The canary

Days ago I traipsed through the iconic Canadian Shield north of Toronto. This is Group of Seven turf. Glacial lakes. Bent pines. Granite boulders. Babes on jet skis. Families have owned cottages here for generations. When a prime property makes market, it usually engenders a feeding frenzy. But not any more. Sales are down a crushing 42%.

Yesterday I went south – almost as far as you can go in this country. This, too, is prime cottage country on the north shore of a great inland lake, within two hours of eight million people. For Sale signs are endemic. My research shocked me – in the entire region over the last six months, only half a dozen sales.

Some people (I’m one of them) view recreational, cottage and hobby properties as canaries in the mine. More often than not they signal latent, unseen danger and are harbingers of things to come. The reasons are simple: most people buy second properties by borrowing against their city digs. So when the economy softens and folks fret about debt, the place by the lake is the first to be thrown overboard.

And nobody actually needs to have sand between their sheets, of course. So cottages are discretionary investments, and when economic uncertainty’s in the air, the seasonal real estate market takes a dive. That would be about now.

Add to this, entire swaths of the country where real estate is turning moribund – the Okanagan, southwestern Ontario, Fraser Valley, Halifax, Van’s vaunted west side and Brampton, for example – and it’s becoming clear the housing market is quickly stratifying. This is all more alarming (for people with too much real estate) because mortgage rates remain near historic lows. Imagine if these were normal times, and a fiver cost 7.5%.

Meanwhile scary things continue to happen in urban Toronto and Vancouver – scary because they mask what’s coming for average, mortgage-paying, homeowning, everything-in-the-house middle class folks. In 416, for example, an 80-year-old, mid-town, kinda nice house was listed recently for $1.495 million and seven days later sold in a bidding war for $2.1 million. Yes – $605,000 above asking.

And in Vancouver, despite a collapse in sales in former HAM heaven (Richmond) and the impossibly tony west side, the average SFH price last month was $1,212,265 – down a tad from May. But the salient point is that this time two years ago, that number was $819,235. That’s an increase of 47.95% in 24 months – which eclipses the greatest gains made by horny US markets leading up to the housing collapse of 2006-11.

In other words, while sober reality seems to be leveling out both sales and expectations at the lake and in a growing part of the country, urban fools in the godless GTA (Pride Capital of the World) and delusional Vancouver are stealing headlines and propagating the media myth that real estate is just peachy. Also, without a doubt, the trip back down will be a lot more colourful in those two cities than in, say, poor Regina. (There home prices will simply corrode along with the value of commodities.)

Nothing I’ve seen over the past months makes me doubt what happens next. Prices always crescendo at the end of a frothy period of excess. They invariably start the sputter and choke in suburbia. And never have recreational properties taken a hit, without pain traveling back to the city. The path ahead is clear. Lousy economic growth. Indebted families. Structural unemployment. Inflation. Creeping rates.

House values correct, then stagnate. Early vultures get creamed. Smart people leave Dodge (a.k.a. Vancouver), and invest in liquidity.

Not the kind with fish.

145 comments ↓

#1 Hovering on 07.02.11 at 8:10 pm

I’m seeing a lot of tear down/rebuild/flip in Kitsilano (Vancouver). Nothing new there.. always a pretty common sight.

But lately I’ve noticed a clear increase in volume and drastic decrease in the quality of the tear down / rebuild crews.

Where once it was rented fences, strewn with advertising for Builder X and Plumber Y. Now it seems it’s Bob and his cousin (and their friend who has a pickup truck). No scafolding b/c 2×4’s and a prayer will do.

Who would be dumb enough to buy a house built by these maroons?

Last gasp indeed.

#2 boomorbust on 07.02.11 at 8:31 pm

first??? now what the hell is that all about. Anyway, the invisible paint is starting to dry and the picture is much clearer now. Put the shovel down and climb out of the hole.

did that in jan 08, still the legions of idiots keep coming.

what to do?? just wait…. reality will kick in.

#3 Mr. Reality on 07.02.11 at 8:38 pm

Thanks for the update Garth.

Mr. R.

#4 Brian on 07.02.11 at 9:11 pm

A house I bought 10 years ago for 140 and sold for 320 here on vancouver island is for sale again.
This is after 50 thousand or so of updates, asking price 325 down from 349 and no offers after 6 months .
This compares to the two days it took me to sell it 3 years ago.
The times are a changing and some of us are going to clean up.

#5 $froma$ia-(Money does come from trees!) on 07.02.11 at 9:18 pm

Theres a road in Richmond that I took my wife down. I had to show her this street with all the houses that went up in the last Asian migration. 1992-94 ish.

Theres plenty of houses of that time built along this road, just like what is going on in other parts of Richmond. I told her, “see this road, this is what happend 16 years ago and I we’re seeing it again.”

Back then average homes went from $110 to $360k from 1986 to 1994 with the big gains in the last 4 years or so…

The question here is that we have inflation coming as well as higher rates.

Inflation will help justify the high housing prices but rising rates are the sobering factor.

Now homes are $12ook, more expensive then California?!?

If the government closed the immigration flood gates, we may some real fireworks… either way Richmond is ruined…High density housing has ruined what was an uncrowded suburb. Such a shame.

$$$$

#6 Aussie Roy on 07.02.11 at 9:24 pm

Aussie Update

Prices in Sydneys premium beachside suburb crumble.

http://smh.domain.com.au/real-estate-news/beachside-bargains-beckon-as-property-prices-go-to-water-20110701-1gv3u.html

As the great Aussie land price bubble reaches bursting, block sizes shrink to postage stamp size.

http://www.news.com.au/money/property/great-aussie-dream-downsizes-as-house-block-areas-halved/story-e6frfmd0-1226086345678

#7 LS on 07.02.11 at 9:26 pm

For what it’s worth (and likely not much) here in Kits and Arbutus (on the west side of Vancouver) I see many new listings coming on the market that are being sold by Asians. It’s like even the old “HAM” is starting to realize the opportunity to bail or that the market’s on its way to losing its legs. (Or both.)

#8 Mr. Lahey on 07.02.11 at 9:27 pm

It would appear Randy that the feds are going to keep rates low, punish the savers with negative interest rates all in an effort to keep the drug of borrowing going. The feds know that raising rates will bring a complete collapse of the charade known as rising house prices in mania cities like Toronto and Vancouver (the trailer park has been spared this madness thankfully). This is what differentiates the current feds from previous feds who raised rates to bring sanity back to the world. The bubble will eventually collapse even without the feds raising rates, yet their reluctance to do so has prolonged the agony. The economic shithawks are still coming Randy, they’re still coming.

#9 ralph on 07.02.11 at 9:27 pm

I would have to agree with Bank of Canada Governor Mark Carney when he stated (last fall) “While asset prices can rise or fall, debt endures”.

http://www.theglobeandmail.com/report-on-business/carney-sharpens-warning-on-household-debt-levels/article1734911/

Japan had a historic credit bubble which burst around 1990.

The following is a link to a long term chart of the Nikkei 225. Since 1990 it is down by approximately 75%.

http://finance.yahoo.com/q/bc?s=%5EN225&t=my&l=off&z=l&q=l&c

The following quote is taken from an article in the New York Times which was written on Oct. 16, 2010:

“OSAKA, Japan — Like many members of Japan’s middle class, Masato Y. enjoyed a level of affluence two decades ago that was the envy of the world. Masato, a small-business owner, bought a $500,000 condominium, vacationed in Hawaii and drove a late-model Mercedes.

But his living standards slowly crumbled along with Japan’s overall economy. First, he was forced to reduce trips abroad and then eliminate them. Then he traded the Mercedes for a cheaper domestic model. Last year, he sold his condo — for a third of what he paid for it, and for less than what he still owed on the mortgage he took out 17 years ago.”

http://www.nytimes.com/2010/10/17/world/asia/17japan.html?pagewanted=1&_r=1&hp

The following is a quote from an article on the CNBC web site (written on June 14. 2010) which is entitled “US Housing Crisis Is Now Worse Than Great Depression”:

“It’s official: The housing crisis that began in 2006 and has recently entered a double dip is now worse than the Great Depression.

Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data.”

“Then there is the issue of underwater homeowners—those who owe more than their house is worth—representing another 23 percent of homeowners who cannot leave or are in danger of mortgage default.”

http://www.cnbc.com/id/43395857/US_Housing_Crisis_Is_Now_Worse_Than_Great_Depression

#10 SquareNinja on 07.02.11 at 9:34 pm

I’VE GOT FRONT-ROW SEATS TO THE MOST EXCITING SHOW ON EARTH! GO VANCOUVER GO!!!

Also, the word on the street is that retailers have not recovered from the 2008 Financial Crisis. Absolutely have not – they’ve either just managed to hang on, gone into huge debt, or have shut down altogether. It’s not going to get any prettier in lovely Vancouver, and it’s a situation that the average house-buying Joe would not ever be aware of.

#11 Utopia on 07.02.11 at 9:44 pm

A friend of mine bought a fixer-upper six months ago. Spec only. He bought it to turn a profit on the real estate frenzy in Saskatoon. He and the wife worked hard to fix it up. They put in SS and granite counters natch. Pissed away a huge line of credit, hired contractors and pledged the family home against all the fresh debt.

At the time I was warning him that danger was lurking for real estate and that I felt very strongly it was not a good time to speculate for profit. “The market could turn at any time” I said.

He and the wife blew me off as a fear-pandering fool and then listed off all the reasons why Saskatoon could never fall. They had so much confidence I even doubted myself at times. Needless to say, it is different here in the Sask-patch (at least according to them).

Lo and behold, he spoke to me yesterday. The house is not selling after dozens of showings. He is priced too high because of all the money they invested in renovations and so not one single bite has emerged.

Now he is feeling really anxious. The confident tone has vanished and he even sounded a little humbled.

The worst part…..he read the CBC headline story “Canada’s Housing Bubble Close to Bursting”. Told me he was shocked when he saw that. Could not believe I was actually right.

All this time he was sure I was just blowing smoke and talking like a doomer so it never really registered. His wife even accused me of being negative (so I just shut up). He never even considered that I actually knew what I was talking about until last Friday. Until then he had outright refused to hear the reasons for my concerns.

Until now.

“So what should we do?” he asked earnestly. “This is real, if the papers say there is a housing bubble about to burst then a lot of people will try listing to dump houses before it happens!”.

Sadly, it is too late for most. Way too late. So gave it to him straight and this is what I said.

“Just move it” I told him. “Drop your price quickly, hope to break-even and do it as fast as you can. The general public might be slow on the uptake but the speckers, flippers and builders will not be so slow to act”.

“They will want out before it is too late and they will price ruthlessly so they don’t end up losers. That means supply is set to rise exactly when demand is falling and the competition is about to get fierce. Flippers will not listen to Realtor entreaties to wait until next spring, they don’t give a shit about market conditions and will list everything, even drive down prices if that’s what it takes to get out before the bubble pops”.

He finally got the message. Even his foolish wife listened this time.

#12 Bronx Bombers on 07.02.11 at 9:46 pm

I live an hour’s north of the GTA – houses are moving – not sure what all the chirping is about – I have yet to see a house go on the market for more then 6-8 weeks without a sold sign slapped to it…

I could pull a section from this site in 2008 and the same comments appear – geez people, everyone sits in their dark, damp basement apartment and makes predictions that are borderline pathetic. People are parking money that is a tangable asset – when inflation makes your money worthless in the next few years – better to have something then a bunch of useless numbers on a bank statement which won’t be worth the ink it’s printed on…people, get a history book and read up on it –

G-Man, have a question for you – you made a good point on why RRSP’s are not a wise decision – but what makes you think they’ll tinker with rrsp and not tfsa – please, when the economy hits rock bottom – everything is fair game. I laugh that you tell the herd in here that tfsa are a lock – haven’t you learn’t anything while in Ottawa –

PS – great job – but for some strange reason too many in here follow to the letter on what you write – now thats scary!! booooooOOOoo

Your words are inconsistent. If you believe the economy will hit ‘rock bottom’ the last thing you want is a mortgage. And where did I say anyone would tinker with RRSPs? — Garth

#13 Mr. Reality on 07.02.11 at 9:48 pm

http://images.magnetmail.net/images/clients/ResearchAF/attach/201106_3D_Hurricane_and_New_Normal.pdf

Have a read and be very patient!

Mr. R.

#14 Devore on 07.02.11 at 9:55 pm

#9 ralph

I think the Japanese scenario is what we have to look forward to, with a prolonged period of low rates (which aren’t gonna save real estate) and rising costs, eroding people’s standard of living and trapping them in their debt. US is already well on its way there, Green Shoots(tm) but a distant memory.

#15 Hoof - Hearted on 07.02.11 at 9:58 pm

We bought a property in the CARIBOO (B.C.) in 1993.

It’s approx. 300 miles from Vancouver

It’s current “assessed ” value is approx. 5 X’s what we paid.

Without boring details (….much of which is based on Garth’s soft porn blog) ..we are now focussed on selling.

Economic philosophy ?

…….. = get out N-O-W….. !!!!!!!!!!!!!!!!!!!!

Strategy ?
……set a price X= ” in pocket ” ……and the purchaser pays the RE commission + HST.

I’ve scoped out the competition, other listings, and will play the “wounded duck” game.

Asking price will be below the relative market price…thus get quick “shark” price …..or bidding war.

IMHO…relative to the area..the property we own is prime for various reasons.

Garth is right…recreational property is..de- jure …or de-facto…. discretionary income…

I had illusion’s/ delusion’s of developing the property….aka building a cabin…..and then re-selling ( aka >$$$’s) but am NOW convinced P-I-G-S get slaughtered…….don’t get greedy.

IMHO..we are in NO Lose position…..it’s only a matter of how “greedy” we are ………versus the competition.

PS : Thanks Garth

#16 dutch4505 on 07.02.11 at 10:03 pm

Hello Garth

If you have a chance take a look at the editorial page of the USA TODAY. (July 1, 2011 date) I was having my breakfast at my favorite local greasy spoon in Bellingham WA. Reading the USA TODAY and they were recommending that the USA follow Canada when it comes to mortgage financing. You may find it interesting. You can form your opinions about the article…but I almost my lost my scrambled eggs reading it. What a load of bullshit.

Meanwhile my fellow Canadians continue to buy alot of real estate in Whatcom county, Washington. Thank you all!

#17 john m on 07.02.11 at 10:06 pm

Great post Garth as always…The only doubt in my mind is not whether there will be a crash but just how serious will it be…..looks damn serious to me

#18 Nostradamus Le Mad Vlad on 07.02.11 at 10:11 pm


“But not any more. Sales are down a crushing 42%.” — Yep, all over things are becoming a lot more sluggish, and it’s not just the summer weather.

The m$m portrays us as having a terrific time, but the opposite is true. No mention of that, ‘tho — bad news duzzent sell papers or advertising space.

“. . . the place by the lake is the first to be thrown overboard. They invariably start the sputter and choke in suburbia.” — Given the alternative of living in a city, I would much prefer to live close to a beach or lake than a city.
*
Recovery or joke? Greed Applies to all western civilization; Peak Oil? Maybe not; Prostitution Not a great job, but it pays the bills; Whereas multinationals get a one billion pound tax break; Europe’s on sale.

US – China As if there weren’t enough to keep everyone busy with, here’s another one; Pakistan – S.Arabia Interesting conundrum, if true; Fukushima More to come?

Agenda 21 Better explanation, b/c the CPC will bring it in here after the US; 9:24 clip Proof that Obama was funded by marxists (incl. Soros; Social Media turning kids’ lives upside-down; DSK This is what Sarkozy didn’t want; Diana Documentary banned in UK. Well, Dodi was a Muslim and the chance is good they would have married, and Barmy Blair and Prince Upchuck; FF’s havebecome the norm (nice map), Perfect Storm First para. is good, and Goes with the previous link.

#19 John on 07.02.11 at 10:23 pm

Moribund in Halifax? Do you have stats? Source link?

Thanks

#20 not 1st on 07.02.11 at 10:29 pm

Garth, how about posting some real analysis on whyu commodities will slowly lose value. The only way this happens is if the greater economy gets gutted.

False. Commodity prices spiked on speculative trading, are in correction, and will continue on news from China. — Garth

#21 Tim on 07.02.11 at 10:30 pm

“That’s an increase of 47.95% in 24 months – which eclipses the greatest gains made by horny US markets leading up to the housing collapse of 2006-11.”
——————
So your estimated correction of 30% will put us back to where prices were about two years ago?

I have said correction, then melt. There is no known bottom. Sorry you have trouble with retention. — Garth

#22 Tim on 07.02.11 at 10:40 pm

“… either way Richmond is ruined…High density housing has ruined what was an uncrowded suburb. Such a shame.”

———–
You can say that about Vancouver as well. It is becoming so dense and crowded and people are fed up with the noise and the traffic is horrific. Many want to leave the city, but don’t want to be stuck with a hellish commute from the suburbs- the only thing worse in Canada would be to sit on the 401 driving to work in the smog-ridden, humid Toronto…

#23 HouseBuster on 07.02.11 at 10:40 pm

Elvis has left the building. Housing is dead.

#24 Utopia on 07.02.11 at 10:51 pm

“Some people (I’m one of them) view recreational, cottage and hobby properties as canaries in the mine….So when the economy softens and folks fret about debt, the place by the lake is the first to be thrown overboard……The path ahead is clear. Lousy economic growth. Indebted families. Structural unemployment”. ~~ Garth Turner
——————————————————————–

Thanks for an excellent update Garth. I am sure the Dawgs will have much commentary to add about their own neck of the woods. Only by seeing it first-hand can we appreciate that real estate carnage is already underway in the hinterlands and cottage country.

I agree too that the soft patch we are now being treated to is merely a small taste and a warning of what is to come. Resort property is in for a beating as urban home values falter.

Suddenly, a second home or getaway place loses it’s luster as stress is applied to the primary family home and finances.

Most will hang on as long as they are employed but too many others will attempt to dump the extra burden as financial insecurity creeps back into their lives, thus pressuring prices downwards. Prices will fall. Just like they always do in this kind of situation.

And to that I will again add that a recession is coming. In fact I would challenge anyone out there to show me a period in Canadian history where recession did not parallel a major housing correction. The two go hand in hand.

Like Justin Beiber and screeching female fans.

So unemployment numbers will surely rise as property values fall, new home building permits wither and gross sales numbers decline for Rona, Home depot and the raft of companies that have been providing materials and services to feed the building boom we have seen the last two years.

We cannot be complacent when it is blindingly obvious what lies in wait around the next corner. What comes next is consumption numbers in the ditch, insecurity for anyone involved in the building trades, an economic slowdown as a contraction reveals itself and rising unemployment.

It is as obvious as a wart on our nose. So we are not bulletproof in Canada after all. We are not special. The banks will have challenges too in the coming years as revenues get thinner and bankruptcies rise.

The time to get ready was yesterday. Save. Get out of debt. Do it now.

#25 Increasing that 1% on 07.02.11 at 10:51 pm

BPOE and Smokin’Man have continued to be right.

The path has been and is not clear as to WHEN the shtf- [in certain areas]

Thinking I will never buy ‘a condo’.
Have one condo-owning nightmare under my belt,
and now, seeing how the one closing the balconies, for ‘several months (!) more’ with not good enough reason, solution, blah, blah–the ramifications for an owner
1) for their own lifestyle
2) if they want to sell
3) if they want to, or are, renting it out
=xs bs.

Of course this is not everyone’s experience, and there’s a chance you can get in, get out with no problems
(Garth’s sexual innuendos must be rubbing off)
–but it’s hit and miss, mostly a matter of luck, little control

so is much about real estate, and many other things though…
crap

#26 Foggy on 07.02.11 at 11:06 pm

This cottage is nothing special but it’s been for sale now for 3 years. And no price change. The owner has reviewed the non-sale of this cottage each month for 36 months in a row and has not lowered the price one penny. Makes you wonder what the marketing strategy is. With the coming housing correction not too far away, will this disposable place be even more saleable?
I shake my head…

#27 Foggy on 07.02.11 at 11:07 pm

Damn…here’s the link:

http://www.youronlineagents.com/joewhitmell/viewlisting.php?id=152234

#28 Lorne on 07.02.11 at 11:39 pm

#4 Brian….what city are we talking about. I am looking to buy on VI….but don’t want to spend much more than 3….sounds like that house could quickly get there!

#29 TurnerNation on 07.02.11 at 11:41 pm

As I’ve previously noted on this shovel-ready weblog, Whistler BC is boasting more than a few Reduced and New Prices. Squamish was ravaged already by the Squamish Sasquatch (last spotted heading N. on Hwy 99).

Whether or not ersatz blog dog Carney raises rates is secondary to a looming liquidity contagion via a tightening of credit supply, downpayment requirements, or mortgage terms.

Liquidity is the watchword in the coming years.
Water water everywhere and not a drop to drink.

Scary: The inverted pyramid of global liquidity

http://commons.wikimedia.org/wiki/File:The_inverted_pyramid_of_global_liquidity.gif

And from a local realtor(r) weblog:

http://torontorealtyblog.com/2011/06/24/quick-hits-4/#comments

“139 Galley Avenue is one of the nicest renovations I’ve seen in 2011.
This property is only 10-12 houses in from Roncesvalles Avenue – right in the heart of the vibrant commercial/retail section, and I believe it’s going to sell in multiple offers for far over asking.

Priced at $989,700, the house is a 2 1/2 storey, 3-bed, 4-bath property with a finished basement. But it’s the style, flow, layout, and quality of finishes that is making this house a “must see.”
———-
List: $989,700
Sale: $1,141,000” <—— :-0

#30 TurnerNation on 07.02.11 at 11:46 pm

The problem in the GTA is WASP money, easy credit, young nesting “yuppie”couples, and old houses! That dour Protestant work ethic is flung by the wayside when confronted by a gentrified 80-year old brick SFH. ;)
Bidding war!

It makes them wet in the pocketbook.

#31 Carp on 07.02.11 at 11:57 pm

Peak water is on its way – wouldn’t water or its industry not be a good investment longer term?

#32 blase on 07.03.11 at 12:15 am

Garth, I looked and looked but couldn’t find your answer to your question about which province wasn’t running a deficit. Did you ever post an answer?

Answer – none. — Garth

#33 Rich Renter on 07.03.11 at 12:16 am

# Mr Lahey, FYI the Feds don’t decide the rates. BOC does.

#34 shanks on 07.03.11 at 12:46 am

hey vlad, that india sterilization link is one of the saddest things i have ever seen.. and to think they have been trying this for over 32 years.

#35 Cato on 07.03.11 at 12:54 am

I used to laugh when I would hear people talk about rec. properties as investments but not anymore – now it just pisses me off. Very few of these properties generate any cashflow, most sit empty majority of the year sucking down resources. From income perspective they have little value, so what are the banks supposed to do with them.

Most speculators went one step further and have been sucking out equity to buy a garage full of toys, vacations, the works. I live an austere lifestyle compared to many of them. I know people that make 1/3 my income and have no net worth yet live a lifestyle far above mine thanks to easy credit. Whats worse, it breeds an air of superiority – they actually look down on me.

Its made me perpetually pissed. Guess what, they may have very well won. They lived the lifestyle, I didn’t. Sure, they’ll hit the wall and go bankrupt but so what – in Canada bankruptcy is a joke. Just take a look at what you get to keep in a province like Alberta –
http://alberta.bankruptcycanada.com/faq.htm#bankruptcyexemptions

The greatest insult comes next. There is only one way to counteract a deflating asset bubble, but the cure is worse than the disease. Its wage inflation. When the kid bagging your groceries is making $25 an hour suddenly homes will seem affordable to the masses again. The policy makers have been reluctant to push this button, but desperate people do desperate things.

#36 Priced_out on 07.03.11 at 1:10 am

All crappy talk fro you continues, people like me who are hooked to this pathetic blog comes here every day to find out something new, but alas it is always same old cowboy crap, same ole stuff you have said millions of times ( house prices will come down), just because of your pathetic talk ( which people like me love to hear), we are priced out and will never be able to buy some decent home here. This blog has started to annoying lot of us because nothing is changing except house prices are going up everyday. Now prices are at the poing where even 25% of correction will not do anything and I am priced out forever.

It’s my fault you don’t have enough money? — Garth

#37 wes_coast on 07.03.11 at 1:21 am

For a BC view of rec property – check out the vacancies in Parksville, BC. This is a resort town on Vancouver island. Listings through the roof. All the idiots that bought 1/4 share now trying to get out. Not even a whole place to sell. Value trap. This is just the beginning.

#38 unbalanced on 07.03.11 at 6:36 am

Can anyone please tell me why prices in Winnipeg keep going up ? I’m not kidding !!!!

#39 mikef on 07.03.11 at 7:00 am

When the kid bagging your groceries is making $25 an hour suddenly homes will seem affordable to the masses again. The policy makers have been reluctant to push this button, but desperate people do desperate things.

—————————————————————–

When grocery baggers make $25 /hr getting fruits
and veggies at the farmers market will be tougher to get than cheap Toronto Maple Leaf tickets.

Grocery delivery services online will explode.

Are you kidding me,in the US profit margins are so thin
for supermarket chains,they hire “shopping cart wranglers” to bring back all the shopping carts stolen
by the homeless.

Recreational properties is an investment.
What a laugh.
When you factor in gas to and fro,repairs,food,equipment etc. what investment.

It’s a vanity item like most jewelry anf luxury cars.

I read somewhere that family lawyer offices inT.O
are filled with bickering siblings.
What are they fighting for?
The cottage.

#40 bigrider on 07.03.11 at 7:01 am

BBQ yesterday at a buddies home in Etobicoke. Quite a few people.

The topic of RE came up.

My buddy paid $450 for it in 1995 and could easily get 1.2 to 1.4 today for it. Try to tell him RE is a bad investment.

Another friend has 5 rentals in and around woodstock/Brantford area. Blows every penny he makes from his income but here is the kicker, all his properties are cash flow positive and u 20 to 40% since purchase. His cottage..he is dividing into three lots, the sale of two make his third free to him with cottage remaining and a profit to boot. Try to tell him RE is a bad investment, he is well north of 2 mill net worth.

Here I am investing in financial assets over past 12 years, struggling through two crashes and equity indexes which have gone nowhere and RE has been a cash cow through the entire period.

Yes I am frustrated.

Needless to say, no one believed my point of view that RE was done.

Their words are worth nothing. If they’ve made gains, they should crystallize them. Otherwise, all hat and no cattle. — Garth

#41 BrianT on 07.03.11 at 7:01 am

#35Cato-I don’t know who told you that the policy makers are interested in grocery baggers making $25 an hour. Listen to Carney,Bernanke,Harper-pretty well anyone but Layton-median wage increases are always viewed as a major negative for the economy.

#42 Mr Buyer on 07.03.11 at 7:24 am

I suspect that article forecasting a 25% correction can be considered hopeful if not the bait for a trap (25% decrease, better buy now) in that 25% seems a little light for a correction in this instance (Japan’s was 40% on average but I know of many individual cases in which a 70% correction came to pass). I am thinking that article is a little early damage control to try to minimize panic (expect 25% so you do not freak out until 30 to 35% materializes).

#43 mississaugasold on 07.03.11 at 7:33 am

I hung out with my friend who recently bought her condo (which I strongly suggested she not) and she continues to baffle me. So she is going to do an almost gut job on the place; new kitchen, floors and bathroom.

She’ll be throwing a lot of money into the condo before she even moves in and get this, her boyfriend’s lease isn’t up until a year and a half later so he either going to move in together or they may decide to buy something else in that time!

It truly confuses me why they would buy something and renovated and perhaps live for such a short period of time!

At this point, I can only smile and nod and talk about her renovation choices with excitement; while worrying about her financial future. SIGH

#44 JessicaJ on 07.03.11 at 7:36 am

Thanks for the update Garth. Is it possible the selling agent intentionally priced the 416 home lower to initiate a bidding war?

#45 Keeping up with the Jones' on 07.03.11 at 7:40 am

Hi Kids, now that your in college and your Dad is having a health issues, we put the summer house up for sale. We know that you are busy with your friends and Dad just got laid off, so this summer… you have to get a job if you want to finish college. We love you,
Mom

#46 not 1st on 07.03.11 at 7:57 am

If China and speccers are driving the commodities boom, then it has a long way to go yet. The U.S. and others are still going to pump in printed stimulus money and China is still on a building tear for a few more years at least. Nobody wants the party to stop, especially china cause they have 1 billlion revolters ready to exolode if the economy goes down.

#47 Big Al (New) on 07.03.11 at 8:15 am

Since immigrating to Canada in 67 and TO specifically I’ve seen 3-4 corrections in the housing market. I’ve timed all but one quite well and currently sit all in cash after selling last year and almost doubling my homes value in 4 short years.
I don’t have a feel for what’s about to happen this time, because each previous time Governments involvement was minimal. This time they are trying to keep this bubble inflated at all costs as I suspect they have guaranteed to much of this mortgage paper. In fact a large percentage of GDP is derived from construction activity and not a healthy Manufacturing base which has been off shored by most Corporations to maximize profits utilizing slave labor rates.
The only thing I suspect is that this time whatever happens will be epic. There’s no more cut your losses and go back to making widgets for company X Y or Z at a good rate of pay. Now it’s going to be “Welcome to Walmart” please enjoy all our quality made Chinese products.
It’s like the closing scene of Planet of the Apes when Heston finds the half buried remains of the Statue of Liberty, that type of epic.

#48 Randis on 07.03.11 at 8:17 am

For those of you who refused to face the reality and believed Garth is talking crap, you are just plain stupid. Especially you, Bronx Bomber and Priced Out.

Get an idea on economy 101 before trying to act smart. Know no shxt and act like a smartass dismissing others, its ppl like you that piss me off

Btw, Utopia, big hand for you for scoring @ post #11

#49 househornyhousewife on 07.03.11 at 8:17 am

Hi Garth,

I have to agree partly with what Bronx Bombers says, although I think that his tone is ehr .. uhm .. rather “disrespectful” to say the least. This is a forum for discussion and not personal insult. State your argument and be done with it.

I live in a part of Québec where the market is different depending upon which lake area you are looking at. Lake Massawippi, for example, has been stagnant for years and nothing has sold .. sellers there, however, are sticking to their ridiculous asking prices regardless of what the market is doing, simply because many of them can afford to do so and are in no hurry to sell. Many of these homes are second, third, or even fourth residences and owners have plenty of staying power (although, if they are still carrying a mortgage on these properties, I am sure that higher interest rates will annoy the heck out of them). Nearby Lake Brompton is home to many doctors and specialists who work at the nearby hospital and this market moves very quickly, as I recently found out. However, not many seem to be willing to risk paying past the million dollar mark and this is obvious when one looks at historical sales of this area. Also, sellers are asking more reasonable prices for their properties (which contributes to the quick sales). Other lakes in the area have their own little markets and bubbles etc.

I have been in the market for over a year now and have had at least two offers rejected, either because I did not feel that the property was worth more than my offer or because I was not willing to be dragged into a bidding war. I regret nothing. When I do find a place, I will pay what I think it is worth. I will move into it, pay my mortgage and live my life. If the market value of the house goes down, I will still continue to pay my mortgage until the place is paid off. I will pay what I can afford for a place and I will choose very carefully so that I will not have to move in the near future (although I realize that things in life do happen). I do not intend to “flip” the place, nor would I in my wildest dreams ever use it as collateral to buy another place for speculation purposes. I will buy a place that I can afford and this is considering that mortgage rates may go up in the future (for heaven’s sake, who the heck thinks that interest rates are going to stay this low forever ?! especially over the long life of a mortgage .. this is ridiculous “magical” thinking).

I refuse to sit in my basement (figuratively, since I do currently own my own home and can sit wherever I please) and wait the ten or so years that it will take for this market to fully “correct” itself .. all the while saying .. it’s gonna happen soon, it’s gonna happen for sure. Sure, some people (especially in the larger cities but here as well) are being greedy when selling their home (this is quite obvious) but others are not. If you all believe in this scenario that everyone will suddenly stop buying houses and that luxury homes will suddenly have to be unloaded at a fraction of their original purchase price well this ain’t gonna happen. The market will slow down, definitely, greedy sellers will be forced to face reality and come down in price, for sure, people who speculate on real estate will get hurt, and so they should as this is a risky business where get rich quick schemes don’t have a place, interest rates will go up, sure as shootin’, filthy rich moguls with lots of property and cash will suddenly become paupers and have to sell their multi million dollar homes for a small fraction of the price that they paid for them .. get real people … students who are coming out of school with student loans and who think they can afford a 4,000 square foot home in an upscale neighbourhood with all of the bells and whistles that people five times their age (I exaggerate for effect) took a lifetime to be able to afford … just because some bank says they can (because said bank can pass of their risk onto the public coffers while reaping all of the rewards) and they feel they are somehow more talented and special (most likely because they were told this by their “special” parents all of their lives) .. this is happening all of the time these days and THIS is what is putting our economy in danger.

We need to change our financial attitude. Things are no different from the time of our grandfathers and grandmothers. One needs to use debt wisely, very wisely, and buy things with money that one actually has and not money that will be made in the future. This takes discipline and common sense … something that is obviously in short supply these days.

This housing business is no different from all of the credit card debt that we Canadians have. We want it all now and are not willing to wait and someone is out there telling you that if you sell them your soul (read this as financial enslavement for life), you CAN have it all now.

As for the RRSP’s and TFSA’s, while I realize that deferring taxes to a time when tax rates will be higher may not seem like a good idea, Garth, I do think that deferring taxes is pretty much all that we consumers can do. In addition, those deferred taxes will be earning income in your pocket in the meantime (as opposed to the government’s). When those RRSP’s have to be turned into RRIF’s, you will hopefully be able to put together a plan to minimize your tax burden and you will be making less than you are now thereby attracting a lower rate (which may or may not be the same rate as you are paying now by that time). TFSA’s are fine when you are deciding whether you should open a regular savings account or a TFSA. Then of course one should go for the TFSA (perhaps take the tax refund, if there is one, you got on deducting those RRSP’s and put it in a TFSA !). However, in light of the maximum allowed on the TFSA, this measly few percent tax free per year on a measly few thousand dollars per year is definitely not gonna make me bank my life savings on this. I still think the RRSP’s are worth doing … deferral of taxes is not a bad strategy in my opinion.

Whew, that was long. Sorry about that. Good to get it out of my system though.

Oh, and knock off the sexist talk guys. It is not always the “stupid wife” or house horny housewife who is willing to make stupid house buying decisions. In my case, it is I who is the careful money manager and I happen to know many other couples who are in the same situation. Not all women want to be barefoot and pregnant in their stainless steel applianced / granite countertopped kitchens so cut the crap guys … or at least, be more careful about what you say about the fairer sex.

All the best and happy house hunting ! Just be careful out there.

#50 blase on 07.03.11 at 8:26 am

I laugh when people like Priced Out say they are priced out forever. This is the most naive statement possible. There couldn’t possibly be more signs that prices have peaked. This was all set up by the elite, just as it’s always been. In a year, maybe two, maybe four, no one knows for sure, but this gas bag will burst. And when it does, you won’t be able to give away your trophy house. Just like the guy in Calgary who told me he bought his house for $300,000 in the early 1990’s at the bottom of the cycle. The house is in the best neighborhood in Calgary, Lower Mount Royal, 2 doors down from the American Consulate. It’s worth a few million now. Houses are only worth what people think they are. It’s simply an illusion, and people are fickle. The Miata, the PT Cruiser, the Toronto Blue Jays, Alanis Morissette, they all had their day in the sun. In a few years, people will wonder why they ever wanted to live in a 500 sq. foot box in the sky with expensive parking, or why they thought rates would never return to the mean. So for those white-knucklers out there, relax, and let the fools fight it out for the last crumbs. Dinners almost over. Then you get to have dessert.

#51 johnnny on 07.03.11 at 8:33 am

#35-when the kid bagging your groceries is making $25 an hour…
If you haven’t noticed yet,we the consumer are being trained to scan and bag our own groceries.Soon they will have us stocking the shelves and sweeping the floors.Another huge source of jobs set to expire.

#52 maxx on 07.03.11 at 9:07 am

“…..the average SFH price last month was $1,212,265 – down a tad from May. But the salient point is that this time two years ago, that number was $819,235.”

The pace of world change continues to be both practically unmitigated and permanently destructive to economies.

In Canada, our leaders have been seduced by the price they set for the “Golden Ticket” to gain entry to Canada. IMO, the ticket price is far too low and it’s value to Canada is a myth- it pock marks an already fragile economy and appears to screen only for money.

For all of the collective education and “brilliance” our leaders purportedly possess, their short-sightedness has created unprecedented misery everywhere, much of which we know about, and much we never see. People the world over, many at or near retiring, have lost their savings; millions now living in the streets and more who continue to remain invisible and completely without support of any kind.

Conditions worsen daily and still, the reins of power insist on persisting with ZIRP and pouring serial deluges of tax money into the great maw of the financial system hoping that these actions will scoot them out of their painted corners and shock it into a lovely carpet of “green shoots”.

Many are now looting their RSPs, savings and HELOCs as a result of this catastrophic mismanagement. This will only add huge supplementary burdens to social programs in future. Taxes will shoot through the stratosphere but few will be able to foot the bill.

#53 Steven Rowlandson on 07.03.11 at 9:29 am

Priced out is quite correct to be out raged at the excesses of the real estate market. If he can not find a way of joining the wonderful world of home owners then he needs to find a way of overcoming the problem by other means. If he does what stock brokers and realtors want him to do he will be eaten for breakfast.
Therefore he needs to get back to basics with gods money. It is out of favor, can’t be worth zero and relative to the global economy it is trading for between 5% of a penny on the dollar and 5 to 10 cents on the dollar. Buy low and wait to sell high and always avoid paper and always take delivery of the metal.
Garth will certainly assure you that gods money is out of favor and is not money. Then again some people have a hard time telling the difference between currency and money.

Gold is a rock. God is a representation of human morality. You are nuts. — Garth

#54 allister on 07.03.11 at 9:31 am

#32 blase

OK – now who has the most debt.

Ontarios annual deficit 22B= $2000 per person or $8000 for my family

http://www.thestar.com/news/ontario/article/714053–as-ontario-s-deficit-soars-restraint-looms

Ontario owes 263B = $24000 per person or $96,000 for my family

http://www.ofina.on.ca/borrowing_debt/debt.htm

With all the new taxes of the last 8 years, they still can’t run a balanced budget. They don’t have a revenue problem, they have an out-of control spending problem.

#55 Onemorething on 07.03.11 at 9:51 am

I’m off to Sydney next weekend and in VAN this summer to look at RE on spec with purchases for 2013-14 in mind.

If the owners dont like the offers when I make them then I know it’s still not 10% before the bottom!

Liquidity! Nuff Said!

#56 Ben on 07.03.11 at 9:56 am

#40 bigrider on 07.03.11 at 7:01 am

Ya, it’s pretty hard to argue with a guy that has made nothing but money the last 16 years in real estate that his world is coming to an end. lol

It’s like these wacked out preachers telling us the world will come to and end on such a date and it doesn’t happen so they change the date. lol

I’ll believe it when I see it.

#57 pen pal on 07.03.11 at 10:05 am

# 35 Cato

Are you on crack?
World wage arbitrage will NEVER allow CDN wages to reach a level where current house prices are in line with wages.

NEVER, got it!

And I used to think you had a good head on your shoulders – what are you, desperate?

#58 pen pal on 07.03.11 at 10:10 am

# 25 Increasing that 1%

“BPOE / Smokin man have continued to be right”

Yeah pal, just like the guy who jumped from an 80 storey building who thinks he is actually ‘flyin’ as he passses the floors downward to his death ’cause he hasn’t hit ground yet.

You are a f’ing moron.

#59 Helicopter Ben on 07.03.11 at 10:18 am

Hey garth just wondering if you you can expand on your thoughts on Commodities . Are you saying commodities spiked cause of speculation? I dont think speculation is the prime mover, supply and demand is always the mover. I may be words in your mouth here though. I can see a problem with china’s economy as the U.S. economy declines their exports will slow down but with small part of asia getting a middle class i would think that the current demand could hold for commodities. I am not arguing with you, I am just reading otherwise from people like jim rogers. I am all ears though

#60 Bobby on 07.03.11 at 10:19 am

For # 40 Bigrider,
I have a good friend who once bragged to me what his house was supposedly worth. I just smiled. But when he sold a short while later, after purchasing something first, he found his best offer was $175 less than what he expected.
Remember your property is only worth what someone is willing to pay.

#61 Markey on 07.03.11 at 10:22 am

We noticed a lot of FOR SALE signs in Prince Edward County too. Places that rely heavily on the Yankee dollar are hurting.

#62 Helicopter Ben on 07.03.11 at 10:31 am

#53 Steven Rowaldson …… I agree with you…….. -Gold is a rock. God is a representation of human morality. You are nuts. — Garth . True Gold is a rock but what the hell is money? Paper created out of debt with a promise of its value backing it, and that promise has been broken with high Inflation as it is no longer worth nearly as much as it used to be. I will take the shiny rock. Paper money has been a short experiment in human history, its pretty clear people in power cannot be trusted to regulate fiat paper money. Gold is a lot smarter then any central banker

#63 Bill Gable on 07.03.11 at 10:35 am

The Realtor was crushed.
She had this rental shown for the third time in three months, as we sat and enjoyed a rare semi sunny day, here in La La land.
The showing was for 30 minutes…we saw the couple of ladies get in their Mercedes (*natch) and drive off, and they were laughing.
We saw the agent walk out 2 minutes later, looking rather, uh, crestfallen.
This apartment has a great view – we get to rent it for 2 K a month and it is on the market for nearly a million.
It needs major work.
This won’t sell – we are moving (agent had us sign a two year lease and then listed the fricking place) so we fixed her wagon.
Now the place will go on the rental pool. Trouble is 12 empty million dollar condos are ahead of her. Chances of renting in the next how many years…..zero.

Greed kills.

Still amazed at the number of BMW’s and high end crap on the cow paths that pass for roads here.

Tried to get my siblings to invest the money from sale of our high end apartment building (we got a TON) – nope -one bought a golf haven in Palm Desert that has already lost 75 K in Value in a year, and my other brilliant sib has a million dollar 1/4 share in, gulp, Parkesville.

They think we are morons to rent.

Watch what happens over the next three years.

I loved the trick question, Mr. Turner – re: Debt free Provinces. I laughed so hard I just about dropped my William and Kate Tour Coffee Cup. (*Now there’s a great way to spend tax payers money – a souffle!!!)

Oy, what a Country of dolts!

#64 Beach Girl on 07.03.11 at 10:41 am

I have felt an impending feeling of doom since 2007. I am European. That means cheap. Owned 5 houses, dumped 3. Bought a wonderful six bedroom house, 2 kitchens, 2 laundry rooms, 2 living rooms, etc. I rent out 4 rooms for 500 a piece. Have my own private quarters. Had RRSPs since 21. Plus I rent out a duplex. Worked my whole life. Drive an 11 year old Cavalier with a bit of leprosy. Eat well, but at home. I will go into retirement with breathing room. All my life my friends have laughed at my frugalness. I see stress on some faces. Really think something bad is going to happen. I have always been fearful of being broke. Not going to happen? Unless the world goes down.

#65 cb on 07.03.11 at 10:46 am

I live in Kamloops in a new development. In the elevator I overheard a couple visiting a friend that purchased a unit to flip but couldn’t turn a profit so he had to keep it. I wonder how many other fools are still out there doing this here. Know another couple that just bought a rental property here hoping to flip soon. The realtor, of course, felt it was a great idea. Unbelievable! Prices have been slowly eroding here but some greater fools still like the taste of the kool-aid. According to the realtor, he “guarantees” a nice return. How, I asked? Apparently, he used the past decade as his arguement. And they bought it…

#66 cb on 07.03.11 at 10:48 am

I live in Kamloops in a new development. In the elevator I overheard a couple visiting a friend that purchased a unit to flip but couldn’t turn a profit so he had to keep it. I wonder how many other fools are still out there doing this here. Know another couple that just bought a rental property here hoping to flip soon. The realtor, of course, felt it was a great idea. Unbelievable! Prices have been slowly eroding here but some greater fools still like the taste of the kool-aid. According to the realtor, he “guarantees” a nice return. How, I asked? Apparently, he used the past decade as his arguement. And they bought it…Another friend of mine deals with the housing industry with his company. He tells me it is “very quiet” right now. But it’s almost like a little dirty secret around here that nobody wants to let out.

#67 zombiedelight on 07.03.11 at 10:53 am

#31 Carp on 07.02.11 at 11:57 pm
Peak water is on its way – wouldn’t water or its industry not be a good investment longer term?
_________
Water is not somethin you burn and it then disappears like oil…
It is forever recyclable and
You can extract it from the air, see Ecoloblue machine

#68 Helicopter Ben on 07.03.11 at 11:23 am

Just to expand on the idea of money…… I dont see how something created out of nothing has any chance of surviving. it cant help but fail as it is fundamentally flawed. It fails every single time, add in the fact that it controlled by institutions who are morally corrupt , banks are no longer the nights templar instead run by rothschild who fund both side of almost every war including the Nazis. All money is Trust, and how can anyone trust it these days, just look around the world, all the economic problems have been created from governments and banks messing with money and credit. How many times are you going to get bent over before you realize inflation is man made and done on purpose to make you poor and banks rich. Gold and Silver gives us our freedom back.

#69 Joe on 07.03.11 at 11:27 am

#35 Cato – “Its made me perpetually pissed.”

You and me both. I sometimes stop and wonder, why didn’t I pig out on debt, get all the toys, buy a house, buy a car, furniture, clothes, live the good life, then call Gail Vaz Oxlade to come and put together a nice plan so that everything’s all fine and dandy in 3 years. At least while I’m paying off the debt I’ll be sitting on nice leather furniture with my feet up on a solid oak coffee table rather than the crap from IKEA that I bought when I was in college while I sock away my nuts in a nest egg that will probably get eaten up in taxes one way or another anyway.

#43 mississaugasold: I get the same thing, trying to be excited for friends who’ve bought houses and paid too much, try to be excited about their boring boxes with backyards that can barely fit a patio set. I get cognitive dissonance after a while, so I just start avoiding them. My pool of friends is shrinking daily. So I come here for a boost and some hand holding from Garth to get me through.

Friends of mine recently bought a box in the ‘burbs. Their dog now wears boots in the house. Why? “Because my friend bought a house and their dog scratched their wood floors to hell and I’d rather not live with crappy floors.” Correct me if I’m wrong, but if you paid $600,000 for a house shouldn’t your floors be of a quality that they’re not so easily scratched? Good luck with kids. So as I say, I can barely mask my real feelings about making your poor dog wear shoes in the house to protect your stupid floors. The floors look cheap, as does the whole house. The showhome is done up to the nines but their place is quite the disappointment, to be honest. I felt bad for them.

#70 TurnerNation on 07.03.11 at 11:27 am

This weekend’s Barron’s newpaper coverpage (respected US investment paper) forcasting an oil spike, for what it’s worth.

But a newspaper could use a sensationalist opinion for a cover story…sells well.

Get Ready for $150 Oil
By GENE EPSTEIN
After a decline this summer, crude’s price is likely to rise sharply by next spring. It will hurt the economy, but it won’t be a disaster

The U.S. economy is never completely ready for higher oil prices, which is one reason they take a nasty economic toll when they arrive. But readiness can be enhanced by awareness of the likely outlook for petroleum prices–and the outlook today is relatively grim, although probably not disastrous.

Despite the recent 20% decline from April highs, new highs on crude, heating oil, diesel fuel, jet fuel and gasoline seem likely over the next 12 months. Following some further easing over the summer, the second leg of the long-term bull market in petroleum–the first occurred in 2007-08–probably will begin this fall.

http://tinyurl.com/3ulwmgl

#71 Christopher on 07.03.11 at 11:30 am

Gocery bager doing the work of 3 people! less check outs longer line-ups! Stock shelves and long list of duties,crappy minimal hours, this is just how it is. And a lower wage rate to go with this is how it really is….for those lucky enough that never had to suffer. Yes real esatate was the only way to make some quick cash other that lotto and drugs. Now we must wait to see what the next game will be.

#72 zombiedelight on 07.03.11 at 11:47 am

Have a wonderful day everybody!!
http://www.youtube.com/watch?v=taeN

DELETED. You are no longer welcome on this blog. — Garth

#73 not 1st on 07.03.11 at 11:47 am

liquidity = volatility, and hence the flash crashes and scumbag traders in the equity market who can and will steal your portfolio in a day if they want.

non-liquidity = stability, and hence the reason housing or real estate cannot crash overnight simply because it takes more than a couple clicks at a computer to make a transaction. Also, there is no central index for price discovery or fixing.

That is the strangest comment in at least a year. Illiquidity just gutted the US middle class. — Garth

#74 Utopia on 07.03.11 at 11:50 am

#48 Randis

Thanks Randis. I have a response for Bronx Boomer too by the way. I apologize if It is a bit long. You guys who only read one-liners can just click past it. Please. Got to get it out of my system though. Times are changing and I woke up this morning and suddenly realized what it was.

Commentary follows…..criticism is surely welcomed (I won’t get mad,… promise)

#75 Utopia on 07.03.11 at 11:50 am

#12 Bronx Boomers wrote……..

“I could pull a section from this site in 2008 and the same comments appear – geez people, everyone sits in their dark, damp basement apartment and makes predictions that are borderline pathetic. People are parking money that is in a tangible asset – when inflation makes your money worthless in the next few years – better to have something than a bunch of useless numbers on a bank statement which won’t be worth the ink it’s printed on…people, get a history book and read up on it”
——————————————————————————-

Time for you to reconnect Bronx Boomer. Times have changed.

If you did not notice, many commodities are in sharp decline. Oil is way off, Corn dropped 11% in a single session last week, Wheat is in a major corrective phase and even Gold has flat-lined and now sells below 1500 an ounce….

The US Fed meanwhile is loathe to introduce QE3.

We cannot afford more stimulus yet as we have seen it has delivered some of the nastiest inflation in years without bringing on real growth. Commodity induced inflation is just a global tax on basic consumption and it has led to the outbreak of civil unrest of epic proportions in Africa and the Middle East.

Worse news, for Obama at least, it means he is unelectable next year if these same policies continue. Bernanke is now boxed into a corner. He needs to stimulate but cannot do so as that business is driving up input costs and will eventually lead to higher interest rates. Other solutions are needed. More money may not be the answer but regulation could easily fit the bill.

The Fed knows this. They are looking for better solutions to drive growth while keeping rates low.

The hard assets trade that folks run to for protection against sharpening inflation is coming off the boil. Why? Because Easing is ending with no promise to do any more at this time. Because cost-push inflation does not ever deliver the real goods anyway. It is a risky bet that garners as many losers as winners. Even precious metals are now being impacted as is typical in a commodity rout.

New policies are being formulated. Commodities must come down in value and efforts are now underway to minimize the profusion of dollars that were shifting into the risk trades of the past and instead send value seekers back into equities.

The release of oil from the Strategic Oil Reserves was just one aspect of the new effort to crush commodity speculation and kill the inflation genie. Knocking down Silver via Comex rule changes was another. And killing off high corn prices through the promotion of much greater acreage planting is sheer genius because that trade is just so huge in the world of food costs. Corn is in everything we eat.

You might think Silver is a big business based on all the talk but it is really a very small trade in the overall picture. Stack it up against corn and you will see what I mean. Corn is the closest equivalent we have to oil itself in the food world. It is massive. That one day 11% price drop last week put a lot of traders flat on their sorry asses courtesy of the US Department of Agriculture. It was huge.

Think this through. People tend to associate the future with events that have occurred in the past. In 1929 stocks crashed and sent us into a depression. Therefore in 2012 stocks might crash again. Right? I now think that is wrong.

Too many believe an equities crash is sure to bring the onset of the next depression. Many traders seem certain this is coming. But that thinking is wrong because times, demographics and the global economy have all changed. Populations are expanding and global demands are on the rise. That should propel commodities higher of course (at least in general terms and over the long run) but my contention is that serious efforts are now underway to limit the upside there and squelch the hard assets trade.

If you don’t get this then you won’t get anything at all.

The US and most other Western nations simply cannot afford higher interest rates right now. Not with the public debt levels we are carrying. We are all therefore just trying to buy time by pushing off the advent of interest rate increases by slowing the speculation in commodities as much as possible.

It is not written policy of course but it is being done nonetheless and those efforts will almost certainly accelerate. The precious metals trade is coming under fire from policy makers because it represents a threat to the stability of an economic recovery. PM speculators (while right in their thinking) are now destabilizing monetary policy. It is incredible really. Dangerous too.

What they don’t get is that their success in propelling metals higher versus the dollar and most other currencies only ensures that Central Banks will lean towards being even heavier buyers in the future. This suggest control will ultimately be vested centrally in the hands of regulators and not speculators. Confiscation is a near certainty to close the loop and end the outright competition with fiat currencies and the system we all rely upon. And make no mistake, this can happen overnight with the cooperation of just a few bodies. Precious metals is a tiny, tiny market relative to say bonds, forex, derivatives, oil…….. or even Corn!

You need to understand the connection.

If inflation runs unchecked then rates will rise. It is really that simple. Speculators driving up commodities are forcing the hands of regulators to quell the enthusiasm. They need to take action if they are to prevent a debt reconciliation event from occurring and in order to maintain the low rate policy required to stimulate economic growth.

Your idea that hard assets are the go-to investment choice are actually out of touch with what is now taking place. Commodities are dropping and investment is shifting back into equity markets where it is well known that most big companies sit on nice fat balance sheets and are proving good healthy earnings every quarter.

Record profits in many cases.

The great irony is that while equities proved the undoing of America in the 1930’s they may well prove to be the salvation of investors in the coming hard times.

How crazy is that?

Well times have changed. Lets just consider for a moment though that lower input costs translate directly into corporate profits and thus into dividend potential. We already have strong companies so it is only reasonable to conclude that by suppressing commodity markets at this time that equity values could rocket ahead even on modest growth prospects. That is why I now believe equities are where to be and quality companies must be owned going forward. This is my essential premise.

It is debt instruments that are the true risk trades now. Let me point you to Greece where bonds are paying out in the double digits, even up to 26% for some issues last time I looked. Do you think there is a gamble there?

Strong companies meanwhile are posting tremendous profits. Food in particular is huge. Global demand is growing for many classes of business and even slow growth prospects can deliver superb results if you buy at the right price. Those companies are fully solvent, busy with orders and they are fat and cash heavy.

Why the hell would debt interest you? Mortgages especially.

Unlike debtor nations swimming in a shark infested pool of paranoids and fools who would risk it all for security (!) or quick yield, these companies just keep chugging along and returning dividends and profit to those who are wise enough to own them. They are not constrained by regional politics nor do they care to worry about taxation as it simply flows through to consumers anyway.

The global giants are operating with a free hand and delivering much needed goods to a demanding world in a virtually borderless globalized economy while governments grapple with riots on their very doorstep. Some countries as we know are already at the very door of default.

In a world with billions of fresh new customers on the rise across Africa, Asia and the Middle East you actually want to be invested in quality healthy companies. We could well see a crash again. But this time it will not be equities that take the brutal hit.

Debt will be trashed. Debt will crash. Bonds will skid. Profit making business meanwhile will be the place to be invested and that is where you need to be to protect your capital and generate a return through thick and thin. It’s all about dividends, growth and income now. A new corporate world is on the rise and the real power will be vested in the boardroom, not in the dingy back rooms of the debt dealers.

So fear debt my sorry friend. Shun mortgages and bonds. You are living in the past where leveraging up always ensured wealth in the future. But those ideas are stale now. Leverage can mean death for investors in this indebted world of servitude to bankers. Never forget that the sword cuts both ways in regards to long term obligations and leverage.

What you want now is flexibility and liquidity and quality.

You need to stay nimble in changing times. Getting loaded down with 30 or 35 year obligations is just a fools game when you are surrounded by instability on all fronts. At a time when your own community may face default as we are seeing in the US today.

That means staying invested in stock markets despite the stern warnings from the freaks and the weirdos and the hyperinflationists and the nut-cases. Hard assets are not all bad. But they can ruin your day when governments target them in efforts to keep interest rates low though.

Get this right and you will understand where we are headed.

Policy makers are working overtime to put the inflation genie back in it’s bottle. They will kill the hard asset trade if necessary. That means Gold and Silver too for all you metals nuts. The global economy and its welfare is not your own personal fat oyster to harvest when times get tough and all policy tools will be deployed against your trade to limit the damage until stability can be achieved.

Rates must remain low and stable until a real recovery can be engineered. That is one of the very highest priorities of governments all over the world right now and virtually everyone is on board in making that happen.

So hard assets are becoming a risk trade now too. And you can Bank on that.

#76 ms bboomer on 07.03.11 at 11:59 am

I’ve been reading this blog for a few years now, having not found another blog/site in Canada similar to my own thoughts. I learn a lot. Until 2008 I was ignorant about economical things, for instance, I did not realize that many (most?) people borrow from their home equity. It seems that this is one of the reasons for what is happening globally. When hubby and I bought, many years ago, we saved a few years, bought, then paid off mortgage in a few years. Since then we have never borrowed anything. I assumed that most people did this, lol!

#77 The Original Dave on 07.03.11 at 12:04 pm

this blog is funny.

Those impatient, complainers out there – didn’t you guys ever meet some of the dot com millionaires in the past? They were hard to argue with too. They saw their assets increase ten-fold. It doesn’t mean that those gains couldn’t be erased…they were. In the U.S, there were all kinds of people that made a fortune on real estate (on paper). They never realized those gains, and now they don’t have them.

Kick back and relax. Buy investments that are cheap. Real estate won’t be a buy for several years.

#78 Snowboid on 07.03.11 at 12:12 pm

50 blase…

Got a kick out of your post, I was raised in Upper MR and the home my parents paid $17,000 in the early 60s is listed for $ 2.4 million.

They had good incomes but living in MR was well beyond their means.

My high-school friends came from really rich families, and it was fun at the time to ‘pretend’ to be wealthy.

My parents lost a bundle in the RE ‘correction’ of the early 1980s. The toys (boats, RVs, sports cars) they had bought with ‘home equity’ were all sold at a loss. The ‘retirement’ nest-egg disappeared. Lawsuits took the rest.

They died broke…but they inadvertently passed on valuable lessons about real estate and the hazards of debt – especially home equity.

We took a few risks in real estate and made cautious use of home equity, but were careful about timing and got out before repeating my parents mistakes.

Again credit has to go to Garth, despite what some posters say, this blog stimulates intelligent thought. I wouldn’t be surprised to find that my multi-millionaire former high-school buddies are regular readers!!

#79 BrianT on 07.03.11 at 12:20 pm

#40Big-If one is highly levered in RE, a 2 mill net worth can vanish very quickly.

#80 Nick on 07.03.11 at 12:26 pm

My dad has a power boat docked at Booths Harbour on lake Erie. The harbour is about 25 mins southwest of Simcoe, near a very small town called St. Williams. I was shocked by a few things I saw this year.

1) Quite a few of the docks for rent there are empty. Every year all the docks are rented and a boat is sitting in the water, until this year. I’d estimate 10% to 15% of the dock spaces are empty.

2) The small cottage community right near the harbour is littered with ‘For Sale’ signs. There were houses/cottages for sale last year that haven’t moved and more have come onto the market.

To get to the dock I have to drive through a bunch of small to mid-size towns. There are sale signs up in Simcoe, Delhi, Tillsonburg…and the list goes on. South Western Ontario is getting hit hard in the small towns/communities.

Canary in the coal mine indeed.

#81 Devore on 07.03.11 at 12:27 pm

#12 Bronx Bombers

I could pull a section from this site in 2008 and the same comments appear – geez people, everyone sits in their dark, damp basement apartment and makes predictions that are borderline pathetic.

And what happened in 2008? Oh yeah, prices dropped 20% in a matter of weeks. Rescued by rates dropping to 0 and all semblance of lending standards erased. But hey, lets not let facts get in your way. I’m sure they will come up with something again.

Oh, my “damp dark” apartment has gorgeous views of English Bay and downtown, which would cost me a ridiculous $400k or more to own in a shoebox format, at least a 50% more expensive proposition than renting. I know, I used to own.

Enjoy the strangers living in your house, so you can make ends meet, and sit tight, after all if all the “pathetic predictions” are wrong, you’re gonna make out like a bandit, right?

#82 pen pal on 07.03.11 at 12:30 pm

# 56 Ben

….and when you see it I hope you have every penny you own and leveraged to the hilt as you come to the realization that you are too late to sell….

Why would you even bother posting – your ignorance is on display for all to see here.

#83 Devore on 07.03.11 at 12:33 pm

#16 dutch4505

Not surprising, just another pylon propping up my view. What the American public wants most right now regarding the “housing crisis” is to authoritatively assign blame (on the banks) and for government to reinflate the housing bubble. The drop in prices is seen as the problem, that requires a solution; most would deny a bubble existed at all.

Lessons learned: 0.

#84 pen pal on 07.03.11 at 12:45 pm

# 46 not 1st

My, what analytical skills you have – can you point to ANY facts to support your OPINION.
Naw, didn’t think so.

I can see why you are “not 1st”.

#85 pen pal on 07.03.11 at 12:51 pm

# 40 Bigrider

Nowadays, a net worth of 2 million is not a lot, especially for a lucky real estate genius of the boastful sort you are hanging with.

You will ASSUREDLY go broke listening to people with a paltry 2 million net worth. That is truly all hat and no cattle.

Listen to guys with serious money, measured in 100’s of millions or even billions, but I doubt that they will go out of their way to tell you what they are doing.

#86 Timing is Everything on 07.03.11 at 12:54 pm

Gold is a rock. God is a representation of human morality. You are nuts. — Garth

The religious [gold] nut ‘bars’ are about, I see.

#87 Herb on 07.03.11 at 1:07 pm

Utopia,

you have worn out the speed bumps on your laptop again!

#88 Increasing that 1% on 07.03.11 at 1:08 pm

#58. penpal
Yes Pal/fellow moron,
There has been and is risk, as I mentioned.
BPOE/Nost Jr and Smokin’Man have said prices are going up in Van, and TO, respectively.
Garth confirms that’s still happening in his post today.

And, yes, there are many factors that show there will be a downturn, but, as I said, NOone knows WHEN that will happen.
So, though, again, it IS a risk, as in the past 2 years, and for how much longer we don’t know, people who have bought in these areas have had the opportunity to do well for themselves.

“In 416, for example, an 80-year-old, mid-town, kinda nice house….sold…– $605,000 above asking.”

“And in Vancouver,….. an increase of 47.95% in 24 months – which eclipses the greatest gains made by horny US markets leading up to the housing collapse of 2006-11.
In other words,…. urban fools in the godless GTA (Pride Capital of the World) and delusional Vancouver are stealing headlines and propagating the media myth that real estate is just peachy.”—Garth

So, as Garth has taught: RE is an emotional asset, and those emotions are still running high in these areas.

Funny, so many (or maybe it was mainly you, changing your name) have called BPOE and Smokin’ man the same thing.

#89 Nostradamus Le Mad Vlad on 07.03.11 at 1:24 pm


#34 shanks — Another method of depopping.? Also see link further on — “Invade, dammit!” — about the wealth that has suddenly appeared in India.
*
Chaos — The gods have the last laugh on us puny humans! Guess none of the following links really matter much. “The possible incoming “Kill Shot” ELE (Extinction Level Event) as in ELEnin could bring such an excitation of the sun and literally scorch the earth.” Good enuf reason for Yellowstone to blow its top; Invade, dammit! There were diamonds found u/ground in Af’stan; Uncle Sam and his coalition did a pretty good job of raping that country; Several links in re: Gadaafi’s speech, Sarkozy (who may have his own problems now that DSK is on the loose, and Los Alamos — plenty of radiation to go around.

Speculation Mini ice age for Eurozone, incl. UK? Chinese sovereign wealth vs. US sovereign debt; Russia not immune to bank bailouts; China’s turn to be mired in debt; Possible Blackmail DSK – Assange – Madoff, etc.; Pakistan Could be this is why Pakistan is quietly moving some its nukes to S.Arabia.

#90 Pat on 07.03.11 at 1:33 pm

#19 John wrote:

“Moribund in Halifax? Do you have stats? Source link?”

For example, record number of properties for sale, according to my stats. Source: mls.ca

#91 not 1st on 07.03.11 at 1:34 pm

Lots of paper bugs on this blog today. Utopia, you are simply wrong about corporate profits. Corporations are carrying trillions in debt hidden from the balance sheet and so are banks and government. Businesses took the bailout funds and bought back their shares in order to prop up the stock price, while insiders sold. There are no corporate profits. How can there be when the largest consumer in the world is in virtual default. 44 millions people using food stamps, 20% real unemployment, 1 trillion in credit card debt, 1 trillion in student loan debt, 14 trillion debt and 100 trillion long term obligations. You think this is sustainable. Austerity is coming to the U.S. soon and it will be reflected in the DOW soon.

The stock market is simply a rigged casino ponzi game with the big boys siphoning off millions a day using HFT. Its a scam, plain and simple, and you don’t win. 15% return..pfft. Not by the common man thats for sure.

#92 Helicopter Ben on 07.03.11 at 1:52 pm

#75 Utopia……… I had to read your post a few times just to digest what you were saying. As far as Oil coming down it is still very high and i dont see it coming down any more in fact i think it will go higher which is good for our economy, as long it doesnt get too out of hand, as far as the Oil reserves being released that didnt do a whole lot, what did they release a months worth of oil? As far as QE 3 is concerned they have no choice if they want to pay their debts and stop citizens from rioting, i dont know what they will call this new stimulus but it will come by the end of the summer i believe. And when they do it doesnt matter how many times they try to Squash precious metals with margin rates they wont be able to keep it down, believe me if they could gold wouldnt be at 1500 today. have you noticed central bankers around the world are buying gold? Your right about silver it is a tiny market all the more reason you cant stop it cause once india and china start buying a lot the paper asset for silver and gold will be left behind , the price you see today is the paper price not the actual hard metal, most people dont realize this but pretty soon i think they will. as far as speculators go they arent the one driving this, i dont know why everyone keeps blaming speculators for high silver and gold prices that is ridiculous , sure there is speculation in silver but they arent the main drivers of it. I dont doubt one day soon they will try to confiscate gold and silver but even if they do the price will go through the roof before they do and how do they plan on stopping asian nations from buying it when they promote their citizens to. Precious metals are always stagnant during the summer months, they will take off again after the summer. you seem to know an awful a lot about the subject, do you deal with this sort of thing in your line of work? I dont agree with everything you are saying but i dont know much really . I dont know why so many people on here are rude when they dont agree with someone. I am a laid back silver bug, maybe i should change my name to that:)

#93 Cato on 07.03.11 at 2:00 pm

#41 BrianT , #58 pen pal

There is a method to my madness. Yes, excessive wage inflation is traditionally viewed as extremely dangerous – but in Keynesian economics its actually deflation that is feared above all else. So its really a choice between lesser of two evils.

When I look at policy makers I look for those in positions of power who are dictating the terms to others, titles are meaningless. Its not Harper, its not Jack – its the unelected members governing the world’s financial bodies who are really driving the bus.

QE along with the stimulus & bailout measures didn’t go as planned. The plan was to remove the toxicity from banks balance sheets so banks would start lending again. Money would once again be sloshing through the system flowing from mainstreet up to wallstreet and economy would heal itself. It didn’t happen, most of the retail banks are in far worse shape then stress tests led us to believe. The banks were forced to horde the cash and very little money flowed into mainstreet, it all went directly to wallstreet. It means deflation is still a very clear and present danger on mainstreet and if mainstreet falls it would take wallstreet with it.

So the solution is going to have to involve an end run around the ailing retail banks and get money to consumers directly. If the Fed could drop money from helicopters out into the street it would. The alternative is stimulus measures aimed at wage inflation. Of course there is no way to sterilize effects of wage inflation so we’ll quickly see inflation bleed into other areas but compared to deflationary risks its lesser of the evils.

To pull it off they’ll need some sort of economic bubble as the vehicle. My bet would be large green energy initiatives or other measures aimed at weaning west from crude oil. It fits nicely within current geopolitical climate. OPEC cartel can no longer be controlled & regional flareups like Libya cannot be suppressed as easily as they could in the past. Its sets the stage perfectly for large scale, domestic energy initiatives involving green energy and natural gas. Those lucky enough to be in sectors benefiting from these initiatives will see effects first, but the inflation should trickle down over time until it reaches the kid bagging groceries.

Its not to say the kid bagging groceries for $25/hr will be any better off – infact standard of living will probably be alot worse for those at the bottom thanks to inflation. But the increased money supply will restart the Keynesian machine – the real estate bubble can reflate, consumer debts are repaid with inflated dollars allowing debtors to heal much faster and begin credit cycle again. This benefits the debtors in society, and incase anyone hasn’t noticed the debtors outnumber savers by a pretty larg margin.

Of course savers will get creamed, foreign debt holders like China would be seriously miffed but there isn’t much they can do about it. The alternative involves debt default which is far worse and China knows it.

So as far as I can tell its all a question of timing, being ready to pounce with capital when the time comes and go along for the ride. Wallstreet is where all the inflated dollars from mainstreet eventually come home to roost. To set the stage properly I think we’ll first need to see proper amount of pain & fear hit mainstreet which is where we are at now. Then the insanity can continue.

#94 Basil Fawlty on 07.03.11 at 2:12 pm

“False. Commodity prices spiked on speculative trading, are in correction, and will continue on news from China. — Garth”
The Central Banks of the world have been printing money like drunken sailors (QE etc.). This is inflationary and has also pushed up commodity prices.
Like Jimmy Rodgers says, if the economy does well commodities will increase. If the economy does poorly central banks will print money and commodities will increase. How could the price increases only be based on speculation at a time of such unprecedented money printing?

#95 eaglebay on 07.03.11 at 2:13 pm

#59 Helicopter Ben

Good common sense. But not all true. The Chinese economy is doing much better than you think. Chinese consumer goods will be produced more and more for their own Chinese consumers. 100s of million of them.
Don’t forget other Asian countries and India, Brazil, Indonesia, etc…
As people in all those countries get wealthier, commodities are bound to get more expensive.
I also think that the US economy will improve considerably in the next few years.
Due to the cost of fuel and therefore transportation, some US manufacturing sectors are improving. Steel, furniture and other heavy and large items are now getting cheaper to produce in North America.
The US isn’t Greece. If they want they could easily solve their debt problems. The US Government is the problem.
Watch and see.

#96 jess on 07.03.11 at 2:16 pm

flopping is more widespread in california

Assessor Mails 475,296 Annual Assessment Notification Letters. The value of one quarter of all properties is below their purchase price On Friday, the Assessor’s Office will mail 475,296 Assessment Notification letters which detail each property’s assessed value as of January 1, 2011 (lien date). Each notice serves as the basis for the calculation of property taxes contained in the property tax bill to be mailed in September. The overall number of properties assessed below their purchase price increased five percent to 124,148. The total reduction in assessed value of these properties increased thirteen percent to $27 billion. All reductions were assessed proactively by the Assessor without a single taxpayer request. Twenty-seven percent of all single family homes, and forty-nine percent of all condominiums are assessed below their purchase price, primarily due to the collapse of the residential real estate market.

“The fact that the assessed values of some properties are being restored and others are reduced, can be very confusing for property owners. Most property owners assume that according to Proposition 13, the assessed value of a property can increase no more than two percent annually. That is not entirely true,” said Stone. When the market value of a property declines below the previously established assessed value as of January 1 each year (lien date), the Assessor is required to reduce the assessed value to reflect the lower market value. However, when the real estate market recovers, the Assessor is required to “restore” the assessed value consistent with the market. Proposition 8 provides that property owners are entitled to the “lower” of the fair market value of their property as of January 1, 2011, or the assessed value determined at the time of purchase or construction, and increased annually by either two percent or the annual California Consumer Price Index (CCPI), whichever is lower. This year the CCPI is 0.753 percent.

high end takes a hit
The conforming loan limit determines the maximum mortgage amount the Federal Housing Administration, Fannie Mae and Freddie Mac can buy or guarantee. Without congressional action, the limit will drop to $625,500 from $729,950 for the majority of counties nationwide on Oct. 1.

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

Assessor: Value of one quarter of all properties is below their assessed valued
http://www.sccassessor.org/portal/site/asr/

#97 garrulous squirrel on 07.03.11 at 2:20 pm

We are seeing a good example of the ‘crushed vulture’ syndrome south of the border. In the sought after southwest and south the horny Canadians were first to ‘vultch’ when prices were off 10% ( our meida was splattered with headlines on what good deals were to be had ‘south of the border….bwahahahahahah)……..prices are now down 50% and falling!!!! Talk about ‘catch a falling knife’! But don’t just finger the goofy ‘canook’ ( the yanks don’t pronounce the ‘U’ the way we do….there have been an army of Brits and Brazillians who have also been taken to the cleaners in Miami and Palm Springs. It just go’s to show ‘suckers are ubiquitous’ wherever they originate.

I think a lot of people confuse ‘HAM’ with ‘Asia’. The Chinese nationals that are coming to Vancouver are not part of the immigration stat from ‘Asia’. These are not Thai’s or Koreans, disaffected Japanese or Indonesian. The tsunami of investors into Vancouver are an elite cabal of Chinese nationals from the Peoples Republic of China. They are not subject to Canada’s immigration laws because they are not immigrating….they are laundering stolen money in the easiest country to launder money on the planet. The Canadian government sets no reporting criteria for the the origin of funds. These Chinese nationals will only come to Canada if the scams they run blow up in their faces. As of today this is very public knowledge here and in China. Why this fact has gone over the heads of F and the gang in Ottawa has really got to make you wonder. Obviously the Canadian goverbment is well aware of whats going on and is allowing it….or being forced to accept it. Lets call this for what it is….and as it has been reported on internationally…….a flood of illegally obtained money that has stolen hundreds of billions from the Chinese state and Canada doing nothing to stop it. Pointing the finger at ‘immigration’ is just stupid misdirection. ‘F’ …..hire yourself a new PR guy….the one you have is making you look like a fool.

As such the flood is not affected by price points or local economy……the Chinese theives who are dumping the loot into Vancouver don’t care what they lose…..they only care that they got the money out and that they can have a bolt hole to run to if the Red Army moves against them in another affected cultural showing…..study some Chinese history……all 60 years of ‘the revolution’. These crooks know that Canada will never deport them…….we will even pay taxpayer dollars to fight the extradition of a single one. Such is canada’s great angst over ‘offending the immigrant’.

On the home front we see…much to our distress that the media has us begging for notice and struggling for relevance…yet again. The ‘Royal Visit’ has again been trotted out as ‘putting Canada on the map’….and as being…….’World Class’……..!!!!!!! Will we ever stop being such desperate weiners?

#98 Utopia on 07.03.11 at 2:20 pm

#87 Herb on 07.03.11 at 1:07 pm

“Utopia, you have worn out the speed bumps on your laptop again!”
———————————————
I know, I know. I had to get out a second laptop. My post did not fit on the first one. Damn thing bled right of the pages at the margin of my screen. Did you read it though? Curious to hear your thoughts.
=====================

#91 not 1st.

I see your point. We need to remember that not all corporations took bailout money though. The vast majority was set aside to prop up banks. It was, as you recall, a financial crisis. Some money went to keeping automakers from failing because they are considered so central to the remnants of our manufacturing sector.

But the food giants, pharmaceuticals, telecoms and many other industries got no such free lunch and have continued to profit. You will note that I heavily favour defensives and particularly those with a strong history of paying dividends. All stock is not created equal. I appreciate your argument but investors clearly differ and they have proven this by buying certain equities and pushing the P/E ratios. These companies continue to be in demand and each set-back is seen as just a better buying opportunity. I am trending to agree with that sentiment as I see that Governments at all levels are being hollowed out. Many are at risk of defaulting on pension obligations for example. Is that not a reason to look to strong performing companies for return? You will have heard Garth discuss preferred’s many times. He is not saying that because he is a crazy person and while I can agree there are difficulties with some of these instruments I also tend to lean in favour of owning quality versus junk. Debt is junk. I don’t want it anymore and will not invest there.

Thanks for the response by the way. Glad to know someone actually read the whole thought through to the end and took the time to send an answer back.

You made my day.

#99 GTA Girl on 07.03.11 at 2:42 pm

To BronxBomber: I live north of TO. Same 6homes in my immediate area still sit on market nearing 8 weeks. Agents are starting to lower asking prices. One 5,000sqft mansion, finished everything, pool, cabana bar, spa bathrooms, Downsview kitchen, 4car garage was listed at $1.7. Now $1.3

These homes moved fast 1yr ago. Last house was $2mil over 1yr ago. $1.3 is a deal compared to tight little 2525sqft homes in suburbian wasteland they were selling for $900k to start w/no upgrades, cookie cutter neighborhoods with nowhere to walk to except a Walmart parking lot.

The monster homes are taking a hit from lofty highs. But at least these people bought them many years ago for 1/3 price. It’s those people who bought crap new builds/over asking that are going to wake up under water.

Come on people! Didn’t you think the cookie cutter souless homes in places like Milton/Brampton/Newmarket at $800k were crazy? I thought even at $450k I couldn’t understand how people afforded them.

#100 Utopia on 07.03.11 at 2:46 pm

59 Helicopter Ben asked….

“….just wondering if you you can expand on your thoughts on Commodities . Are you saying commodities spiked cause of speculation?”
————————————————————–

If I can answer that Ben, the simple answer is “yes”.

You might be interested in the following recent article by Gary Shillling that appeared on Bloomberg. It is titled “China Heading for a Hard Landing” and discusses commodity speculation. Some have estimated that as much as 25% of current valuations are purely the result of speculators absent real demand.

http://www.bloomberg.com/news/2011-07-01/why-china-s-heading-for-a-hard-landing-part-5-a-gary-shilling.html

#101 jess on 07.03.11 at 2:49 pm

There are no corporate profits?

1 Trillion Offshore
U.S. multinational corporations have more than $1 trillion in profits outside the country that would be taxed if brought back to the U.S. Companies including Apple Inc. (AAPL), Cisco Systems Inc. (CSCO) and Pfizer Inc. (PFE) have been lobbying Congress for a tax holiday similar to one enacted in 2004.

http://www.bloomberg.com/news/2011-07-01/bill-clinton-backs-tax-holiday-on-foreign-profits-with-caveats.html

#102 eaglebay on 07.03.11 at 2:53 pm

#91 not 1st

You’re last. If you do proper DD you can select companies with great fundamentals. Nobody can screw around with solid companies.
The US could solve their deficit quickly by simply canceling Bush’s tax cuts. And , the US Government could simply stay out of the economy.
I’m a common man and I’m making a lot more than 15% on the market, including this year. Loser.

#103 jess on 07.03.11 at 3:00 pm

the shirts of their back,how tax policies fleece the poor christen aid september 2005

According to the International Monetary
Fund (IMF), in low-income countries, for every US$1 lost in trade taxes, only 30 US cents has been recovered in sales and consumption taxes.9
Competition that involves setting low rates of corporate tax or giving tax holidays in
order to attract investors from different countries is throttling public services in those countries and may be significantly harming economic growth.
A 2004 report by the global consulting firm McKinsey highlights the ineffectiveness of
offering such incentives to companies. The report examines foreign direct investment
(FDI) in Brazil, China, India and Mexico. It concludes that while FDI brings significant benefits, such as employment and technology, ‘popular incentives such as tax holidays, subsidized financing or free land, serve only to detract value from those investments that would likely be made in any case.’10

But in the past 30 years, low-income countries have experienced a slump in the amount of tax they collect because of falling tax yields from trade taxes and the
stagnant rate of direct taxes, such as income and profits taxes.11
There has been a similar trend in middle-income countries where the need for additional revenue is not as great, but where tax is important as a means of
redistributing wealth. For both low and middle-income categories, the changing trend means the burden of taxation has shifted, from rich to poor.12
The very organisation that has presided over many of these changes – the IMF – has produced new research, showing that for every US$1 poor countries have lost by
liberalising trade tariffs, they have ‘at best’ recovered just 30 cents through other forms of taxation. Even middle-income countries have recovered only 45 to 60 cents of each dollar lost.13 Moreover, those countries that have followed IMF advice and attempted to recover lost trade taxes through VAT have fared no better than those that have not.14

scope for mispricing and, as a result, the laundering of profits.30 Raymond Baker in Capitalism’s Achilles Heel details a number of examples of under-priced exports, such as TV antennas from China priced at US$0.04, rocket launchers from Bolivia at US$40 and US bulldozers at US$528.
Baker also gives examples of over-priced imports, such as German hacksaw blades, priced at US$5,485 each, Japanese tweezers at US$4,896 and French wrenches
at US$1,089.

#104 not 1st on 07.03.11 at 3:06 pm

There are no corporate profits?

1 Trillion Offshore
_________

That won’t go far to pay back the 17 trillion corporations are in the hole for. DOW stalwart General Electrics debt obligations exceed the entire country of Canada’s.

http://www.nytimes.com/2009/04/04/business/economy/04charts.html?_r=1&em

This is my continuing problem with this blog. Over priced real estate is preached as bad. Agreed, I get it, but then at the same time, everyone blows sunshine about the equity markets when the exact same thing is true about that sector as well. Its selective reporting at its best.

#105 TurnerNation on 07.03.11 at 3:11 pm

Greedy developers! New “Victory Condos” for re-sale at King/Spadina in Toronto. A flipper is asking 310k for a 470sq foot. But look at the developer’s ad claiming 600 sq foor of living space. 190sq feet of this space is on the balcony! Fine in Florida maybe, but not when for seven + months of the year it’s too cold for balcony use.

What’s next, selling the condo garbage room as a party room??

http://toronto.kijiji.ca/c-ViewAdLargeImage?AdId=294164898

#106 Helicopter Ben on 07.03.11 at 3:32 pm

#95 Eagle Bay…………….. I think the U.S. is in worse shape then Greece, the only difference is the United States has the luxury and the curse of having the worlds reserve currency. Greece cant devaluate their dollar and have no room to maneuver where as the states just keep kicking the can down the road. When you look at the U.S. debt, federal, municipal and personal its overwhelming. factor in 20 percent dont have a job and 1 in 7 are on food stamps. where is the solution? Jobs arent coming back, the federal government couldnt pay their bills during the boom, now a lot less people are working and paying taxes and many countries arent buying as much U.S. debt as they used to. Interest rates have to stay low so everyone can pay their bills, personal and federal debt, but they cant really lower the interest rates anymore, so again what is the solution? i havent heard one politician address it, the reason being is the solution is to raid the 401k’s , raise the retirement age, up taxes and cut back on many of the social benefits. this is political suicide and no one will attempt it till they have too, possibly after 2012 elections. Simply put they are a nation that lives over their means that no longer produces much with an aging population. what i am afraid of is they arent looking for a solution rather to just blow the whole thing up and create a new currency, world or north american currency. look at all the wars the states are in, its like they are giving their last hoorah before the nation falls apart like so many have before them in the exact same way. debouched their currency, went on many long unjust wars and lastly but mostly morally corrupt to the core.

#107 TurnerNation on 07.03.11 at 3:36 pm

#73 not 1st on 07.03.11 at 11:47 am

I think it’s: Volatility = flight to liquidity (the US dollar)

As I understand it this is why commodities (oil, silver, gold) were not spared during 2008 market crash. And oil is traded in USD. A flight to liquidity means selling of oil into USD.

Similarily a(nother) freeze in credit markets would hurt heavily indebted Canadians, forcing a drive to liquidate houses.

(“Whaddya mean my 1.2 million crack shack may only be re-financed at 900k of value @ 4.5% — instead of @ 2.5%?”).

#108 Ben on 07.03.11 at 3:40 pm

#82 pen pal on 07.03.11 at 12:30 pm

I don’t have a single penny in real estate, got divorced and sold my $290,000 home 8 years ago. Packed a suitcase and hit the road only to see real estate start it’s double the day I sold.
You miss read my post, this collapse in real estate has been in the making for 4 years now? I would love nothing better then to see a total colamity. Do I think it will happen, I have my doubts.

#109 rental monkey on 07.03.11 at 3:53 pm

Craigslist Victoria @ 11:20 a.m. today has a BEDROOM for rent in a home at Bear mountain for ~get this~ $700.00 a month. Not a suite, a frigging bedroom! Brutal. And have access to a bathroom in the laundry room. WTF? That is seriously bizarre. Not too mention a pain of a commute. Good luck to those owners……

#110 TurnerNation on 07.03.11 at 3:58 pm

#40 bigrider on 07.03.11 at 7:01 am

I would tell your friends, while they may be doing okay look out for the other people in the market.

There’s no point in building a “safe” prudent R/E portfolio when maybe 50% of the market is made up of drunk on credit, reckless speculators!

There was no such thing as a “balanced, safe” .com stock portfolio no matter how hard one tried.

As always, it’s “the other guy” on the roads to look out for. Even if you drive safely, a reckless teen or a drunk can still wipe you out.

3-5 years of RE gains could be wiped out within a few short months. When oil went to $120, it was at $30 a year later…

Houses are different you say, yes houses have greater illiquidity and greater transaction/financing costs! Even worse.

Every variable mortgage like an OTC interest rate swap for the banks. You pay them 2.5%/yr variable, they pay out 1.7%/yr fixed in a GIC . House wins on the spread.

You pay 3.8% 5-year fixed mortgage, they pay you 3% 5-year fixed GIC. House wins on the spread.

#111 Bill Gable on 07.03.11 at 4:26 pm

Anecdotal note on just how bad it is in the Good Old USA – our neighbours in Washington – a place that actually has manufacturing and infrastructure, unlike here in La La Land – it’s O-V-E-R.

Washington state closes tourism office over budget woes | Reuters

http://t.co/YxDICbN

#112 Debtfree on 07.03.11 at 4:27 pm

nostradamus … you sound like your not having an up day . This video should cheer you up a bit.

http://www.youtube.com/watch?v=LLCF7vPanrY

#113 Uki_7 on 07.03.11 at 4:29 pm

BBC: “High cost of property hits China’s middle class “:

http://www.bbc.co.uk/news/business-13959239

#114 Hoof - Hearted on 07.03.11 at 4:37 pm

#106 Helicopter Ben

Well , under the NWO premise…..the U.S. is the world police….even they admit it.

The US will provide fresh military meat (often when youth has few job options) with toys from the Military Industrial Complex to protect the Bilderberg interests often using False Flag strategies…..

Maybe the US citizens, en masse… will get head out of asses…perhaps review Rothschilds…and other REAL history since 1776…and use their current inherent “strength” advantage to go after the real scum and put THEM on trial for economic war crimes.

Economic war crimes are only one degree of separation from murder ………IMHO.

#115 dec3ptiKon_ on 07.03.11 at 4:39 pm

Mister Obvious on 07.02.11 at 5:46 pm
#190 dec3ptiKon_

“I hope that signature isn’t permanent. The guitar will be worth more without a signature from a member of Bachman Turner Overweight”
——-

Dork.

Well Mr Obvious, it’s obvious that you know nothing about vintage guitars. It’s a fact that a classic guitar is worth more if kept in it’s original condition ie NOT HAVING THE PAINT JOB COMPRIMISED BY PERMANENT INK.

Dipshit.

#116 AKatz-Oaville on 07.03.11 at 4:45 pm

Good article about the global financial crisis:
“A reckless love of money?”
http://www.open2.net/blogs/money/index.php/2009/10/01/a-reckless-love-of-money?blog=5

#117 Mr. Lahey on 07.03.11 at 5:03 pm

#33 For your info, I am aware the BOC sets rates. If you think they do this independent of the feds then I have some prime swampland in Florida to sell you…

#118 Mr. Lahey on 07.03.11 at 5:12 pm

A comment for those who have friends that are boasting about the rise of their property values in mania cities like Toronto. The insanely low interest rates that the feds/BOC have set have fueled this insanity. Now, having had the debt crack addicts loaded up to the hilt, Carnavale Carney says that Canadians cannot lose sight of the debt levels that they have loaded up on. Really Mr. BOC Governor? Really? Dah… If interest rates were at their historic norms, house prices would not still be doing their high wire acts in mania cities like Toronto. I bought my first home when interest rates were 14.5%. I’d like to see who could afford a million dollar mortgage at 14.5%. Now with variables at 2 and something percent… Randy, like the Garth Man says, this won’t end well.

#119 bullion.bunny on 07.03.11 at 5:35 pm

#54 allister on 07.03.11 at 9:31 am

Don’t you get it….debt=control

http://www.youtube.com/watch?feature=player_embedded&v=2B_SxGmSJP0

get back to work slave

#120 Maxamillion on 07.03.11 at 6:15 pm

#99 GTA Girl

Come on it’s not that bad in these neighbourhoods. They come with free entertainment.

A possible drug deal gone bad in a high end neighbourhood in Vaughan?

http://www.cp24.com/servlet/an/local/CTVNews/20110703/110703_Drive_By/20110703/?hub=CP24Home

If anyone is interested there a few homes for sale on the same street.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10427888&PidKey=1643848907

#121 hey guys you're on the same page! on 07.03.11 at 6:16 pm

Settle down there #115 dec3ptiKon…..I think you’re actually agreeing with Mr. Obvious but you’re calling him a dork and a dipshit.

And why are you shouting anyways…… “NOT HAVING THE PAINT JOB COMPRIMISED (sic) BY PERMANENT INK”? Dude, really.

He, like you, believes that the Fender is worth less with stuff written on it. By a hefty Canadian rock legend, or otherwise. Or, conversely, that it is worth more if unaltered.

Now kiss and make up.

#122 jess on 07.03.11 at 6:17 pm

knowledge Symmetry – geo coding

World Bank is opening its vast vault of information.
currently giving public access to more than 7,000 that were previously available only to some 140,000 subscribers — mostly governments and researchers, who pay to gain access to it.

Those data sets contain all sorts of information about the developing world, whether workaday economic statistics — gross domestic product, consumer price inflation and the like — or arcana like how many women are breast-feeding their children in rural Peru.

It is a trove unlike anything else in the world, and, it turns out, highly valuable. For whatever its accuracy or biases, this data essentially defines the economic reality of billions of people and is used in making policies and decisions that have an enormous impact on their lives. ”

Mr. Zoellick says the bank’s newfound openness is part of a push to embrace competition, both internally and externally, as it tries to reduce poverty and foster economic development.

The Mapping for Results Platform provides detailed information about our work to reduce poverty and promote sustainable development around the world. This pilot website aims to visualize the location of our projects and to provide access to information about indicators, sectors, funding and results.
Prior to the Spring Meetings 2011, Mapping for Results has identified more than 1250 active Bank financed activities working in 16,520 locations. These activities are a subset of more than 2,500 active financed Bank activities with a volume of more than $160 billion.
Read More »
http://maps.worldbank.org/

#123 SMOKING MAN on 07.03.11 at 7:12 pm

Any idea how hard it was not to have a beer at ceases casino in Windsor last night while watching the Tragically Hip. Buy the way had a smoke with a few of the band members, and rowdies right at the entrance. They were a little worried I would hound them for an autograph, ha, did they not know they were in the presence of the legendary smoking man. For I was afraid they would hound me. See kids that is how a great mind thinks.

Now as far as cottage country Real estate goes, ya it’s in the toilet, Garth is 100% correct, why. Could it be that price shot up far to rapidly a few years ago. Anyone notice how our mind control media was pumping cottage country a few weeks ago.
Toronto is s different story. But only time will prove me right and all the skeptics will insult me as usual.

And now lets rub some salt of the bubble head predictions of late 2010. “In the spring there is going to be massive listing in the GTA, sales are going to crash with prices.”
Sell Sell Sell you where saying.
Well that did not happen as I said it would not.

Un like you guys when I f-up a predication, and I usually put my money where my mouth is example Yellow Pages YLO Got killed on it( still long) might make it back? But not afraid to say I was wrong.

But you guys when you are wrong, lets change the subject or push it down the calendar.

Wimps to say the least……..

#124 fancy_pants on 07.03.11 at 7:36 pm

IMO, the SHTF when the rates go up but not before.

Greed doesn’t switch to fear until the crap is in your pants. crap isn’t in your pants until you can’t keep the house payments. can’t keep the house payments when rates go up.

#125 Nostradamus Le Mad Vlad on 07.03.11 at 7:44 pm


#106 Helicopter Ben and #111 Bill Gable — Your two posts have similarities, e.g., it’s over, esp. with the US debt at US$100 tri., not including the deficit and unfunded liabilities!

#112 Debtfree — Hi Debtfree. Quite the opposite, actually. Temp. is warming up (finally), gentle breeze rustling through the trees and spent time with BIL and other friends, great rock ‘n’ roll + blues — it’s a great life!
*
#119 bullion bunny — Slavery or freedom? You are right, of course; Cover Up at Fukushima falls apart. “Remember the initial report of massive radiation leaks that was then withdrawn with the official explanation of a “calculation error?” That was a lie; the original figures were the correct ones.” wrh.com; Wood Pulp Fifteen companies that feed us wood (good for fibre intake?); Strange nuke stuff; Los Alamos close to re-opening; Starvation again in the Horn of Africa; Sick JokeNo, not C-H-F. The BBC; Although the US, some principles can be applied here and the Eurozone; Al Bore “Al Gore, America’s loopiest ex-vice president, is at it again.” Greece China probably won’t bail Greece out now, as they support the Palestinians / Gazans, and Greece is sucking up to Israel by blocking the aid ships.

2:13 clip Tuesday, Aug. 2 — US debt default day (DDD); 4:44 clip Gold and silver now legal tender in Utah; David Cameron One billion pound tax break for companies (yesterday); today, 40K families turfed into the street; Ratings Agenciesmay derail Greece; Soros “In other words, he advocates more of what has brought on the economic crisis in the first place.” Real Cause of out-of-control US debt.

#126 Killer Chicken or Imploding Boomer? on 07.03.11 at 7:54 pm

91 not1st – if corporations, banks, governments, students, homeowners etc all have debt, who is
it owed to?

#127 45north on 07.03.11 at 8:01 pm

Utopia: talking about precious metals: Confiscation is a near certainty to close the loop and end the outright competition with fiat currencies and the system we all rely upon. And make no mistake, this can happen overnight with the cooperation of just a few bodies. Precious metals is a tiny, tiny market relative to say bonds, forex, derivatives, oil…….. or even Corn!

I read your post and bought a ton of corn and am insisting on delivery!

Maxamillion: I followed your link to the place in Vaughan listed at $1.8 million. $1.8 million that’s a great retirement fund no matter what your age. And just think it’s just 42 minutes from Toronto City Hall! (would anyone say that he could do it 4 days out of 5?) Well there are a lot of places the same distance from City Hall and they don’t cost $1.8 million. The roof has a lot of valleys – they tend to leak first, bet there are two furnaces, costs a lot to heat. Wonder what it will look like in 20 years?

#128 Devore on 07.03.11 at 8:05 pm

#123 SMOKING MAN

Un like you guys when I f-up a predication, and I usually put my money where my mouth is example Yellow Pages YLO Got killed on it( still long) might make it back? But not afraid to say I was wrong.

But you guys when you are wrong, lets change the subject or push it down the calendar.

Did you even look at the company, its financials and filings, recent new releases, analyst commentary, or you just saw a cheap stock with high yield? Not only is YLO a company with a poor business model and execution and future prospects, for which, like RIM, it is rightly getting punished, you’re likely to see your precious dividend cut soon as well. I wouldn’t go so far as to say a dead company walking, a turnaround with new management is always possible.

But stick with it, you might break even sometime.

Blindly jumping into something with both feet and displays of bravado are not admirable qualities in an investor, that no one should seek to emulate. Throwing a dart at the TSX and losing is one thing, being proven wrong after careful research and a deliberate decision because risks have a downside is quite another. Which one are you?

#129 Tony on 07.03.11 at 8:40 pm

Like i said before when Mississagua and Brampton tank it’s over all over but the crying. Both cities are the zero down capital’s of Canada. Only time will tell what all the residents do when they lose, walk away and say goodbye to the houses they should’ve never quote owned in the first place.

#130 Utopia on 07.03.11 at 8:45 pm

#126 45north
————————
OK. That really cracked me up. You might not be so far wrong though. If the precious metals trades did end who is to say ppeople won’t start hoarding sugar and instant coffee.

==================
#92 Helicopter Ben (aka Laid Back Silver Bug)….

Thanks Ben. I appreciated your remarks. I agree too that managing the price of oil is a tough nut. That is probably the biggest hole in my argument although there are others. Not sure why you see a big rise on the horizon as China slows. I see it coming down myself as the driving season ends and activity is off in so many countries.

You might have to forgive me. I am still in the process of working through an idea in an attempt to draw some conclusions about where markets and the world economy is headed next. I can get a bit off track at times as I go off in multiple directions.

I have first drawn attention to how high commodity prices can impact inflation and thus lead to interest rate increases. You will likely recall President Obama accusing speculators of harming the economy by driving up the price of oil. He was not really that far wrong.

This has suggested to me the real reason that no QE3 is forthcoming and that efforts may now be underway to cool off commodities altogether. I cannot know exactly how that might be achieved but it was not so long ago that average investors were not able to participate in commodity markets at all and the hundreds of ETF’s now available are a relatively recent phenomenon.

It is also worth considering that the vast majority of trades are controlled by banks these days. If the spigots were turned off there is no reason commodities would not see declines and I am quite sure that pressures can be applied to reduce the level of speculative fervor. Again, this is a Fed exercise.

Furthermore, I have noted that Central Banks are no longer sellers of gold but have instead become net buyers. It is clear that they have the capacity to absorb all the gold available should they so choose.

Meanwhile, governments themselves are strapped and have resorted to dipping into pension to fund operations. The public sector is sick with debt. There is little question about that.

Over in the private sector though we are seeing some real signs of strength developing and performance has been good for many. It is clear to me that Governments will view companies as their salvation and encouraging fresh consumption (or rather stifling the forces that slowing consumption) is now a priority.

Again, commodity prices play a role here in whether a true recovery can ever come about. As prices fall, demand will typically rise. This feedback loop in stimulating economic activity must weigh ultimately on the Fed’s ability to keep rates artificially low until a real recovery begins.

Debt is not really a problem in any event if you are able to grow out off it. The US government is keenly aware of this. Stealth devaluation has backfired though and led us right to the door of a new recession which can be ill afforded while massively ramping up indebtedness.

A slow down will put the spotlight on debt to GDP relationships and as we know it is not a pretty picture already. How much worse will it be as the economy slows ever more.

I am seeing a diminishing role for governments in the future as our major companies take a larger role. I am not saying it is a good thing, only that it is happening. Signs are all around us. The shifting of effective ownership of water rights from the public to the private sector is a perfect example.

Others will note that the austerity being imposed on Greece is effectively a hostile takeover of public enterprises. We may in fact be witnessing the rise of a new breed of corporatism.

As I suggested earlier though, if commodity prices decline at this point in time it will only serve to boost company revenues and therefore deliver more quarters of positive results. This tells me that equities will flourish (at least for awhile) and are the right place to be.

We need to pay close attention to the price of oil and other major inputs at this time. It is how we will know the direction the economy is really going to be taking in the future.

#131 Mister Obvious on 07.03.11 at 8:48 pm

#115 dec3ptiKon_

It had nothing to do with the guitar, pal. It was you putting down Randy Bachman who gave a gift to the writer of this blog for his unselfish effort. Your boorish comment was entirely uncalled for. Nimrod.

#132 Bench Warmer on 07.03.11 at 9:09 pm

All this waiting around for housing to tank, totally mirrors the Tech bubble. Some arguing about when, some arguing that it will never happen, and most never even giving it any serious thought. Here in Calgary I can tell you we are already starting to slide down that slippery slope. The Bull trap in this town happened back in the spring with the last of the suckers getting in before the rules changed. The situation in Calgary regardless of what oil and gas does looks very grim. Glad to be sitting it out on the sidelines debt free cash in hand, waiting for all this to play out.

#133 Herb on 07.03.11 at 9:20 pm

#98 Utopia,

I can’t believe I read the whole thing, but I did (wife asked me to, since she couldn’t understand it).

Put myself in the position of an investor who had to make a decision under the usual conditions of uncertainty: equities or hard assets, not to ignore the financial sector entirely. Yes, millions of new customers, but can they afford to buy? And lots of efficient and profitable companies, but what if the commodities they rely on cost enough to put their products out of the reach of consumers?

At the end of your script I had seen no convincing argument for either side, so it remains six of one and half a dozen of the other. Guess the answer would be to cover all bases – Garth’s diversification.

While I’m at it, let me pass on what I heard the commander of a German division tell his staff: Writing is short enough if not a word can be omitted without changing the meaning.

#134 Andrew on 07.03.11 at 9:23 pm

#75 Utopia

That was the most incoherent and contradictory post I’ve ever seen on this blog. Sometimes people hit a wall where they think they know everything and so they become unable to learn anything new. It seems like you hit that wall a couple of years ago.

First, you say that US and other countries can’t raise interest rates because they can’t afford it right now. Then you say that policy makers are working overtime to bottle up inflation. Well you can’t have it both ways. Either we have low interest rates and runaway inflation or we bankrupt our banks and plunge head-first into recession/depression with higher interest rates. You can’t “engineer” your way out of mathematical laws. It’s not a matter of “working overtime” to fix things. It’s a decision that can take 5 seconds. Either raise interest rates and cut spending or not. That’s it.

You talk about “speculators” driving commodities higher, which is ridiculous. Government policy and money printing is what drives commodities. Buyers are simply responding to the fact that the government is making commodities more valuable.

Then you say this.

“What you want now is flexibility and liquidity and quality.”

Wow, we want quality, huh? And I thought sh*tty investments were the way to go! Guess I’ve been thinking about this all wrong. Sheesh.

“Rates must remain low and stable until a real recovery can be engineered.”

It’s BECAUSE of the low rates that we are getting farther and farther from a real recovery. Seriously, this statement is no different than saying “chemotherapy must be postponed until the cancer goes away.”

It’s a sad thing that the people who have the most to say seem to know the least.

#135 Lisa on 07.03.11 at 9:46 pm

I know a guy who works at a big mortgage insurance company in T.O.. He says they have a long list of people who will default if rates go a quarter percent higher. They are anticipating this, know it’s coming and are just waiting.

#136 Helicopter Ben on 07.03.11 at 10:10 pm

At this point i believe housing will go down here in canada forsure, but not cause of the reasons we have believed that last few years, it would of played it self out if it had been left alone. but it looks like the world wide economic collapse will come before the canadian bubble has its time to play out, same results just different horse crossing the finish line. Real estate is no longer our main concern, or atleast it shouldnt be. i know this is a real estate blog but at this point i think you should do your best to get out of the way of this runaway train thats coming for us. we arent being told the truth from the media so most people arent aware of what they are in for, we do live in one of the best countries in the world and one of the safest countries for this coming collapse. it will be horrendous for americans and europeans, it will be painful for us to, just not as bad.

#137 dec3ptiKon_ on 07.03.11 at 10:35 pm

Mr Obvious

My comment is about as uncalled for as your personal opinion of an overweight canadian guitar player, and your childish name calling.

Grow up and realize that not everyone puts fat axemen on the same pedestal that you do.

#138 Utopia on 07.03.11 at 11:11 pm

#134 Andrew wrote….

“First, you say that the US and other countries can’t raise interest rates because they can’t afford it right now. Then you say that policy makers are working overtime to bottle up inflation. Well you can’t have it both ways. Either we have low interest rates and runaway inflation or we bankrupt our banks and plunge head-first into recession/depression with higher interest rates”.
————————————————————

Andrew, if inflation is contained there is little risk that interest rates will rise too quickly. This is the opposite of what you are asserting. What we do not want is that we have very high rates of inflation that can only result in interest rate increases.

It might be fine if our inflation was delivering real growth and new investment but it is not. Commodities are turning into a casino of speculation that are causing damage through rising prices in a flat economy and thus are thwarting attempts to bring about recovery.

There is a good reason that we have two inflation numbers by the way. Core inflation strips out food and fuel, in essence removing the prices that are driven by speculation. We know too that headline inflation will be dropping in the coming months as the prices of major inputs are all dropping now. Oil which is the key driver is heading lower and that is a very good thing.

I could have done without all the insults by the way.

Not sure why some of you object so strongly to long posts either. It is simply not good enough for me to just blandly write that I believe equities will rise. That assertion calls for an explanation as to why I have that belief.

It is just not possible to write one-liners and still offer any insights into why I have arrived at a conclusion that is in conflict with current widespread beliefs. As you will be aware, there is fear in the markets again and a growing number of investors are concerned that a serious equities rout is imminent.

I have just come to a different conclusion. Now you know why.

#139 betamax on 07.03.11 at 11:11 pm

#35 Cato: “They lived the lifestyle, I didn’t. Sure, they’ll hit the wall and go bankrupt but so what”

I’ve said this before here, but bankruptcy has only recently had mild repercussions — i.e. during the current credit bubble, in which even bad credit is glossed over and lending continues unabated.

The longer the bubble lasts, the older these people will be when they finally go bankrupt. A middle-age financial do-over will mean that they’ll be playing catch-up the rest of their working lives and will be paupers in retirement.

A rather horrible retirement crisis lies ahead for those who’ve gorged on too much debt, and it will coincide with an increasing lack of government funding for pensions, services and medicare. The scale and depth of it will be unprecedented.

#36 Priced_out: “Now prices are at the poing where even 25% of correction will not do anything and *I am priced out forever*.”

Wrong conclusion. If 25% won’t do anything, then the correction will be more than 25%.

In the meantime, forget about buying and focus on enjoying your life. Home ownership ain’t all it’s cracked up to be. Only the current bubble makes it seem like owning has no downside.

#140 Peter Pan on 07.04.11 at 12:13 am

Hey, you got a picture of Rob Ford on a jet ski! Cool.

#141 spaceman on 07.04.11 at 1:38 pm

#4 Brian on 07.02.11 at 9:11 pm

thanks what is the listing # I would like to have a look at it…

#142 Jason in Calgary on 07.04.11 at 2:52 pm

Just got a new rental in Calgary.. not quite as good as what Garth mentions for 1599 but doing pretty good for 1700…. glad to be away from the mortgage monster for many more years!

#143 disciple on 07.04.11 at 3:17 pm

Well, methinks this is the last of the posts for this blog entry, so with all intentions of not upsetting the apple cart of mainstream illusion too briskly or jauntily, I will introduce a new idea to the plethora of minds out there: let’s see…how about something I was thinking about this weekend at camp, FIRE.
Science has no complete definition of what this is. Surprised? I mean we all KNOW what fire is, but there is no theoretical basis in modern science for what we observe as a dancing flame. Many believe it is a hot mixture of incandescent gases and in truth this is how we can sometimes identify the substances being burned, but the flame itself as a measurable unit, the visible effect of the combustion, defies explanation. Just as a whirlpool in a body of water is just water, but the whirlpool itself is a definable unit, but has no basis for a definition, other than being a special formation of the water molecules.

Are you grasping the mystery? If you lit a candle in an absolutely still room with no ambient changes in air pressure with plenty of oxygen, the flame would still dance randomly. We would expect it to stay still or act in a predictable fashion, but there is something else directing its movements other than what we think is in the room….

#144 disciple on 07.04.11 at 3:23 pm

“The only thing getting in the way of my learning is my education” – Albert Einstein

Zero-point energy:
The amount of energy in the volume of vacuum space contained within a single light bulb is concentrated enough to bring all the world’s oceans to the boiling point!

Imagine, just for a moment, what might be possible if you could harness this energy. I fear that it already may have been…

#145 Imstupid on 07.04.11 at 4:39 pm

#35 Cato

Don’t be angry. I bet you own a full head of hair, you sleep well at night and your lifestyle is sustainable for your entire life. Let me educate you to the outcome of over spending. While I agree Canada is a joke for bankruptcy it has unseen consequences, divorce, depression and stress. I lost my entire savings at 25, that was the biggest learning lesson of my life. I sat on my couch and vowed never to put myself in that position again. Fortunately for me it was money I had and lost not money borrowed. Let your friends look down at you, who cares. The joke will be on them, trust me.

If the bag boy gets paid 25 an hour, intrest rates are going to be 15% or we will see capital flight. If you try to play with the market it only helps you in the short term, eventually that too will hit wall and boc will have no other tools. A correction must take place to fix market. It’s not a bad thing, sure the media makes it seem really bad. I think a couple of years of hard economic times is better than a lost decade like what Japan had.

But I’m stupid.