Deception

It was an interesting juxtaposition. About the time the stock market opened for business and decided to suicide, the country’s largest real estate board was blowing sunshine up the city’s rear end. As always, nothing was quite what it seemed.

Like this:

“Strong home sales continued in July, with a substantial rebound over last summer’s slow-down brought about by higher mortgage rates, new lending guidelines and misconceptions about the HST. The greatest rebound was seen in the condominium apartment segment in the City of Toronto,” said Toronto Real Estate Board President Richard Silver. “If the current pace of sales holds up, we could see the second best year on record under the current TREB market area.”

The average selling price in July was $459,122 – up by almost ten per cent compared to the July 2010 average of $418,675.”


That was the official release from the Toronto Real Estate Board, and how could it be more positive? Sales bounding higher by 23% over last summer’s levels, and prices rocketing ahead almost 10%. Holy crap, that even beat Vancouver’s 9.2% bloat.

But there’s another story at play. Here’s what the cartel did not tell folks about a real estate market so massive it dwarfs those in the rest of the country combined.

Compared to June, July was a bust. Sales in the GTA slid a substantial 22% from the prior month (just as they careened lower 21% in Vancouver). Yes, this July beat last July – but that was a stinker, as people worried about higher interest rates (they rose last summer) and the HST (it launched a year ago).

And how about that 10% price gain?

More illusion. Prices actually peaked in the GTA four months ago, with the average hitting $485,520. So the July number represents a drop of 5.4% in little more than 100 days – which looks a lot like a 15% annualized boner to me. In fact, prices shaved 3.2% in the last month alone, which was somehow omitted from the TREB media release. I guess their printer broke.

Hmmm. Big drop in sales and prices from last month. Valuations trending lower since the Spring. Total 2011 sales lower than those recorded last year. So are words like ‘strong home sales,’ ‘second best on record’ and ‘substantial rebound’ responsible? Of course not. These are realtor-salesguys! After all, they dreamed up stuff like ‘handyman’s special’ to describe a demolition.

And what of the other big story – Stockapocalypse?

Yes, the Dow shed 500 points and the TSX bled through its eyes. Commodities tanked, the dollar tumbled, precious metals fell apart and there was no place to hide. That was the wall-to-wall media story in the hours following the blessed closing bell.

But, not exactly. The retreat on equity markets could be summed up in one word. Risk. Given the odds Europe is in for more trouble and the US economy is not yet in the recovery everyone expected, investors decided to take risk off the table. That accounted for the selling part.

But there was an equal amount of buying. Billions and billions rushed into the bond market, flooding US Treasuries, Canadian government bonds and even the debt of the same Canadian companies whose shares were being hammered. Valuations for ETFs like XGB, which tracks the most boring, pedantic government bonds, were positive for the day while equities shed four or five per cent.

All this money had the predicted impact. Bond prices shot higher and yields raced lower. If you happened to own bonds, bond funds or bond ETFs, you made money. If you had a balanced portfolio with both growth assets and fixed income in it, you probably came out unscathed. It’s thanks to the negative correlation between equities and bonds – they usually move in opposite directions, which tempers big gains yet protects against big losses.

It’s a good example of why you should never invest with your butt hanging out. Yes, bonds are boring. Yeah, interest rates suck. But owning bonds to collect the coupons is like parking your babe-magnet Harley to keep it shiny. Instead, these things can rock with capital gains as well as handing over income.

Of course, you can sell some of those higher bonds tomorrow, collect the gains and use them to spend the day shopping for cheap equities – using ETFs, of course. That’s where I’ll be. I’ve already picked out my best Lucchese boots, Prada Uomo shades and Naked Boxerbrief unmentionables. Nasty.

Oh, and if you run into any realtors with yellow corneas or doomers in Depends, be kind. They just wanna be you.

191 comments ↓

#1 T.O. Bubble Boy on 08.04.11 at 10:18 pm

July 2011 sales in the GTA were over 20% lower than July 2009 sales in the GTA.

any questions?

#2 Andrew on 08.04.11 at 10:24 pm

Precious metals fell apart? Gold hit an all-time intraday high today and then retreated slightly.

#3 CREA Circle Jerk on 08.04.11 at 10:24 pm

Well, today makes QE3 official. Doesn’t matter if that policy failed miserably twice already, and has failed miserably in Japan for close to 2 decades. All it will create is inflation, and actually pressure consumer spending even more since inflation has been outpacing wage gains for many years – hence less discretionary consumer spending. Italy and Spain are about to enter the Greek twilight zone. The answer will be a coordinated bailout with funds created out of thin air.

These crises are hitting with increased frequency because debt saturation has hit the tipping point. The question as it relates to Canadian Real Estate is when that tipping point will be hit for debt straddled Canadians?

#4 Jon B on 08.04.11 at 10:26 pm

I wonder if the real estate profession might one day change its tendency to deceive. Most people in this country seem to be pretty ignorant and will believe almost anything from an “official” organization like the RE gangs. Maybe when the cartel is busted up and a competitive market evolves we might have a group of real estate sales people that would give ethics and honesty a try.

#5 chris on 08.04.11 at 10:28 pm

One question. Is my variable rate mortgage going up in light of this mini entry to a recession?

#6 LJ on 08.04.11 at 10:28 pm

Love the way that realtors use the statistics available to their advantage. One month it is Y/Y price increases and M/M sales increases. The the next month they use other statistics (median vs. average prices).

You could say that the stock market gained today in the PE ratio and a realtor would give you a lollypop for seeing the light at the end of the tunnel.

#7 bullion.bunny on 08.04.11 at 10:31 pm

DELETED

#8 Maxamillion on 08.04.11 at 10:34 pm

Urbanation Report: “there were 39,196 condo units under construction in the Toronto CMA in 153 projects in Q2-2011, a high water mark for Toronto”

http://urbantoronto.ca/news/2011/08/urbanation-releases-record-breaking-condo-stats

#9 City Slicker on 08.04.11 at 10:38 pm

Garth with all this talk about defaults, are bonds really all that safe nowadays?
thx

This ain’t Greece. — Garth

#10 NFN_NLN on 08.04.11 at 10:39 pm

Thanks for the heads up. I purchased XRB and XBB on your bonds recommendation a while back. I was wondering if you were going to hint at when to get out.

How about moving to XIU while it’s down?

#11 The Original Dave on 08.04.11 at 10:39 pm

i’m confused on the statistics comparing this year to last year. 2011 has been better than 2010 was up to August, no?

Today I was reading about technical analysis. Every once in a while I do this. I go back to some gems that are now out of print.

this is how market tops/reversals reveal begin…..

a) asset rises in price. If you see that there is higher volume than usual and very little change in the price, a reversal is very likely. This can happen in a bull market or a bear market. High volume with minimal price changes is an indication of a reversal.

b) a second indicator of a reversal, is an asset that is rising in price with reasonable volume and then it continues to rise in price with very thin volume. That is a situation where there’s very few dummies that are jumping into a trend that is losing it’s lustre.

#12 Wise Guy on 08.04.11 at 10:40 pm

Perhaps the stock markets will continue to slide and people will not be so anxious to continue buying these so called, “investment properties”, like the condos in downtown Toronto.

This could definitely be the spark that lights the fire in the downward spiral of real estate here in the GTA. Just like the financial crisis a couple years ago, it might and could be the trigger, but this time, there won’t be a recovery!

I truly believe that the real estate correction will start with the downtown Condos here in the GTA. Too many people have purchased these dwellings with 5% down or less with the belief that they can just rent them out.

We shall see…

Also, not being a Gold Bug or anything, but listening to Kramer on CNBC, he believes that Gold still has a way to go upwards for the main reason that he feels Gold can no longer be considered a commodity, but it acts as a safe haven, like currency.

http://goldbasics.blogspot.com/2011/05/jim-cramer-gold-is-currency-not.html

#13 R on 08.04.11 at 10:40 pm

How much capital will have to be blown up by the debt heroin addicts before we can get some form of viable economic activity that doesn’t involve trying to reinflate burst asset bubbles? The piper has to be paid eventually.

#14 vyw on 08.04.11 at 10:42 pm

The markets may fall further tomorrow depending on the jobs reports, so best assess risk, lock in profits, maybe be 50% in cash for bargains.

The Toronto market usually takes a seasonal pause in the summer/fall. Demand is still strong, listings are low, interest rates are low, Toronto is a great city, but then again, it might just freeze up. I guess the speculators are hoping and praying tonight.

#15 Housing Crash is here on 08.04.11 at 10:42 pm

“July 2011 sales in the GTA were over 20% lower than July 2009 sales in the GTA.”

Realtors are the biggest threat to the Canadian economy. Some would even call them financial terrorists. I wouldn’t go that far …..Then again who can defend realtors? CHMC needs to be removed and allow the free markets to clean the excess from the housing ponzi. Spread the truth….the truth which realtors fear.

#16 Joe Robertson on 08.04.11 at 10:47 pm

Garth it was just 4 days ago you were pounding your chest how right you were making fun of all those who were calling for a market sell off due to the US debt situation…so much for Debtageddon you said.

You added that anyone who shorted the market Monday was a fool betting against America….hmm the Dow is down 767 points since Monday….hope you weren’t foolish enough to buy equties Mon as even the “its different here” TSX is down 620

Europe is down huge this week and Asia is getting smacked tonight…hmm I guess global debt is an issue???

Don’t get your shorts in a twist. This is not 2008. — Garth

#17 Mr. Reality on 08.04.11 at 10:49 pm

Garth,

You missed shorting the market through inverse ETF’s as a part of your high risk high yield portion of a diversified portfolio.

If you shorted the TSX, oil and the S&P 500 through bear + ETF’s at the market peak in May, you would have had a 30% gain in the last two weeks.

Hmmm i wonder when the real estate market will fall off a cliff like stocks did today? Something tells me us real estate bears have more painful waiting for that to roll off a cliff and get exciting.

Mr. R.

I don’t short. Neither should you. — Garth

#18 mid-Ontario on 08.04.11 at 10:50 pm

It has started.

Greece cannot be saved. Ireland and Portugal will follow next. Today we learned that there is no plan that can help Italy and Spain. The market now knows that the end is coming.

The debt ceiling talks exposed the main street media as nothing but pom pom pumpers for more debt. Many are now on to the end of the US as we know it.

Garth can rebalance until the dogs come home. In the end, his part of the ship will go down just after the rest of it.

Canadian RE is toast for 17 years.

You forgot the bubonic-laced rats. — Garth

#19 Gord In Vancouver on 08.04.11 at 10:55 pm

All this money had the predicted impact. Bond prices shot higher and yields raced lower.
___________________________________

yields raced lower

…meanwhile, our govt. is trying to sell bonds.

What can they do to make what they sell more appealing?

#20 Don't Believe The Hype on 08.04.11 at 10:59 pm

Friday should be an interesting day in the financial markets as the U.S. Nonfarm payroll number is released. If you’re a long-term investor, days like today are like a gift. And if the NFP number is weak on Friday, while others are selling, I’ll be buying.

#21 the Phantom on 08.04.11 at 11:00 pm

Evening Garth and friends…

I suppose the one word that would properly encapsulate the comments the TREB attributed to their Real Estate market; their “bread and butter”: Orwellian and if you’d indulge another word or two (depending upon how you classify compound words), perhaps you could throw Doublespeak in there as well. On the other hand one could argue that another part of their job is to retain that spirit of optimism even when it isn’t readily apparent and focus on what looks good…I don’t know; I am not a RE agent but those are my thoughts for now. I am signing off for tonight.

the Phantom

#22 S on 08.04.11 at 11:04 pm

$1660 /oz to $1650 / oz is pm falling apart? What did I miss?

A $40 move. — Garth

#23 somejerk on 08.04.11 at 11:06 pm

Nice first tobb… interesting that the doomers dont say anything about the 30% tank in pm when the market tanked(2008)… those hedge fund guys have to sell something… the one thing i noticed as well with to real estate board was the way they were changing the ‘reporting method for communities’ because of month to month sales volitlity… I guess they dont want to confuse us with what sunshine they are pumping, we might realize its not so sunny out there…if your a ninja a nice etf to be in last few days was hxd…

#24 Timing is Everything on 08.04.11 at 11:13 pm

…”as people worried about higher interest rates.”
“Yeah, interest rates suck.”

Interest rates?…That is the question. I have visions of people ‘thinking’ they can afford even more debt. The lure is even more enticing. What say you?

#25 Smoking Man on 08.04.11 at 11:14 pm

Hate to spoil the bubble head party but Garth you are not being that honest. You of all people should know that July prices are almost always lower than April May and June prices.

Here are 5 year charts see for yourself
http://guava.ca/

As far as the Bond Market what have I been perching for the last few months….Load up on bonds and short the market.
Interest rates and yields will tank….

This is yesterdays yield chart, today’s will show a free fall…

Yet no respect, no acknowledgment of my evil genus…

It’s the story of my life………Perhaps I should work on my approach…..

Na
:)

#26 squidly77 on 08.04.11 at 11:14 pm

Realtors are the biggest threat to the Canadian economy. Some would even call them financial terrorists.

I would.

#27 JohnnyBravo on 08.04.11 at 11:15 pm

Never mind debt-ceilings, or Italy, or the machinations of Jean Claude Trebuchet.

The biggest reason the markets “corrected” (I always loved that euphemism) over the past several days is because of uncertainty. No, I’m not talking about the usual kind of uncertainty; I’m referring to the specific uncertainty over QE3.

Will the Fed unleash another round of “money printing” that will artificially jack stocks higher than they deserve? That’s the debate now rampant in the financial press/Wall Street PR machine.

The US fiscal fiat masters want the dollar to decline in order to keep interest rates low and the debt service manageable, but they don’t want an outright dollar collapse. So they carefully tread a very fine line between hosing bond holders and keeping them sufficiently interested in Treasurys such that demand can outstrip supply. If this requires the occasional stock market bloodletting, so be it.

In the meantime, the Fed jawbones the markets in order to manipulate expectations. In recent weeks we’ve heard various Fed officials say QE3 is not on the table because liquidity is not the issue. Then they say QE3 might be necessary, but only if inflation remains in check. Yes. No. Maybe. But only if…

But that said, what has become increasingly clearer to more and more market “observers” is that, even three years on, 2008 is not yet over. If it was, there would be no talk of QE3.

#28 westopia on 08.04.11 at 11:15 pm

$1660 /oz to $1650 / oz is pm falling apart? What did I miss?

A $40 move. — Garth
—————————————

A three quarter of one percent move, and still higher at the close from the two days ago. Thanks to my “hiding place” in PM’s, I laughed at today’s market erasing all its 2011 gains.

#29 Smoking Man on 08.04.11 at 11:16 pm

Forgot the link re my last post

here it is

http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/?page_moved=1

#30 The InvestorsFriend (Shawn Allen) on 08.04.11 at 11:18 pm

Garth is Right… and Wrong.

It is true that stocks were down and bonds were up. And it is true that it was a good day to be in a balanced portfolio. No argument there.

But it is wrong to suggest that in the net money went FROM the stock market to the Bond market.

Garth said:

(stock) “investors decided to take risk off the table. That accounted for the selling part.”

Yep, that’s true… (or at least some invested decided to take risk off the table)

and he said

“But there was an equal amount of buying.”

Yes! and for a minute there I thought he was getting at the fact that for every dollar of stock sold there was an equal amount bought. But no, instead he went on to say:

“Billions and billions rushed into the bond market, flooding US Treasuries, Canadian government bonds and even the debt of the same Canadian companies whose shares were being hammered.”

NO, NO NO! That is not (exactly) what happened.

What happened was investors as a whole decided stocks were over-priced and bonds were under-priced.

A bunch of stock investors wanted to sell but few were interested in buying so the offer prices had to come down. In the end some stocks were sold and those same stocks were bought by others. No net money flowed out of equities in that process. Not a dime. (Well some did leak away to the dealers for trading costs)

Some stock investors sold and received cash, but the same cash was supplied by buyers (where’d they get it one wonders, maybe from selling bonds).

At the end of the day with stock prices down, lots of equity wealth had simply evaporated.

Meanwhile no one was willing to sell bonds except at higher prices, bond prices were bid up, some people (mostly institutions actually) bought bonds from others that sold. Not a single dime in the net flowed into bonds.

At the end of the day bond prices were up and lots of wealth got created from thin air.

The amount of wealth created in bonds if it was equal to the amount lost in stocks, that was only coincidence. Both markets can sometimes go the same direction.

Anyhow maybe it sounds like sematics and the entire financial press describes the process like Garth does. But they are wrong. They talk as if selling exceeded buying in the stock market, it did not and can not. Edmonton Jim in yesterday’s post had it correct.

So there. You’re Welcome Garth, I knew you would want me to point out this error.

Insert denial below (remember no insults allowed… oh okay make an exception for me)…

#31 S on 08.04.11 at 11:20 pm

” $1660 /oz to $1650 / oz is pm falling apart? What did I miss?

A $40 move. — Garth”

That’s an intraday move, yes? Sounds like a trader’s point of view.

#32 RealityCheck on 08.04.11 at 11:22 pm

These realtors have no morals. As a result I’ve started a rebellion against them. I go to the MLS website and look for overpriced houses and email the realtors.

My message varies in text but essentially I’m telling them that house prices are going to correct substantially.

Spread the word. The Rebellion has begun!

#33 RealityCheck on 08.04.11 at 11:27 pm

These realtors have no morals. As a result I’ve started a rebellion against them. I go to the MLS website and look for overpriced houses and email the realtors.

My message varies in text but essentially I’m telling them that house prices are going to correct substantially.

#34 Habbit on 08.04.11 at 11:29 pm

Hi Mr. T. Would you share what it is you will be buying using ETF’s? Thanks

#35 Three Kinds of People on 08.04.11 at 11:31 pm

To Whom it May Concern:

doomers generalize unfairly: not EVERYONE will go down in economic flames…if it comes to that.

just the herd.

and while many people will most likely be financially destroyed, there will be those who come out unscathed–and even benefit.

Like Garth, and, hopefully, some of those here.

for example, not everyone lost everything during the great depression.

Essentially, there exist three types of people when confronted with arduous/trying times:

1. The “Deer-in-headlight” individual
2. The “Show-me-how-to-survive” individual
and
3. The “This-ship-is-unsinkable” individual

Which one will you be? Which are you now?

food for thought :)

#36 Snowman on 08.04.11 at 11:36 pm

#1 T.O. Bubble Boy

“July 2011 sales in the GTA were over 20% lower than July 2009 sales in the GTA.

any questions?

Yes sir, this is Snowman from Doom and Gloom Daily News,my question for you is: how many years have you wasted on this blog waiting for RE to tank? All this while the RE prices in your area has skyrocketed ever since? Thanks …

#37 Markey on 08.04.11 at 11:38 pm

Another blogger who sees a buying opportunity: http://blogs.marketwatch.com/thisisinsane/2011/08/04/buy-this-market/

#38 Alan on 08.04.11 at 11:43 pm

“Naively, you seem to believe stocks can drop, reflecting reduced economic confidence, and that will not impact housing. A poor assumption. Financial markets recover much faster than real estate. — Garth”

Naive? Hardly. My point was to suggest that you’re picking on real estate as an asset class that has been ready to tumble so peeps can stay out of harms way.

Interestingly, I did not see you screaming to get out of stocks the last few months because the stock market had priced in a higher economic recovery due to 24/7 money printing and sovereign debt problems that would cripple governments world wide. I saw no fancy photos of brokers out on a ledge ready to take the swan dive onto the pavement. In fact you advocated everyone to sell their real estate and pile into stocks, etf, reits and bonds. (yes I know you only tout balanced portfolios and steer clear of metals) Fair enough. But remember historically stock markets rebound, and btw, so does real estate. Lets not quibble over time spands simply because liquidity of each asset class are so different from each other. Let’s just agree that you got a blog who’s job it is to prevent silly people from over leveraging themselves into real estate. I’m ok with that.

#39 MEL on 08.04.11 at 11:44 pm

Sorry Garth, this will be worse then 2008. Dow will fall to around 5,000 by 2012/2013.

U.S. 10 year treasuries will fall to 2%, Canadian dollar will fall, oil….

#40 Cato on 08.04.11 at 11:45 pm

Take one part risk aversion, mix in a few hundred billion dollar capital calls and throw in fresh evidence of a PIIG default and you have one toxic brew. When the big boys are forced sellers they throw everything overboard, its like a giant rummage sale and I’ll never pass up a good deal. There is no rhyme or reason behind their logic, just sell, sell , sell.

I did the tourist thing in Italy a few years before the financial crisis hit and thought to myself how the heck does this country manage to function. Turns out it doesn’t function, at least not economically. It was all an economic charade. Italy is screwed, its too large for the EU to bail out on its own. If you think tea partiers were pissed just wait until they get wind of yet another US sponsored EU bailout.

The last thing the US wants is a flight to safety back. The US needs a weak dollar & the whole purpose of intervention in the bond markets was to scare capital back into risk & job creation. The Bernank won’t be pleased, in fact I bet every conversation going on at the Fed involves a colorful metaphor for the Europeans. They’ve really screwed the Fed.

The middle class gets slaughtered once again. This next round of stimulus & bailouts is going to be epic, its got to be an all or nothing shot this time around – just a question of when.

#41 JohnnyBravo on 08.04.11 at 11:47 pm

#30 The InvestorsFriend (Shawn Allen) on 08.04.11 at 11:18 pm

I must be feeling a bit masochistic tonight…

Barring new issues, the supply of shares remains constant, so yes, for every share sold, one is purchased. But what drives the price higher or lower is still an imbalance between supply and demand. You can still have more sellers than buyers, or vice versa.

As for bonds, they are not like stocks. New bills, notes and bonds are issued by primary dealers all the time, so “new” money is required to keep the bond market going.

Money CAN go from stocks to bonds. I sell my stocks and use the proceeds buy bonds. See.

#42 waterloo Resident on 08.04.11 at 11:47 pm

I don’t want to think about the crashing stocks OR the potential for crashing real estate, I want to think about only the GOOD and HAPPY things that we have in life.

#43 East Van on 08.04.11 at 11:54 pm

After today’s stock market crash recent home buyers who got their 5% down payment by borrowing from their RRSPs may be laughing????

#44 wetcoaster on 08.05.11 at 12:00 am

Global BCTV rolled out the usual tools to feed the masses stating that there will be zero effect on house prices from any stock market correction or decline in the US economy. Imagine that, Cam Muir knows everything, even the future of the largest risk money in the world. No mention of 20% sales declines, nor HAM not buying up Richmond anymore, nor China markets tanking.

Even Michael Campbell didn’t breathe a word of real estate. Why wasn’t Ozzie Jurrock interviewed ? I want to know the Hot Property of the Week dammit ! I think it was in Williams Lake last I heard, or was it Prince Rupert ?

#45 Andrew on 08.05.11 at 12:01 am

DELETED

#46 Ryan on 08.05.11 at 12:02 am

The worsening global economy is going to make the housing slump even worse. From what I have heard and from my own observations, the market is slowing in many areas including where I live (Ottawa). Credits markets are freezing up in Europe as we speak because at least 5 countries are near default. Canada is going to be hit very hard by the 2nd leg down in the global depression. Interest rates do not need to go up for real estate values to go back to fair value (much lower than today all over the country but especially in Vancouver and Toronto).

I don`t think you were right when your responded to me in another thread that interest rates are not going down. I`m pretty convinced that the BoC is going to reduce the rate to 0% by early next year if not by late this year because the housing market and global economy are crashing. I plan on paying next to nothing on my variable rate mortage. I`m wondering what everyone else thinks.

#47 Bank Run in Greece on 08.05.11 at 12:03 am

Looks like the greeks are doing a bank run and when news gets out people will do a bank run in NA. It’s makes perfect sense that investors are putting money into “Billions and billions rushed into the bond market, flooding US Treasuries, Canadian government bonds”

The economies of the world are going to crash .we need a healthy dose of deflation.
nice find Nostradamus Le Mad Vlad
http://blog.alexanderhiggins.com/2011/08/04/mainstream-economist-stocks-crash-recession-certainty-49031/

#48 Aussie Roy on 08.05.11 at 12:05 am

Aussie Update

Worst retail results for 50 years

http://www.smh.com.au/business/worst-retail-results-for-50-years-20110803-1ibvc.html

Auction results even those supplied by the industry still look sick

http://www.myrp.com.au/showNews.do?id=487

Follow the debt

http://m.smh.com.au/business/debt-wrangling-your-guide-to-economic-chaos-20110804-1icr9.html

Sydney struggles as headwinds cause vacancies to balloon

Who said rents only go up because there is a shortage?.

http://www.smh.com.au/business/solitary-sydney-struggles-as-headwinds-cause-vacancies-to-balloon-20110803-1iblv.html#ixzz1U7jjT9Bl

The building and construction industry seems to be bearing the brunt of the brittle Australian economy, with more than 85 companies either entering administration, liquidation or being hit by a winding up notice over the past month in Victoria and New South Wales alone.

http://globaleconomicanalysis.blogspot.com/2011/08/eighty-five-australian-building-and.html

#49 Randis on 08.05.11 at 12:07 am

Hello all, after a nice litle vacation I am back in the mix again.

Some random thoughts for the day …

1) Somewhere around Yonge/Sheppard there is this storefront realtor office where it has a big sign that reads “Let’s play! Play the real estate game correctly” … I was like WTF … no wonder ppl are frenzied over RE because its a GAME and ppl with too much ego would think they can PLAY this million-dollar game … Some realtor, some joke for real …

2) In one local Chinese real estate publication there is this mortgage broker who wrote an article that sings praise to the gain potential of RE going forward. More importantly, this mortgage broker spent half of the article (1 of of 2 pages) to blast at ANYONE (economists, financial professionals and institutions etc) that predicts RE crash … I wonder how much formal financial education these realtors or mortgage brokers received in their life, and how they think they know better than anyone else … Funny enough, I wrote him an email basically countered all his flawed arguments and he never replied. Some PR skill this guy has

3) Today’s market was bleeding for real and as Garth points out, bond is a great alternative at time like this, esp corporate bond. Just a little reminder, there are a lot more investment vehicles out there other than stocks and RE. So please don’t think that RE is the only way out when stock drops … I know the fellow bloggers here is a smart group (except for some), I am just saying the obvious just to rant and get it off my chest …

Anyhow, good night all.

#50 repairman90 on 08.05.11 at 12:08 am

Those American bastards are screwing us again.

#51 The InvestorsFriend (Shawn Allen) on 08.05.11 at 12:13 am

BANK BASHERS TAKE NOTICE!

One bank is paying big companies NEGATIVE interest on deposits! (i.e. they are charging to hold deposits)

http://finance.yahoo.com/news/Bank-of-New-York-Mellon-adds-apf-3353726022.html?x=0&sec=topStories&pos=5&asset=&ccode=

Welcome to the world of nearly zero interest rates. If the bank can’t lend your deposit out at a decent interest rate they will charge you to hold your money.

Historically banks give you the check writing and debt card aspects of looking after all the transactions on your money for a low fee or zero because meanwhile they (horrors!) loan out your deposit at a decent interest rate.

When they can’t loan out your deposit at a decent interest rate they now want to charge you to hold your money.

It’s called fee for service and we will see how this plays out in the compettive market.

Meanwhile bank bashers and those who fear fractional reserve banking will have a field day of moaning and groaning.

Hilarious!

#52 JohnnyBravo on 08.05.11 at 12:14 am

Garth, thanks for keeping the realtors “honest.” You know what Twain, or Disraeli, or whoever said about statistics, right?

“Handyman’s special” Right. Here are a bunch of other RE euphemisms I dug up to enlighten the readers:

1. sparkling pool = nasty green hole in the ground
2. cute/quaint/cozy = hobbit sized
3. tons of potential = needs everything replaced but the foundation
4. short sale = long drawn out process
5. foreclosure = smells like death
6. mature landscaping = bring along your industrial weed whacker
7. recently remodeled = someone has fixed something since 1985
8. full of character = green linoleum, shag carpet and 1970s paisley wallpaper
9. up and coming neighborhood = ghetto
10. bank owned = dead landscaping, broken windows
11. new paint and carpet = previously occupied by a smoker with fifteen cats
12. custom/unique = bizarre (ie: a toilet in the kitchen or floor plan designed by Dr. Seuss)
13. 1/2 bath = a closet with a toilet in it
14. easy access = backs up to a freeway
15. galley kitchen = a hallway lined in cabinets
16. single owner home = grandma died here
17. low maintenance landscaping = concrete
18. close to = you can see it from your bedroom window
19. charming = so adorable, you wont even notice the crack in the foundation
20. well maintained = nothing has been updated

#53 pablo on 08.05.11 at 12:22 am

Hey Garth; go back and check my predictions for your book contest, maybe a tad late but my predictions are holding true so far. So how about a book for me?

As to “don’t bet against the USA” well I would: their housing market is in shambles and clogged up with millions of properties under foreclosure, the banks aren’t even bothering to manage this bloated inventory of seized assets properly. It’ll be decades before there’s any turnaround, if at all. The securitization of mortgages and sale as investment assets by the banksters caused the shitstorm. US debt increasing at 100% of GDP. and with QE3 all but declared a certainty, tomorrow there’s more bad news coming and a further fall in the markets, and the far east markets will be falling tonight as well, further escalating the force of the decline.
As I said earlier, my prognostications are on target and will play out as I’ve predicted.
Oh yeah I almost forgot about your reply on the last post. 900lbs eh, is that with or without the bike?(nuk,nuk,nuk) “shithawks are flying, shitwinds are blowing, there’s a shitstorm coming, it’s going to shitagedon!” Did u get any on u?

#54 bill c on 08.05.11 at 12:26 am

so what why buy stocks. Put all your money in real estate and you will be fine. Dont waste your money in the stock market. Invest as much as you can in your home and you will be rich.

#55 Ozy - Some Guys are funny on 08.05.11 at 12:28 am

What is so good is homes prices are high, no one should be happy about that, ot means more property taxes next year, like they not already taking some people’s income fro 2 months a year?
RE Industry should be mourning when priced grow, is not someting to brag about, in anticipation of loss of afordability and no bread (sales) for them in the future.
Silly brains on some guys, the payout has arrived

#56 L H on 08.05.11 at 12:39 am

Newsflash! The Canadian long term real yield is now but 0.75% ! Some still hope for 7%+ real returns (e.g. Social Security Trustees, Calpers, etc), but clearly some professionals in the markets have abandoned all hope (e.g. the people who are buying the 33-year CAD linker bond, ISIN #CA135087ZH04, last at 122.1000/122.4660 (0.75/0.74))

Garth, I won’t argue with your actual past returns (mine have been even better), but at least have the grace to give our readers a disclaimer, “YMMV”

You make money on price, not yield. Learn how this works before embarrassing yourself further. — Garth

#57 Ex-Cowtown on 08.05.11 at 12:45 am

Made $$ today. Gotta love them bonds!

#58 Angus on 08.05.11 at 12:45 am

DELETED

#59 from kits on 08.05.11 at 12:48 am

@Habbit
I like XIU…

I hope the investors keep thinking the sky is falling, just more buying opportunities! I still think retail investors are causing the swings to be quicker and larger, but what do I know.

What I believe (I have no idea but guess) most people including myself feel as though things should happen faster. i.e. – real estate dropping but in reality these things take years to develop. we are so used to everything today, I think we will blink one day down the road and real estate will be a have not just like the province of quebec!

#60 Timing is Everything on 08.05.11 at 12:55 am

Make that a double dip sno cone, Sir.

#61 Timing is Everything on 08.05.11 at 1:00 am

It seems Firefox (latest and greatest) does not play well when submitting comments on your blog now. After I ‘Submit’, I get a blank web page. Then I have to close the window and re-open your web page, then reload the page to see my newly submitted commit….?

#62 Helicopter Ben on 08.05.11 at 1:02 am

BILL…….”Helicopter Ben needs a hug…..
my wife [an OT for the brain injured] feels that there are those on the blog who safely qualify for the ‘personality disorder’ tag.
regrettably science does not yet have a cure”…………………………………………………………………….- Thanks for your concern Bill, did you meet your wife at her work? do you have any thoughts of your own or just your wife’s? . Bonds worked out well today Garth i cant take say otherwise, but i do feel with such low returns and such high inflation that you are losing money overtime, some may argue its better then losing a lot and thats fine. With QE3 starting i think its really going to hurt the bond buyers and savers. Deflation is looming large but i dont think it gets here quite yet, high inflation first.

#63 brandon on 08.05.11 at 1:10 am

Pm’s did not fall apart. Don’t discredit all your other brilliant insight into the world of investing. Stubbornness can be a positive trait at times. Time will tell I guess. I have been stubborn regarding the price of real estate being ridiculously overvalued.

#64 Mr. Reality on 08.05.11 at 1:12 am

Garth

There are two sides to every trade no matter how you look at it. Shorting indices is a perfectly acceptable way of hedging against a financial downturn.

Its the perfect safety net in case i lose my job. One click and i am in cash. The farther the market drops the more cash i have to weather a storm. Now mind you the whole time my diversified portfolio in bonds, stocks ,dividendsetc. is risk off. I have no problem riding things out in that regard.

As far as all that buying is concerned? Really, are you willing to take on such risk buying into a 500 point drop?

If you bought into the drops in 2008 you’d be waiting a long time to recover. This time it is worse. This is a tanking after QE1 and QE2 have run their course. There isn’t a buy signal in sight.

Right now i’d say that buying into this market with no real upside except a QE3 kool-aid infusion is far riskier than shorting it. The downside is huge when you factor is the US running out of bullets, China and its issues as well as the Euro chaos about to unfold.

Love the blog, love your views on real estate but i do not agree with your moves in a market such as this one.

We’ve peaked we are heading into a recession and it is not a time to buy. Wait and buy at the bottom which we are no where near yet.

Come on blog dawgs tell me I’m wrong!

Mr. R.

#65 Nostradamus Le Mad Vlad on 08.05.11 at 1:16 am


Re: the person’s beer sex machine belly. Is that a double-innuendo for a forthcoming 25% or so inflation rate?

“And what of the other big story – Stockapocalypse?” — Not necessarily. Both news items could happen simultaneously for a reason, to confuse us (easily done), so we wake up and don’t know where we are or what we’re doing (also easily done).
*
Back in the heyday of yesteryear, men were men and sheep were scared. Seems to have changed now — men and sheep cuddling up to one another, while the slaughter continues from Wall St., the Nikkei to Bay St. Guess the FTSE took a battering in Limeyland as well.

#13 R — “The piper has to be paid eventually.” — Could be a good reason why social programs like CPP – OAS – GIS – SS will be trimmed significantly. Good reason to load up on TFSAs and other investments.

#159 Great vids Nostra! on 08.04.11 at 8:03 pm — Great vids — A different perspective on Apple; Tokyo slides Great buying opportunities, but where’s my godforsaken moolah? Cash vs. Gold Cash wins, hands down; Emperors The new American.

Link in. Trojan Horse — that’s what the debt crisis is being used for, to scare sheeple shitless so they give up all their rights and freedoms; Cuckoo’s Nest and we’re smack in the middle of it! Asian Markets and Is this a good time to speak of politically-induced hyperinflation? ZIRP = Inflation is not the same as ZZ Top. World markets — Got Me Under Pressure Live, white beards, cheap sunglasses and cowboy hats.

F-22s and F-35s Grounded (can’t blame China for that); NAU – SPP Speaking of Texas secession earlier, ‘owzaboud provincial secession? Seizing Assets Starting in California.
*
Chaos — Is Elenin real or gay fairy dust? Yours sadly, Vladly! Plus 0:21 clip Solar flares are playing tiddlywinks with us again.

#66 Nemesis on 08.05.11 at 1:17 am

“I’ve already picked out my best Lucchese boots, Prada Uomo shades and Naked Boxerbrief unmentionables.” Hon. GT

That’s so ‘Harley’, GT. Keep that up and the temptation to shave (your scalp – not your legs) will become irresistible. You might even start visiting tattoo parlors.

#67 wicked as it seems on 08.05.11 at 1:25 am

I had a thing of beauty numerical correlation of the portfolio going today but the only two single stocks outside of ETF’s and bonds in total were enough to hurt me! Lesson learned and will work the balance/correlation aspect of direct investing more.

#68 Timing is Everything on 08.05.11 at 1:29 am

Same problem ‘submitting’ with IE9. But you probably know that by now. Cheers.

#69 Tim on 08.05.11 at 1:56 am

What happened to your “don’t bet against America?”
You can thank the tea party whack jobs and the big investors for this. It is funny how easy it is for people to link a day with a big loss to some reason that has been happening for a long time. Europe’s crises didn’t start yesterday, America’s multiple problems weren’t realized yesterday, yet that’s what many attribute this bad day on the markets to.

#70 Kitchener1 on 08.05.11 at 1:56 am

its almost 2:00am and i am still shocked a bit. Asain markets are still down large, Europe is a bit better but still tanking and the US futures looks to be down just a bit, might open flat or even up.

The only green i see is Gold– for now, until margin calls liqudate the weak hands.

QE3 is now a certainity after the Aug 9 Fed Meeting. No other choice at this point.

I really hope the US markets dont break anymore key support levels today or else watch out.

only good news I can see so far is the loonie dropping hard and fast– somewhat positive.

If italy blows in EU– cover your you know what.

#71 timo on 08.05.11 at 2:12 am

http://www.economonitor.com/danalperts2cents/2011/08/04/on-cnbc%E2%80%99s-%E2%80%9Csquawk-box%E2%80%9D-on-the-day-the-music-died-%E2%80%93-sorry-was-it-something-i-said/?utm_source=rss&utm_medium=rss&utm_campaign=on-cnbc%25e2%2580%2599s-%25e2%2580%259csquawk-box%25e2%2580%259d-on-the-day-the-music-died-%25e2%2580%2593-sorry-was-it-something-i-said

Good video

Europe and Asia are getting spanked again so watch for emergency meetings.

keep your money safe

#72 Across the Pond on 08.05.11 at 2:20 am

These realtors have no morals. As a result I’ve started a rebellion against them. I go to the MLS website and look for overpriced houses and email the realtors.

My message varies in text but essentially I’m telling them that house prices are going to correct substantially.

_____________________________________________

Tell people to stop putting the overpriced bids in as well then! Realtors aren’t going to tell their clients that they should list their house lower, and ‘only accept lower offers because the housing market is overcooked’. Their wage packet will shrink, and nothing will be gained. They’ve ridden this astronomical rise list the homeowners of VanCity and Toronto as well.

If you really want to make such a powerful statement, start emailing the Feds to reform the CMHC, and BoC to shoot up interest rates – I’m sure your letters of protest will make just as much of an impact.

I’m personally protesting by keeping debt free, living well within my means and watching the madness go on.

#73 timo on 08.05.11 at 2:57 am

http://www.youtube.com/watch?v=S8H2FIf1oH4

http://www.youtube.com/watch?v=eI4bCSwjcgM

ponzi finance :)

#74 Amarillo on 08.05.11 at 3:15 am

Boners & stinkers & handyman specials
Mixed with talk about beautiful shekels
Realtor’s shouts rang out, many cries were heard
A goldbug was killed by a flying turd
The stockbroker’s lunch had turned to curd.

#75 Aaron - Melbourne on 08.05.11 at 3:34 am

Real House Price Index Update (Australia)

Last week, figures from the Reserve Bank of Australia showed home loan credit growth was at its lowest level ever recorded, with RBA records dating back to the 1970′s.

On Tuesday the ABS released the latest quarterly update to 6416.0, House Price Indexes: Eight Capital Cities, Jun 2011.

A reader has asked if we can update the Real House Price graphs, and with the ABS figures hot of the press it was the perfect time to do so.

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

THIS GRAPH IS A MUST SEE.

http://www.whocrashedtheeconomy.com/blog/?p=1657

#76 Jon in Cowtown on 08.05.11 at 3:45 am

What we’re seeing are increasingly desperate attempts to preserve wealth except that no one knows where to park their money. I wonder what his is a symptom of?

#77 not asian on 08.05.11 at 4:17 am

I noticed that one buyer bought many properties (all SFH) in Richmond BC the month March/2011, then put them back on the market immediately for the same price plus commissions and closing costs. Three – four price reductions later (big loss), still no takers. Why would someone do this?

#78 timo on 08.05.11 at 5:11 am

cheers to bubbles
http://www.youtube.com/watch?v=I4s0nzsU1Wg

#79 McSteve on 08.05.11 at 5:51 am

If stocks slide a bit further, I’m going to load up the truck. Anyone buying Suncor at ~$30 will look like a genious in 10 years when gas is $2.00+ a litre.

#80 Raincouver on 08.05.11 at 6:34 am

#not asian
trying to cycle dirty money.?

#81 Two-thirds on 08.05.11 at 7:04 am

On the RE front, here is a survey on renters intentions of buying:

“Seven in Ten (70%) Renters in Ontario Say Buying a Home is in their Plan

But Majority (89%) of Ontarians Believe Owning a Home Will Become Even More Difficult for Future Generations”

http://www.homeownershipmatters.ca/resources/ipsos-reid-summary/

Reading between the lines, the poll results are bearish – only 12% plan to purchase RE within the next 2 years while 54% are unable to afford a home.

But surely, immigrants will save the day, right?

#82 Ky on 08.05.11 at 7:14 am

With gov’t and corporate yields entering record low territory, the horizon for many boomers just got worse. One wonders how many boomers, heavily weighted in housing assets, now face the necessity of eating into that home equity to support retirement. The last 12 months has provided an amazing window of opportunity to purchase high quality preferred shares and fixed income, especially in corporates (who, unlike gov’ts, have improved their balance sheets). Well that opportunity is closing out fast (as witnessed yesterday). 12 months ago, 7% seemed boring, today that would be glorified. Income, liquidity and flexibility are king, that’s the new reality. Assets that tick off all of those 3 boxes have done very well recently. I worry for those who may sell too late, and then have limited options for sufficient income streaming investments. A brutal double whammy…

#83 thinktank on 08.05.11 at 7:22 am

Hmmm….GARTH…can I ask why you have never advocated the use of options contracts to hedge ones portfolio when these violent market swings happen. It doesn’t have to get sophisticated or complex …some basic SPY ETF 3 OR 6 month PUT contracts would be likened to an auto insurance policy …its “just in case” coverage. A “balanced ” portfolio is a safe sound approach…but INCREDIBLY boring. 5-7% annual return????? BORING ….a 100% equities portfolio with proper option hedges can NET (yes I said NET) you 3-5x that WITH more downside CALCULATED protection than a balanced portfolio and that’s also factoring in about a 55% win/loss ratio.
OK…yesterday I posted I sold my GLD calls because of extreme technical readings ….so far it seemed like decent call…I took nice profit off the table Wednesday and can always jump back in on a MEANINGFUL pullback (yesterday was not meaningful)
Also went long silver (SLV ETF) using call contracts . Got stopped out of that pretty quickly with a small loss when it decided to “fishline” on me and ….in this wild correction….I was dipping my toe, buying out of the money December and January call contracts on select equities ….why….because the same technical indicators that told me that gold had reached extreme reading to the upside also indicated that extreme readings to the downside were being triggered – go figure. Will I be correct – only time will tell but I know this much ….with the PURCHASE of options, you know your MAXIMUM risk in advance – from there its just a matter of correct position sizing and playing the probabilities!!!

Good luck all…and remember …annual double digit returns are very very real year in and year out if you take the time to learn -read up on options trading and its 100 x safer than a long only portfolio (god I shudder at the thought) …sorry Garth going long and short CAN reward handsomely and I know you know that so don’t be hatin’

#84 Aussie Roy on 08.05.11 at 7:27 am

I’m sorry to raise this topic again, Garth.

I do feel it’s important to understand the role that debt and banks played, blowing up both our countries housing bubbles.

What is so hard to understand about how banks create money?.

Deposits become loans, loans become deposits, deposits are used to make more loans, more loans become deposits, rinse and repeat.
Lending expands the monetary base.

Perhaps this might help, from link below.

“Fractional reserve banking allows the money supply to expand or contract. Generally the expansion or contraction of the money supply is dictated by the balance between the rate of new loans being created and the rate of existing loans being repaid or defaulted on”.

Even Ben knows that, it’s why he did QE1,2. Defaults caused a contraction in the monetary base, his fix was to supply liquidity. IMHO QE3 will happen IF, the rate of credit expansion (private, public and corp lending) goes negative. Makes one ask the question can lending continue to expand forever?. Of course not but that won’t stop some trying.

Please read table.
http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation

Thinking Banks don’t create money from their fractional reserve system is like believing the earth is flat, popular at the time but wrong.

Saw this quote on another blog, sort of sums up the current wisdom.

“Got a problem with too much debt?
I’ve got the perfect loan for you!”.

#85 T.O. Bubble Boy on 08.05.11 at 7:55 am

@ #36 Snowman:

“July 2011 sales in the GTA were over 20% lower than July 2009 sales in the GTA.

any questions?

Yes sir, this is Snowman from Doom and Gloom Daily News,my question for you is: how many years have you wasted on this blog waiting for RE to tank? All this while the RE prices in your area has skyrocketed ever since? Thanks …

To answer your question: zero years wasted.

I was a part of the RE market in Toronto until last year. My wife and I owned a condo downtown, and sold for a variety of reasons (the main reason was starting a family). We made a good amount of money on that place — far more than all of the condo fees + mortgage interest over that timeframe. So, we can easily say that we lived there for free for several years, plus extra gains.

To your remark about RE “skyrocketing”, that simply isn’t true for where we were — the price we sold at in 2010 was HIGHER than a comparable condo (same exact size/layout, one floor lower, approximately the same upgrades) just sold for this week. So, yes – the TREB’s average price stats are still rising, but that average does not apply evenly to all real estate.

We’re now happily renting a million-dollar home for less than a traditional mortgage would be costing for the same property (ignoring all of the other homeowner costs).

From what I remember, I’ve been on this blog since near the beginning in 2008, and the only decision that my family has made based on Garth’s blogging is NOT to rush into buying a home that would represent the majority of our net worth… and to get more balanced in our investments.

What everyone (especially RE pumpers) need to realize is that past performance is not indicative of future performance, and all markets revert back to the average over the long term. Pointing out things like “Real Estate has gone up for 10 years” actually WEAKENS the case for buying RE — that statement tells you that all of the gains have been made, and the best case scenario in 2011 is for prices to stay relatively flat for the next 10 years.

#86 timo on 08.05.11 at 7:57 am

http://www.voxeu.org/index.php?q=node/6804

right to the point and why the public is up in arms

#87 Suburban Guy on 08.05.11 at 8:01 am

I keeled over laughing when I saw the the phrase “unspoiled basement” for an unfinished basement in a recent advertisement.

G-man, you should take a poll. “Who would you trust more, a realtor or a used car sales associate?”

#88 Connie on 08.05.11 at 8:28 am

The prices seem to dip every July-Jan. It is hard to distinguish this from a real dip (where prices do not recover in the next spring market). If you look at the plunge-o-meter’s site (http://www.chpc.biz/Major_Cities_Chart.htm). You see that every summer, fall, winter brings lower prices to be revived in the spring.

The stocks will probably have a bounce as well, no telling if it is a dead cat bounce or a real one until all is said and done.

#89 Utopia on 08.05.11 at 9:08 am

They multiply like rabbits.

There are three Re/Max balloons floating over Saskatoon this morning. Three. Things must be heating up. I can’t help but see the symbolism in these bubbles drifting overhead because I now know that it is just a matter of time before they all come back down to earth.

Yesterdays news was filled with analysis and chatter of the days sharp market sell-off. Some people are feeling rattled.

These kind of events usually give people a sense of foreboding about the future. Sentiment can change in a heartbeat from optimism to negativity where the future is concerned. Security is sought over risk.

Would you think to yourself “gee, what a great time to make a major home purchase and take on a mountain of debt…..things are really looking up!” Some will not.

Which is why market corrections hurt housing sales.

#90 The InvestorsFriend (Shawn Allen) on 08.05.11 at 9:25 am

JohnnyBravo at 41 responded to my pointing out (at 30 above) that no net money came out of stocks yesterday, instead a lot of wealth simply vaporized into thin air. Every stock sold had a buyer.

Yes Johnny YOUR money can move from stocks to bonds. But in the net for investors as a whole population there is zero ability to “pull money” out of stocks. For every dollay you pull out someone has to put that dollar in. That ‘s how the trading of stocks works.

Stocks can make or lose money for investors as a whole population and yesterday they lost money big time. But the trading of stocks does not result in money flowing in or out.

When companies sell new shares or pay dividends or buy back stocks, that causes money to flow in or out of stocks in the net for investors as a population.

Sellers DID NOT exceed buyers yesterday. Instead the price had to move lower to equalise sellers and buyers. Good old supply and demand.

#91 arctodus on 08.05.11 at 9:36 am

#39 you are correct..it will be much worse than 2008…Garth is in error (but I credit him for allowing at least some dissenting opinions on his blog…it is HIS blog after all)

We are all missing cause and effect…I have repeatedly tried to make a few understand the metrics of this, but most do not have the proper perspective (historically or macroeconomically to understand).

We are on the stairsteps of civilizational collapse..the first stages of which are financial …we are also seeing the second stage, commercial collapse around the world. Third stage is also beginning (political collapse). The 4th stage is where the really bad stuff starts…social implosion….

But all the rest of you keep chattering about house prices in Burnaby…I personally would more concerned about cash flow, avoiding government eyes and bolstering family ties…cause what will flow over the landscape in the next decade will be like molten lava..unstoppable and unrelenting…and driven entirely by the human response to the world cutting off our species energy supplies.

#92 kilby on 08.05.11 at 9:50 am

One can’t help thinking that there is a lot of money being “laundered” in Vancouver real estate compliments of lax federal government rules pertaining to money entering Canada. What other group can buy millions of dollars of real estate then just let it sit empty and/or depreciate ?

#93 Bobo on 08.05.11 at 10:04 am

Garth, don’t make month-over-month comparisons of sales and prices that are not seasonally adjusted. C’mon man…

#94 Alberta Ed on 08.05.11 at 10:11 am

Maybe Toronto Real Estate Board President Richard Silver should go by the name ‘Long John’.

#95 Utopia on 08.05.11 at 10:16 am

Yesterday we were discussing the very low number of SFH sales in Victoria and I commented before going and looking at the numbers.

Not always a good idea.

In any event, it should have been clear that the number of sold homes was representative of Victoria proper and excluding all the regional suburbs and communities.

Here are the total sales numbers for the region according to the Victoria Real Estate board. They tell us that on average both sales and prices declined while listings rose 14%. Both average and median prices declined for the region as well. Keep in mind the stats are for a huge area that includes the Gulf Islands.

http://www.vreb.org/mls_statistics/current_statistics.html
http://www.vreb.org/pdf/vrebmss.pdf

#96 Utopia on 08.05.11 at 10:24 am

#62 Timing is Everything on 08.05.11 at 1:00 am

“It seems Firefox (latest and greatest) does not play well when submitting comments on your blog now. After I ‘Submit’, I get a blank web page. Then I have to close the window and re-open your web page, then reload the page to see my newly submitted commit….?”
————————————–

I am getting even stranger messages. I use Linux and it is asking me to save or open files on my own computer when I submit a post. What the hell is that about?!!

I never know if posts go through anymore either. They don’t appear like they used too. Usually I have to try several times. Then I get some window about cloud something or other with nonsense messages.

Tells me the site is closed or not cached.

Waste of my time.

#97 pbrasseur on 08.05.11 at 10:25 am

Garth – Are you really saying that bonds that yield belows the inflation rate are a good investement because they can “rock with capital gains”?

Bonds can give capital gains ONLY if interest rates go down. Sure that can happen, it did yesterday, but with rates at historic lows is it really reasonnable to speculate on them going even lower?

You say it makes sense to park money, yet even with a short term bonds (say two years) the markets have more than enough time to rebound, even to double and you’ll miss it all. Guess what, eventually that’s probably exaclty what will happen to the millions of sheeps who are selling to seek “safety”.

Compare that to buying a company like Intel at 9 time profits with almost 4% (and growing) dividend… Now that to me is real safety.

‘Bonds can give capital gains ONLY if interest rates go down.’ Wrong. Bonds yield gains when demand rises. Falling yields are a corollary of prices being bid higher. — Garth

#98 Utopia on 08.05.11 at 10:26 am

#62 Timing is Everything on 08.05.11 at 1:00 am

“It seems Firefox (latest and greatest) does not play well when submitting comments on your blog now. After I ‘Submit’, I get a blank web page. Then I have to close the window and re-open your web page, then reload the page to see my newly submitted commit….?”
————————————–

I am getting even stranger messages. I use Linux and it is asking me to save or open files on my own computer when I submit a post. What the hell is that about?!!

I never know if posts go through anymore either. They don’t appear like they used too. Usually I have to try several times. Then I get some window about cloud something or other with nonsense messages.

Tells me the site is closed or not cached. Also says the website is off-line. Did it work….did it fail…..???? Who the hell knows anymore. Maybe I need a holiday. There is gardening to be done.

Waste of my time.

#99 Brad in Cowtown on 08.05.11 at 10:27 am

I hate to say “I told you so” but where are the stock market bulls? You know, the ones who were citing cheap PE ratios and saying the TSX was ridiculously on sale…
Meanwhile, some of us were saying nothing had really improved since the 2008 meltdown; that crisis was merely “delayed” a few years not “averted”. And predictably, Garth laughed at us when we said that.
Buying now is like trying to catch a falling knife. Good luck to you – more red ahead.

#100 Poppy on 08.05.11 at 10:29 am

Aussie Roy,

I lived in Oz for a year long time ago, really enjoyed it and thought I could retire there/get a vaca property etc. How much do you think real estate would go down there? Do you remember how cheap it was? Was it ever comparable to Canada’s home prices?
thanks

#101 The InvestorsFriend on 08.05.11 at 10:30 am

Auusie roy at 85 said:

“Thinking Banks don’t create money from their fractional reserve system is like believing the earth is flat, popular at the time but wrong.”

True, aussie, fractioanl reserve banking allows banks together with their customers to loan out money which gets redeposited and loaned out again and redeposited…

Since money is counted as the sum of bank deposits plus bank notes in circulation fractional reserve does add to the money supply.

But these laons and deposits do not change wealth when the loans are made.

Thinking that fractional Reserve banking is a bad thing is like belieiving that a spherical earth is a bad thing.

Common, people – life is great, has never been better. Your ancestors would marvel that you think YOU have it bad.

#102 Brad in Cowtown on 08.05.11 at 10:31 am

Buying equities now is ballsy, but very dangerous. As they say, if you get cut trying to catch a falling knife…

This was bound to happen. As I wrote before… 2008’s true impact was delayed, not averted.

#103 Bigrider on 08.05.11 at 10:35 am

Wow Garth Lucchese boots, good taste. What would a pure white bread guy like you know about Lucchese boots? You must have a lot of friends who are Italian.
To afford them, they and you must have owned a lot of RE over past few years.

#104 wonderwoman on 08.05.11 at 10:35 am

Snowman said,

Yes sir, this is Snowman from Doom and Gloom Daily News,my question for you is: how many years have you wasted on this blog waiting for RE to tank? All this while the RE prices in your area has skyrocketed ever since? Thanks …

That depends on when you’d sell your house. Will you sell after 3 years of straight increase? Guess not, you hold out to the peak, or near peak…if you can time it correctly…however, most people can’t unload their houses when their optimal price point is reached due to a lack of greater fools. Then you’d have to ride out the correction, if you are financially able. Houses aren’t as liquid as you’d like to think. Food for thought…the auctioned Quebec mansion back on the block.

#105 JohnnyBravo on 08.05.11 at 10:40 am

#91 The InvestorsFriend (Shawn Allen) on 08.05.11 at 9:25 am

Ohhhhhh… So THAT’S how stocks work! Your didactic discourse is very edifying.

A couple of things. So you do agree that new money is required in the bond market right? Otherwise sovereigns and other entities could not issue new debt, and total debt could not expand, right?

While shares sold equals shares purchased, the number of buyers CAN exceed the number of sellers, or vice versa. That’s one reason for order matching. For example: you can have two sellers each selling 100 shares, and one buyer buying 200 shares.

#106 EdmontonJim on 08.05.11 at 10:41 am

#152 The Investors Friend (yesterday)
While I understand that as the values of portfolios are devalued weath “disappears” into thin air. I also understand that the vanishing wealth was only potential wealth, not actual wealth (true wealth is only realised in consumption). In order for real wealth to vanish it has to be physically destroyed (or stollen). As far as I know nothing really changed with the companies and assets that the stocks and bonds represent, they are still there in the exact same state they were yesterday. Only the mean valuation of them changed. Even the valuation of cash can change like this.
But all things are relative, equal and opposite reactions and all that. If the absolute value of all measured assets has decreased, that means the value of something unmeasured has increased (personal security, liquidity). Even if everyone loses in absolute terms, someone has to lose less, and therefore ‘win’ in relative terms. Even in wars, which destroys actual wealth for everyone involved, someone seems to come out ahead, relatively speaking.
I’m even willing to accept the possibility of some evil consortium of bankers that have the whole game rigged, but I think to myself, “Hey, if you can’t beat em…”
So the question as always is what is of most worth today, and where can I get it?
(And yes I know, the correct answer is “The Kingdom of Heaven”, I mean worldly things [I’m Albertan, the SoCred doctrines still echo around here])

#107 RealityCheck on 08.05.11 at 10:43 am

Become part of the rebellion. Go to MLS and find an overpriced house, click on the email realtor link, and send them an email telling them what you really think.

Spread the idea like a virus.

#108 Goldenshowers on 08.05.11 at 10:48 am

DELETED

#109 City Slicker on 08.05.11 at 10:52 am

Garth with all this talk about defaults are bonds really a safe investment the way they use to be?
Maybe only some countries?

There is no default risk with Canadian bonds – government or corporations with sound ratings. — Garth

#110 2deep on 08.05.11 at 10:53 am

Take a look at the criteria CMHC uses to calculate vacancy rates

http://www.cmhc-schl.gc.ca/en/hoficlincl/homain/stda/suretaanme/suretaanme_002.cfm?renderforprint=1

Next time you hear a report on vacancy rates (they are used as fear mongering tools in SK and AB all the time to influence renters to become buyers) think about all the empty spec purchased homes on the market that are sitting empty while the owner waits for it to appreciate (that aren’t in the CMHC report)

#111 City Slicker on 08.05.11 at 10:56 am

#9 City Slicker on 08.04.11 at 10:38 pm Garth with all this talk about defaults, are bonds really all that safe nowadays?
thx

This ain’t Greece. — Garth
———————————————————
Greece wasn’t Greece either not too long ago. And look at things unravelling now. Canada, US and Europe will all end this way eventually. Gold will be the only safe haven.

Absurd statement. — Garth

#112 mousey on 08.05.11 at 11:13 am

Quick post about an interview I heard yesterday on CKNW. Mike Smyth (aka Mr. Inflamatory) was speaking to somebody from the New Home Builders Assoc (or some such organization) about the effect and impact of the property purchase tax, which was apparently brought in by Zalm as some sort of “temporary” luxury tax. Fellow said that new homes should be exempt for a variety of reasons. He cited the tax as impacting on affordability and that it was preventing people from getting the market. I don’t like the tax, but really if the stats are true that we have 70% home ownership in Canada now, how can he say the tax is preventing people from getting into the market? People are in the market in droves. A real estate agent called in and talked about the hardship faced by young buyers. He said that if the down payment was less than 20%, then they’d have to cough up the CMHC fee, which could be added to the mortgage – which I believe is correct. He went on to say that the banks wouldn’t put the property purchase tax on the mortgage so the buyers would have to have that money in hand as well. I’m sorry, but really this is a load of crap. Maybe the banks won’t put it on the mortgage, but they give cash back, extra lines of credit and create all kinds of vehicles to facilitate the buyer. That is one of the reasons we have a bubble – everybody can buy with little financial depth. Also, I take issue with the rep from the New Home Builders group when he says that getting rid of the tax would make homes more affordable. This guy is dreaming – the prices won’t be reduced, they will increased to account for the reduction in taxes paid by the buyer.

#113 Bigrider on 08.05.11 at 11:19 am

10 years from now RE prices in T.O will be little changed from today the stock markets globally will be much higher possibly tripling from here and the best advice anyone can follow is to shred your financial statements and turn off the business media

#114 Abitibi Doug on 08.05.11 at 11:22 am

I figured sooner or later Garth would comment on the current state of the stock market, namely it’s a good time to buy. As I said in a posting earlier this year, markets should behave like a governor that regulates speed of an engine. When the speed drops, it pulls the throttle open to give it more power to compensate for the speed drop. Like the governor, now is a good time to respond to the drop in stocks by putting more money into the market. Wow, it’s Boxing Week sales in the middle of summer! Awesome! No better time than now to pull money out of the orange guy’s shorts (who is that guy anyways?) and use it to buy cheap equities.

#115 Helicopter Ben on 08.05.11 at 11:25 am

It seems to me this crash was done on purpose to roll out their QE3 and send everyone rushing into treasuries keeping the interest rates low and allow more cash to pay for their new debt ceiling, its a real win win for the federal reserve and the politicians . they will now be heralded as saviors as they destroy the currency, give you a problem then a solution.

#116 Brad in Cowtown on 08.05.11 at 11:31 am

Too bad “unprecedented global coordination” doesn’t seem to be helping investors at the moment.

Investors who worry about ‘the moment’ shouldn’t be investors. — Garth

#117 Junius on 08.05.11 at 11:31 am

#4 Jon B,

Didn’t you answer your own question? As long as people keep believing the spin of the RE business and the echo chamber of our mass media they will keep spewing their yarns.

It is a both a sad commentary on the state of corporate ethics and professional journalism in this country.

#118 JohnnyBravo on 08.05.11 at 11:33 am

” …give you a problem then a solution.”

Ah, yes, the good ol’ Hegelian Diuretic.

#119 Mr. Plow on 08.05.11 at 11:50 am

#5 chris

Anyone’s guess. BOC have been talking about raising rates, which is what affects your VRM, but then it has been a lot of talk. Now they are saying maybe no increase till 2012, which could be delayed yet again when we get there.

I expect them to stay the same, perhaps a small uptick by this time next year. 0.5% maybe…

#120 Utopia on 08.05.11 at 11:54 am

So I was just listening to the news on the half hour at CBC radio just a short while ago and the newscast guy was telling me that after yesterdays big sell-off that markets were doing better today (I am paraphrasing as I don’t recall the exact remarks).

Anyway. So as he is blithering, I am looking at my screen and it is telling me that the TSX is down another 260 points!!!

OK, that is the real news. what is he talking about?

What is wrong at the CBC? The real story should have been “Stock market sell-off continues…total declines in 7 trading days now exceed 10%. A serious correction is now in progress”

If I had relied only on the radio I might have suspected everything was A-OK this morning and markets were rebounding after yesterdays bloodbath. In fact, all the major US indices are in the red at this moment too and the TSX is getting slaughtered (again).

With bank runs now taking place in Europe, a flight of capital to bonds and cash in the US and hedge funds working overtime to get some firepower back on their side there is definitely the whiff of panic in the air.

This cannot end in an “up” day at this stage of the game as the commodity rout continues breathlessly. Monday will not likely fare any better after a weekends review of the carnage and losses. Technicals are getting breached everywhere you look……

I think we may have a crash on our hands. The real story will be about what happens next week and what news develops over the weekend.

A 10% correction is not exactly a crash. In 2008-9 the Dow was off 55%. — Garth

#121 Abitibi Doug on 08.05.11 at 11:57 am

@Brad in Cowtown, #116 said: Too bad “unprecedented global coordination” doesn’t seem to be helping investors at the moment.

Oh, but it is helping investors immensely! It has made stocks, and mutual funds that invest in them cheaper to buy for those who are in for long term. The reality is markets became overvalued and were due for a correction. These corrections are to the stock market what fire is to the boreal forest. In the short run it creates destruction, but over the long haul it clears out the deadwood and paves the way for new growth in the future. It’s time to sign off now, so I can see what stocks and funds are on sale.

#122 Boycott on 08.05.11 at 12:03 pm

Same is the case with Calgary…. Close to 5% down

http://www.facebook.com/#!/permalink.php?story_fbid=240017142696419&id=203937936304340

#123 AG Sage on 08.05.11 at 12:10 pm

Garth, thanks for the kick in the pants to shift into bonds the other week.

#124 westernman on 08.05.11 at 12:12 pm

Addressing Mr. Reality Check
Are you kidding? Why don’t you just go about your life making sure YOU aren’t taken to the cleaners and stop trying to save the world… the world doesn’t want to be saved … get it?

#125 timo on 08.05.11 at 12:12 pm

Utopia,

just my opinion,

the correction is due to stimulus pullback in the US. Oil dictates heavily in setting commodity prices and without artificial propping up of the markets oil and commodities must drop. Canada’s exports are oil and commodities hence the hit. Where it stops is the question but the real market is now in control .

Have fun on the ride down , watch for the overshoot and if you hear about Italy having a heart-attack invest heavily in guns and depends.

love watching history…

#126 Mr. Reality on 08.05.11 at 12:18 pm

I will say this again. You should not be buying anything in this market. This is the tip of the iceberg.

Mr. R.

#127 Snowboid on 08.05.11 at 12:39 pm

#120 Utopia…

What is wrong at the CBC?

Same thing at most MSM outlets, the news is no longer of any value.

News is either an extended ad for a new company or product (e.g. Apple – ‘oh goody, a new iPad is coming out’) or features stories about cute puppies or kittens when another major economic event needs to be ‘hidden’ from the public.

The only difference at the CBC is that H owns it instead of your local cable or phone company.

My first employment after college was with TV News (Regina then Calgary) and it saddens me to see what has happened over the last 40 years.

But it’s not just the MSM – look at the internet. Try and find legitimate information, especially consumer-related. It is almost impossible.

Some websites are now the equivalent to printed CB radio (apologies to any truckers here) – you have no idea most of the time who is behind what is published or what their motive is.

Being able to ‘weed’ out the best of the knowledge is tough.

The comments section of this blog is a good example, readers have to be able to balance all the comments and try to find a middle-ground on the advice given.

This blog, however, is one of the few I trust, because Garth has shared advice that worked out very well for us.

Thanks, GT!

#128 Utopia on 08.05.11 at 12:41 pm

Yesterday I touched briefly on the topic of shifting sentiments in investment markets. I told you there was a finite amount of capital available to be shared around and that the US needs its fair share.

The problem evolving now is that as Euro issues offer higher rates (and everyone and his dog still chase yield) that there is now serious competition for bond issues.

This is no small matter.

The US (and Canada) are offering near historical low rates on its various Treasury and bond issues. This in the face of above average returns offered all over Europe. This is also in the face of good returns offered in Asia where interest rates are steadily rising to head off inflation.

Can you see how the competition for money is heating up?

So how is the funding gap closed without increasing rates on this continent and ensuring no issue goes unloved and undersold?

Well a damn good equity scare can send money fleeing for safety. You don’t even need bad news to make that happen, just the cooperation of major buyers to pull the rug out from under the markets. That takes a few phone calls to achieve in the real world. It is called unconventional marketing and strategy.

That works for awhile anyway.

It will not work forever though. At some point, rates here at home must rise to attract capital back to these shores. Rates must rebalance to match global markets.

In other words, interest rates will march higher in the coming months and years and there is no if, and’s or but’s about it. This is not even an option at this point.

Equity flight meanwhile is a temporary fools game. P/E’s are great, prices have dropped nicely, earnings results show over 75% of companies beat estimates and with falling commodity and input costs earnings will rise next quarter.

You can only scare the poop out of investors for so long before they cotton on and react by buying what is actually on sale. By buying what is quality.

If you are investing right now you do need to be aware that there is a tremendous competition amongst a wide variety of issuers for your money.

You will be rewarded short term for buying some issues on the panic trade, punished harshly for refusing to sell others as they decline symptomatically.

All I am saying is that the set-up to reinvest in equities with a good upside is nearing and the gold miners in particular look to have a terrific growth potential (I have a love-hate relationship with them but cannot deny the opportunity to own improves daily).

Europe meanwhile is sagging and with its troubles is sucking the wind out of other markets as capital shifts there for the juicy yields.

The only response in the US would be to harvest equity investors and pension fund money back into Treasuries despite the terrible returns.

Fear works. But fear not.

Then go forth……and prosper.

#129 Brad in Cowtown on 08.05.11 at 12:50 pm

116Brad in Cowtown on 08.05.11 at 11:31 am
Too bad “unprecedented global coordination” doesn’t seem to be helping investors at the moment.

Investors who worry about ‘the moment’ shouldn’t be investors. — Garth

Not worried. I just enjoy referencing that corny line.

#130 Junius on 08.05.11 at 12:53 pm

#113 Bigrider,

You predicted, “10 years from now RE prices in T.O will be little changed from today the stock markets globally will be much higher possibly tripling from here.”

What is the basis for this prediction? What about interest rates? Are salaries going up? How?

Why is one asset rising 3 times and the other getting stagnant?

Bold prediction.

#131 BrianT on 08.05.11 at 12:55 pm

#111City-At least the first part of your statement was completely accurate-anyone can verify this by looking at the historical yields on Greek debt. A lot changed in a year (so much for that stupid “the bond market knows” B/S).

#132 RealityCheck on 08.05.11 at 12:57 pm

@#120 Utopia – At some point an algorithm of a bot will kick in and decide to start buying. Other bots will see some upticks and their algorithms will kick in too. Then a bunch of cash will come into the market and that 10% correction will be history.

#133 Dorothy on 08.05.11 at 1:05 pm

The problem with both stock markets and real estate is that they are ruled by human emotion, not fundamentals. This is is the reason they are impossible to accurately predict. All we can do is use our best judgement and hope for the best. But there is definitely an element of luck involved when investing in either. The difference between them being that it is far easier to get out of stocks at short notice than it is to get out of real estate.

Personally I have never been an advocate of using real estate as an investment vehicle unless it is something like an apartment building that generates an income. And even then, there are many pitfalls. But stocks and bonds can be risky too, and there aren’t many who make 7% or more a year the way Garth claims they do. I have many friends who consider themselves lucky if they generate 4% annually from their portfolio.

I’m not saying the higher rate is impossible, I’m just saying it’s unlikely unless you really know what you’re doing. And most individual investors don’t. Even many so called “financial advisors” aren’t as knowledgeable as they profess to be, as many of their customers found to their cost in the recent meltdown.

So what’s an average investor to do? That is the question. And frankly I, and many more just like me, truly do not know. We’re caught like a deer in the headlights, tucking our money in the orange guy’s shorts and hoping for the best. But I see no benefit selling my paid for home into a down market, losing a lot of money in the process, and then starting to pay anywhere from $1000 to $1500 a month to a landlord.

I know people who rent and who are tired of having to up and move when the landlord sells the house out from under them. Or others who have difficulty getting the landlord to do basic maintenance. Or still others who are falsely accused by unscrupulous landlords of doing damage to the unit, which they are then asked to pay for. And the list goes on. Renting is no honeymoon for many. Besides which, if everyone takes Garth’s advice and becomes a tenant, rents will eventually go up due to the increase in demand for rental property.

So while I agree with Garth that buying condos and single family dwellings for investment purposes is a bad idea, and that people should never buy real estate they can’t afford, I do not agree that it is always a good idea to sell your principal residence into a down market and become a tenant. Because if that were so he’d have done it himself, and I remember he told us that he is still living in a house he owns.

There’s a lot more to home ownership than just dollars and cents. It’s a nice feeling to be “king of your own castle”. If you’re in danger of being foreclosed on for some reason then by all means go ahead and sell, but if you’re happy in your particular castle, and can afford to continue living there, then why shouldn’t you continue to do so? I intend to, and apparently so does Garth.

So long as RE does not constitute too much of your net worth, fine. Own it. What percentage of your assets does the house equity represent? — Garth

#134 JRL on 08.05.11 at 1:05 pm

Exxxxxxcellent! In anticipation of this I already took risk off the table, and congratulate myself for perfect timing once again. This stock market thingy is easy as pie, wish I had gotten involved sooner in my life – perhaps a lesson for young people, learn about investing early. Don’t rely on “professional” money managers, they are worse than useless (unless you are super rich and can afford the very best like Bernie Madoff).
Buying opportunities coming right up!

#135 Utopia on 08.05.11 at 1:17 pm

A 10% correction is not exactly a crash. In 2008-9 the Dow was off 55%. — Garth
————————————————

I was referring to what may be coming, not what has already transpired. Surely you understood that is what I meant.

At 20% of the damage you are running ahead of events. Relax. — Garth

#136 bill on 08.05.11 at 1:25 pm

remax uses balloons to advertise….

how appropriate
bubble shaped objects filled with hot air

#137 Aussie Roy on 08.05.11 at 1:28 pm

Poppy on 08.05.11 at 10:29 am Aussie Roy,

I lived in Oz for a year long time ago, really enjoyed it and thought I could retire there/get a vaca property etc. How much do you think real estate would go down there? Do you remember how cheap it was? Was it ever comparable to Canada’s home prices?
thanks

Hi, glad you enjoyed the land down under.
Im here http://www.barossa.com/barossa/climate.aspx

How much will prices fall, who knows, maybe to 3-4 times annual income (currently 6) and that could take a decade or more.

Here is a great price graph (1998 -2011) of my closest capital city.
Might give you an idea how we compare to Canada.
(Sept 2000 $130k – June 2011 $405k)

http://www.landservices.sa.gov.au/5Publications/Metro_Median_House_Sales/MetroMedianHouseSalesGraph.asp

Kinda looks like one half of a bubble – LOL.

You might also be interested in prices 2010 – 2011.

http://www.landservices.sa.gov.au/5Publications/Metro_Median_House_Sales/vh_port_adelaide_enfield.asp

Adelaide SA http://en.wikipedia.org/wiki/Adelaide

#138 pbrasseur on 08.05.11 at 1:29 pm

‘Bonds can give capital gains ONLY if interest rates go down.’ Wrong. Bonds yield gains when demand rises. Falling yields are a corollary of prices being bid higher. Garth

Just the same, demand can still be irrationnal.

Think about it, people are buying american debt because they are worried about … american debt!

How stupid is that?

If you want to worry then worry but at least don’t buy the very thing you are worrying about!

No wonder most investors en up losing their feathers…

No professional, institutional or international investors are worried about US debt default. Just the amateurs who are led around by the nose by the lazy MSM and the nutbar doomers. — Garth

#139 jwkimba on 08.05.11 at 1:36 pm

Garth doesn’t push his books that much on this site, but he really should. I followed most of Money Road, consolidated disparate accounts, signed up for direct investing and created a garth approved ™ balanced portfolio. I logged in last night to see how much I had lost yesterday…and I was up 1.2% from last week.

Cool to see the bond vs equity thing actually working right in front of my eyes!

#140 Mister Obvious on 08.05.11 at 2:08 pm

“No professional, institutional or international investors are worried about US debt default. Just the amateurs who are led around by the nose by the lazy MSM and the nutbar doomers.” — Garth

A quote suitable for framing. It’s left to readers to decide whether I mean that as a compliment or not. Hint: I do.

#141 gumshoe on 08.05.11 at 2:18 pm

At least countries like UK, EU, USA are upfront about inflation. The ‘never never’ land of CDN government economic announcements would have you think that Canada is floating on an etheral fart bubblr far above the global economy.

http://www.telegraph.co.uk/finance/economics/8683495/Factory-price-inflation-at-near-three-year-high.html

While true that these other countries have manufacturing while Canada relies on increased revenue from taxation. Canada’s ‘economic miracle’ is premised on Chinese goods being manufactured at prices that are considered ‘dumping’ under international rules….but do’s ‘Canaduh’ move to protect or create manufacturing…..of course not…..that runs contrary to the historic policy of Liberal administration to ‘create sustainable development in the third world’ on the backs of CDN taxpayers.

But this policy is breaking down….the eastern provinces of China can no longer manufacture cheap crap for CDN consumption in order to facillitate the BOC’s phony hedonic ‘core inflation targets..( which you all know do not measure anything you consume on a daily basis). The Canadian government is having to subsidize the transfer of factory capital to the volitile ‘ultra cheap’ labour pools of western China…where poverty is creating hundreds of riots every year….all so the Carney can cliam that plastic keyboards are more ergonomic this year and that the new T shirts have a synthetic fiber to make them last longer and thereby..under the geometric modelling of hedonics….make ‘inflation’ come down.

Don’t be surprised if real estae prices continue to climb along with all other consumables. It is not the ‘value’ of the consumables that are going up…..it is the ‘unit of exchange’ going down.

#142 highway61 on 08.05.11 at 2:37 pm

The results released by CREB for July confirmed all my bullish remarks and comments related to the Calgary real estate market. For the first time in months we actually find that the amount of new properties hitting the MLS increased over 2010 by 5%. However, to go with that we saw a remarkable 26% increase in single family sales with a median price increase of 2.25%. Switching over to condos the month end inventory level was down almost 18.5% strongly opposing the increase in unit sales of over 14% while the median price remained essentially even with 2010.

any comments? :-)

#143 Abitibi Doug on 08.05.11 at 2:37 pm

One more comment before I depart to spend the huge amount of money I saved buying dirt cheap stocks and funds (not to worry, it will be replenished by dividends).
Hardly a day goes by where I hear or read about widening wealth disparities, where those greedy fat cats on Wall Street or Bay Street make more and more money while the rest of us don’t. Now it’s payback time! YOU can now buy cheap stocks and equity funds, rake in dividends (or capital gains, as stocks will go up again) and give those fat cats some serious competition!

#144 Zorik on 08.05.11 at 2:37 pm

Does anynody knows how to get a non resident status in Canada if you have debt ?

#145 Future Expatriate on 08.05.11 at 2:38 pm

Wow. Wonder how fast the US Fed can print up all the money it kept pumping into the stock market today to prevent the 800 point straight down fall it was heading to shortly after noon PST.

Plunge Protection Team Tea, anyone?

How much longer to they think they can keep this up?

There is no evidence of Fed intervention in the US equity market. Do you have some? — Garth

#146 Neo on 08.05.11 at 2:38 pm

Anyone else find it odd that the market does a knee jerk swing 300 points on QE Euro style for Italy. When

A) It didn’t work in the U.S. and it won’t work for a multitude of reasons over there, namely Italy actually could default.

B) It looks like the terms of the agreement are forcing austerity on a country with zero growth and growth is the only thing that will propel them out of the mess, NOT austerity which will do the opposite.

C) They are going to have to do the same thing for Spain.

This is all becoming a broken record. Stocks higher on QE from another country now. Correction continues once it fails over the pond….Again…

#147 Happy on 08.05.11 at 2:45 pm

RE board or realtor should not have any right to publish the real estate data.

There should be an auditor, outside the gang, that provides objective analysis.

#148 Dontcallmeshirley on 08.05.11 at 2:56 pm

This blog’s author has difficulty acknowledging the prevalence of money printing.

Why?

It’s an important piece of the puzzle when choosing an investing course of action.

It’s called inflation. It’s why investing for income, not just speculative capital gains, is a key strategy for most people. — Garth

#149 Dontcallmeshirley on 08.05.11 at 3:17 pm

It’s called inflation. It’s why investing for income, not just speculative capital gains, is a key strategy for most people. — Garth

Inflation is an orderly, structured growth.

The printing we’ve seen go on is rightly called something more descriptive than “inflation”.

In any case, it clearly means no one should be in cash.

We live in cash. Inflation is still moderate enough that cash can easily form part of an investment strategy, albeit in controlled moderation. — Garth

#150 Dontcallmeshirley on 08.05.11 at 3:43 pm

We live in cash. Inflation is still moderate enough that cash can easily form part of an investment strategy, albeit in controlled moderation. — Garth

Depends on what’s in the basket when calculating inflation right?

The point is, more disorderly, unstructured, money creation is coming.

How do all us uneducated, hot dog eating, running shoe wearing savages guard against this?

PS. I have cash < 10% ;)

#151 brett on 08.05.11 at 4:48 pm

“No professional, institutional or international investors are worried about US debt default. Just the amateurs who are led around by the nose by the lazy MSM and the nutbar doomers.” — Garth

Jimmy rogers, Marc faber are worried and many more pros whos names you probably wouldnt recognize. even PIMCO head Bill gross fears default down the road.

None of them have said the US is about to default. Stop making this up. — Garth

#152 Imstupid on 08.05.11 at 4:54 pm

#28 Westopia and the rest of those who cone here to pump PM’s

You must all remember that the price increase or decrease in the price of stocks are only one aspect. It is that mind set that attracts you to PM’s. Even though the markets erased 2011 gains this week, you are still paid to hold in the form of dividends. Many companies in the USA are cash rich right now, this means two things 1 asset buying, which will generate higher profits or increased dividends. In any case holding shares in them will generate a return.

PM’s only pay you if price increases. That’s it, I would strongly suggest diversifying to spread the risk around. You must remember, just like at the casino your up when your still playing and you won when you cash out. Until then your just up. I sold off 68% of my PM’s that was the number that brought me to even. 32% that I still hold was the profit. Just something to think about.

#153 JohnnyBravo on 08.05.11 at 5:09 pm

#149 Dontcallmeshirley on 08.05.11 at 3:17 pm

First:
You said, “Inflation is an orderly, structured growth.”

Check out the chart at:
http://observationsandnotes.blogspot.com/2011/03/100-years-of-inflation-history.html

Second:
If you are going to argue about inflation, you need to first define it. Do you mean monetary inflation or price inflation (e.g. CPI)? Not even economists use the same definition consistently.

When the Fed creates money in order to purchase securities or a bank issues a loan, that’s monetary inflation. Some, including myself on occasion, have referred to the Fed’s money creation process as “money printing” but its really not.

(When the US Mint creates coins, that’s more akin to money printing than what the Fed does.)

Price inflation (CPI) is a consequence of monetary inflation, but not always to the same degree or with a consistent lag.

And Garth is right. Cash can form part of an investment strategy. In fact, you can argue it absolutely must. Like now. If you think the market it going up you want cash to buy stuff cheap. A lot of investors are heavy in cash right now. For example, professional trader Jason Schwarz claims his portfolio is 65% cash right now. That’s huge.

#154 jess on 08.05.11 at 5:18 pm

Transparency ?

Will this with holding tax treaty undermine the automatic information exchange ?
http://www.eurodad.org/whatsnew/articles.aspx?id=4625

#155 thecomingdepression on 08.05.11 at 6:00 pm

DELETED

#156 Helicopter Ben on 08.05.11 at 6:13 pm

Article: Govt officials: US expecting S&P downgrade…. Wouldn’t this cause interest rates to rise? (if it was to happen)
http://blogs.abcnews.com/politicalpunch/2011/08/govt-official-us-expecting-sp-downgrade.html

#157 THE STOCK MARKETS SET TO CRASH on 08.05.11 at 6:20 pm

The talking heads are telling people to hold and not panic and sell. That was the exact same advise in 2008. Better to sell and buy back lower then follow or believe the liars on tv. Any rally you should sell. The feds can not QE3 or else the usd is finished. Besides if QE1 and 2 failed why will 3 be any different. The debtors of the world need to take their medicine.

#158 Junius on 08.05.11 at 6:23 pm

#147 Happy,

You said of the Realty Boards, “There should be an auditor, outside the gang, that provides objective analysis.”

You mean like a ratings agency? That worked well in the markets didn’t it!

They would just pay that group off. It is the market version of the Stockholm syndrome.

What we need is a vibrant press. The most important thing about Real Estate is that the actual numbers are available to everyone. It is a pretty transparent market in that regard as compared to so many others.

#159 arctodus on 08.05.11 at 6:27 pm

“No professional, institutional or international investors are worried about US debt default. Just the amateurs who are led around by the nose by the lazy MSM and the nutbar doomers.” — Garth

Jimmy rogers, Marc faber are worried and many more pros whos names you probably wouldnt recognize. even PIMCO head Bill gross fears default down the road.

None of them have said the US is about to default. Stop making this up. — Garth

No they actually think that the US will take the hyperinflation route…which is default by another name.

In other words, I’m correct. — Garth

#160 Tony on 08.05.11 at 6:30 pm

#5 chris on 08.04.11 at 10:28 pm

Are you serious? As interest rates plunge so does the monthly carrying fees for your mortgage.

#161 rower on 08.05.11 at 6:38 pm

The “new Muskoka” isn’t so hot anymore.
Quinte and District real estate board released stats for July 2011. Sales in July 2011 were at 261, down from 283 in July 2010. Dollar volume of those sales decreased by 11.9%.
As of July 31,2011, active listings are up by 1.4% over 2010.
You can have your pick of McMansions on the water. The greater fools have decided to stay in the city and keep their money in their pockets…..

…..or maybe they don’t have any money.
Went to see TNLATB yesterday to talk about renewing the mortgage (at a much lower interest rate). The first mortgage she offered was a cashback mortgage. She told us that MOST are renewing with a cashback mortgage to help pay off some of their debt.
We said no thanks.
We are in the minority because we only have mortgage debt. Unbelievable!

#162 Tallguy on 08.05.11 at 6:49 pm

” uses balloons to advertise…”

I remember 2008 (in LA), where Remax used the same method. Back then, the US RE bubble was bursting

#163 Devore on 08.05.11 at 7:05 pm

#158 Junius

You mean like a ratings agency? That worked well in the markets didn’t it!

How is an auditor/ratings agency any different from press, as you advocate? Ultimately, he who pays the piper, calls the tune. Neither the press nor ratings agencies, no matter how “robust” or “vibrant”, are paid by the consumers of the information, so why would they care about them? Their customer is the one who hands over the money, whether that is the security that wants to be rated, or an advertiser.

If “we the people” want a press that reports real news, or investors want a ratings agency they can trust, they must be prepared to pay for it, so that it is answerable and responsible only to them.

#164 Oasis on 08.05.11 at 7:26 pm

“…precious metals fell apart and there was no place to hide.” -Garth

________________________________________

Gold has made a new high every day this week in Canadian dollars. $1640 CAD is a new all time high today. Let’s try and stick to the facts.

I know you enjoy taking things out of context, but the reference was to a $40 drop intraday drop. — Garth

#165 kilby on 08.05.11 at 7:40 pm

#96. Utopia.

Victoria residential sales for July 30th to August 5th. Just Victoria (including Vic West)
18 new sales
7 SFH, 11 condos…18 total. If this rate keeps up for a whole month that would be 72 sales..Not near enough for 1,000 realtors

#166 Nostradamus Le Mad Vlad on 08.05.11 at 8:01 pm


#47 Bank Run in Greece — Amazing what one finds on the ‘net, esp. in the financials!

#143 Abitibi Doug — Bingo! There’s oodles of money to be made, esp. if one can put their emotions to one side and take advantage of the downturns.
*
GW in the Yolkanagan? It’s close to 34C today, well about average for this time of year.
*
Bet On Yourself, but don’t bet on the US Fed; Eight Families of the Fed; Nearly 15% of Americans on food stamps; Hiccup Time which will probably lead to higher taxes, like VAT and HST; Gold and Silver Don’t own any, and I don’t want to: 4:19 clip Recession Now, Apocalypse Yesterday and Next Week (“France and Belgium next for Euro Crisis”); 6:05 clip Financial crisis man-made? Chances are good that plenty of unknown Bernie Made-Offs made off handsomely rewarded.

Go forth to Pluto, Timmy G.; Interesting Pic, plus the ECB is buying Spanish and Italian bonds. I use mine to wrap fish ‘n’ chips in! Double Digit Increases for energy company in UK.

Fukushima Radioactive dirt, and it’s not political manure and Two Headed Dragon Fukushima, etc; Methinx M’sieur Jones may be short-circuiting; Murdoch Over Easy Transparent m$m?

Katrina Five officers get their just desserts, but what of dubya and his gang; Health Canada Wonder if this has anything to do with layoffs at Environment Canada? Arctic Drilling It’s begun; Rudy Giuliani The steel from the twin towers disappeared rather quickly; Cheap Labor Could be this is why Harper is building prisons, even as the crime rate decreases. There is no need for prisons to be built, other than ulterior motive.

#167 BrianT on 08.05.11 at 8:41 pm

Tin foil hat nonsense yesterday, MSM headline today as S&P downgrades US debt from AAA http://money.cnn.com/2011/08/05/news/economy/downgrade_rumors/

#168 TurnerNation on 08.05.11 at 8:42 pm

Breaking…

WASHINGTON (MarketWatch) — Standard & Poor’s has reportedly backed off a plan to strip the U.S government of its prized triple-A debt rating Friday after White House officials challenged the analysis and said the credit rater was “trillions” off in its analysis.

According to multiple reports, McGraw-Hill /quotes/zigman/233490/quotes/nls/mhp MHP -0.87% unit S&P told the government Friday afternoon of an imminent downgrade. But officials told the agency it was “trillions of dollars” off in its analysis, in part because of the complicated “baselines” that are used to compare long-term government spending and revenue projections, according to reports.

#169 reality guy on 08.05.11 at 8:46 pm

us downgraded

not official yet but S&P is in the process of downgrading the usa to double AA

#170 TurnerNation on 08.05.11 at 8:47 pm

U.S. loses AAA credit rating from S&P
8:42pm EDT
NEW YORK (Reuters) – The United States lost its top-notch AAA credit rating from Standard & Poor’s on Friday in an unprecedented reversal of fortune for the world’s largest economy.

#171 JohnnyBravo on 08.05.11 at 8:51 pm

Does anyone even care what S&P or Moody’s or Fitch even say anymore? If you don’t accept Dagong’s opinion (downgraded to A, negative outlook), how about Weiss Ratings (one of the few independent American ratings agencies who don’t get much press because they are not in Wall Street’s pocket) ? Weiss downgraded the US to C-Minus a while ago.

#172 Rich Renter on 08.05.11 at 8:59 pm

It will be interesting to see what the next trick will be or maybe the shit has hit the fan.

#173 TurnerNation on 08.05.11 at 9:01 pm

Alarms are going off at the bunker, I am sure. Lock and load. Seal the doors, unload the lastest delivery of squirrel jerky, and oh yeah avoid walking under any open windows near Bay St. Don’t tell me this is priced in…

#174 eaglebay on 08.05.11 at 9:09 pm

#128 Utopia
Don’t you ever sleep. Do you have a life?
What do you do for a living?
I enjoy your posts but, this seems to be full time.
Anyway, keep it up.
By the way the market is doing fantastic.
Wow, opportunities abound.

#175 timo on 08.05.11 at 9:16 pm

what a soap opera.

utopia,
sorry i spoke to soon.

When Italy was just bailed out it kind of proved to me that this whole crisis is staged. Big money is having fun attacking currencies and forcing more debt on to countries. This going to work until the public says enough is enough.

Austerity does not solve anything financially. Voters hopefully will finally tell governments they have had enough.

Jobs data is going to make for a very interesting year. If any sane person is still thinking that r/e goes up they should be committed.

#176 HouseBuster on 08.05.11 at 9:17 pm

So what does it mean for the TSX on Monday?

#177 timo on 08.05.11 at 9:22 pm

http://www.businessinsider.com/sp-dithers-while-dagong-global-cuts-us-credit-rating-again-2011-8

hahaha!!!!

China wants more money to keep playing. Sell them Arizona.

#178 Utopia on 08.05.11 at 9:23 pm

#165 Oasis

“Gold has made a new high every day this week in Canadian dollars. $1640 CAD is a new all time high today. Let’s try and stick to the facts”.
—————————————
Indeed, let’s stick to the facts. The Canadian dollar has been dropping and thus Gold, which is priced in US dollars has appeared to increase as an outcome of currency changes. But you knew that, right?

#179 Roxana on 08.05.11 at 9:27 pm

US now has a AA+ credit rating.
Get your tin foil hats out, people!
Now this is what I call “uncharted territory” – it’s a double whammy: money running from stocks on Thursday went into Treasuries and other bonds, and now the investors who did that got a cruel kick in the balls.
I’m sick to my stomach…

#180 BrianT on 08.05.11 at 9:46 pm

#172Johnny-Everybody knows that S&P is a farce but that is a side issue. This move is an indication that change is underway.

#181 bill on 08.05.11 at 9:47 pm

#63 Helicopter Ben on 08.05.11 at 1:02 am
BILL…….”Helicopter Ben needs a hug…..
my wife [an OT for the brain injured] feels that there are those on the blog who safely qualify for the ‘personality disorder’ tag.
regrettably science does not yet have a cure”…………………………………………………………………….- Thanks for your concern Bill, did you meet your wife at her work?

No I met her when I was doing sound for a 60’s rock band
I think for myself quite frequently and listen to what she thinks and then make a decision.
You bit on the second statement hook line and sinker. it was met as a general statement of some of the blog dogs.
I can safely say you confirmed what I thought.
you still need a hug ,dont you?

#182 Utopia on 08.05.11 at 9:47 pm

In retrospect, perhaps my use of the word “crash” this afternoon was a bit of an over-reaction as events were unfolding.

I was not alone in that concern though as a huge second day sell-off appeared to be in progress at the time I left my comments. Both the Dow and TSX were looking to see 500 point drops at that stage. Who would not start to fell a little negative at that point.

Happily, the Dow rallied on the day and finished positive. This did not look even remotely likely at noon though and as the prior days correction was amongst the ten worst days ever recorded by the exchange,….I was naturally getting my shorts in a knot.

So what is a crash anyway?

There seems to be a lot of debate around the definition. In general though, a broad-based and significant double digit sell-off over a period of days will qualify. We have now had that on both the TSX and the Dow.

What happens next will determine if this is simply a hard seasonal correction or if it morphs into something bigger. For the record though, I am feeling positive and believe that we just caught a break on a terrific buying opportunity.

I am looking forward to Monday.

#183 disciple on 08.05.11 at 10:13 pm

What happens next is destruction of the dollar. I don’t see any other option, it was the intention all along. Probably why China has been secretly trading USD for control of industries all over the world, reduced holdings of treasuries by about 50% in the last few years, if I’m not mistaken…

#184 Utopia on 08.05.11 at 10:19 pm

#175 eaglebay to #128 Utopia

“Don’t you ever sleep. Do you have a life?”
——————————–

I need a girlfriend. That might distract me from this site.

#185 Helicopter Ben on 08.05.11 at 10:51 pm

#185 ..Utopia………. Get a life size blow up doll of garth, keep you company on those long weekends lol

All sold out. At least the model with real beard hair. — Garth

#186 wonderwoman on 08.05.11 at 11:45 pm

Snowman said,

Yes sir, this is Snowman from Doom and Gloom Daily News,my question for you is: how many years have you wasted on this blog waiting for RE to tank? All this while the RE prices in your area has skyrocketed ever since? Thanks …

Correction can happen anytime, and if Carney didn’t lower the rates, real estate prices would have crashed already. So what do you make of those that profit during a time of high risk? Just because some people managed to profit from this logic defying insanity doesn’t make the investment sound, or even intelligent for that matter. They just got extremely lucky. But most aren’t gonna be so lucky. Do you know that the Quebec mansion is back on the block after a no reserve auction?

#187 Future Expatriate on 08.06.11 at 3:25 am

#146 – @ Garth

You mean, other than common sense? Do you really think the heads of the major investment firms have underlings sitting there plugging “sell at $x” and “buy at $X” numbers in the computers on the fly? Of course they’re not. They shut them off and wait for the bottom.

So how else can you account for 400 point roller coaster rides in the space of a few hours? Where else can that “money” be coming from if not printing presses?

Reagan’s Executive Order 12631 – Working Group on Financial Markets.

Google it.

The stock market should be at 6000, MAYBE 7000. 3000 lower than 9-12-2001 allowing for the collapses between then and now and the current one. There has been no BOOM whatsoever (that didn’t already pop) to allow for double that index.

Smoke and mirrors and useless paper hot off the printing press.

#188 Future Expatriate on 08.06.11 at 3:27 am

This is not to say I don’t agree with you that a balanced portfolio is the best protection against such shenanigans.

#189 Utopia on 08.06.11 at 8:59 am

#186 Helicopter Ben on 08.05.11
————–

Stop it Ben. You are discouraging the hairy girls.

#190 jess on 08.06.11 at 12:22 pm

rating the raters 2003
Due to decades of failure to warn the investing public.

…”As committee members will recall, in our examination of the analyst investment banking world, many were surprised to learn of the relationships and the revenues generated between the various parties in transactions relating to analytical opinions. It appears that the NRSROs do receive a significant amount of revenue from the parties they are assigned for public purposes to rate.
Then there is the real issue of bottom line performance. NRSROs do have access to more information than any other market participant other than the officials or the corporation which they are examining. Shouldn’t we expect as a result their performance to exceed that of any other analyst or observer of corporate conduct?
These are all questions of great significance and concern. It has been sometime since the Congress has reviewed the NRSRO system in any detail. And it is my expectation that today’s hearing will provide us with a broad scope of information, very helpful in understanding whether any further actions may be warranted or not.”

http://commdocs.house.gov/committees/bank/hba89083.000/hba89083_0f.htm

Wednesday, April 2, 2003
U.S. House of Representatives,
Subcommittee on Capital Markets, Insurance,
And Government Sponsored Enterprises
Committee on Financial Services,
Washington, D.C.

=================
http://www2.standardandpoors.com/spf/pdf/media/SP_GuideToRatingsPerformance.pdf
=

Our report entitled “A Global Cross-Asset Report Card of Ratings Performance In Times of Stress” (June 8, 2010), as well as details on the changes that Standard & Poor’s has made based on lessons learned
from the recent financial crisis, can be found on our public website, http://www.UnderstandingRatings.com, where we also post our current default and transition studies for issuers and securities.

#191 Roland on 08.06.11 at 9:33 pm

@142

Canadian official inflation stats are rigged to UNDERSTATE real inflation rates. So are the official inflation stats of nearly the entire developed world. Canada is not particularly worse than the USA (or anybody else) in this respect.

During the past 20 years every country in the developed West has had their equivalent of the USA’s “Boskin Commission,” dedicated to finding specious justifications for systematically understating inflation.

Lots of reasons for this:

1. Biggest reason is Demographics. Developed world has aging demographics and lots of people collecting, or about to collect, pensions and other benefits linked to official inflation rates. Cutting nominal benefits is political dynamite (remember what happened when Mulroney tried to partly deindex CPP?) esp. since that big aging demographic are also a potential voting bloc. It’s easier to suck the blood from pensioners while they remain politically asleep…

2. Understating inflation rates makes governments look good, since it exaggerates the real GDP growth taking place during their tenure of office.

3. Understating inflation helps drive asset speculation since low inflation is used to justify low interest rates, making leverage cheaper than it should be. Investors like cheap leverage and don’t mind their cheap speculative loans free riding on short-changed pensioners.