and now fueled by human emotion. Bye-bye. — Garth

#7 Neo on 06.20.11 at 9:49 pm

One thing I will never understand about your stance Garth, is that on the one hand you acknowledge there has been an unprecendented credit bubble that has found its way into housing more than any other asset. The correction in Canada of which you are still anticipating. Yet, at the same time you seem to believe that all the calamity of 2008 has been addressed Globally by dousing the debt flames with more debt. I’m sorry, but it is just counterintuitive and you lose some of your credibility here. Just because you think the U.S. and the Globe for that matter have not addressed what ultimately led to the 2008 crash doesn’t automatically make you a doomer. But you thinking housing can go down 25% nationally and have it not seriously damage our economy/TSX is laughable. It’s like the housing bubble is in a bubble all onto itself in your mind. Let’s face it. Neither you or I know what’s going to happen. But to suggest another crash isn’t even a possibility is just as silly as saying a housing crash at the historical heights they are now won’t cause a bigger downturn than the 90’s housing crash did.

Don’t take the US experience and graft it here. There will not be widespread default and foreclosures in Canada, just a general equity decline. That will hurt consumer spending, but not cause a banking/financial crisis. You need to understand the system better. — Garth

#8 Brad in Cowtown on 06.20.11 at 9:53 pm

End-users are tapped out, having bought stuff they couldn’t afford, including houses. They’re swimming in debt. And they’re about to watch their paper wealth deteriorate as their home values decline next year. Yet, somehow, during all that, we are supposed to believe corporate profits are going to rise 18% ? Selling their stuff to whom, exactly?
Last I checked, RIM’s earnings got smoked and they have to lay people off…
18%?!
Somebody’s lying. And the markets know somebody’s lying. That’s why the PE ratios are so low. And why they’ll stay low.

#9 disciple on 06.20.11 at 9:56 pm

I disagreed with everything in the 5th paragraph except: “Gold will not replace money. Jesus is not coming.” Now that I can agree with…the rest has already happened before (different names, same old games) so there is no reason it won’t again…WW3 anyone?

#10 Out of the Shadows on 06.20.11 at 9:58 pm

Garth,

Question #2 – HAM

It seems an increasing number of people are calling for the govt to introduce legislation to limit residential real estate purchases by foreigners. I don’t see this happening. At this point in the markets, with prices being where they are and destined to correct, HAM brings in an injection of capital into the economy, since odds are, Canadians are selling to foreign speculators. We keep the capital, the government makes its tax and we don’t need to borrow or create export jobs to reap the benefits. Sure, real estate becomes increasingly unaffordable for the average Canadian family, but we were already past that point when HAM made the headlines. I thought this market would correct long ago, but HAM may keep some parts of it going as long as global leaders find new ways to maintain their balancing act.

Assuming time has not yet fully run out on this market, do you see any intervention or will the government let this play out?

Thanks again.

#11 TaxHaven on 06.20.11 at 9:59 pm

You’re simplifying things ridiculously.

You don’t have to be a “nutjob” to buy physical gold.
You don’t have to feel “stocks are a bargain” to speculate in that market.
You don’t have to think the world will go to hell in a handbasket to eschew bonds, REITs and preferreds.

But when Nouriel Roubini, Bill Gross, Jim Grant, Marc Faber and Jim Rogers are all hunkering down – some calling for massive collapses in living standards – it might be a good idea if we proceed cautiously.

And this?

“Equity markets are the most sensitive barometer we have of economic health”

…is flat-out fruitcake.

How much of the (flatlined for 11 years) stock markets are buoyed by government stimulus spending?

And consider for a moment unemployment. Credit freeze-ups. Profit margin collapse. Price inflation with income stagnation. Ongoing sovereign defaults. Rising taxes. Still-rising personal & governmental debt levels. Pension/insurer/mutual/hedge funds predicating their entire business models on 8% returns…

In other words, we have to see PAST any one market, any one statistic and look at the big picture. Aren’t any of these more meaningful as indicators of (poor) economic health?

It’s impossible to treat the ludicrous stock market as anything but one more casino – the more so in a day and age when speculation & a desperate search for yield drives EVERYTHING.

Have a nice depression. — Garth

#12 LH on 06.20.11 at 10:02 pm

Here’s another unsolicited piece of advice: PAY DOWN YOUR DEBT my fellow Canadians! If fixed income benefits from low correlations with equities and is “good”, then debt (essentially negative fixed income) is categorically “bad”.

That’s right, a 3.75% mortgage is bad news when Canadian Govt 5Y bonds yield 2.185%. Even CIBC’s 3% cashback + 5Y floating @Prime-0.5% refi offer isn’t as good as going debt free.

For many, selling their house, paying down the loan and downsizing/renting may be the answer.

#13 tigerbaby on 06.20.11 at 10:06 pm

> The Banksters create money out of nothing …

what exactly is money suppose to be created out of? it seems to me that money is the medium to facilitate trade, and as world trade increases due to productivity increase, money need to increase correspondingly.

> one cannot use money itself as a commodity to make more money …

but the service that let you bring 35 years of future income forward to the present so you can buy the house got to have some cost associated with it?

> My Greek neighbours … They refuse to pay property taxes there as well. …

don’t want to pay taxes and don’t want to pay debt … who here will buy Greece sovereign bond after their default?? … unless it’s backed by real assets such as some islands of course

#14 mid-Ontario on 06.20.11 at 10:14 pm

“Oh yeah, one more. Avoid the dipsticks. Buy the dips.” – Garth

You said it Garth. Silver has dropped from near $49 to $36 or so. Buy this “dip” and be happy as the stock and RE markets melt away.

All the best from bullion lickers anonymous.

Good luck with your rocks. I use money. — Garth

#15 Min in Mission on 06.20.11 at 10:15 pm

Man, I must suffer from terminal stupid!!

“As for investors, nothing’s changed these past weeks, save one detail. You should still have a balanced portfolio with a fixed income anchor giving revenue and gains potential. You should avoid taxes with dividends and cap gains. You should reduce real estate exposure. You should have assets which are negatively correlated. You should avoid direct equity market risk and use exchange-traded funds. You should run from mutual fund fees. And if you don’t know how, find a smart person to help you.” – Garth T.

I can read the words, but, I can’t seem to understand it! I would really like to have a smart person in my, somewhat limited, circle of friends.

Excellent post Garth.

#16 Debtfree on 06.20.11 at 10:16 pm

Thanks Garth you’re a leeward shore in a sea of stupidity . I predict if the BoC stupidity continues . We will see gold appliances , platinum counter tops and diamond studded taps. Just to make her weak in the knees . I mean really . Isn’t granite and stainless so 2011.

#17 BrianT on 06.20.11 at 10:17 pm

JESUS IS COMING BACK-LOOK BUSY.

#18 not 1st on 06.20.11 at 10:19 pm

German and French banks have more than 100 billion in direct exposure to greece alone, not to mention Ireland, Portugal, Spain an Italy. Thats just their direct cash position. If you consider their leveraged positions, its more like 2 trillion dollars in exposure.

No Garth, you are simply 100% wrong about the global credit system and the stock market. Its not solvent and is balanced on a pin right now and the equity market was juiced with QE, not corporate profits. That doesn’t mean guns and ammo time, but it does mean that something worse than 2008 is brewing.

Those banks have $136.2 billion in Greek exposure and $2 trillion in total to Italy, Spain, Portugal and Ireland. At least be an accurate dipstick. — Garth

#19 Ant-626 on 06.20.11 at 10:27 pm

2 Neo: A very credible and thoughtful note.
2 Garth: You do really sound like Ben Bernanke before 2008.

#20 Midas on 06.20.11 at 10:30 pm

TigerBaby writes: “it seems to me that money is the medium to facilitate trade” — Correct.

Then he writes: “as world trade increases due to productivity increase, money need to increase correspondingly.” — False.

If the money supply remains stagnant, and wealth increases, then money buys more. There is no universal need to increase the money supply.

Central bankers like to increase the money supply to give the illusion of growth, to beggar the holders of debt, to favour those who receive the new money first, and to finance wars.

We’d be far better off without central banks. In their absence, gold would once again be money.

But never will be. — Garth

#21 InvestX on 06.20.11 at 10:35 pm

“A housing crunch in Canada will not bring a financial collapse, as happened in the US. ”

Why is it any more different up here?

Mortgage securitization. Jingle mail. CHMC. Capital reserves. — Garth

#22 Hoof - Hearted on 06.20.11 at 10:38 pm

No,……

To cover ALL BETS… do a Goldman Sachs…..

Buy a 24K gold gun……….with 100% buckshot.
.
There is NO honour amongst thieves, thus act strategically,…..

Goldman Sachs and their minions will outfox you via trading…….thus nail them outside the box.

Historically… winners are those that think
O-U-T-S-I-D-E the box…..

#23 Republic_of_Western_Canada on 06.20.11 at 10:42 pm

Garth is enamored with the Bay Street machinery and slick high-rise banking buildings. He’d hate to see it get sick, and couldn’t imagine a Goldman-Sachs type rout of employees there any more than a silicon development engineer could have imagined layoffs, PhDs stocking shelves, and street beggars in downtown San Jose back in 1999.

Maybe the colonialist mentality of southern Ontario expects nationwide taxpayer backstopping for every braindead stunt coming out of there. But more people remember the NEP than they dare admit.

I’d put my money on Mish this time around.

Only a rabid separatist cowboy could make that leap. Amazing. — Garth

#24 Abitibidoug on 06.20.11 at 10:43 pm

So in other words this minor pullback in the stock markets is a good time to get more money out of the orange guys shorts and into stocks or ETF’s that invest in them.

#25 Cognizant on 06.20.11 at 10:43 pm

“The Canadian mortgage market is dominated by the Canadian Mortgage and Housing Corporation (CMHC) and this government-owned company operates in much the same way as Fannie Mae and Freddie Mac.  The CMHC insures and guarantees mortgages as well as buys mortgages from banks in order to issue mortgage-backed securities that trade in the secondary market.  In comparison to Fannie Mae though, the prognosis of the CMHC is notably worse.  For instance, at the height of the housing boom in 2007 Fannie Mae had guaranteed over $2.3 trillion in mortgages[2], nearly a quarter of the market.[3] As of 2009 the CMHC guaranteed over $900 billion in mortgages, about 90% of the market.  Fannie Mae had approximately $44 billion in net assets to cover those guarantees, giving them a leverage ratio of about 50:1.  The CMHC has about $9 billion in net assets to cover theirs, with the ratio working out to a staggering 100:1.  To make matters even worse, 74% of the CMHC’s assets are invested in those very same mortgage-backed securities.  If the Canadian housing market ever took a dive the CMHC would be bankrupt in the blink of an eye.”

http://www.mises.ca/posts/articles/the-canadian-moral-hazard-corporation/

#26 tigerbaby on 06.20.11 at 10:43 pm

I think people betting on Greek default may actually generate more and more bailouts … as at some point it becomes cheaper to bail Greece out than to payout the CDS’s

so the result is that the Greeks continue to have the cake and eat it too by being closest to the edge …

#27 Westopia on 06.20.11 at 10:44 pm

You’re right Garth. Gold won’t replace money, because it IS money. Honest money.

#28 BrianT on 06.20.11 at 10:44 pm

#7Neo/Garth-The whole premise that Canada will have a RE price decline averaging 25% or more without a major and very deep recession is very far fetched. Real estate is one of the most important industries in the entire economy-as far as I know Canada has never had a RE price decline of that magnitude without a deep recession-the two have always gone hand in hand.

#29 Mr. Reality on 06.20.11 at 10:45 pm

Sorry Garth.

It doesn’t matter how much money companies are making. Consumer spending runs economies and when debt freezes spending it does not matter how much money companies are making.

When the S&P 500 breaks through 1260 watch out. The sell off will begin. And that will happen soon enough.

Mr. R.

#30 Mikey the Realtor on 06.20.11 at 10:45 pm

“It’s impossible to treat the ludicrous stock market as anything but one more casino”

There is some truth to this but fundamental investing will always outperform speculation.

It wont be too long before we get a real glimpse of reality, once QE2 ends. I have a feeling that Ben is realizing that throwing money at everything has done nothing, a real cleansing must be performed.

#31 tigerbaby on 06.20.11 at 10:46 pm

is there any statistics on the number of people owning multiple properties? that should shed some light on the speed of the decline …

#32 Ralph Cramdown on 06.20.11 at 10:51 pm

[A]ccording to the latest annual TD Canada Trust First-Time Homebuyers Report, only 76 per cent of first-time homebuyers got pre-approved for a mortgage before they started shopping around for a house – down a significant amount from last year’s 91 per cent. […] only 72 per cent of first-time homebuyers spoke with a mortgage lender before they started seriously looking at homes, down again from 84 per cent in 2010. […] in 2010, 85 per cent of first-time homebuyers arranged for a home inspection, while this year only 67 per cent did. Fewer homebuyers also learned about their mortgage options, calculated their closing costs or budgeted for property taxes in advance of buying a home this year.

The above is excerpted from a realtor’s blog. He thinks the solution is education, of course, but I see it as a symptom that all plausible demand has been pulled forward, and they’re now scraping the residue from the barrel labelled “morons.” On the upside, if you’ve got a house which should have “caveat emptor” inscribed above the entrance, now might be a good time to sell it.

Today’s news: Frankie says relax.

#33 tigerbaby on 06.20.11 at 10:56 pm

> If the money supply remains stagnant, and wealth increases, then money buys more.

this works overwhelming in favour of people who already has the money, against the up-and-coming generations who will do most of the work to shape the future world

whoever adopts this system will quickly become stagnant and non-competitive

#34 JohnnyBGood on 06.20.11 at 10:58 pm

Uhhh… not so fast.

First, don’t blindly believe anyone––prophet of doom or private profit maker––without doing your own due diligence and applying your own grey matter to the problem. Even the smartest investors are just people––emotional, fallible, and mostly human. Witness the great John Paulson’s latest capitulation and tremendous loss as the big TRE goes “Timber!”

Second, the risks are still out there. Nothing has actually changed in this regard since 2008. Just some reshuffling of the risk. On the positive side, most of the risks are known and have largely been priced in. But there is always a chance of the unexpected or the failure to anticipate all contingencies. After ’29 we were never supposed to have another such crash and depression again because we learned from our mistakes. However, we keep changing the game so there is always the risk of new mistakes.

(BTW, Lehman was not a mistake, as bankers and gov want you to believe. Prior to Lehman the world was well acquainted with systemic risk (to name but a few: S&Ls in late ’80s, Mexico in ’94; Asian Tigers in ’97, Russia in ’98; LTCM; Argentina; Bear Stearns 2007; yada, yada, yada). Crisis is now the norm. No one is going to tell me the smartest investment bankers, commercial bankers, central bankers, and fiscal authorities did not know what would happen if Lehman was allowed to go kaput. Lehman was a controlled demolition. Capitulation on the best of possible terms.)

Stock prices seem to be mostly influenced by corporate profits, in the long run. John Bogle (of Vanguard) also says that stocks rise along with the economy, in the long run. However, like any asset, stock prices are affected by supply and demand. Since supply is relatively stable, the larger factor is demand. Earnings are one factor, but another factor is money. Or more specifically the growth in money.

Equity markets are the most sensitive barometer for many factors, including new money. This is why stocks are a relatively good hedge against inflation (unless inflation gets out of hand). So when you value stocks, you have to factor in inflation.

Take a look at the following three charts. They show the DOW long-term chart adjusted for inflation. I offer multiple sources for the sake of adjusting for any bias. You can find more.
http://home.earthlink.net/~intelligentbear/com-dj-infl.htm
http://www.dogsofthedow.com/dow1925cpilog.htm
http://pragcap.com/chart-of-the-day-inflation-adjusted-dow

The growth in the real DOW does not look quite as good as most of us are use to, eh? Granted you have to include dividends when calculating the overall return, but on a pure capital gains basis, this is not a great ad for investing in stocks.

Notice the period from ’66 to ’82. Most investors regard this period as a sideways market because in nominal terms it did move basically sideways for all those years (though with huge swings up and down). But in constant (inflation adjusted) dollars, the value actually declined quite significantly.

Why do I point this out? Because very few forecasters are calling for a new stock market boom. Most are calling for a range-bound sideways to down market. Well, with all the money printing going on in the world, it makes sense to expect high inflation. Under these circumstances, will it really be a “sideways” market?

One more thing. The S&P has advanced about 100% (i.e. it doubled) between the March ’09 lows and today. Corporate earnings have been very good indeed. But given all the new money that has been created since March ’09, how much of this rally is really just inflation? Quite a bit, I’d say.

This is not a “glass half full” vs. “glass half empty” argument. It’s more like, “what exactly is inside that glass?” You need to know before you drink.

So yes, invest in stocks, bonds, ETFs, etc. And get an advisor if that’s what you need. But get a really smart one who can get you real, positive, honest-to-goodness, after-tax, inflation-adjusted returns. And stay away from mutual funds.

#35 zombiedelight on 06.20.11 at 11:00 pm

I admire your brilliant insights on real estate Garth, but your logic around the stock market is flawed as many of us try to explain to you :)

Here is the point, if your saying was true “Stocks are driven by corporate profit” then why would the whole market crash in 2008?
Why would Riocan drop from 21$ a share to 11.58$ if stocks are drivent by corporate profits??
See, the stock market is an entity in itself that reacts to “buyers” and “sellers” just like the real estate…
Simple isnt it??

As for the depression with our rocks, enjoy yours heating your home with your paper money and eating paper money.

In a panic, everything falls, and in 2008 there was fear profits would evaporate. The only panic currently worth noting seems to be on this blog tonight. — Garth

#36 Mr Buyer on 06.20.11 at 11:01 pm

I am hoping for the best but maybe I should be preparing for the worst. The images from the depression have been burnt in my mind by my grandparents and teachers. I certainly hope we avoid that calamity. I still remember clearly a picture of some German fellow in the latter stages of the war (WW2) with a wheel barrow full of money and unable to buy a loaf of bread with it. I can also remember the gas crisis from the 70s and how we pretty much cruised through it along with a few more financial problems in the 80s, 90s and the Lehman crisis. Our society weathered all these storms without a depression era collapse so there is reason for hope. It is the magnitude and government made nature of this housing bubble that gives me pause. Couple this with the exodus of jobs and manufacturing (a large portion of the manufacturing we have is largely owned offshore) and I can not help but think of the term ‘a death of a thousand cuts.’ I accept there is internationally understood financial reasoning for Canada’s state of affairs but I am thinking that maybe we are needlessly playing against a stacked deck (debt). There is also the looming challenges of population growth a short distance past these present challenges (40 years will tell the story). I can not help thinking that movement towards being a largely self sufficient nation is an option that precious few countries have but we do and we should use it to our advantage.

#37 squidly77 on 06.20.11 at 11:03 pm

In Canada, every province but one has full recourse mortgages.

#38 poco on 06.20.11 at 11:06 pm

I guess the term “professional” realtor can take on a whole new meaning when it comes to selling houses nowadays !http://www.vancouversun.com/news/real+estate+council+probes+transfer+accused+killer+house+wife/4977575/story.html!!!!!!!

any bets it will be off the market in no time –seized by the RCMP (proceeds of crime)

hey Mikey & BPOE—team up with this babe and you can make her first sale a big”hit”!!!!

#39 TEMPLE on 06.20.11 at 11:08 pm

Agreed on all points except one, specifically that ETFs avoid direct equity market risk (I am assuming you are speaking of simple index ETFs). As index ETFs are comprised entirely of stocks, you carry all the risk of directly owning equities without being able to drop the potential time bombs or weak junk. The only thing you are doing with ETFs is ensuring a diversified portfolio- which is good, of course. However, with even a small amount of effort, an investor can use passive strategies to match or outperform index ETFs, and pay less in the way of fees in the process.

At any rate, great post today- I’ll be forwarding it to a few friends for sure.

TEMPLE

#40 The InvestorsFriend (Shawn Allen) on 06.20.11 at 11:12 pm

Brad in Cowtown says:

Last I checked, RIM’s earnings got smoked and they have to lay people off…

No Brad, RIM’s earnings did not particularly get “smoked”. Its share price got smoked due to a weaker outlook.

Profits in Q1 were down 4% only from the prior year quarter. Indeed they were down 25% from the prior quarter but we would have to understand the seasonality on that.

Anyhow what has the problem at one solitary company got to do with predictions of doom for the entire stock market? No one said people will stop buying smart phones. The fear is they will stop buying RIM’s phones.

Do “all ya all” really think big corporations are about to stop making money.

Most people believe the following two things at once:

1. Big corporations make way too much money and rip off consumers all day long.

2. Owning stocks is a losing proposition.

Both are unlikley to be true at the same time over the long term.

Most people have no clue about investing.

Half the people are dumber than average!

#41 xyz on 06.20.11 at 11:14 pm

@squidly77

Sorry but do you have a point? All full recourse means is they have to claim bankruptcy to walk.

At the end of the day if I was looking at 30-40 years of paying a mortgage that is infinitely bigger than the sales value of my house, Bankruptcy would be a no brainer.

#42 Kaganovich on 06.20.11 at 11:15 pm

#25 Cognizant

Thanks for posting that bit of information. It sounds like a very precarious position that we the taxpayers have involuntarily assumed via the CMHC. What say you Garth?

#43 Kitchener1 on 06.20.11 at 11:21 pm

Garth you are both correct and incorrect as stupid as it sounds.

The right asset allocation and finding the “nuggets” are what will make wise investors rich.

BUT

Make no mistake that there will be carnage in equity markets in the quarters to come, the momo trades and computer algo’s are setting of flash crashes on a daily basis in diff markets. Sino Forest fiasco along with the linked IPO are just a taste of whats to come.

People, if you do not participate daily in the markets or trading, get your inverse ETF’s set up as well as your stop losses.

Its going to get bumpy, all lot of folks will get tossed out– dont be one of them.

#44 Siddelly on 06.20.11 at 11:22 pm

Is tonights message ” Bull markets are sometimes painful” ?And one has to wonder if those replacements are truly Killer Klownz.

#45 Roial1 on 06.20.11 at 11:23 pm

Jesus is not coming.

I definitely agree on that prognostication.

This planet stinks.

Even I would not come here if I had the choice.

#46 El Magnifico on 06.20.11 at 11:35 pm

In a panic, everything falls, and in 2008 there was fear profits would evaporate. The only panic currently worth noting seems to be on this blog tonight. — Garth

If a panic can suddenly change market perception, why couldn’t it happen all over again, in the case of another financial disaster such as a default by Greece, Ireland, Portugal or even Italy?

The stock market can be reactive to bad news and may not have factored all the risks that might potentially occur. These risks seem to be closer and of higher scale than ever before.

After QE1 and QE2, we’re now going into Q3E, QE4, etc. even if it called with another name. Printing money to get your way out of debt might be a good thing in the short term but is disastrous in the medium/long term. People have a legitimate concern about inflation and try to find a way to protect themselves against it.

On top of that, we might have the next financial crisis will come from the country that is experiencing the biggest real estate bubble ever: China. I’m not making it up, it comes from reputable and respectable economists:

“Is it too soon to start predicting the next boom and bust financial crisis? Maybe not, said Prof. Rogoff. Just look for another housing bubble. “Housing is the best single indicator of whether you’re heading toward a financial crisis,” he said. And most Americans may not realize it, but one is already underway right now—in China.
(…)
For Prof. Rogoff, China looks like “the best candidate” for the next financial shock wave—at some point. “It’s an accident waiting to happen,” he said. There is no transparency, yet all the world and their personal trainer is now wagering that China will be able to grow without end for the next 40 years. “It’s the best ‘this time is different’ story,” he said.”

If that happens, what do you think will happen to the stock market? I don’t think that has been factored in the price of stocks…

Garth, you might be right in your analysis but acknoledge that a lot of people commenting on your blog have valid and legitimate concerns. After all, it’s their money and they care about it as much as you care about yours and the one of your clients. As for me, I don’t have any gold, silver or anything. I’ve tried to build a balanced portfolio in the same way you’ve described, but I’m honestly not sure that I won’t take a hit in the next few years. It doesn’t really matter as I don’t plan to retire in the next, er, 30 years! The economy will have plenty of time to recover if something happen.

For the full article: http://online.wsj.com/article/SB10001424052748703323704574602030789251824.html

#47 John on 06.20.11 at 11:36 pm

Garth ..Garth

I have some questions for you..

1) When was the last time house prices kept dropping
and stock market sustained at same levels?
2) Why is there a strong corelation between QE2 and
the stock market prop up from November 2010?
3) Why is the volume in the market low in the past 2
months, if this represents market confidence?

All your profits in ANY stock will evaporate in thin air in a matter of next FEW weeks if Ben Bernanke does NOT continue with stimulus or quantitative easing policies.

If you think otherwise than you are in for a shock.. soon. Housing market and equity markets will fall or rise together unless an external measure props up either markets.

All I needed to do to prove my point with this post was open the floodgates. — Garth

#48 "recetly graduated, working girl" on 06.20.11 at 11:37 pm

Today I went to look at the bachelor rental between cypress and maple in Vancouver. Nothing special: private home, really small, but clean, tidy and full kitchen suite, 675 tokens a month + utilities- “reasonable” I thought filling in my application… but here pulls in the yard black lexus and asian couple walks up. quick look and they gave 1000 buck just like that for the rental . ” it is for our maid – very lovely”. I shouldn’t , but I cried when I rode my bike back home.

#49 nonplused on 06.20.11 at 11:39 pm

Oh, and…

You are also wrong about whether gold will become money. Of course it will never again be money you and I carry around in our wallet, but the rest of the world is already positioning for the time when it will be how central banks refer to each other.

Gold is money. Nothing else ever was or ever will be.

Paper money schemes are in theory just as good, if you can convert at a fixed rate. And that is certainly not the case today. The longer you hold the gold, the better. Holding beats any interest rate you can get, even a Garth ™ portfolio.

#50 Mackie on 06.20.11 at 11:41 pm

I don’t know what is going to happen. Every time I think I know, my expectations are shattered or, at the very least, proven to be slightly off kilter. I can predict what will happen in the future as long as it is not the near future or even the middle to near future.
Garth on the other hand seems to know everything when, in fact, he is just like the rest of us. He has opinions based on some fact and some educated guesses. His blog is certainly worth reading, but the way some people here worship him boggles my mind. His views on precious medals alone puts him in the same league, in my opinion, of so many stock pushers who seem to fear any move toward the validation of gold and silver as a potential substitute for fiat currency, which isn’t worth the paper it is printed on.

Currency is money and gold is neither. Stating the obvious does not make me a ‘stock pusher’ especially when I just wrote that direct equity investing is a bad idea. If you can’t make an argument without attack, give it up. — Garth

#51 Hoof - Hearted on 06.20.11 at 11:42 pm

OMG…..

(= Oh My Gold???)

Agreed that currency should be tied to have a parallel commodity (ie Gold ).

The ratios help prevent Goldman Sachs type hyperinflation etc. BS

However…….we are far beyond that…since Nixon post 1973.

IMHO….Gov’ts should reign in Private banks…literally and figuratively NUKE them…….and create the monetery system others have alluded to for 100’s of years.

De-facto…the longer any/all governance models leave it..the greater they are indicted as in bed with Banksters.

#52 nonplused on 06.20.11 at 11:44 pm

By the way, I have just foreclosed on Garth’s bunker, his Harley, and his wife. Don’t believe me? I printed a piece of paper that says it’s so! Guess what? You can lie on paper, and pretty much anything on paper (or electronic) is a lie.

#53 Patrick on 06.20.11 at 11:51 pm

Wife’s family say’s China’s Real Estate market is starting to implode which is exactly what Wall Street Journal has written:

http://online.wsj.com/article/SB10001424052702304906004576367121835831168.html

Look out below Hongcover.

#54 Midas on 06.20.11 at 11:51 pm

Ron Paul on gold and the economy:

http://www.thestreet.com/story/11157398/1/how-ron-paul-would-fix-the-economy.html

“…history has shown that fiat currencies internally self-destruct, and they always go back to gold. Gold, if you pick up a coin minted 6,000 years ago, you’d still have your money. If you pick up a piece of paper printed a year ago, it might be worth half its value. So history is on my side of the argument. ”

RP is a whack. — Garth

#55 Cookie Monster on 06.20.11 at 11:53 pm

Markets are always wrong.
Jesus ain’t coming back due to massive shortage of miracles and false advertising.
US $ is doomed, like Grease.
All prices will rise with inflation, just like the tide that lifts all boats, the savers, pensioners, bond holders will all lose purchasing power, someone has to pay for all this fun.

#56 InvestX on 06.21.11 at 12:01 am

squidly77: “In Canada, every province but one has full recourse mortgages.”

That’s correct as far as I know.

And who knows if the predatory lending was as bad up here with as many NINJA loans. No stats to indicate either way.

#57 rangergord on 06.21.11 at 12:02 am

Like your blog in general Garth, because it is almost the only one dealing with the real estate decline set to hit Canada. Fail to understand the animosity towards those who are awake and paying attention while taking steps to protect themselves with precious metals. You have not convinced me of your case beyond real estate decline and obviously many others here are not convinced either. Maybe you are convinced of the infallibility of central bankers, their political servants, and the soundness of the stock market and government and corporate bonds BUT many others are not. I agree with Neo and many of the others here that being nervous and approaching the future with caution is only prudent. Otherwise we are to believe that you alone are priviledged with knowledge supporting a deep faith in the foundations of government and finance. No thanks.

#58 Nostradamus Le Mad Vlad on 06.21.11 at 12:06 am


Judy Collins Send in the Clowns (4:01 clip), live. Better than politicos or banxters!

“It’s all there waiting for the dots to be connected.” — And when those dots do align like all the planets in the universe, what then? Do we become soopah rich lalillionaires, showered like Boadicea and Cleopatra with wealth beyond our wildest means, or do we, in fact, go supernova and blast off into the the nether regions, the bowels in the heart of the sun?

Well, that’s an unproven scientific theory anyway!
*
#29 Mr. Reality — “Consumer spending runs economies . . .” and #34 JohnnyBGood — “However, we keep changing the game . . .”

Both good points. Trouble is, plenty of consumers are tapped out, being more concerned about paying debts off so cutting spending to a minimum. The ones who do have money have it in investments such as Garth recommends, but are not frivolous spenders.

Not sure whether “we keep” changing the game, or if it is a combination of politicos / big biz. / TPTB; they may be changing it without telling us, but we have to keep moving ahead, adapting to different circumstances each day, guessing at what is coming next.

Taking all this into account, it leads to #22 Hoof – Hearted — “. . . those that think O-U-T-S-I-D-E the box…..”

Certainly can be cold on the outside looking in (GW?). But with the right resources and a good advisor, one can make solid use of a monthly income, which is sure to warm the cockles of any heart!
*
Govt. layoffs Another poster earlier mentioned the feds. were looking to go smaller, so this fits in nicely.

Fukushima Not doing the environment much good; Pix of Fort Calhoun and a chart of the Missouri River levels. Missouri River closes 100 miles of bridges; 1:25 clip Speaking of nuke plants breached, another one.

Russia As per China, Russia has sold 30% of its US bonds; Rare Earths Prices soaring. Should have bought some when they were penny stocks; Bailouts ‘R’ Us Apply 2day! U2 can join PIIGS and others to buy MMs (Magnificent McMansions). No repayment ever required — it’s free and EZ! China flooding leads to higher food prices; Gold and Silver Russia and China divesting themselves of US bills / bonds, buying PMs and other hard assets instead.

Garth’s Doomer 2 column on show in different parts of the universe! Planet X is Planet 10. What a boring name; Agent Orange, depop. and Monsanto; The Kremlin At least Obama has one major supporter; Strange Law and Order “NC man robs bank for one dollar so he can get medical care.”

#59 Joe on 06.21.11 at 12:09 am

Ha ha ha. Second pic is way better than the first. Change brought on by more hate mail from PETA?

#60 Mr Buyer on 06.21.11 at 12:12 am

I just stumbled across an article from 2010 about the Canadian Banking system…
http://www.american.com/archive/2010/february/due-north-canadas-marvelous-mortgage-and-banking-system
The article is now somewhat dated but there was an interesting fact…not one Canadian Bank failed (I am not sure but I think that means all branches as well)throughout the depression (1930s). This is news to me and cause for a certain amount of hope (but who knows, maybe it was ‘different’ then).

#61 Prof ANON on 06.21.11 at 12:17 am

Hedge inflation on food. Get your hunting draws in for Alberta within the next couple of days.

#62 Calgaryillusion on 06.21.11 at 12:27 am

” markets think a 2008 rerun is impossible – now I agree”

Right, because “it’s different this time”. Systemic risk is worse now than 2008 because nothing in the system is fixed. All that happened was the transfer of crap assets to the public domain in exchange for trillions in taxpayer capital into bank coffers (to make them ” adequately capitalized” for the next inevitable event….at our expense of course). The so called profits of these companies is an illusion that cannot be carried forward in the absence of trillions of government stimulus….which is supposedly coming to an end (or perhaps not – QE3?). Just saying that markets are distorted from quantitative easing, so how can you predict future earnings will continue to climb?

#63 Sebastien on 06.21.11 at 12:31 am

Is it true that there’s more than 1144 trillions USD in derivatives outstanding worldwide ?

If so, Alan Greenspan must be proud of himself…

#64 Jed on 06.21.11 at 12:42 am

Funny bloggers tonight–just validating what G so nicely says about the fruitcakes who post here; a mental illness is a disease which tells you you are normal. Interesting article on the wisdom of renting:
http://search.japantimes.co.jp/cgi-bin/nb20110620jp.html

#65 Ralph Cramdown on 06.21.11 at 12:43 am

In Canada, every province but one has full recourse mortgages.

Big deal. Many US states are the same. In many of the ones that aren’t, only purchase money mortgages are non-recourse, so if you refinance (cash out, or rate/term), your new mortgage is recourse.

#66 No Haven on 06.21.11 at 12:58 am

Good read – Canada is No Haven from US Dollar Collapse

Isn’t the Canadian economy very tied to the US economy.
So if the US falters, wouldn’t it affect Canada’s economy

http://www.resourceinvestor.com/News/2011/6/Pages/Canadas-Dollar-is-No-Haven-from-US-Dollar-Collapse.aspx

#67 AACI Home-Dog on 06.21.11 at 12:59 am

Good work, GT….best article I’ve seen yet.
Please; why do you prefer ETF’s to direct equity trading ?

More diversity, less market risk. — Garth

#68 betamax on 06.21.11 at 1:22 am

Garth: “Markets think a 2008 rerun is impossible.”

Markets thought it was impossible the first time.

Remember all those articles touting the ‘Goldilocks’ economy? Time and time again, the market has proven that it can’t spot a bubble till it does a Hindenburg.

#7 Neo makes a good point. Though Canada will escape a banking crisis (as Garth maintains), housing has become too large a part of our economy — as has consumer spending — for housing to tank without taking the larger economy down with it.

No, Jesus ain’t coming, but it’s going to get fugly out there.

#69 cj on 06.21.11 at 1:23 am

Thanks for the big picture and reminders of needing a balanced portfolio. Having a good financial advisor is critical. My concern for these bloggers who got out of real estate and are sitting on lots of cash may try to invest on their own.
From personal experience , this is where fear and greed come in once again. People who want to get rich fast and take risks with their portfolio are not much better off if they gambled in the real estate market.

Establishing financial independence happens over a long period of time and with professional help. I learned the hard way in my 20/30s. Now I am much more sensible and patient

#70 Canuck Abroad on 06.21.11 at 2:29 am

You may be right but I am waiting to see what Bernanke says in the FOMC statement / press conference tomorrow. Much is riding on whether he announces a replacement for QE2 (widely expected to be something like Operation Twist 2 because QE3 would never fly). If he reassures the market that the money spigots will continue to flow then equities are probably safe but so are all commodities. Risk ON, baby!!! If Bernanke fails to do that I think he will be punished and better equity prices might be achieved later in the summer/fall.

#71 bromance on 06.21.11 at 2:33 am

I’ve been around long enough to know a big stock rally is in the cards.

#72 Avoid the market. on 06.21.11 at 4:39 am

Can I vote? I vote void the stock market till you see what happens at the end of June.

Why end of June? That is when QE2 runs out without another QE3 in the pipe.

US GDP has been pushed up by tarp, QE2, QE3 and once it is gone, it’s gone. We will then see the true economy without the gov’t spending your money.

Greece will affect the EU, EU will affect the US, the US does affect Canada, but to what affect?

Japan did affect the markets. Greece is affecting the world. Here in the UK, we see Greece as the 2nd domino (after Iceland), next is Portugal, Ireland, Spain, Italy, France and …

Gold and silver has been announced in the USA (July 15th) to be illegal to trade as currency. GOOD, because as Garth says, it’s NOT currency. Gold coins stamped $50 (1 ounce of gold) are worth $50.

#73 Devore on 06.21.11 at 5:00 am

#26 tigerbaby

I think people betting on Greek default may actually generate more and more bailouts … as at some point it becomes cheaper to bail Greece out than to payout the CDS’s

The people doing the bailing out have nothing to do with CDS. Greece is a bottomless pit. It makes no sense for Germans to keep bailing it out.

#74 Devore on 06.21.11 at 5:05 am

#33 tigerbaby

this works overwhelming in favour of people who already has the money, against the up-and-coming generations who will do most of the work to shape the future world

whoever adopts this system will quickly become stagnant and non-competitive

You think people who have the wealth today are bothered one bit by inflation? Put another way, would you rather be paid with money worth more every day, or worth less?

It is an academic exercise what would happen to whoever adopts this system; too many people have too much to lose.

Keep em coming tb.

#75 bullion.bunny on 06.21.11 at 5:21 am

Take this…….

http://www.zerohedge.com/article/china-conducts-emergency-reverse-repos-inject-money-market-liquidity

http://www.zerohedge.com/article/utah-pushes-accept-gold-silver-alternative-currency

P.S. Rally until the fall………then a possible correction

Utah? You serious? — Garth

#76 Neo on 06.21.11 at 5:52 am

Don’t take the US experience and graft it here. There will not be widespread default and foreclosures in Canada, just a general equity decline. That will hurt consumer spending, but not cause a banking/financial crisis. You need to understand the system better. — Garth

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

Who said I was grafting the U.S. experience here? I said in CANADA the 90’s housing crash lead to the 90’s recession along with interest rate hikes that you’ve agreed are a foregone conclusion. Foreclosures have NEVER been an issue in Canada and I don’t foresee it being one. The problem is households instead pull back on consumption which given it is 58% of our economy causes it to contract. When a disproportional amount of your income goes to housing, Canadians will and have dutifuly continued to pay those household expenses at the expense of consumerism. The banking crisis won’t happen because the risk is on the taxpayers not the banks through CMHC insurance and that sleath bailout of $75 billion a few years ago. Some of our banks even received backdoor funds from the U.S. which has been documented. Look Garth, you are not the keeper of all economic knowledge just because you worked for Revenue Canada. Don’t look down at everyone else and say I need to understand the system better simply because I don’t agree with everything you say. I do understand how our debt based monetary expansion/recession system works and we’ve just blown the mother of all bubbles that has yet to properly de-leverage worldwide. Central banks Keynesian money printing oddessey of the past 3 years has done nothing to convince me that it’s all systems go and there is nothing to see here, let’s move along. You have yet to explain in your infinite wisdom how you simply gloss over the macroeconomic impacts and seem to compartmentize the microeconomic issue of housing and it’s limited, in your view, contagion.

The 90s recession in Canada bears no resemblance to the current US experience. You are making this up. Another recessions is entirely possible, even likely. But the housing correction will not in itself wreck havoc. — Garth

#77 Mickey on 06.21.11 at 6:09 am

DON’T own Greek Bonds or Chinese Sino Forest. I sleep well at night. Canadian stocks are also being ravaged. One of the byproducts of our economy are the many great small cap pharm stocks with drugs in the pipeline that are going bankrupt. The reason is people are paying too much taxes, and too much for housing and no longer have money to speculate with. These small cap companies simply have no money left to research. Be careful with the stockmarket these days at it no longer gives quarther. Paulson lost 500Million last month so even the very best minds are having trouble diversifying.

#78 MikeT on 06.21.11 at 6:25 am

Garth, during the last big depression of 2008-2009, 13 years of stock market gains were erased. The market still didn’t reach its previous highs. What caused that? The US RE market? If yes and if we expect the Canadian RE market to fall – why be invested in financial assets? If not – can you please advise what else caused that crash, so we can avoid it in the future.
Cheers.

I think you need to read more. Start with “Too Big to Fail.” — Garth

#79 T.O. Bubble Boy on 06.21.11 at 6:28 am

Don’t worry people, Flaherty just sealed the fate of the housing market:

http://ca.reuters.com/article/domesticNews/idCATRE75J3NI20110620

“The reality is that their housing crisis continues, that there’s a danger of a prolonged housing crisis in the United States. That’s not in Canada, and that’s because we regulate, we supervise, we monitor; we have fiscal responsibility in terms of the housing sector in Canada, a very different place,” he said.”

This sounds a whole like like 2008, when he had rainbows and sunshine in his forecasts while the world crumbled…

As a reminder, he said in August 2008:
he expects solid economic growth this year, despite signs the country was on the brink of a recession in the first half.

… and then in November 2008:
We may well be in a technical recession in the last quarter of this year and the first quarter of next year

#80 SMOKING MAN on 06.21.11 at 6:34 am

Grth said:
Not if you believe stock prices are most influenced by corporate profits. The latest survey (Bloomberg) shows US companies expect to earn 18% more this year than in 2010 – which means stocks are cheap. How cheap at these levels? The lowest price-earnings ratio in 26 years.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

So true, so then why am I short?… Batman showed his ugly ears on a five year chart. However I will reverse my postions when I get confermation of a trend turn.

Ps FEMA camps do exist. My cuz has a contract with them.

#81 Mikey the Realtor on 06.21.11 at 7:09 am

RP is a whack. — Garth

Agree, RP has no sense of running a country. His belief is that everyone is rich or has some professional designation making him/her oodles of money. Take a look at Detroit and that would be the outcome of the US with RP as the head.

poco – tantalizing, link doesn’t work

#82 Cowboy on 06.21.11 at 7:34 am

How the hell would Garth know if Jesus is coming?

#83 Mackie on 06.21.11 at 7:39 am

Garth: while many will disagree with me, including you, I find diversification through etfs and mutual funds to be problematic. Although i own etfs and one or two mutual funds, I much prefer to purchase pure stock and live and die with my decisions. Problem with etfs and mutual funds is that they almost always contain dogs that I don’t want any part of owning. Yes you can get burned investing on your own, but nobody cares more about your money than you. If an investor can’t be bothered then by all means get a financial advisor, but if you care about your money, I’d rather do most of it myself.

Unless you are an untrained amateur. But that’s not you, right? — Garth

#84 bigrider on 06.21.11 at 7:42 am

I am adding some money to Norm Lamarche’s, canadian special opportunities MUTUAL FUND today.

Ya I know, avoid mutual funds because of the high fees. This one has some of the highest since it charges performance fees on top of the MER (what a fool I am).

All you guys can see how I do over the next few years.

#85 BrianT on 06.21.11 at 7:49 am

#73Devore-I don’t know who told you the massive CDS re Greek debt is not a factor-I assume it was the DSM (Deadstream media).

#86 bigrider on 06.21.11 at 7:49 am

Geez, I just calculated how much in fees I have paid over the years to Sprott asset management for holding those mutual funds and hedge funds they sell over there.

What makes it worse is those fees have gone up as an aggregate, each and every year…LOL

I hope no money is in Sprott Shrinkage Fund. — Garth

#87 BrianT on 06.21.11 at 7:53 am

#76Neo-Nice to see such eloquent and well reasoned posts on this site.

#88 despeculated on 06.21.11 at 8:00 am

“Don’t take the US experience and graft it here. There will not be widespread default and foreclosures in Canada, just a general equity decline. That will hurt consumer spending, but not cause a banking/financial crisis. You need to understand the system better. — Garth

I think Garth just said ‘it’s different here’

Of course it’s not the same. People who dabbled here in house porn will be creamed, as in the US. But there will be no banking crisis, which was the main ingredient of economic collapse to the south. — Garth

#89 TurnerNation on 06.21.11 at 8:02 am

Bill Gates – the Doomer!

http://globalresearch.ca/index.php?context=va&aid=23503

” Bill Gates is investing millions in a seed bank on the Barents Sea near the Arctic Ocean, some 1,100 kilometers from the North Pole. Svalbard is a barren piece of rock claimed by Norway and ceded in 1925 by international treaty (see map). ”

He knows, with one stroke of a pen we will have troops coming by to confiscate our food supply for ‘our own good’. Family will wail, plead, as the troops load the allegedly diseased good onto the fire heap. Where have we seen this previously…the communist purges & famines in Russia.

Recall the mad cow scare where cattle were destroyed, and the recent fear rumblings of a “Superbug”.

Our food supply could be forcibly destroyed overnight by our goverments’ health boards. The solution is waiting in the wings…private seeds and GMO foods, profit beyond belief as we all must eat. Man playing god.

The troops wil never go hungry or unpaid, they will be loyal to the end.

#90 FranSix on 06.21.11 at 8:03 am

The one thing that investing in an appropriately chosen bullion related asset can do for you is to protect against currency devaluation. No other investment can accomplish this.

Currencies as a whole have devalued on average 17% yoy against bullion in the last 11 years. This is a red flag on currencies as a whole.

But don’t take my word for it, Stats Can will show a 12% yoy increase in money supply by the Central Bank. And this has been going on since post Nasdaq crash, contributing massively to the housing bubble in Canada.

http://www40.statcan.ca/l01/cst01/econ07-eng.htm

So you look for stock market charts adjusting for inflation, there have been very little in the way of returns since 2000.

http://advisorperspectives.com/dshort/updates/Real-Mega-Bears.php

My strategy for currency devaluation: (a) earn more in assets that actually pay you to on them, (b) then spend it on an excellent life. No point dying with a bag of rocks. — Garth

#91 Neo on 06.21.11 at 8:11 am

The 90s recession in Canada bears no resemblance to the current US experience. You are making this up. Another recessions is entirely possible, even likely. But the housing correction will not in itself wreck havoc. — Garth

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

Why do you keep going back to the U.S.? Garth, PLEASE read what I am actually saying. Forget about the U.S. lol. I am saying in Canada…In the GTA…house prices fell 30% in the 90’s and it lead to the 90’s recession..in CANADA. You are saying the current housing bubble is the worse in CANADIAN history yet you feel it will not have at least an equal magnitude of the 90’s recession. I am saying it will be far worse. That isn’t being a doomer. That is a perfectly reasonable thing to say. I’m not comparing it to the U.S. recession, you are. I’m focusing right here at home in Canada but also using my peripheral vision to see what is going on in the global economy because we are so interlinked. You seem to have a blindspot or perhaps just have the blinders on.

Wrong. The early Nineties recession was the result of 14% mortgages, higher business loans, rampant inflation, government deficits and a weak US economy, plus a few other factors, including house lust (many similarities to today). Housing was a casualty, not the cause. Of course recession is possible now, but not the deflationary collapse that has gripped the US – and it was you who made that initial contrast. A real estate correction will decimate a lot of families, young buyers and foolhardy Boomers, but it will not alone bring the one ingredient necessary for the collapse you predict – a banking and financial crisis. Wise investors will skate through this unscathed, and wealthier. — Garth

#92 BrianT on 06.21.11 at 8:18 am

India is going crazy over gold and silver-Garth should hope that India implodes, because if it doesn’t PM holders won’t have to lick their bullion (they can hire and assistant to lick it) http://www.zerohedge.com/article/indian-gold-and-silver-imports-surge-stunning-500-may

How does a country with 1,155,347,700 people, 83% of whom live in poverty where the uneducated wear their meagre wealth, have anything to teach us? Sheesh. India. Utah. Carthage. You metalheads are grasping. — Garth

#93 Nemesis on 06.21.11 at 8:22 am

I was wondering when you’d pen a, “Yes, Virginia – there is a Santa Claus…”, GT.

Oh, to be such a sanguine scenarist.

“Injustice boils in men’s hearts as does steel in its cauldron, ready to pour forth, white hot, in the fullness of time” – Mother Jones

Well, doubtless we’ll find out soon enough? ;)

#94 bigrider on 06.21.11 at 8:30 am

#86- Garth-“Hope no money is in Sprott shrinkage fund”

No such thing. Nice try.

Too bad all of the house humping people around me could not see the value in putting 5-10% of their assets in Sprott’s Hedge fund.

Anyway, I will go out on a limb here, so Garth can get his axe out and chop it down. I say that a diversified portfolio of very expensive mutual funds from some of the best in the business, Mersch, Sprott, Lamarche , Sehgal ,Taylor a few others will outperform any diversified portfolio of low cost etf’s with a 40/60 weighting, or any other weighting for that matter, that Garth proposes, fees included.

Hack away Garth.

Hey, if you enjoy giving over 250% more in fees to a manager you’ll never meet, be my guest. Somebody has to. — Garth

#95 Macrath on 06.21.11 at 8:33 am

Prophets of Doom – Dr. Nathan Hagens

http://www.youtube.com/watch?v=37FGyLxahAE

#96 tomohawk on 06.21.11 at 8:34 am

Question: isn’t investing in mining stocks a hybrid between the best aspects of owning bullion coupled with owning equities? What am I missing? :-)

Market risk. — Garth

#97 Hashnugs Inthebong on 06.21.11 at 9:24 am

People don’t seem to do the Foxtrot anymore.

#98 Fuzzy on 06.21.11 at 9:30 am

True, if we look at earnings today, it would make the market look ‘cheap’. However, earnings, which have a notorious reputation to be mean reverting, are at record highs. Will they continue to go higher? With stimulus ending and austerity being imposed, can we realistically expect earnings to go higher, justifying higher equity prices?

Stock market might look cheap on earnings, but those earnings are at maximum risk today, as are equities. Though I don’t expect another 2008-like crash, I think this current correction is not over quite yet.

#99 Contrarian on 06.21.11 at 9:42 am

One of the funny things about the stock market is that following the herd is almost a guaranteed way to lose money. Being late to the party means buying higher than you should and selling lower than you should.

When people start telling you that investing in X is easy money, then run away! When most of the voices are confident about their positions, it’s time to really worry.

Everybody is worried about the market right now. The markets are a mess of zigzag bipolar confusion. The smallest bit of bad news sends traders into a selling frenzy. This is precisely why so many stocks are historically undervalued. In other words, it’s a great time to double down.

It’s very similar to sitting at a poker table. You win by getting people to think their hands are worth less than they are or more than they are. If a guy has aces and you’ve got a straight, you want him to think he’s got the top hand. Or if he has aces and you’ve got nothing, then bluffing is all about making him think you have a straight.

The same psychological rules apply to the biggest “game” on the planet. Play when everyone’s afraid, and get away when they’re delirious with greed.

#100 Raincouver on 06.21.11 at 9:43 am

If most of your economy is based off service industry and a bit of tech jobs, what will support the Vancouver economy if construction stops?

#101 GTA Girl on 06.21.11 at 10:03 am

Mentioned previously, 6homes in my upscale subdivision north of Toronto. On market over 6weeks. Savvy pushy real estate agent of one of them just lowered price of one house from $1.388 to $1.2. Still no movement. Over a year ago a less attractive house on street sold for $1.5. Other homes still sitting.

Now our area just got word of a new super highway to be built from hwy400 to Niagara. Developers are already putting in plans for massive urban sprawl in and around our hamlet. What the hell is going on? Who is buying $700k 2,000sqft homes? Aren’t they shooting their condo sales in the gut?

Something has to give. This all makes no sense

#102 Brad in Cowtown on 06.21.11 at 10:06 am

#40 Shawn

“No Brad, RIM’s earnings did not particularly get “smoked”. Its share price got smoked due to a weaker outlook.

Profits in Q1 were down 4% only from the prior year quarter. Indeed they were down 25% from the prior quarter but we would have to understand the seasonality on that.

Do “all ya all” really think big corporations are about to stop making money. ”

You missed the point entirely. Instead of being smug and dismissive, you could maybe…
oh, never mind.

I never said they would stop making money. Where did I say that?! Nothing like trying to have an intelligent discussion and someone drags it into the sandbox with remarks “all ya all”. Your mom must be so proud.

My point was simply that predicting corporate profits to rise 18% in this environment is absurd.
They have to sell more of their good and services in order to increase their profit.
And so many consumers have already spent the money they would have otherwise spent in the future (had they not borrowed it). Instead of spending now, they will be saving and paying down their debt. Instead of buying new smart phones asap, they’ll keep their old ones a little longer…

So unless the extremely wealthy (e.g. Garth) spend more to make up for the little guys spending less, corporate profits will not be rising 18%. Doesn’t mean they won’t make money. I never said they wouldn’t.

That’s not a doom and gloom prediction.
It’s common sense.

#103 JohnnyBGood on 06.21.11 at 10:11 am

I’ve studied mutual funds pretty extensively. I’ve read many books and reports on the subject. I know many people in the MF industry.

I’ve conducted a very thorough review of my own portfolio of MFs over a 10 year period. My MF portfolio contained more funds than I care to admit from more fund companies than you can shake a stick at.

What I found: While different funds and different managers can get varied returns over the short-term, over the long run funds with similar asset allocations and risk will revert to a mean ROR with very little difference in performance. No one has a crystal ball. And genius (or more likely luck) is usually short-lived.

Therefore, one of the best ways to maximize returns is to minimize costs. Reducing your costs by 2% can make a huge difference in the long run. This is true of trading as well. The costs can kill you in the long run, assuming you survive the game long enough to have a “long run.”

An interesting little anecdote about hedge funds (which charge management fees, plus performance fees): A very successful hedge fund manager in Florida was showing off the magnificent yachts and mansions that he and his associates owned. The friend asked, “Yeah, but, where are your clients’ boats and mansions?”

Having said that, someone like Sprott who invested in gold bullion over the last decade or so did see huge appreciation while stock prices basically languished. I know of many other very smart investors who still see huge value and upside potential in gold. The potential should not be ignored or summarily dismissed.

The reason many investors do not like gold is because it is anathema to their investment philosophy which says an investment should generate positive cash flow. Many very smart very successful investors follow this basic principle. To do otherwise is really just speculating. Even many gold bugs say gold is not an investment, but a hedge against currency risk.

But having said THAT, bottom line: You can’t argue with results.

#104 Basil Fawlty on 06.21.11 at 10:17 am

“In fact, doomer is sexy. Dark’s the new black. It’s infectious and narcotic. But also misleading, debilitating and probably wrong.”
At least you said “probably wrong”, since the dominoes continue to fall and Goldman Sachs deserves the title “Vampire Squid”.

#105 squidly77 on 06.21.11 at 10:27 am

#41 xyz

Sorry but do you have a point? All full recourse means is they have to claim bankruptcy to walk.

Yes I do. The states that had the highest fall in price were the non-recourse states. I will leave it you to figure out why.

#106 Kimi on 06.21.11 at 10:39 am

Of course it’s not the same. People who dabbled here in house porn will be creamed, as in the US. But there will be no banking crisis, which was the main ingredient of economic collapse to the south. — Garth

People have gone gold crazy and crazy in general. Everyone I know saying ‘we should buy gold, we should buy gold’. I’ll admit I’m a green horn. I have worked most my life in the airline industry and .. have always been saving because of it. No security at work and I don’t see security in gold … Cash invested wisely is king. I worked in the stock market in the 80’s to late 90’s and have seen people and brokers lose thier shirts in times less serious than these.
… and now I am off to the bookstore buy ‘too big to fail’ … thanks Garth.

#107 brett on 06.21.11 at 10:40 am

Garth said….”Gold will not replace money”

Gold IS money, it fits the 4 requirements in the definition of money, where as Fiat “money” only fits 2 of them. gold is money but it is not a wide spread currency, learn the difference between money and currency. Now go buy some cheap gold stock.

When I can sot at Loblaws with gold, it’s money. — Garth

#108 Mister Obvious on 06.21.11 at 10:43 am

#82 Cowboy

“How the hell would Garth know if Jesus is coming?”
————-

In case you’re unaware, Garth is quite well-connected.

#109 BrianT on 06.21.11 at 10:46 am

#92Garth-Can we assume you will not be attending the huge Bollywood festival in TO this year? http://www.iifa2011toronto.com/en/index.html

#110 tran, Calgary on 06.21.11 at 10:55 am

http://amog.com/offbeat/101352-japanese-scientist-burgers/

Fear not, there’s recycled food; no food shortage.

#111 pbrasseur on 06.21.11 at 10:57 am

The gold bugs are out, time to get the Raid!!!!

#112 Fires, floods and debt oh my... on 06.21.11 at 10:57 am

You are right about everything except one point……..

Jesus will come again………

:o)

#113 BrianT on 06.21.11 at 11:05 am

Classic rant by Bill Gross (manager of the largest bond fund on this planet) -it reads just like Doomer 2.1 (it is written for adult audiences) http://www.zerohedge.com/article/bill-gross-college-worthless

#114 bill on 06.21.11 at 11:09 am

chuckles the clown being buried?

#115 American Werewolf on 06.21.11 at 11:44 am

“That will hurt consumer spending, but not cause a banking/financial crisis. You need to understand the system better. — Garth”

Its also going to hurt everyone with a vested interest in the perpetual growth of the housing sector: carpenters, electricians, plumbers, mill workers, loggers, shipping industry, renovation (carpet/furnishing), etc….. It will cause an instant GDP drop that will cast a decade’s shadow and might push unemployment up to 15% or more. Pair this up with what is happening around the globe (and the Chinese elephant in the corner), and you might see a financial crisis yet.

#116 Chaos on 06.21.11 at 11:52 am

Vlad…

Many moons ago I wrote(tongue in cheek) that very possibly in the future, jail may become the last resort for a secure retirement.

Healthcare, a job, meals, a bed, climate controlled, safer than the streets, education, counselling, rehab, TV, cards, drugs, lots of friends, no bills.

Wow, apparently, the future is now.

#117 Dorothy on 06.21.11 at 11:56 am

I have to agree with Garth when he says that the doomers are painting an inaccurate picture of our current economic climate. The company my spouse works for is currently swamped with work, almost more than they can handle, and it’s ditto for my son’s employer as well. And as all of our friends are reporting similar circumstances in their workplaces, this “doom and gloom” image you often read about appears to be quite wrong.
Sure there are probably some sectors that are not doing very well right now, but that’s always the case no matter what the state of the overall economy may be. But if large segments are doing as well as I’m currently observing, I don’t see how the larger economy can be quite as bad as some people would have us believe.
What we’re really facing is a crisis of confidence following the 2008 financial collapse, and it is that very lack of confidence which may ultimatly prove to be our downfall no matter how well things are right now.
It is a crisis of confidence that is dropping real estate prices in every part of the country except Toronto, Vancouver and Saskatchewan, and it is a crisis of confidence that has recently lowered stock market prices.
If people’s faith in the economy continues to erode, the doomers predictions may well become a self fullfilling prophesy, but it will be caused by the perception of the masses rather than the reality of the situation.

#118 greg on 06.21.11 at 11:58 am

First of all ‘FIAT CURRENCY’ Isnt money its debt, an IOU backed by a promise, A poory devised Ponzi Sheme In which fractional reserve banking makes us poor and the Banks rich through inflation. Gold and Silver is money and has been for 5000 years where as Fiat Debt Currency has been used for 150 years, average life of A Fiat currency is 40 years, and its been 40 years now since Nixon took the American Dollar off the gold standard in 71. Since the american dollar back’s all of the world currency as they go we go. No Country willingly wants to buy american Debt anymore atleast not as much as they used to, just look at what china is doing unloading their position in the dollar. and as The United states buy less of asian goods asia buys less of american debt , this is what really fueled our Bubble last decade, asia living under their means and us living over it. America is a fascist/socialist Country, and all their taxes collected isnt enough to pay for their indulgence so they run a deficit to live beyond their means, only now foreigners own them . With 1 in 7 americans on food stamps and half the population getting a government cheque one way or another there really is no solutuion, they dont produce anything and only really export their debt. Middle class jobs arent coming back as you cant compete with slave labor from china. All this means is QE to Infinity as they will never collect enough taxes and not enough countries are loaning to them, this will cause hyperinflation, if they dont to QE it will cause massive deflation and depression. with national debt well over 100 trillion including MEDICARE AND SOCIAL security and over 100 million americans over the age of 50 who is going to pay for these people to retire when they stop paying taxes and start living of the shrinking middle class? with 1.2 Quadrillian of bad derivatives the government took on their books after bailing out the bankers there really is no plan to get out as they cant, they will devaluate their dollar so they can pay of their debt and try to export more to compete with china, this will cause huge poverty and inflation which will lead to riots. Gold will do exceptionally well soon But Silver out performs gold in hyperinflation, Stocks and housing will go down and most people will get wiped out . I dont think this is dooms day talk i think this is looking at the facts as they are, if you trust the government to fix all your problems and the world financial economy then do nothing, but they never do and wont this time either. buy food gold, silver and a gun

#119 garrulous squirrel on 06.21.11 at 12:09 pm

So…….now the media and the real whores openly admit that Chinese thieves , crooks, dope dealers and pimps are all thats holding up the Vancouver real estate market…….and they brag that this is a good thing?

http://www.vancouversun.com/business/Metro+Vancouver+luxury+home+market+climb+heights/4977975/story.html

Anyone with half a brain in their heads knows that having this many scum bags moving into your neighborhood is going to end up very badly. If you’ve ever been to China you’d know that it’s a total crap hole. The system is driven and created by a people who are so low life and corrupt that nothing can ever make it better than it is. It is these same people who are using Canada as a dumping ground for their corruption and evil ways. And you want to import more? Are you nutz?

Making Canada the money laundering capital of the world shames us all. We have seen a city hall driven propaganda campaign against the rioters ( when in fact every commentator except myself has failed to ask the bigger questions as to why one hundred thousand people felt it necessary to act out in that way) to try and spin the local BS back to where the condo’s were selling and people had crap for brains when it comes to the larger issues.

#120 Cato on 06.21.11 at 12:13 pm

The world isn’t going to end, its just going to change. Change brings opportunity, it upsets the established order of things.

There’s no global banking conspiracy, but money does buy political influence. The Greeks are waking up to that fact and pushing back against a bailout structure that saw banks made whole on backs of the youth. The pain needs to be equally shared. They might have been able to get away with it in an authoritarian regime, but not a democracy.

The US will eventually get things right, but not yet. Big intrusive government & visions of empire is the antithesis of the true spirit of america. The american spirit is about to make a resurgence, don’t bet against it.

This is going to be the decade big gov’t dies. I for one can’t wait to watch the rats scurry for the door. Before it does there will need to be another round of stimulus. Next year is an election year and the jobs promised by the Obama administration never materialized. The market hasn’t priced in the need for another stimulus round but it will at some point and we’ll see another equity rally.

At end of the day there is plenty to be optimistic about. After decades of failed Keynesian policies that gave us nothing but debt and oligarchies we’ll get to finally see emergence of a world closer to what Hayek envisioned. It’ll be a better world as a result.

#121 American Werewolf on 06.21.11 at 12:16 pm

“People who dabbled here in house porn will be creamed, as in the US. But there will be no banking crisis, which was the main ingredient of economic collapse to the south. — Garth”

Maybe I missed all the ins-n-outs, because by the time Lehman collapsed (leading to this great economic collapse you mention), I had already moved to Canada. I left behind a home I spent over a year trying to sell (3 by the time I was done) and a community bleeding jobs

The way I remember it was that everyone was over-extended, over-worked, under-paid and driven by mania to consume. All the solid jobs in manufacturing were gone overseas, the mills were dried up, and the tech boom (and outsourcing) scalped the brains and shuttled them down to a lower middle class existence. Prior to the cusp, the only thing happening was building, so everyone, from comp sci grads to the high-school quarterback, got involved in building homes for each other to live in (or selling them, or financing them, or furnishing, or renovating them…). So the only solid job was in the housing sector, but in order for it to thrive, people needed to spend/borrow more collectively than they were getting paid. That hit critical mass, and it did so prior to Lehman going under.

So yes, the banks hit a road bump and there was an orchestrated credit freeze. But that road bump was the indebted consumers who came prior to it. We didn’t just have a financial sector built on cards, but we had a service economy built on cards that fell first. If you think there are no similarities, such that the Canadian economy couldn’t stumble prior to the financial sector–you are fooling yourself greatly.

Though, Canada does have a leg up as long as certain command economies are slurping up its commodities.

#122 bigrider on 06.21.11 at 12:21 pm

#94-Garth said “hey if you enjoy giving 250% more in fees to a manager you will never meet, be my guest. somebody has too.”

What I enjoy is consistent and reliable outperformance of benchmarks, which above mentioned managers have been able to deliver.

10 baggers in lamarche and sprott since beginning of last decade while indexes are relatively flat are hardly and accident.

By the way, I have met them all and so to the opportunity exists for those who wish to meet them.

#123 eaglebay on 06.21.11 at 12:29 pm

#99 Contrarian – Good Post, very truthful.

I see that most bloggers on this site are doomers.
They like to buy high and then sell low. Wow.
Not too many people here seems to know what DD is.
Basic fundamentals. Location, management, financing and demand.

I made money this year in the stock market, so far.
I will continue making more money in this market.
This year should be one of my better years.
The doomers are down on the market, too bad. Lack of knowledge, fear, pessimism.

They see the world as a troublesome place and forget that people have needs for commodities. They want a better life with decent infrastructure, accommodations, diet and leasure. China, India, Brazil, Russia, are good examples.

I suspect that most people here are just a bunch of bloggers without much money and the capability to use their money in a smart manner.
Bitch, bitch, bitch. Get off your asses and learn. Ditch your preconceived ideas and brain washing.

#124 eaglebay on 06.21.11 at 12:34 pm

#102 Brad in Cowtown

Are you forgetting that over 3 billion people on this planet are trying to increase their standard of living.
That’s a lot of consumers for an exporting country like Canada that’s also very rich in commodities. Don’t be so provincial.

#125 eaglebay on 06.21.11 at 12:41 pm

#103 JohnnyBGood

Mutual Funds are averages. What is an average? The best of the worse.
Common sense and half a brain can certainly purchase equities. No tips, no following the crowd, no emotions and no attachment. Learn to do your DD properly and be patient.
Beware of economists and mutual fund managers.

#126 fancy_pants on 06.21.11 at 12:55 pm

Markets think a 2008 rerun is impossible. Now I agree.

I ain’t no doomer but perhaps even you have been fooled into a happy stratum of bliss? (excluding RE)

Having said that I know I am the once bitten twice shy guy who has become ridiculously cautious with my finances and have lost opportunites because of it.

But on the flip side, it allowed me to reach a point where I have learned to be content to live modestly and within my means and enjoy life instead of growing ulcers trying to get ahead by a dime.

The greed bug will kill you from the inside out.

#127 Kevin on 06.21.11 at 1:16 pm

@bigrider:

“I say that a diversified portfolio of very expensive mutual funds from some of the best in the business, Mersch, Sprott, Lamarche , Sehgal ,Taylor a few others will outperform any diversified portfolio of low cost etf’s with a 40/60 weighting, or any other weighting for that matter, that Garth proposes, fees included.”

Of course! That’s what they WANT you to believe.

One question though: How come they’re so opposed to putting that in writing? How come they refuse to tie their compensation to the results of their superior skills, but rather insist on being paid a flat percentage of “assets under management?”

OK, I lied, I have 2 questions. The other one is: If these guys are such experts at picking winners, why would they waste their time working, making YOU rich, when they could instead just build themselves a huge fortune and retire a beach down south for the next 50 years?

Is it possibly because – like you – they’re just guessing? Maybe they’re NOT actually as skilled as they want you to believe? Maybe they’re selling losers and chasing winners (read: buying high and selling low), just like the rest of us?

#128 Devore on 06.21.11 at 1:35 pm

#85 BrianT

I did not say it was not a factor. I was responding to the assertion that the ones doing the bailing out (ECB, IMF, US, Germany, France) will do so to avoid paying out CDS. Which is simply false. They have nothing to do with CDS.

Bailouts serve one purpose: to make creditors whole. Oh sure, it will be dressed up in political rhetoric and voodoo economics. At the end of the day, only one thing matters. Who benefits. Follow the money.

If you believe Greece will be endlessly bailed out, then you must also be buying Greek bonds with both hands, because not only will they continue to pay 20% until maturity, but will pay out 100 cents on face value, for a nifty capital gains.

#129 FranSix on 06.21.11 at 1:49 pm

“Gold will not replace money”

The recent passage of the Dodd Frank bill in the U.S. shutting down price speculation in precious metals for all intensive purposes on all futures markets may have had the unintended consequence of re-monetizing an asset that has always been money.

Garth, not only are you a racist against Asians, you are an exceptionally narrow minded short-sighted bigot when presented with the facts. Your triumphalism on pointing out the housing bubble borders on the infantile, and you should not be giving advice to anyone.

#130 Ronaldo on 06.21.11 at 1:57 pm

#63 Sebastien – I’ve read that there are 1.2 quadrillion in derivatives worldwide….meaning that if you started to count from $1 and continued for every second, it would take you 32,000,000 years to get to that number..can’t confirm that tho…

#131 The Original Dave on 06.21.11 at 2:06 pm

Hey G, in the past few months, you mentioned that the stock market was overpriced or due for a correction by 10%. Today you posted that corporate profits were up 18% (if i remember correctly).

Are you saying that the 18% was priced in already before the correction started?

I said the market was overvalued and would correct. It did. I also smart people buy dips. Did you? — Garth

#132 jess on 06.21.11 at 2:26 pm

…”The forced occupation loan was imposed by the occupying German and Italian forces on Greece under the terms of a unilateral decision which they took in Rome on 14 March 1942, and which was subsequently notified to the collaborationist government in Athens.

Under the laws of war in force at the time, in particular the 1907 Hague Convention, an occupied country had to bear the costs of its occupation. So the Germans and Italians forced the collaborationist government to pay them 1.5bn drachmas per month in occupation costs.

However, the Germans, in order to fund Rommel’s war operations in North Africa, imposed on Greece a forced occupation loan.

Accordingly, the Bank of Greece was obliged to open an interest-free loan account in drachmas for each of the occupying powers. Germany stated that it would repay the loan later. The original, forced occupation loan agreement was amended later and was also signed by the collaborationist Greek regime.

The amount of the loan received by the German side during the occupation was estimated in 1947 to amount to 135.8m dollars.

It is worth noting that the German side already paid, during the occupation, two loan repayment instalments. The subsequent refusal to pay the loan instalments has since converted the loan into an interest-bearing one due to arrears. Finally, it should be noted that after the war Italy acknowledged its debt resulting from the occupation loan and proceeded to a settlement with Greece for its repayment in conjunction with the payment of related war reparations.

The issue of the occupation loan was raised by the Greek side in 1955 when it was noted to the Germans that the occupation loan was still due since it was comprised of “normal credits that should be paid”. Then the question of the occupation loan was informally raised by Greece in 1964 through professor Angelos Angelopoulos.
This is attested by the report submitted by Papandreou on 23 February 1965 to then prime minister George Papandreou, in which, inter alia, he referred to the occupation loan.

Then, on 24 February 1965, Andreas Papandreou submitted to the director-general of the ministry of finance of West Germany, a Mr Kaizer, a relevant statement regarding the loans granted, during the war, by the Bank of Greece to the German occupation authorities, in conjunction with the application for a longterm development loan to Greece.

Since then, the issue was raised again in 1974 by Greek central bank director Xenophon Zolotas and verbally on 18 April 1991, by the then foreign minister Antonis Samaras to his German counterpart, Hans-Dietrich Genscher.

The occupation loan was then raised in the most formal way in 1995.

So, following an order by then prime minister Andreas Papandreou to foreign minister Karolos Papoulias, the Greek ambassador to Germany, Ioannis Bourlogiannis, presented on 14 November 1995 to the state secretary for foreign affairs of Germany, Peter Hartmann, a relevant note verbale requesting the start of negotiations between the two countries on the issue of the war reparations and, in particular, the forced occupation loan.

This note verbale was dismissed by the German government in a statement issued by Hartmann.

Sixteen years later the Greek people still await its government to negotiate the repayment of the occupation loan and the payment of war reparations.

And all this when, as mentioned above, the German side has actively acknowledged, since the occupation, its occupation loan debt to Greece by virtue of it having paid two loan repayment instalments to the Greek side.
•Epaminondas Marias is an associate professor of European Union institutions in the department of economics of the University of Crete

http://www.athensnews.gr/issue/13427/36592

#133 Midas on 06.21.11 at 2:36 pm

The issue isn’t whether gold should be money. The issue is whether a free market should determine what money is, as opposed to central banks.

If a free market determined that tobacco were money, as it was in prisoner-of-war camps, that’s fine by me.

#134 Dave on 06.21.11 at 2:48 pm

Wow… if the readership of this blog is any indication, we need to start pumping antidepressants into the water supply!

I think the more that people read financial newsletters and doomsday websites, the more likely it becomes that they will do something silly and reckless with their investment portfolios. It’s a waste of time to obsess about this stuff. There are millions of moving parts in the global economy, interacting in profoundly complex ways. Trying to predict where it’s all headed with any degree of precision is a mug’s game. So if you want to invest, then your best bet is simply to set up a balanced portfolio and stop fiddling with your investments on an hourly basis.

On the other hand, if you’re one of those people who is convinced that every investment is doomed to collapse in some great upheaval, then forget about the markets, gold and real estate altogether. Try investing in your soul. Cash out some of your portfolio and do something memorable with your miserable life. Rent a cottage in Tuscany. Go on a safari. Try scuba diving in Thailand. Do vounteer work overseas for a couple of weeks. Visit Japan, where they have more pretty girls than they have debt. Whatever floats your boat.

In summary: Today is the first day of summer. That means long days, short skirts; hot sun and cold beer. A lot of people here need to stop worrying about the end of the world and start enjoying life.

#135 Coho on 06.21.11 at 2:57 pm

Garth, it is interesting how you lumped in there will be no coming of Jesus with there will be no financial collapse in Canada, no hyper-inflation, nor are there FEMA camps, as if the arrival of Jesus would be a bad thing. The moneychangers of his time didn’t like Him around either…

#136 garrulous squirrel on 06.21.11 at 3:01 pm

From Crap-Couver to Hong-Couver to Riot- Couver to Money laundering -couver, Crime -couver, Gang – couver to…….. Rat – Couver…………….the ‘Shitty of Rats’ keeps finding new lows.

The Bureaucrat inspired hate campaign against the unhappy citizens of Rat-Couver reminds some of the Stalinist era where families were pressed to rat on each other. The bureaucrats and the pissants who follow are spending enormous time and tax payers money to hype a campaign against the ‘rioters’.

Duh…does anyone really believe the BS that a truckload of brooms and shovels just ‘found itself’ at curbside the morning of the media blitz? Doesn’t anyone ask who those people were and where they came from? Do you have to be an idiot not to realize that the hate campaign is just propaganda out of city hall?

Remember the hate campaign was inspired by the same mayor who killed you right to free speech and assembly during the overly hyped Olympics. Now he is trying to persecute the 150,000 who spoke the truth of how they feel through their actions.

The condo developer/owners at ‘shitty hall’ are desperate to keep prices up…..because they all depend on the hype to save them from financial ruin. They must keep up the hype at all costs. Don’t anyone dare to express themselves………….the pimps don’t like it.

It seems that civic expression and Charter rights don’t sit well with the delicate mayor of Rat Couver.

#137 Truth seeker on 06.21.11 at 3:07 pm

Nobody really knows what is going to happen. The only thing that is guaranteed is that Jesus will come and judge all of mankind.

#138 Vancouver_Bear on 06.21.11 at 3:39 pm

#81 Mikey the Realtor on 06.21.11 at 7:09 am

Link works, it just one more time proves that realturds are just….well realturds!

Hint for the realturds (remove !!!!! in the end)

#139 BrianT on 06.21.11 at 3:46 pm

#134dave-Thanks for the stereotype that only bubbleheads/himbos can enjoy life.

#140 Neo on 06.21.11 at 3:51 pm

Wrong. The early Nineties recession was the result of 14% mortgages, higher business loans, rampant inflation, government deficits and a weak US economy, plus a few other factors, including house lust (many similarities to today). Housing was a casualty, not the cause. Of course recession is possible now, but not the deflationary collapse that has gripped the US – and it was you who made that initial contrast. A real estate correction will decimate a lot of families, young buyers and foolhardy Boomers, but it will not alone bring the one ingredient necessary for the collapse you predict – a banking and financial crisis. Wise investors will skate through this unscathed, and wealthier. — Garth

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

Actually Garth. You are wrong. The crash in the GTA of 30% wasn’t experienced in ALL of Canada. As a whole Canada has NEVER seen nominal prices fall more than marginally. In the 90’s, housing in Canada was basically flat as a matter of fact. The only time it has ever plunged was during the 2008 crash whos epicenter was the U.S. who you summarily have dismissed as having an impact. Have a look at the chart in this link for Canada housing prices since 1980:

http://www.theeconomicanalyst.com/content/have-canadian-consumers-reached-their-limit-must-read-report-year

So if what you say is true and there is a 25% average haircut nationally then we are in big trouble. I understand there other other factors precipating the 90’s recession. But your entire list I could argue exist today in some form. All except Bob Rae of course. We can’t ignore that (-: Mentioning 14% interest rates in a vacuum doesn’t mean much, since prior to these foolish emergency interest rate policy, the late 80’s always had a double digit interest rate environment. You needed to present the RATE of interest change. If you did that you would see that a 2-3% change in the next 1-2 years is entirely feasible. However, in this current environment homeowners are FAR more leveraged than 1990. Anyway, I guess what I am saying Garth is that if this 25% average decline happens to Canada OVERALL. We are in deep doo doo, that includes your precious stocks, dividents, ETF’s as well as the Gold hoarders and real estate pumpers. Having our Banks coming out like roses in the short to medium term because we’ve assumed all the risk will be of little consilation to Canadians as they have been so far to Americans.

Lastly, don’t kid yourself. If the U.S. doesn’t pull itself out of there deflationary deathgrip it is in. We aren’t escaping it either and neither is the rest of the world. We are far from an autononous economy that is self sustaining. ie, circa 2008.

#141 new_era on 06.21.11 at 4:07 pm

Bigger job losses expected in the US

Canada and China might feel the same pain with so much on their ecomony based on real estate

http://money.cnn.com/2011/06/21/news/economy/california_budget/index.htm?iid=HP_LN

#142 Utopia on 06.21.11 at 4:15 pm

“People who dabbled here in house porn will be creamed, as in the US. There will be no banking crisis, which was the main ingredient of economic collapse to the south”. — Garth
—————————————————————————

It seems it is a tough row to hoe with the Gloomer’s and Doomer’s today. Everyone sees a mega crisis around every corner. To be honest, I have fallen into the same mental funk too from time to time. The Doom theory is just so compelling at times that it is easy to forget the basics that the economy is actually built around.

I agree with Turners comment above. We do have a stronger banking sector and one that is less exposed than most others in Europe and the US. We are even getting the first news snippets of major credit issues coming out of China. So why are we better off?

Let’s give some consideration to that over the next few days and count our lucky stars. In the meantime I would suggest to the banks, who are pushing Lines of Credit hard lately, to cool their heels and use some common bloody sense.

The last damn thing we need in this country is even one stretched and over-leveraged bank that cannot make ends meet (I mean seriously, you bank execs…..start using your heads). You read the media reports and the warnings of your own economists too I presume?

So pay attention. This is no time to be pushing the envelope.

#143 Brad in Cowtown on 06.21.11 at 4:19 pm

#125 eaglebay
” Are you forgetting that over 3 billion people on this planet are trying to increase their standard of living.
That’s a lot of consumers for an exporting country like Canada that’s also very rich in commodities. Don’t be so provincial. ”

Standard of living improvements mean nothing when they are accomplished largely through abuse of cheap money. It won’t be cheap forever.
When that realization sets in, and people begin to understand they’re spending more money to buy the same basket of goods and services, what will THAT do to their “standard of living” ?

#144 bigrider on 06.21.11 at 4:27 pm

#128 Kevins Rant to Bigrider.

Your blather is so full of holes I am only going to respond once. You can go ahead and get last word as most people try to do on this site. You will only reply if you don’t grasp what I am plainly saying.

You say they don’t tie their compensation to performance. Incorrect. Many if not all hedge funds charge performance fees in addition to fixed costs. Fixed costs go to pay for administration ,sales fees and the glossy brochures you receive when you invest in the products as well as a profit for underlying fund firm. Yes they are “expensive” but I care only for net result to my portfolio. If performance is exceptional, I am happy to pay, “horse before the cart ” my motto. By the way, ETF’s have a cost as well, albeit lower for sure. ETF’s guarantee NOT to outperform there respective indexes for that cost, quite a pill to swallow in my opinion since indexes have gone nowhere for 10 years. . Also, neither “guarantee” as you put it , performance at all.

You said “why would these guys waste their time making you rich when they can make themselves rich etc etc. ” These managers have there own assets invested in there own products and have become extremely wealthy doing so. Their performance and skills are proven by a long track record of outperformance. You would have done yourself good to do some research and invested in the likes of those mentioned, you might have done as well as I have.

You said ” they might not be as skilled as they want you to believe..they are selling winners and holding losers..guessing” Once again, look at long track record. One year of outperformance could be an accident, two maybe, three but 10??.

You want to make some money, hope that Sprott, Lamarche, Mersch ,Taylor ,Sehgal and a few others stick around for a while and start paying them some “fees’ by investing in them.

After all ,when you hire a money manager like Garth you are putting your faith in him and he will charge you a “fee” as well ,will he not.? Albeit a bit lower on Garths side for fees but I am cool with that 1 to 1.5% more to get these guys above in my corner.

Again, I have nothing against ETF’s at all and use them regularly as well.

#145 Utopia on 06.21.11 at 4:33 pm

I really did not express myself clearly in the previous post. I am worried that our banks our relying to heavily on an old model of growth that depends primarliy on mortgage and LOC lending to generate revenues and they are not adapting quickly enough at a time when credit is reaching a peak in this country. There is a fine line between open exposure to credit granting in a declining product segment and systemic risk in my opinion. I do not have answers to how banks can continue to achieve past performance but I would imagine better opportunities might now exist in acquisitions, small business lending, investments beyond our borders in key growth areas and other forms of finance such as insurance (yes I know insurance is a conflict zone). But to not make efforts to evolve as general credit granting itself becomes risky makes no sense to me at all. Where are the bright people within the banks who can see the new opportunities for expansion and are not stuck in the same old mould of trying to expand on business models that are already fully mature and heading into decline?

#146 Makaya on 06.21.11 at 4:34 pm

@Truth seeker
“The only thing that is guaranteed is that Jesus will come and judge all of mankind.”
You’re kidding, right? Nobody told you there is no Jesus, no god, nothing? I think Global should do a piece of news on it!
The bigger the lie, the more people will believe it lol. Like Real Estate in Vancouver will keep going up. LMAO…

#147 Sail1 on 06.21.11 at 4:40 pm

Mark Carney came as close as any central banker ever could on Wednesday to saying some parts of the Canadian housing market are in a bubble. He also basically said there’s not much the Bank of Canada can do to stop the frenzy.

http://business.financialpost.com/tag/housing/

Seems hard to believe that the bank of Canada cant do anything. Just move rates up a little that will stifle the frenzy very quickly.

#148 jess on 06.21.11 at 4:41 pm

US Mayors Call for End to Wars and Nuclear Weapons
Tuesday 21 June 2011
by: James Russell, Truthout | Report

Mayors from around the country gather at the United States Conference of Mayors in Baltimore, June 17, 2011.
Peace activists won a major victory on Monday, June 20, when the US Conference of Mayors voted to adopt two resolutions that call for a drawdown of troops in Iraq and Afghanistan and the abolition of nuclear weapons. Both resolutions also demand the reprioritization of defense spending, including the $126 billion spent each year in Iraq and Afghanistan, toward the needs of municipalities.

The group, which represents mayors of municipalities with 30,000 or more residents, has not passed such a resolution in 40 years.

Institute for Policy Studies (IPS) fellow Karen Dolan directs IPS’s Cities For Peace project, which organizes elected officials and activists to take action against war on a local level. In a statement to Truthout, Dolan said that the mayors, “are responsive to the needs of the people in a way in which Congress and the president have not been. Unless money is better spent at the state and local level, we will not see an economic recovery.” According to IPS, hundreds of municipalities around the United States have called for the end to the wars in the Middle East.

While the antiwar resolution was subject to vote after a contentious proposal to pull it, the nuclear weapons resolution passed unanimously, according to observers.

The resolutions come on the heels of a report released by the conference that shows that, “double-digit unemployment rates persist in 103 (28%) of the 363 U.S. metro areas.” Some areas, like Dayton, Ohio, and Detroit, Michigan, are not forecast to see a return of jobs lost to the recession until at least 2020.

U.S. METRO ECONOMIES | JUNE 2011
GMP AND UNEMPLOYMENT FORECAST
Key Findings

http://www.usmayors.org/metroeconomies/2011/keyfindings.pdf

#149 DM in C on 06.21.11 at 4:47 pm

#130 Fransix

Got a lot of skin in the housing game, eh?

BTW, the phrase is ‘all intents and purposes’.

#150 jess on 06.21.11 at 4:52 pm

Mr. Gross reference to education in his country. …and cheaper wages elsewhere…

How does he answer to all the “foreign” worker programs in his own country ?

Fifa investigation
A while ago we blogged the story about FIFA’s so-called African “tax bubble” whereby FIFA forced a poor African country to forego all its football tax revenues in order to funnel yet more money into FIFA’s gilded Zürich headquarters. That story was enough to make any right-thinking person retch; Panorama interviewed some right-thinking Dutch observers who tend to agree with us. Professor Han Kogels of Erasmus University, Rotterdam, had this to say.

“They want to create their own tax haven. A fully exempt situation. That is, FIFA and its FIFA subsidiaries that are fully exempt from any tax whatsoever levied at every level – state level, municipal level. All sorts of taxes: consumption taxes, income taxes – you name it – it’s all exempt.”
http://taxjustice.blogspot.com

#151 SMOKING MAN on 06.21.11 at 5:07 pm

You want to know why the Vancouver has gone nuts.
Its the Hong Kong east.

A parking spot in Hong Kong goes for 700,000K you don’t want to know what a condo goes for.

#152 Jed on 06.21.11 at 5:12 pm

#40
And at the same time they think stocks will plummet, the dumber half is loading up on blackberries, ipads, etc…

#153 Truth seeker on 06.21.11 at 5:13 pm

Makaya,

Just like the smartest of the smart failed to see the past financial crisis, the smartest of the smart claim there is no God. it is actually foolish to say there is no God as it would be actually saying you know all knowledge in the universe. It would be like me saying there is no Bobby Johnson in the universe— foolish.

Besides, billions claim to know Jesus. Just like you claim to know your friend, your wife, your boss, etc.

Think about it with an open mind.

#154 I live in Edmonton on 06.21.11 at 5:16 pm

A subject that rarely gets much talk on here is the quality of buildings being built since 2000. At least here in Alberta our building codes have had no standard for building envelopes throughout the province. Widespread throughout the city we are experiencing buildings rotting from moisture infiltration and there’s not a damn thing we can do about it!
A good friend of mine just got a condo assesment for $30,000 due in one year because her exterior is rotting! She paid $239,000 for her 800 sq. Ft. 1 bedroom here in Edmonton and it’s worth about $199,000 now and going lower (avrg. condo prices have gone down $7000 per unit the last 2 weeks in Edmonton). with what she paid for her unit, the net loss on the price correction starting to take place, and the loss of $30,000 she has to pay for the poor building standards, she will lose nearly $80,000 in just four years!
For $80,000 she could have rented her 1 bedroom in a nicer building with pool etc. for 7 years and banked her $1500 a month mortgage payments & been further ahead!
One thing people should remember just because it’s new doesn’t meen it won’t be plagued with problems. I won’t even go into the foundation issues on the sotuh side of the city that were built in flood zones, amny have to pay $1200 a year for full coverage house insurance!

#155 BrianT on 06.21.11 at 5:25 pm

#146sail-Hard to read that article without throwing up in your mouth a little. The part about these idiot grifters blowing shareholder capital because of a “quirk in international banking rules” was classic.

#156 Ben on 06.21.11 at 5:39 pm

A guy arrived from Vegas yesterday here in Dallas for some management course.
We got talking real estate in Vegas… he bought his house pre bubble for 88 K and it went up to 320 K top of bubble but he never sold, now it’s worth 80 K.
He says the bottom isn’t in yet either, it’s got so bad that theives are breaking into the endless foreclosures and stealing the copper piping, furnaces, ac units, etc.. and the banks could care less.
He said that $1 million dollar homes at top of bubble can be had for 250 K now.

#157 garrulous squirrel on 06.21.11 at 5:40 pm

Regarding ‘buy the dips’…….I don’t know if market timing is the best strategy unless you’re one of those of us who follows the market from 36000 feet and can actually determine a dip or a promotion ( conversely) from a depression.

I agree generally….but I think it wiser to keep a little powder dry every month and buy incrementally into companies that show strong earnings and a history of raising dividends.

Theme investing can be just as dangerous to the amateur…so careful there too. Popular media stocks and media theory can also be given a wide berth…..reporters are idiots and whores….most times both.

Don’t be in a hurry to buy today. Be more concerned about what you buy.

#158 im stupid on 06.21.11 at 5:51 pm

Hey Garth any response to mid june treb sales?

Done. — Garth

#159 Junius on 06.21.11 at 6:16 pm

#155 I Live In Edmonton,

You said, “A subject that rarely gets much talk on here is the quality of buildings being built since 2000.”

Yes, it has been discussed. Most of Vancouver is total junk. Now it is Chinese Junk.

Leaky Condos continue to plague many people. Recently one of the premium condos downtown had an assessment on their windows that will be a killer for most owners. Fortunately (according to BPOE) they all were bought with cash anyway so it won’t matter.

My father was a developer. He says that with every construction boom comes a wave of lousy construction and ugly architecture. We now have the proof in Edmonton, Vancouver and pretty much everywhere.

#160 JohnnyBGood on 06.21.11 at 6:20 pm

#126 eaglebay

What? Did I give the impression that I actually like mutual funds? Ughh… I feel so dirty.

Seriously. While you CAN get decent performance with mutual funds (I know because I have), the costs are very high. Over time this will dramatically reduce your long-term returns. Also, MFs are very illiquid and opaque. Just a few reasons I got out–though certainly not the only ones.

#161 The InvestorsFriend on 06.21.11 at 6:22 pm

Neo at 141 said:

As a whole Canada has NEVER seen nominal prices fall more than marginally. … Have a look at the chart in this link for Canada housing prices since 1980:

http://www.theeconomicanalyst.com/content/have-canadian-consumers-reached-their-limit-must-read-report-year

The problem with that Chart is it is on an aritmetic scale, so a 10% dip now looks huge compared to a 10% dip in 1980 when houses were under $60k

A logarithmic scale is the only way to compare percentage drops across years when the price trend is changing a lot.

On a log chart you would see that the percentage dip in 1982 was probaly easily the largest on the chart.

#162 Nostradamus Le Mad Vlad on 06.21.11 at 6:28 pm

“The only panic currently worth noting seems to be on this blog tonight. — Garth”

Well, I’m tired so count me out of this panic!

#53 Patrick — “Look out below Hongcover.”

An article in the KDC today said that rich Chinese are venturing less to North and West Vancouver, more to HK. Seems they may be hunkering down a little, playing their cards close to their chest.

#67 AACI Home-Dog — “More diversity, less market risk. — Garth”

What about Chinese rare earths in ETFs (or Cdn. companies)? Too risky? Or should one stay with Cdn. junior mining / exploration companies?

#89 TurnerNation — “. . . private seeds and GMO foods . . .” — There is more than enough evidence that one acre of arable land can support numerous families. Farmer’s Markets are a great source of info., for setting up and buying directly from farmers, bypassing all the extra costs.

#93 Nemesis — “Well, doubtless we’ll find out soon enough?”

Interesting post. Care to take a guess at what ‘soon enough’ might be? A weather forecast is 50% accurate, 50% wrong so I’ll say anytime from now until 2015 when the boomers receive their CPP / OAS / McMansion mtgs. + bills to go along with that!

#108 Mister Obvious — “In case you’re unaware, Garth is quite well-connected.”

I suspect many here did not realize how well connected Garth is to the other worlds. I learn something new here every day!

#116 Chaos — “. . . jail may become the last resort for a secure retirement.”

A resort, such as on the Costa del Sol? Hah! Call up CSIS, TSA and Homeland Security, say boo, be jailed for life with free health care, three daily meals, exercise, fresh air all at taxpayer’s expense.

Where do I sign up? Now I have smidgen of Harper’s thinking (warped as it is), DSK, Jack the Ripper, you and I can play poker at night!

#163 Hoof - Hearted on 06.21.11 at 6:41 pm

#157 Ben

Not surprised….

One would be amazed at how fast an uninhabited dwelling can deteriorate.

No heat….cold winter pipes pop. Mold on ceilings. Thieves strip copper pipe, fittings…windows vandalized….

It has to be a nightmare in those areas.

Eventually, the cities will be forced to tear them down…at taxpayer expense …..too much of a hazard.

#164 Industrial Guy on 06.21.11 at 6:43 pm

“The latest survey (Bloomberg) shows US companies expect to earn 18% more this year than in 2010”. These stats don’t tell the whole story.
Yes sir, they are making money like bandits ……. but …. jobs are lagging behind and in some parts of the USA unemployment it’s actually rising again .. why? Because those profitable corporations continue to export jobs out of the USA and Canada.

Chrysler for example, expects to do very well in the small car segment with the new FIAT 500 .. a car made in Mexico.

#165 Mikey the Realtor on 06.21.11 at 6:44 pm

#139 Vancouver_Bear

too many exclamation marks in the link, once I removed them I got a rude awakening with your pic staring right at me, that was a sick joke, bear.

#166 Industrial Guy on 06.21.11 at 6:48 pm

“Back-to-work legislation imposes lower wages than Canada Post’s last offer” T.O. Star

The Harper Government just declared war on the pulic service …. and this will end well?

Whether you like or dislike Canada’s public employees. They represent a significant part of our economy.

#167 Hoof - Hearted on 06.21.11 at 6:52 pm

#146 Utopia

IMHO…its been nothing but a ponzi scheme for decades.

The Banksters and Wall Street have maxed out/run out of their ideas of milking us dry.

People are waking up…

#168 Tony on 06.21.11 at 6:56 pm

The companies are still losing their shirt. The only thing that changed was reporting rules and cost cutting. The stock markets will do an 80 percent down move the only question is how fast and for how long.

#169 Herb on 06.21.11 at 7:09 pm

Please, People, let’s stick to real estate and the factors that affect it: economics, politics – and sex. Let’s leave religion out of it.

#170 poco on 06.21.11 at 7:09 pm

#148 Sail 1
Mark Carney came as close as any central banker ever could on Wednesday to saying some parts of the Canadian housing market are in a bubble. He also basically said there’s not much the Bank of Canada can do to stop the frenzy.
http://business.financialpost.com/tag/housing/
Seems hard to believe that the bank of Canada cant do anything. Just move rates up a little that will stifle the frenzy very quickly.
______________________________________________

I, along with most other potential home buyers, have wished for rates to start moving up to quell the insanity in the price appreciation of housing in most areas. The thinking there being–the higher rates will eliminate many potential buyers (can’t qualify for a mortgage) and will eventually bring prices down to a realistic level.(simple terms anyways)

I’ve followed the tri cities for about 2 years now and can say that not all areas had the big price increases after the 2008 downturn as Vancouver did. The more i look the more i find sellers who are underwater or near underwater and appear desperate to get out.

Condos sitting since last spring and now with price drops of $200 to $500–not in the thousands anymore, when the first price drops were usually 10k because of lack of interest. Townhouses in complexes i’ve followed, where in Jan they were selling for 20k to 40k more than today–more and more selling for almost what the owner paid in 08 and09

I’ve posted many properties (mostly condos) that are listed for less or sold for less than the owner paid just a few years ago —- if i can find them–the realtors definitely know there’s hundreds out there and i would imagine F and C know about them too–and no it’s not just the tri cities –it’s all over

So, what to do –raise rates –eliminate more low end buyers from the market–send these sellers who are already underwater deeper into debt because they have to lower their price further.
just my thought…….

#171 guelphite on 06.21.11 at 7:14 pm

I am a psychic.
A big crash is coming. Soon
Go cash.
Trust me.

#172 TaxHaven on 06.21.11 at 7:49 pm

“RP is a whack. — Garth”

That’s all I needed to hear, mainstreamer!

Now, I’m willing to state that MAYBE, just maybe, the “doomers” are correct…

#173 Bill Gates IV on 06.21.11 at 7:51 pm

You are an idiot. Hope you have the balls to print a retraction exactly 12 months from now.

Sure. And you, Billy? — Garth

#174 miketheengineer on 06.21.11 at 8:08 pm

Garth:

Everything is real rosy dude.

Lets see. Gulf of Mexico….screwed due to BP oh and this has totally screwed up the gulf steam.

Now lets see….Reactors blow up in Japan. Air, ground and water total screwed for 10 million years. Nuclear reactor industry total destroyed in most countries now. Japan and Germany shutting them down.

Fema Camps..they exist…see Video by Jesse Ventura. I am sure Nostradaumus le mad Vlad knows where the link is. They banned this video, so no one could see it.

Massive Flooding across globe, US, Australia, China, Canada…biblical proportions. Lots of people totally screwed and displaced. Never seen before in our recent history.

Even Garth has a bunker.

Do your self a favor, get a good set of Camping Gear…and prepare for the unexpected.

I never said things were rosy. I just said there’s money to be made. That’s what this is all about. No? — Garth

#175 Hoof - Hearted on 06.21.11 at 8:27 pm

Leaky buildings:

What amazes me is why people haven’t figured it out.

In the old days, Hi rises were built with either brick and/or concrete on all exterior surfaces.

Most balconies were recessed into the building, but outside cantilevering was fine.

The reliance on caulking to seal joints is ridiculous..it is is temporary….like a band aid .

These aforementioned buildings, built up until the early 1980’s, are still standing and I can’t recall ever seeing exterior remediation work.

#176 Makaya on 06.21.11 at 8:33 pm

@ Truth Seeker

“Just like the smartest of the smart failed to see the past financial crisis, the smartest of the smart claim there is no God. ”
So you mean you have to be dumb to believe in god? hmmm, exactly what I thought!

“Besides, billions claim to know Jesus. Just like you claim to know your friend, your wife, your boss, etc.”
If they know him so well, could they introduce him to me? I’d love to have a conversation with him. I have so many questions to ask him, like why he has constantly skrewed up for 2,000 years or why he has pushed RE prices so high that the poor family, the ones that truly needs him, can’t even dream of owning a home in Riotcity.

PS: I was born and raised in a catholic family, went to religious school, went to church all my youth, etc. And then I started to think by myself…
@Herb, isn’t real estate a religion in Canada? I thought Garth was a priest!

#177 JohnnyBGood on 06.21.11 at 8:53 pm

167 Industrial Guy on 06.21.11 at 6:48 pm

“Whether you like or dislike Canada’s public employees. They represent a significant part of our economy.”

Uh, huh. And who pays for the salaries and benefits of the public service, which makes up this “significant part of our economy?”

#178 Sebastien on 06.21.11 at 9:23 pm

Here’s some free pessimism porn for all!

http://www.youtube.com/watch?v=4ECi6WJpbzE

#179 Keith in Calgary on 06.21.11 at 9:31 pm

And if governments hadn’t printed trillions of money to prop up said financial markets would your little pieces of paper be worth anything at all today ???

#180 TurnerNation on 06.21.11 at 9:38 pm

Garth was betrayed and crucified (career-wise) by an unjust ruler. Life imitates art or life imititates history…?

#181 TurnerNation on 06.21.11 at 9:38 pm

Ps. clowns are creepy!!

#182 John Erhart on 06.21.11 at 9:54 pm

Its just comical how many people on here are on a bandwagon investing all your time on the chances of winning your own stanley cup one day ( your own house ). 99% of these posts support each other, and people get hyped up like they are cheering for the same sports team.

Its too bad there is a line up from vancouver to china of people waiting to buy themselves a stanley up even if it means bribing the refs with 40% more then what everyone else thinks.

The Stanley cup isn’t all real estate out there, there is definitely other trophies that people can buy themselves, but it wont be the best. you could buy a leaky trophy that cracks it foundation, so you pay the trophy repair man to fix it.

If your in the financial position to buy a home as your principal residence with say 20% down, do your research, and make a purchase that fits your needs, and financial situation.

The price of the house on the block, condo in the sky, a bungalo in the bush that has been researched, and well thought out for a PRINCIPAL RESIDENCE IN THE LONG TERM is a positive financial decision!

I just bought a house for $600,000, and my payment after insurance, property tax, and utilities is $450 per month.

Have fun getting priced out forever!!!!

#183 Utopia on 06.21.11 at 10:05 pm

#159 im stupid on 06.21.11 at 5:51 pm
“Hey Garth any response to mid June Treb sales?”

Done. — Garth
————————————————————————————-

You know it would not really surprise me to hear that Toronto sales are suddenly tanking. It would make perfect sense as to why there was a contest here the other day, why Carney is warning extra loudly of the hazards of debt and Mr Flaherty is busy trying to instill some confidence in the market.

My Spidey-sense radar is not good enough to figure what is happening in Ontario without actual data but perhaps the guys with the inside scoop have already tipped us off with a three day flurry of contests and speeches and media interviews.

Is this the end then?

Maybe the warnings were not quite so prophetic as we might suspect but rather based on some alarming data that notable declines in price or sales numbers will soon be forthcoming for the Toronto region?

Or am I just cooking up a theory about nuthin?

#184 UVZ on 06.21.11 at 10:09 pm

#162 The InvestorsFriend

Correct me if I’m wrong but wouldn’t a logarithmic chart dampen same percentage fluctuations at the higher prices? Also wouldn’t it make the more recent rocket takeoff pattern seem more subdued?

If so, since people looking at the chart don’t think and perceive the world logarithmically they would be lulled into thinking that the fluctuations are mild and there is nothing to worry about.

I have seen a popular stock market logarithmic chart at different Canadian financial institutions. It always looks the same except for the institution’s logo. That log chart (look for it – it’s popular) can possibly mislead would-be investors into thinking that the stock market is a smooth and stable place. Very comfy, actually.

#185 UVZ on 06.21.11 at 10:16 pm

#103 JohnnyBGood

[A very successful hedge fund manager in Florida was showing off the magnificent yachts and mansions that he and his associates owned. The friend asked, “Yeah, but, where are your clients’ boats and mansions?]

This is actually from an ancient, almost depression-era book by Fred Schwed:

http://www.amazon.com/Where-Are-Customers-Yachts-Investment/dp/0471770892/ref=sr_1_1?ie=UTF8&qid=1308711351&sr=8-1

The more things change the more… (?)

#186 Vancouver_Bear on 06.21.11 at 10:23 pm

#166 Mikey the Realtor on 06.21.11 at 6:44 pm

My pleasure, enjoy.

#187 UVZ on 06.21.11 at 10:25 pm

#141 Neo

I find the chart you linked us to hard to believe.

1. I was there in the late 1980s and early 1990s. It doesn’t match my anecdotal experience.

2. I’ve done some independent, personal research on a local area where I live.

I suspect that — if its source data is accurate — the Canada-wide average (which includes low-demand geographies) distorts its message.

#188 Vancouver_Bear on 06.21.11 at 10:29 pm

#183 John Erhart on 06.21.11 at 9:54 pm

If you don’t mind losing half of what you put down, then congratulations. You just won a prize and a title of (name sounds the same as this site address).

#189 Vancouver Shocks on 06.21.11 at 10:59 pm

#183 John Erhart on 06.21.11 at 9:54 pm

This guy is bang on. Unless there is a law in canada that prevents foreign invesment, prices are going to keep going up, because for investors (people with cash, not us working for $5000 per month) its a deal, and a strong currency to invest in.

I know a guy that works in commercial development, and there is so much money people want to invest in anything they are ready to hand out cash. With people willing to pay hundreds of millions of dollars on investments, what supply will eat up this constant demand for both residential and commercial real estate?

#190 JohnnyBGood on 06.21.11 at 11:25 pm

#186 UVZ on 06.21.11 at 10:16 pm

Hey, thanks for that UVZ. I believe I read the referenced passage in question in another book on investing a couple of years ago.

#191 Truth seeker on 06.22.11 at 12:12 am

@herb

It was Garth that started the Jesus comment.

@Makaya

With all your credentials ( religious school, etc.), you should know that without faith, you CANNOT have a relationship with God.

By the way, you can learn about God all your life and be raised in a Catholic/Christian home —it does not bring you into a relationship with Jesus. Only faith will bring you into that relationship– not head knowledge from being raised in a Catholic home.

There will not be complete justice until Jesus returns–ie:house prices and affordability,etc. Think of it this way, if there wasn’t something after death, life would really be unfair as many/most injustices will never be brought into the light.

I was just saying that most smart educated people did not know the financial crisis was coming just like many smart people say there is no God! People don’t like the idea of there being an ultimate judge because they don’t want there deepest secrets and thoughts to be exposed!

#192 Neo on 06.22.11 at 5:49 am

#162

What’s your point? What is more devasting to a househould in real terms. Having a $75,000 home in 1982 lose 25% or $18,000 when you had to put $15,000 down (20%). Or having a $372,000 and losing 25% or $93,000 when the average person only puts a $26,040 down payment on that house. Now take into account stagnant wages the past decade as opposed to rising wages in the early 80’s and a lowering interest rate environment after 1982 vs a rising one now in the future.

#188 it’s a NOMINAL chart. What it shows is how obsurb prices are right now and a 25% decline is a much bigger deal now than 30 years ago in our current environment.

#193 Heart of the World on 06.22.11 at 9:35 am

An homage from a writer: I came to this blog for its content. Now I read it every day for the fabulous way that it is often worded.

My hat is off.

#194 Brett on 06.22.11 at 11:15 am

When I can sot at Loblaws with gold, it’s money. — Garth

Absolutely Wrong Garth. When loblaws takes gold, and people are actually willing to part with gold at lobbies, then gold is CURRENCY, meaning it circulates among the masses for all transactions. Fiat currency is not money, although it does have 2 aspects of money…medium of exchange, and standard of defered payment, and all present fiat currencies are in danger of losing those 2 aspects. GOLD IS MONEY! and you would be a “greater fool” to spend a single gram of it while it is extremely undervalued to massive debt backed fiat currencies. -and i do mean MASSIVE!!! learn about OTC derivatives, knowledge of that horror will cause you to halt writing about real estate, as you start up a gold newsletter. every fool has some knowledge of real estate, only the greatest amongst us truly understands gold, debt, and the financial schemes used to transfer wealth.
end your ignorance.

#195 Steady Eddie on 06.22.11 at 11:49 am

I think Garth’s investment strategy is OK short-med-term. Any vehicles that are tax free are always good (duh!).

Long term I think anyone who doesn’t own physical gold (25% of portfolio) won’t be hedged properly.

People really need to educate themselves on class struggle and read some history books. It’s OK to read stuff online but you need to apply critical thinking skills. We’ve only enjoyed this way of life for about 70 years. Nothing goes up forever. If you notice the austerity measures and union busting that has been going on, they are doing away with all of social-economic gains working class people have made. Greece is just the test-drive country.

For your consideration:
http://michael-hudson.com/2011/06/rolling-back-the-progressive-era/

#196 Bill Gable on 06.22.11 at 2:53 pm

This from the WSJ – dedicated to Squiggly and BPOE and the rest of the Keynsian boobs that provide much hilarity to us folks that don’t have a bong in their our 20 mouth hours a day.

“BEIJING—After years of housing prices gone wild, China’s property bubble is starting to deflate.

Residential prices are heading downward in some major cities, damping some undesired real-estate speculation but raising the prospect that the Chinese economy may slow more rapidly than anticipated with profound consequences for global growth.

Real estate is a foundation of China’s phenomenal growth record in the past two decades, and its health is crucial to China’s construction, steel and cement sectors. Real estate is also a favored investment of Chinese looking to get better returns than bank deposits pay”.

(*Sounds like a lot of foolish, greedy clowns in GTA and here in Gangcouver).

> KAPOW –

http://tinyurl.com/5wkvvmk

#197 randman on 06.22.11 at 4:10 pm

Brett

You are my hero

I posted this as well on the latest blog entry….

“Betting against gold is the same as betting on governments. 
He who bets on governments and government money bets against
6,000 years of recorded human history.”


–Charles de Gaulle

#198 penpal on 06.22.11 at 7:02 pm

# 183 John Erhart

We’ve found ourselves a GREATERFOOL!

Enjoy your loss of equity you mathless moron.

Couldn’t be happier for you.

“Priced out forever” – yeah right!
Where have I heard that before?
Oh yeah, USA in 2006, Spain in 2007, UK in 2009, etc., etc., etc.

HAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!