Almost human

There are twin metal gates on the rear entrance to the Bunker. Sixteen footers, spanning my driveway. That makes this opening twelve feet wider than the entire piece of land that 8 Williard Gardens sits on, down the road in godless Toronto.

But that didn’t stop 200 people from tromping through the little house there when it went up for sale days ago. Nor did it stop a dozen people from making offers. Nor for the $519,000 listing finally selling for $723,500. “It’s pretty small,” the agent said, “but people are buying to get on to the street.”

Well, chalk up another couple of points for human nature. Here’s somebody willing to pay almost 40% more to get an asset because it’s in demand. People want it. So it must have value. Therefore it will continue to augment. And yet when stock markets decline by 10%, folks feel rivulets of cold sweat running down their sides, and fall over each other to turn paper losses into real ones by selling.

Logic tells us it’s nuts to get into a bidding war for a house and give the sellers $204,000 more than they asked. But emotions kick in and soon our veins are running with the juices of competition, lust and want. Logic also says financial markets constantly gyrate and sometimes correct, so it’s bizarre to expect gains and freak when they erase. But right now millions of illogical people have short breath, sweaty palms and a man craving for Tums.

Of course things are volatile. Tumultuous, even. This will result in a wave of selling over the next hours or days as people rush for the exits – propelled mainly because everyone else is. It’s precisely what happened in March of 2009, when investors capitulated and tossed their stocks,  and mutual funds overboard. It was no coincidence that this tidal wave of equity refugees hits its peak on the very day markets bottomed. Billions in paper losses became real. The trip back up was missed.

It’s a pattern endlessly repeated. We couldn’t wait to grab Bre-X, Nortel, no-profit dotcoms, RIM or LinkedIn, because they were hot. And this week you’ll witness friends, family and neighbours desperate to get out of profitable, solid, dividend-paying corporations – the same ones many of them work for – because the world is ending.

Yeah, I know the news. Dow futures were down 200 Sunday night after losses on weekend markets in Israel, the Middle East, then Asia. The Washington spin doctors spent the last 60 hours trying to downplay the S&P sucker punch, saying the rating change was dumb and undeserved. Sunday night G7 leaders said they’d inject whatever liquidity it would take to calm markets. The European Central Bank said it would snap up the bonds of Spain and Italy, stemming their debt problems. Japan said it would be making big purchases of US dollars, just to give S&P the fiscal finger.

And you can bet the Fed will be in the game soon. The last thing the US central bank will do is sit back and let a posse of bond vigilantes, greedy shorts and glassy-eyed retail investor zombies take down American markets. They did not let it happen in 2008-9, when we were a lot closer to the edge of the cliff, and there’s little reason to believe they will now.

All this takes place against a tapestry of doomernomics promoted by a cabal of folks who root for US insolvency, a gold standard (because they have some), Mad Max rugged individualism or because their RRSPs were hollowed out three years ago when they panicked with the herd and threw themselves of the cliff of despair. The beat’s been taken up by the media, which wouldn’t know a basis point or a put if they fell over one, and suddenly selling is de rigueur.

But, like I said, that’s human for ya. We just never get over it.

The consequence seems obvious. Monday’s likely to end up being a lousy day, followed by a bunch more. People who can’t afford to will sell stuff and lose money. Others will buy it cheap and gladly pay. The TV news will lead with stories about stock markets, instead of sex offenders. Life will feel edgy, foreboding, unsure.

But in a little house on Willard Gardens, amid the packing boxes there will be joy.

For greater fools emerge best in days like these.

246 comments ↓

#1 Unforgettable on 08.07.11 at 10:43 pm

Some folks don’t share your opinion.
http://peterlbrandt.com/the-world-stock-market-bear-has-not-even-begun-to-growl%E2%80%A6much-less-bite/

That’s a shock. — Garth

#2 Debtisforever on 08.07.11 at 10:46 pm

Can’t wait to buy some nice high-yielding dividend stocks!

#3 DP Cooper on 08.07.11 at 10:47 pm

So if the feds intervene again like they did in 08-09, then we can surely expect QE3 no? If so, doesn’t that mean that low interests rates are here to stay….three years now at “emergency” levels? And if so, doesn’t that mean we can expect another run up in equities like 09? If so, history sure repeats itself!

#4 squidly77 on 08.07.11 at 10:48 pm

Buying real estate in Canada now is so incredibly stupid.
Stupid does what stupid does, you can’t stop stupid people from doing stupid things.

I would wager $$$$ that the stupid buyer bet against paid bidders and slime ball realtors.

#5 Smell The Coffee on 08.07.11 at 10:52 pm

First rule of a real estate boom: NO FOOL LIKE A GREATER FOOL. PAY THE MOST, GET THE LEAST.

#6 Markey on 08.07.11 at 10:54 pm

A friend just forwarded me this link promoting condos in downtown Toronto’s Regent Park: http://www.paintboxcondosvip.com/ . An example of subprime named, in realtorspeak, the Home BOOST program. A small fortune for a shoebox in the sky, and thousands more for storage and parking. They illustrate the purchase of a $204,900 unit, but I don’t think such a thing exists in that development (maybe one unit in the basement). And no mention of condo fees. Why would anyone go into so much debt for that?

#7 T.O. Bubble Boy on 08.07.11 at 10:54 pm

How loose are the standards at mortgage lenders these days when someone shopping for a $500k house can magically get another $200k to “win” the bidding war?

#8 tkid on 08.07.11 at 11:00 pm

So, if one had a few gold coins, bought at $1400 plus fees, when would you sell them?

#9 City Slicker on 08.07.11 at 11:01 pm

Garth I’m wondering if these bid up houses are starting to become isolated incidents. Likely we’re seeing less and less of this??

PS – you forgot to mention gold is $1700 tonight ;)

#10 squidly77 on 08.07.11 at 11:03 pm

In the end, someone will be left holding the bloated mortgage bag, it has already happened here in Alberta with tens of thousands people being underwater and drowning in mortgage payments.

Tick Tock Van and T.O.

#11 nonplused on 08.07.11 at 11:04 pm

Over $700K for that? Yikes.

On the other hand it now costs more to service a Ford than it used to cost to buy one 20 years ago. The money is really quite worthless already. You can get a 64 gig iPad for $520, but a single rebuilt (it’s not even new) fuel injector is $400? And you need 8 of them? Every 100,000 km? What’s going on here?

As for the markets, I am not sure there is anybody (except Garth) that did not expect a correction at some point. The run up from the 2008 lows was based on Quantitative Easing, not on any appearent strength in the economy. Unemployment is still quite high, private capital expenditures low, and inventory isn’t moving very fast.

The debt downgrade of US bonds was about as real of an indicator of anything as the whole debt ceiling debate. It’s all smoke and mirrors, it doesn’t mean anything. Anybody who manages their own money doesn’t trust the rating agencies anyway and never did. Anyone remember Enron? The rating agencies did nothing until the collapse was already well under way.

#12 george on 08.07.11 at 11:05 pm

Can a problem which was caused by too much debt be solved by going even further into debt?

http://www.bluecanada.ca/topic/15085-can-a-problem-which-was-caused-by-too-much-debt-be-solved-by-going-even-further-into-debt/page__pid__20644#entry20644

Like Vancouver? — Garth

#13 City Slicker on 08.07.11 at 11:06 pm

Also in 2008 when the markets were tanking and Armageddon was upon us lots flocked to the US dollar as a safe haven. Not this time, gold appears to be the preference.

#14 shamalamadingdong on 08.07.11 at 11:06 pm

FOOOOIIIISSSTTT!!!

#15 Sam on 08.07.11 at 11:07 pm

Some people will give anything to own a house in a “prestigious” neighborhood even if it means they eat cheap food, drive cheap old cars, can’t take vacations, and can’t pay off their credit cards every month, let alone save for retirement. As I took a stroll around my neighborhood yesterday I couldn’t help noticing the vast majority of cars in the driveways were compacts. People spend all their money on their mortgage and have to drive some old econobox. One house nearby had 4 cars in teh driveway plus two parked on the street in front, all of them old and beat up. Obviously renting out several of their rooms.

I was reading “Stop Acting Rich, and start living like a real millionaire” by Thomas Stanley. In it he states that nothign has a greater effect on your ability to accumulate wealth than the neighborhood you choose to live in.

#16 JohnnyBravo on 08.07.11 at 11:08 pm

Like a self-fulfilling prophecy…

Anyone who’s been following the news feeds today could not have helped but hear that Armageddon begins tomorrow (already begun in Asia; Hang Seng down 3.6% as I write). Even The Maestro-cum-Mr. Mud (a.k.a. Greenspan) said the market “correction” is likely not over given the magnitude and momentum of the slide this past week. Emergency ECB bond purchases. Emergency G7 meeting, etc. If the fear keeps building… And if the markets don’t like the responses from the various monetary and fiscal fiat masters, this could get ugly.

Some very smart people have been calling for a Euro banking crisis that would make Lehman look like a flash in the pan. Now the world is spooked because the risk free investment by which all others are measured is no longer officially risk free. And China has reportedly begun playing a bit of strong arm with the currency peg. And gold hits a new record, while Goldman ups their forecasted price.

Tomorrow will be “interesting times.” Let’s just hope, not too interesting.

#17 CREA Circle Jerk on 08.07.11 at 11:10 pm

Garth said:

“They did not let it happen in 2008-9, when we were a lot closer to the edge of the cliff, and there’s little reason to believe they will now.”

Garth, that comment alone tells me how much you patently misunderstand the unfolding crisis. The “crisis” is nowhere to being resolved actually – it just gets worse. The debt trap is actually enlarging and entangling itself further in the real economy. There will be no “resolution” of the crisis until a complete and total westernized restructuring takes place, meaning (i.e. currency devaluations, government spending in line will new reality revenue generation, hollowed-out manufacturing made more competitive globally etc.) The crisis has just advanced this weekend.

I’m not a doomer and I’m very optimistic in the future, but that optimistic time is nowhere near until A LOT of pain and guts have been spilled.

That ‘resolution’ will not come in your lifetime. And I understand the situation quite well. — Garth

#18 squidly77 on 08.07.11 at 11:12 pm

When I bought my third house in Calgary, a modest bungalow in Rundle the asking price was $129,999, I offered $119,000 the realtor then said to me that there were two higher bids, I said good and they should sell the house to highest bidder, the realtor was taken aback.

The next day the realtor phoned and said that the other bids fell through and the sellers countered my offer with a $124,999 buy price.

Long story short, I ended up buying the place in the now crime infested area of Rundle for $121,000.

Stupids that enter into a rigged game are stupids.

#19 MO on 08.07.11 at 11:13 pm

The world is up to its eyeballs in debt. The least painful way forward (for both the US and Canada) is ‘covert inflation’.

http://www.planbeconomics.com/2011/08/04/the-least-painful-way-out-of-the-current-economic-mess/

#20 BC Bring Cash on 08.07.11 at 11:16 pm

Paper money has a long history. Many a Chinese Dynasty fell due to hyper inflation caused by a paper money system. China is once again destined to the same fate as eons ago. Fiat money only works so long. Modern debt based currencies are but only ponzi scams because they depend on ever expanding growth of credit. (borrowing) The system is unsustainable and always like a ponzi scheme runs out of recruits. I quote the following article: Money in capitalist economies is an IOU, an IOU that can’t be repaid.
http://www.24hgold.com/english/printarticle.aspx?pagedest=729351&langue=en&viewarticle=True

This is not a money-bad, gold-good blog. Move along. — Garth

#21 somejerk on 08.07.11 at 11:17 pm

I thought I was insane to bid 5% over on a recent property. Sometimes happy wife = happy life; 90-age formula all factored in makes sense, but not in the center of the universe… Wasn’t even close… winner 35% over ask… others just out with above 25% bids…

Unforgettable: some others think could be a brown dwarf headed our way then nothing really matters… just wanted to start the wacko comments early for you Garth… ;)

Already too late. — Garth

#22 squidly77 on 08.07.11 at 11:17 pm

The German DAX will likely get slaughtered tomorrow as citizens lose confidence in Merkel.

#23 Wise Guy on 08.07.11 at 11:20 pm

I’m super honored to actually live 2 minutes from this house and I’m talking literally two minutes!

I rent a floor in a house on a much more expensive street for $1000/month….how can I go wrong!

The mentality of neighbors will be simple as I have heard it from some close friends in the ‘hood’. So and so’s house went for $700,000 and our house is bigger, so it’s worth at least that.

Anyways, this particular house is in a nice neighborhood, close to the Gardner Expressway, so literally only a 7 minute drive to downtown Toronto, but please, it’s most definitely not worth it!

#24 Smoking Man on 08.07.11 at 11:22 pm

Garth said , “The TV news will lead with stories about stock markets, instead of sex offenders.”

Inspiration for this post……..

Male Boomers……..Are Dumb

I can’t tell you how many dumb rich friends I have……We are all in out 50’s the wives are getting fat, and we are buying convertibles…….Why I say, do you actually think the young cuties are going to really fall for you!!!!!!. They do……They actually believe it……..My buddies are complete Idiots…….

I have a new pick up, roll up windows, stick shift. don’t want to draw attention to myself, plus, It’s a great vehicle to pull a boat to what ever lake I fancy fishing for the day, nothing like a dub, a big bass on the line and having Pink Floyd’s crazy diamonds cranked.

My buddies are getting devoiced left right and centre, buying jewelry and weekend trips for the pretty little fortune hunters.

They all eventually get caught and busted, then the wife who aint that happy with his balding head, his soft thingee, says “got you now prick, ha ha” . Kiss 50% of your wealth and then some down the toilet.

Much worse than a real estate crash don’t you think kids……..

That’s why I say do hookers, You pay them to leave once the urge is gone…………….here is an extra 20…….sweetie. xoxox love you. Bye for ever good riddance………..Next !!!!!!!!

If You ever get caught, honey it was only once and she offered to do what you would not do for 30 years, getting old wanted to see what it was like, it was only once Honest (smoking man wink), a big mistake, I’m so, so sorry, I will never be able to repay you.

A 3 karat ring, an new bmw is all that it’s going to cost.

You can get away with that one all day long till you get caught. But the girlfriend thing, you are toasted, dead, nuts in the blender…..Risk management I say.

Middle aged men are so stupid……………I am so embarrassed to be part of that demographic.

But to my dumb bro’s, and their hotties, restaurants, trips and diamonds, Marco, Steve, and Frank……You should have listened to me on the golf course…..Don’t be crying to me I don’t care……..You where told

Male Bubble heads, do you not see the genus in my logic….Your woman will……

You need to get away from wishful thinking, in life you can do what ever you want but you must evaluate and manage risk, never be afraid of risk, just make the call and do it…….. Think things through without bias, clear your head ……..never fall in love with another woman, a poker hand, and an investment opinion………..

I should start a school……………..

#25 City Slicker on 08.07.11 at 11:22 pm

What else is different this time is gold skyrocketing while oil falling. Gotta love it though. Don’t think it will help Alberta RE.

#26 CREA Circle Jerk on 08.07.11 at 11:25 pm

Garth said:

That ‘resolution’ will not come in your lifetime. And I understand the situation quite well. — Garth

Yeah, sure it will. There’s going to be a crisis unlike anything seen before – much greater than the Great Depression which will bring the situation to a head so to speak. Whether it’s a hyper-deflationary depression or regular hyperinflation remains to be seen. The shear size and scope of the debt – and related derivatives is too much for the system to bare. Just open your eyes man as to what’s going on! Crisis after crisis coming with greater frequencies which keeping getting more difficult to resolve. It’s all right there in front of your eyes. The public portion of the U.S. debt has gone completely parabolic in the last 5 years with no end in sight.

I agree the stock market can do well mostly because of inflation. Corporate profits can do well to as they are generated worldwide. Owning a balanced portfolio can and will do ok. But the real economy and the consumer driven economy are going to get desecrated. They are being desecrated. And the worst part is, the plan is to bailout Italy, Spain, United States (buying bonds) by printing money! All thats going to do is make matters worse like it has been all along.

#27 Off the River on 08.07.11 at 11:26 pm

The KOSPI is down almost 3% at noon. Gold is almost 1700. Things are not looking good.

Garth, is there any chance that you can reconcile your thoughts on PM with your other economic views. You’re spot on regarding the real estate market, but I can’t see how with the way things are going that gold doesn’t go through the roof.

I’m not the brightest bulb on the tree though.

If you can’t see the relation between RE and PM, I can’t help you. — Garth

#28 Joe on 08.07.11 at 11:34 pm

I think there’s a lot of doom talk because really what’s going on is pretty boring. The stock market went down, but it’s going to go back up, so just sit tight. We’re all still waiting for the RE market to correct in Vancouver. The U.S. is not insolvent and although their economy is drifting along the bottom, it is at least still drifting and will be fine. A default in the PIIGS is inconsequential in the lives of most of us.

Feels like the sentiment around here is people wanting to set up on their lawn with a cooler of beer and watch their neighbours get foreclosed and evicted, they want to buy cars for half price. Ain’t never gonna happen. It’s like a bunch of Christians waiting around for the second coming of Christ to tell them they were right all along. Those of us that saved and shunned cheap credit sit here like fools and we’re ready for some action, ready for something to come along and make us all righteous and justified and better. We’re never going to get it though, not in the way the wing nuts are looking for it here.

All I can say is that with last weeks realization that the Canadian economy is blowing fumes interest rates are probably going to stay low for god knows how long. So if 2012 really is the end of the world, man am I going to be pissed that I bothered saving!!!

#29 dosouth on 08.07.11 at 11:40 pm

Well even the E* Trade baby loses everything…

http://tinyurl.com/3haj9qa

#30 Tom from Mississauga on 08.07.11 at 11:44 pm

“And this week you’ll witness friends, family and neighbours desperate to get out of profitable, solid, dividend-paying corporations – the same ones many of them work for – because the world is ending.”
Hilariously true. I’m looking at getting into ticker ZUT. Maybe there will be a bit more panick so I can get it even cheaper price and better yield. Come on media, don’t let me down!

#31 Devore on 08.07.11 at 11:53 pm

Japan said it would be making big purchases of US dollars, just to give S&P the fiscal finger.

It needs to keep the Yen down, not hold a grudge against S&P.

#32 Just Jack on 08.07.11 at 11:53 pm

In the old days, the lender would send an appraiser out to the property and the deal would likely fall through. But now with CMHC insurance, no need for an appraisal. What next? How about drive through windows at the mortgage brokers offices.

#33 HouseBuster on 08.08.11 at 12:01 am

Unbelievable. How is that worth $700K?

#34 Best place on meth on 08.08.11 at 12:03 am

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#35 LH on 08.08.11 at 12:04 am

@Willard Gardens:

Cute house. Not a bad neighborhood but not central enough for me. Asking was deliberately set too low to encourage a bidding war. Like an $0.01-start Ebay Auction, this strategy should not surprise any one. In a hot market, this works much better than setting a full offer price (e.g. “buy-it-now”) that can easily languish after the first week of showings.

@24 Smoking Man:

“……..never fall in love with another woman, a poker hand, and an investment opinion………..

I should start a school……………..”

Where do I sign up?

#36 ExExpat on 08.08.11 at 12:11 am

I watched the Frontline documentary on Bernie Madoff recently. Great kernel of wisdom in this program on the requirements for a pyramid scheme to continue:

1. Constant inflow of new money to keep the asset growing
2. Relative calm to keep existing investors from all dumping their holdings at the same time

Oh, and also a plausible creation story. Madoff had a “proprietary formula”, RE has prudent banks, responsible lenders, and Chinese investors.

So grabbing a cue from BreX, I wonder if this new market turmoil will be the “geologist falling out of the helicopter” moment for RE?

#37 Makaya on 08.08.11 at 12:15 am

Garth, your misunderstanding of what’s coming is indeed surprising…

Maybe you should read the publications from the Global Europe Anticipation Bulleting. These people predicted the RE armaggedon in the US a couple of years before it happened, predicted the mess in the middle east and also have predicted what is currently happening now (including the downgrade of US treasury bonds) a few months ago.

That will give you an idea of what to expect (and escape!) in the near future.

Here are a few abstracts from their publication in early June this year:

“On December 15, 2010, in the GEAB N°50, LEAP/E2020 anticipated the explosion of Western government debt (1) in the second half of 2011. We were then describing a process that would start with the European government debt crisis and then set fire to the heart of the global financial system, namely US federal debt (2). And here we are with this issue at the start of the second half of 2011, with a global economy in complete disarray (3), an increasingly unstable global monetary system (4) and financial centres in desperate straits (5), all this despite the thousands of billions of public money invested to avoid precisely this type of situation. The insolvency of the global financial system, and of the Western financial system in the first place, returns again to the front of the stage after just over a year of political cosmetics aimed at burying this fundamental problem under truckloads of cash.

We estimated in 2009 that the world had about 30 trillion USD in ghost assets. Almost half went up in smoke in the six months between September 2008 and March 2009. For our team, it’s now the other half’s turn, the 15 trillion USD of ghost assets remaining, purely and simply vanishing between July 2011 and January 2012. And this time, it will also involve government debt, unlike 2008/2009 where it was mostly private players who were affected. To gauge the extent of the coming shock, it is worth knowing that even US banks are starting to reduce their use of US Treasury Bonds to guarantee their transactions for fear of the increasing risks weighing on US government debt (6).”

(…)

“In this issue, we discuss the two most dangerous aspects of the Autumn 2011 shock, namely:
. the detonating mechanism of European government debt
. the explosion process of the US bomb in terms of government debts”

(…)

“Finally, we focus our recommendations on the means of avoiding being part of the 15 trillion USD in ghost assets that will go up in smoke in the coming months, with a special mention for developments in real estate in Europe whose collapse we used to anticipate for 2015 will start in fact as early as 2012. ”

“(…) a fourth series is gearing itself up which will see, by early 2012 (15), the launch of a Eurobond mechanism, enabling the sharing of a part of Euroland countries’ debt issuance (16), and the inevitable growing political pressure (17) to increase the share of the private contribution in this broad process of restructuring (18) the debt of the Eurozone’s peripheral countries (19).

And with this fourth series one enters the heart of the contagion process that will trigger the US federal debt bomb. Because, first, in creating a global media and financial environment ultra-sensitive to the issues of government indebtedness, Wall Street and the City have revealed the unsustainable size of US, British and Japanese government deficits (20). This has even forced the rating agencies, faithful watchdogs of the two financial centres, to engage in a mad race to downgrade countries’ ratings. It is for this reason that the United States now finds itself under the threat of a downgrade, as we had anticipated, even though it seemed unthinkable to most experts only a few months ago. At the same time, the United Kingdom, France, Japan… also find themselves in the rating agencies’ crosshairs .”

Sounds like more evidence for the balanced portfolio strategy this blog’s urged. — Garth

#38 Robert Dudek on 08.08.11 at 12:17 am

Here’s my prediction about PMs:

Silver will be up in 2011, but finish down for the first time year-on-year in 2012.

Gold’s winning streak will end in 2013, when the price will be lower on dec.31 than on jan.1.

All in US dollar terms.

#39 The InvestorsFriend (Shawn Allen) on 08.08.11 at 12:17 am

QUESTION…

Why did the value of U.S. Treasury Bonds rise last week?

Answer: Because of the flight to so-called safty. The market bid the required yield on these bonds DOWN and the price of existing bonds had to go UP to deliver LOWER returns going forward.

So, paradoxially, existing bond holders got a capital GAIN now precisely in order that the market could give a LOWER return going forward.

People see the PAST capital gains on bonds and rush to buy forgetting that the very reson for the gain was the expectation of LOWER returns ahead.

Opposite was happening with Stocks. Market went down because investors decided risk was up and they wanted a HIGHER EXPECTED return going forward.

Paradoxically, stock markets go DOWN today in order to provide HIGHER returns going forward. People see the losses today and are afraid to buy, forgetting that the reason the market went down was to adjust to higher EXPECTED returns going forward.

Strange but true…

#40 Best place on meth on 08.08.11 at 12:18 am

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#41 Kitchener1 on 08.08.11 at 12:18 am

GOLD popped $1700, awesome trade to be in short term this week.

Watch out for the 3rd quarter numbers, all u guys screaming for this doom,keep it up.

When the companies stocks get hammered, they will layoff folks just like it was 2008 all over again and at the end of the day, the stock and valuations will come back, while all the folks (mostly boomers) lost jobs and salaries will never come back to those levels.

no jobs, no consumption, no economy.

Some folks need to check your heads, there is no more stimuls spending coming. sure, QE3 might be coming but that will not help out the man on the street.

#42 Nostradamus Le Mad Vlad on 08.08.11 at 12:18 am


Logic and emotions don’t go together and never will. Ask Mr. Spock.

“Monday’s likely to end up being a lousy day . . .” — Not for me. Walk early for a couple of hours to avoid the heat, extra-strength mocha then mow the lawn. Shower, then retire for the day. At least I’m doing something useful!
*
#24 Smoking Man — Good post. Interesting POV.
*
QE3? Hyperinflation is a politically-induced cause, ‘tho it may not help Obama; Debts, although large need not be paid back. Just slash social programs — hence, austerity measures; Austerity Not overly helpful, as it doesn’t address the real problems; Iran’s Oil Bourse Iraq was about to start one, and the US destroyed that country; The Elite “There was no clearer instance than Gordon Brown’s hubristic decision in 1998 to double Britain’s public spending in 10 years.” Look at the UK and Ireland now.

Market Crash? Just one small problem; Bulldozing Homes Possibly BoA, etc. could start with themselves — get rid of all the deadwood at the top; Negative Cratering Bigger than a moon crater; Black Swans everywhere to be seen; Idiots (Aliens?) and Raspberry Tinfoil Helmets For Odin, Thor and the like; Not Working? Hmmmm.

Maybe, maybe not Solar storms; Russia and China Joint naval exercises (to show the US what they are capable of?); Warmonger Phoney Tony Blair is handed a lesson by the Aussies; Ten of today’s hottest jobs, primarily in the US but also here in a short time.

#43 Robert Dudek on 08.08.11 at 12:18 am

re: Silver…

Meant ” first time in many years”.

#44 TheBigLebowski on 08.08.11 at 12:20 am

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#45 Jsan on 08.08.11 at 12:33 am

I can remember a few years ago when Calgary was also going through it’s parade of bidding fools. During one nightly newscast that reported on the frequent bidding wars, they interviewed one couple that just overbid and won. They were giddy as the thrill of bidding and winning rushed through their veins. They nervously laughed stating that they went around 100,000 dollars higher than they had intended.

I was shocked, when I bought my house only a decade earlier, I haggled with the seller over 5,000 dollars to the point that both realtors decided to cut their commissions so the sale would happen as myself and the seller would not budge. What I did was very common. Most people back than would not even consider going over their budget yet it seems many in this generation think nothing of going 100K or more over. They have no concept of debt and many will realize too late just how much damage that extra debt will do to their long term finances.

#46 Cash is King...for now. on 08.08.11 at 12:38 am

Garth,

Gold, silver, and the like ain’t liquid: You are right.

If governments started accepting PM (directly) for tax purposes, traffic violations, HST, etc., it would be a different story.

Until then, cash (whatever its commuted value may be) is king.

Food for thought :)

#47 Future Expatriate on 08.08.11 at 12:45 am

@1 Day trading needs to be outlawed.

#48 WI Boomer on 08.08.11 at 12:45 am

RELAX guys!!!

SMOKING MAN has the right idea tonight.

All this doom & gloom, who really cares? If the pock-up is paid for, you have a boat, beer, good tunes…I’m IN…

Let the world blow up. We will likely be here to re-build it tomorrow. In the meantime, I’ll buy some of those HATED stocks while they are on sale.

#49 Cato on 08.08.11 at 12:48 am

Fear & Greed. Can’t fight the Fed. Here we are back for another round and retail herd once again jumps off the cliff. You’d think after seeing the playbook loop itself around again and again people would get the message. Then again I never thought the lemmings would continue jumping into houses in Canada after having the benefit of seeing debt implosion around rest of the western world.

The bulls and bears will make money, whatever your viewpoint on the world there should be opportunities in the next few weeks. There is only one course of action the global monetary system can take. We’ve seen it before and we’ll see it again. Time to start placing your bets.

#50 Toxicosis on 08.08.11 at 12:50 am

DELETED

#51 Bogdan on 08.08.11 at 12:57 am

And you can bet the Fed will be in the game soon.

What will happen to the gold price when the Fed will get back in the game with another round of QE? Obviously, it will drop like a rock and all the gold bugs will bite the dust, while the preferred bank share will skyrocket.

Is this a joke or something?

#52 Bottoms_Up on 08.08.11 at 12:58 am

#26 CREA Circle Jerk on 08.07.11 at 11:25 pm
—————————————-
You are talking out of both sides of your hole. You can’t have it both ways. How can companies thrive yet the economy gets destroyed?

And as Garth has mentioned before, countries don’t have to pay off their debt; they just have to carry a manageable amount of it. The debt of the USA is currently at 75% of GDP — not bad relative to the PIIGS, similar to Britain, and twice as much as Canada.

#53 Toxicosis on 08.08.11 at 12:59 am

What does real estate have to do with PM’s? Oh that’s right everything else is in a bubble but paper money can, has, or will never be. Is that why the purchasing power of a Canadian dollar has lost a great amount of it’s value and 100 dollars used to go a lot farther 20 or 30 or 50 years ago compared to the present. Forget about houses, what about food, energy, and tuition. These have all gone up, and you get much less bang for your buck. Is it just supply and demand or is money printing and dilution another major culprit?

#54 Dan in Victoria on 08.08.11 at 1:04 am

Nonplused @ 11
Ha, wait till the head gaskets, high pressure oil fitting, fuel rail o rings, egr body, turbo, rear main seal fails.
Now we’re talking money…….

#55 Dr.NickRiviera on 08.08.11 at 1:11 am

Garth, you say not to worry, the stock market has cycles and will rebound – basically telling us to not buy into the media hype and sell, making paper losses into real losses. Yet, when it comes to real estate (which is also cyclical) you are telling people to sell ASAP as we won’t see it at it’s current levels for a decade or more.

This seems a bit odd to me – what if the stock market doesn’t rebound for a decade? Things are not looking so awesome for the future of the US and Europe over the next 5-10 years… I agree with you on real estate but I disagree with you on the markets – I think they are in big trouble. Which, I guess, makes me a “doomer”. :)

#56 reality guy on 08.08.11 at 1:13 am

DP Cooper on 08.07.11 at 10:47 pm

So if the feds intervene again like they did in 08-09, then we can surely expect QE3 no? If so, doesn’t that mean that low interests rates are here to stay….three years now at “emergency” levels? And if so, doesn’t that mean we can expect another run up in equities like 09? If so, history sure repeats itself!
==============
Why do you think they got downgraded in the first place.

Their political joisting. Also the Benanke Printing Press.
If they keep on printing, who will buy their dollar and will they be downgraded again.

Note the feds got downgrade for now. Next in line are the states. I expect quite a few of them to get the crap kicked out of them also.

Remember one thing, you can bail out greece because they are small. But the USA is way too big to be bailed out.

#57 Utopia on 08.08.11 at 1:15 am

Do I even need to say that the coming stock market decline is going to kill the real estate fantasy in this country?

I thank God every day that I never participated in the cheap interest rate casino and never bought into the insanity. That chicken is now coming home to roost exactly as predicted and we have already seen the bubble top in this country.

The proof of that will be in the sales and price statistics coming out over the next 30, 60 and 90 days. Just watch if you have any doubts. The media is filled with gloom and real estate will be the biggest casualty of all that fear.

So it is ending. We all saw this coming although few could time it correctly. The day has arrived though where confidence will be effectively killed as sentiment turns sour and bearishness prevails.

I read the other day that building permits had actually increased in Vancouver. I would not bank on a whole lot of new construction actually materializing though. Not with the dynamics currently underway. Most of those permits will be pulled long before soil is ever turned and a new home built.

On the contrary, we are headed into a recession now and the name of the game will be falling real estate values. It really cannot end any other way.

I ranted at the banks yesterday. After summing up our nations debt predicament in light of the troubles in the global economy I just lost my temper. The banks knew better all along. They are the ones with teams of experts who track markets closely and they know exactly how these cycles end.

Yet they still continue to lend willy-nilly to every foolish kid with a twinkle in his eye and a small down payment who wants an overpriced home. I should not counsel bankruptcy though. That was a little irresponsible of me so please forgive the rant. I am just peeved that our banks are not behaving with the countries interests at heart.

What the hell are they thinking anyway?

So stock markets will take a bit of a beating this coming week. I expect as much. There is always opportunity in a decline though. Keep that in mind before getting all sweaty and panicked. Time to look for real value in the midst of the fear.

Then step out and buy quality. Nothing to it at all.

#58 Carlyle on 08.08.11 at 1:22 am

So today I took the first steps to trying to educate myself. I learned that “equities” means companies and some risk. “bonds” means safety (usually). GIC’s means complete safety with crappy returns. indexed funds means a buy on the market rather than individual stock.

Garth could you do a post on investing for dummies? I’m talking about folks like me that don’t really understand or know about even the barest of basics.

Based on this blog I asked around about terms I’ve picked up … Gave me a slightly better bare basics understanding. But I think many deeply involved in the markets for years don’t realize how ignorant most of the public is not even understanding the most basic of fundamentals … Blindly investing in managed mutual
fund plans with no idea what even basic terms mean.

This blog woke me up to the markets. Trying to learn.

Garth could you do a post on investing for those that don’t know even the basics?

#59 Davey Boy on 08.08.11 at 1:32 am

Garth, don’t know how/why you bother trying to educate people who seem hell bent on self destruction. I’m well diversified, well over a million invested and yet my account has dropped very little during this last market correction. Remember 2009 well where all my neighbors bailed out of stocks and suggested I do the same, trusted my advisor stayed invested and came out fine in the end. Learned first hand not to follow the herd. Admire you patience, love your nightly blog, but personally I would gas this site, people seem more intent on debating your logic then taking your expertise and using it to build equity, over time. Everybody’s looking to get rich overnight, a roll the dice mentality, rather than a well executed financial plan.

#60 waterloo Resident on 08.08.11 at 1:43 am

Garth, please let fellow readers know if this is possible or not, please give us your opinion:

Is it possible to buy a house, a really expensive house well over $1 Million dollars, and then if the economy goes into the dumpers one can simply go and declare personal bankruptcy and get out of all that debt? This assumes that the person has just a job (high-paying job) but no other personal assets other than the house itself.

Can a Canadian just WALK AWAY from the house by using ‘Personal Bankruptcy’ ?

If a Canadian can do it this way, then I guarantee you that millions upon millions of Canadians WILL be doing this starting in two or three years from now.

(Thanks and have a nice day.)

#61 waterloo Resident on 08.08.11 at 1:49 am

Whats making the market have a heart attack on Monday is the though of France, Britain, or Germany, or some other AAA country having their credit rating downgraded, this is something that traders didn’t already “price-in” into the market.
But then again, sometime just when all evidence points that the market will go down, for some reason it rallies and roars upwards for no good reason, just like homes in Toronto roar upwards in price for no good reason.

#62 waterloo Resident on 08.08.11 at 1:56 am

You know, I was just thinking: I get a feeling that people will be so SPOOKED by this stock market crashing that they will sell their stocks (at give-away prices: selling at the bottom), and rush to buy houses in Toronto in a wild bidding war frenzy (buying at the top ) . If this is true then I expect home prices in the Toronto area to rise about 25% just this summer alone.

#63 Utopia on 08.08.11 at 1:58 am

And by the way…

I notice there is a mountain of commentary in the media about Timothy Geithner, the Fed, the S&P downgrade of US debt etcetera. Everyone is analyzing the drama step by step as though this was some kind of big surprise.

Thousands of words have been written about the indignation coming from the White House. The anger. The humiliation. Those stupid S&P rater’s blah, blah, blah.

All of it is nonsense, of course.

This was no surprise. S&P had warned of a downgrade some time ago. All part of the big act. Can you all not see that this is really just theatre?

What few are considering is that this is exactly what the US administration wanted and needed in order to devalue the dollar further. But it is a dangerous game of chicken in my opinion.

Do I have proof? No I don’t. But it is just plain obvious.

The debt is unrepayable and a devaluation of the dollar is the only answer. You could not engineer a better solution than to hurt confidence in the dollar (just a little) than with one of three major rating agencies removing the AAA status.

The best part is that the administration and the Fed are off the hook in this regard. They cannot be directly blamed for weakening the dollar as this downgrade is clearly the outcome of third party ratings.

(Hey, it’s not us, it’s them!!!)

Anyone fool enough to believe that this event was not orchestrated and staged to coincide with the increase in the debt ceiling must be daft or asleep at the wheel.

Of course even more theatre is coming out of Bejing to mirror the drama in the White House. They figured this one out in ten seconds flat. The devaluation in the dollar will force them to remove the peg and they are rightly pissed off.

Check-mate. They did not see that coming.

So while publicly they berate America for being a wasteful spendthrift and openly support the Dagong rating downgrade, in secret they are furious that
their holdings are being whittled away as the dollar shrinks in value. They did not anticipate the S&P actions as a real or credible threat to their interests.

But it happened anyway. They feel betrayed.

They cannot win at this game though and so they have upped the ante and threatened to form a new world reserve currency.

There is no doubt they lost this hand though and the anger was palpable if not melodramatic. They don’t mean a word of it of course and not much will really change. They are just playing to the audience too.

Shakespeare would have been really impressed.

#64 VancouverContrarian on 08.08.11 at 2:06 am

So I heard today about a couple, one of whom works in media, the other who is a mortgage broker. Neither of them make particularly good money here in the insanity that is Vancouver.

They have purchased a home for $800,000+ in North Vancouver, and have put at least another $100K into the thing to get it livable. These people are about my age, and while the rational side of me says I’m on the right track by investing through a balanced portfolio and renting, waiting for the bottom to fall out of real estate, another part of me (the pissed off, emotional part) says WTF?

Garth, how the hell does it make any sense for a 30+ couple to be in hock for almost $1 Million for a hunk of land that doesn’t generate any revenue for anyone?

My big fear is that because of the insanity of the markets, the G8 governments are going to inflate the hell out of the currency, leaving someone like me on the sidelines because the idiots that craved real estate and took out insane, irrational loans to do it, are going to get rewarded for their bad decision making.

If the mob is going to make collosally dumb decisions and be rewarded for it, where does that leave the rest of us who don’t get sucked in?

#65 reality guy on 08.08.11 at 2:09 am

Heng seng down!!!

4 to 5 percent across the board with reits an properties leading the way.

Humm, will this start to expose the China Real Estate Scam.

I believe the first domino’s has been pushed over, I expect a chain reaction in the next few days/ weeks/ months.

#66 Andrew on 08.08.11 at 2:12 am

“If you can’t see the relation between RE and PM, I can’t help you. — Garth”

RE is overbought and over-leveraged by our entire population. PMs are ignored and laughed at by our entire population. Black and white.

#67 waterloo Resident on 08.08.11 at 2:13 am

#24: Smoking Man: you said:

————-
((( “My buddies are getting divorced left right and centre, buying jewelry and weekend trips for the pretty little fortune hunters They all eventually get caught and busted, then the wife who aint that happy with his balding head, his soft thingee, says “got you now prick, ha ha” . Kiss 50% of your wealth and then some down the toilet. Much worse than a real estate crash don’t you think kids……..

That’s why I say ‘do hookers‘, You pay them to leave once the urge is gone.. Bye for ever good riddance………..Next !!!!!!!!
Middle aged men are so stupid……………I am so embarrassed to be part of that demographic.” )))
——————

YOU ARE SO VERY CORRECT with what you said !
I see exactly the same thing that you see too, but I’m not into hookers, its just not my style.

And what does any of that have to do with REAL ESTATE?

( I once read a story about a super-smart man who had experience with all types of women, he said this:

“Never, ever, tell a woman your income, net worth, or live with her. She may not stay with you in a relationship, or she may, that is irrelevant. The point is; follow these few simple rules and you will remain a much happier man than if you don’t.” )

#68 Aussie Roy on 08.08.11 at 2:42 am

Aussie Update

Australian 60 mins special video “The BIG squeeze”.

A MUST WATCH.

“Owners going broke but you can’t tell” – They are living on debt.

http://sixtyminutes.ninemsn.com.au/stories/8281823/the-big-squeeze

Jobs market in reverse

http://www.smh.com.au/business/job-market-shows-signs-of-softness-20110808-1iidr.html

#69 Zor on 08.08.11 at 2:55 am

Does anybody know how to get non resident status if you have a debt ?

#70 +1 on 08.08.11 at 3:22 am

As a true contrarian, I purchased $90k in US dollars. Today, Gold bugs are sheep, blindly following the herd.

Don’t bet agaist the US dollar or the US gov’t as Garth would say and he has been right all along.

#71 Got Gold on 08.08.11 at 3:26 am

Others have hot air.

#72 +1 on 08.08.11 at 3:29 am

To add:

Gold, stocks and silver should experience a new flash crash soon as the stock market goes down, this is a DEFLATIONARY EVENT as money is lost faster than it is gained/created.

Anyone buying PM’s now might as well offer $1 mil for 8 Williard Gardens, you would lose less in the end.

Remember, it took 31 YEARS to recoup the loss in gold after the flash crash of 1981 from $1500 to $350oz in less than 1 year.

#73 GTA Girl on 08.08.11 at 3:32 am

The most expensive home sold in my subdivision this week. 9 homes had been sitting on the market for well over 9 weeks. Prices dropped from lofty $1.8 to all sitting in the 1.2 range.

Someone paid $1mill more for a house on the same small court as another home for sale for $1.2. These brain surgeons bought a house on a same sized lot, with perhaps 500sqft more with a pool for $2.2 mill.

Fellow selling house refused to lower price. He won the lottery. He just bought the house 5years ago for $1mill.

Meanwhile 8 other homes sit untouched. All good homes, bells whistles on enormous lots at $1mill lower. All with owners who must be shaking their heads, confused and drinking heavily tonight.

But one of them just raised his price now. He’s asking $1.9, after 9 weeks at $1.5 lowered to $1.2

This is insane.

#74 R on 08.08.11 at 4:18 am

I think we shall see many years of Economic intervention ahead. This is the new normal. Before, they fixed things by trying to reinflate asset bubbles.. Now its simply staving off crisis.

If there’s one thing i’ve learned its that politicians love to spend money.. Which party youre in dictates what you want to spend it on. No sane politician campaigns on contraction and default though. So you can bet the stimulus packages will keep rolling in for a long while yet.

#75 Tony on 08.08.11 at 4:27 am

I’ll be short both gold and silver around the 9:50 to 10:10am time period. We’ll likely see a 90 dollar swing in gold and a 2 dollar swing in silver. Good advice don’t buy gold or silver tomorrow.

#76 timo on 08.08.11 at 5:20 am

#12 george,

Can a problem which was caused by too much debt be solved by going even further into debt?

tell the PC party and the Sun that the website they are using is going to look awfully foolish pushing austerity for the poor and middle-class and tax breaks for the wealthy. That experiment is being played out south of us and will cause the lab to implode.

If the US follows Mellon we are probably going to see this 1937 moment repeat.
http://en.wikipedia.org/wiki/Recession_of_1937%E2%80%931938

If the US cuts social programs and retirement safeguards now it will drop spending off a cliff and many will power save forcing even more dire results.

#77 Jody on 08.08.11 at 5:21 am

I keep hoping weapons companies will take a hit so I can buy them low, they always seem to pay out well. Offering over asking price, that’s just stupid. I swear to god most of the people in this world had mothers who squeezed when the doctors told them to push, they sustained good old brain damage. I’d love to see HGTV go off the air, I blame those wankers for this stupidity.

My useless stock tips for the day, if they go down more,

Agnico-Eagle Mines, AEM
http://www.wikinvest.com/stock/Agnico-Eagle_Mines_(AEM)

Newmont Mining NEM

http://www.wikinvest.com/stock/Newmont_Mining_Corporation_(NEM)

If I think the SWHTF then I will stock up on fags and booze, maybe chocolate and coffee as well. I’ve already got a closet full of butt wipe. I think the riots in London will grow, people seem to be very angry with the so called ruling class.

#78 eddy on 08.08.11 at 6:12 am

The Short, Unhappy Lives of Fiat Currencies –

http://www.youtube.com/watch?v=gY1EcCUu5nw&feature=player_embedded/

#79 Lucy on 08.08.11 at 6:34 am

Smoking Man…..news flash for you……your wife has a boyfriend.

#80 Tim on 08.08.11 at 6:40 am

If you can’t see the relation between RE and PM, I can’t help you. — Garth

However I can see the relationship between inflation and gold price which is a much heavier factor on the price of PMs than an ‘asset’ like real estate

#81 detalumis on 08.08.11 at 7:12 am

Sorry mate, 8 Willard went for 200K over asking because the agent deliberately low-balled the listing to stir interest. very effectively I would say. The reason this house is valuable is location, location, location i.e. walking distance to subway and shopping. There was nothing stopping Hazel et al of developing Mississauga along this same model but no that takes more time and more money. This model of convenience used to be the de facto standard in all cities when I was growing up but it was dismantled in favour of the strip-mall and jerry built garages with houses stuck on the back model. It’s only in the last 10 years or so that the dirty little secret comes out – a whole whack of people hate the suburbs and a whole whack of them are kids that grew up there. And yes there are a lot of people that will pick a small house in a convenient area over a giant house in the suburbs, it’s the same thinking that makes the uber-rich who can live anywhere they like congregate in Manhattan.

#82 CREA Circle Jerk on 08.08.11 at 7:19 am

#26 CREA Circle Jerk on 08.07.11 at 11:25 pm
—————————————-
You are talking out of both sides of your hole. You can’t have it both ways. How can companies thrive yet the economy gets destroyed?

First of all, the US debt is over 100% of GDP – and that’s only the “official” public debt. It’s much higher when unfunded liabilities are factored in. And it’s all going parabolic.

Don’t conflate PUBLIC (government) balance sheets with PRIVATE SECTOR balance sheets. Governmental finances are in the absolute crapper with growth (present & future) unable to support the massive debt loads. It’s now a case of the insolvent printing money to buy up more bonds and debt of the insolvent. In short, a ponzi scheme. Private sector corporation however are in excellent shape making money hand over fist in the private economy. There’s a huge difference there. That’s why the stock market (rising profits) can go up while governmental finances keep puking debt and will keep getting worse until a massive restructuring and a huge protracted period of public debt destruction takes place. The private sector will just keep selling their products to overseas to stronger economies (bric & asia) and keep making profits with the middle/lower class gets hammered.

#83 BrianT on 08.08.11 at 7:22 am

All you doomers should just relax-a far more accomplished man than any of you, Sir Alan Greenspan has just told the sheeple not to worry-the USA can simply print more money to solve the problem http://www.cnbc.com/id/44051683

#84 maxx on 08.08.11 at 7:37 am

Faith in government ability to correct fiscal problems has been lost by the majority. Governments repeatedly follow the same failing formula of pouring rivers of taxpayer money into a very damaged system which they helped create. They continue to huddle and hand-hold in their “G” series meetings following market drops, resulting in the same band-aid solutions, time after time after time.

There is far too much cheap money sloshing around in the system world-wide.

Quick fixes will never work.

#85 bigrider on 08.08.11 at 7:38 am

Smoking Man.

I have to give you credit where credit is due. Your predictive abilities are quite good and you have to admit Garth, he has been more accurate than you, at least so far.

Smoking man if I have you right, you have been long gold, short S&P and TSX, bullish on Vancouver RE and have said that interest rates have to decline, at least that is what bond market is telegraphing right now.

Bang on on all fronts.

What do you see now for the next little while?

#86 Macrath on 08.08.11 at 8:06 am

Back from a trip to the gold mining north. The neigbour said she was trying to sell her gold in town, population 50k. A 1/4 oz J&M wafer and a 1/15 oz Maple leaf. Absolutely no one was interested, not the Banks nor the jewelers nor the impoverished population. She could not find a buyer for less than 1/2 an oz.
Garth is correct. When times are tough the liquidity of shinny metal dries up like dung in the desert sun.

#87 T.O. Bubble Boy on 08.08.11 at 8:19 am

@ #75 Tony:

I’ll be short both gold and silver around the 9:50 to 10:10am time period. We’ll likely see a 90 dollar swing in gold and a 2 dollar swing in silver. Good advice don’t buy gold or silver tomorrow.

Did you check the pre-market?
http://www.cnbc.com/id/17689937

Gold up about 3.4% and Silver 4.2% as of 8:10am EST this morning.

I assume you mean that you’re shorting at these new highs?

#88 T.O. Bubble Boy on 08.08.11 at 8:24 am

@ #58 Carlyle:

Just spend the $20 and buy Money Road!
(Chapter 3 covers the basics)

#89 $froma$ia-(The Sun can *&^* my caulk) on 08.08.11 at 8:29 am

If you can’t see the relation between RE and PM, I can’t help you. — Garth

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Garth RE is leveraged and PM for the most part, isnt. and you cant rent out a bar of gold, but you can a house.

Print money and support 70% of Canadians that are mortgaged fo $400K…

I would shut up now if you post this…

#90 Beach Girl on 08.08.11 at 8:29 am

#79 Lucy

That is just mean.

Actually, Smoking Man is realistic, I admire his lifestyle. I personally would not want him. But he is cutting edge. He should engage in any activities he prefers, as no one looks good after 70. Enjoy Smoking Man.

Also, I have 50% of my net worth in the markets. I am not worried. This is just another way of the rich and powerful to decimate STUPID day traders. Who make 500 hundred dollars and hit a chicken wing restaurant or peeler club.

I have no problem with people indulging in their fantasies.

#91 Rudolf on 08.08.11 at 8:30 am

Sales statistics released monthly by TREB or CREA are being cleverly manipulated to keep the impression alive that everything is copasetic in the housing market. The same applies to the speculative market forecasts issued from time by Royal LePage and/or REMAX. These press releases are being accepted by the media as facts, and are often published without scrutiny. The public at large is kept purposely in the dark by the real estate fraternity to exploit the last cent of commission before the real estate bubble will finally burst.

The same conniving game is now being played by stock market analysts and financial experts who earn their living also by playing with other people’s money. Many of them are trying to downplay the seriousness of the financial losses occurred in recent days. Instead these biassed experts appear in TV interviews with a happy-go-lucky face to convince the unsophisticated masses that the golden opportunity to gamble in the stock market has arrived. The advice is simply self-serving – because traders will always collect their commissions whether gainer’s or looser’s buy or sell stocks.

#92 Ex-Cowtown on 08.08.11 at 8:35 am

Smells like deal times a’comin! Good thing I kept the powder dry!

#93 renting neighbour on 08.08.11 at 8:36 am

I rent a three bedroom detached house less than a block away from this little place on Willard Gardens. (btw the neighbourhood is very nice, a little stodgy for my liking but nice houses and great tree canopy etc)

In fact it was for sale about 4 years ago so I checked it out. It needs a complete reno, the kitchen is about 35 years old and weird. Plus the house is absolutely tiny, only two bedrooms and both “in the roof” so very little headroom. At the time they were asking about $425 which I thought was a joke.

$719? Makes me laugh even harder.

Also there is something fishy about this one because it was in the Globe “Done Deals” section a few months ago…and then was back in there this weekend. Methinks the realturds are trying to show that there are still bidding wars happening, by “replaying” the done deal. Either that or the deal from a few months ago fell apart and they had to sell it again but I think they’re just repeating it because the figures sound identical to what I remember.

Either way it stinks. Bring on the correction because this is ridiculous.

#94 Better Off. on 08.08.11 at 8:44 am

Why are comments from blog dogs who have been giving great advice and adding value being deleted?

I’ve made some serious coin taking advice from the blog dogs being currently deleted.

Strange.

I made the rules clear recently. This is not a gold blog. Not a doomer blog. Not a fiat-money-is-toxic Armageddon blog. Not a pump-metals blog. Most of all, not an ad hominem blog. All discussion is welcome, but if you can’t make your point without trashing someone else, you will not be published. — Garth

#95 detalumis on 08.08.11 at 8:55 am

Smoking Man, don’t know what boomer planet you live on but it sure ain’t mine. You have found one full of overweight dependent wives and wealthy golf-playing men? My universe has boomer women that earn as much or more than their husbands and work out in the gym six days a week, so if they leave it’s more a case of them kissing their assets goodbye.

Before anybody gets married I suggest they should take their heads out of the sand and look at their parents and their friends; if you cannot stomach what you will become then please remain single.

#96 Dave on 08.08.11 at 9:07 am

My real estate agent told me prices will continue to go up and the best time to buy is right now. I asked her how she knows prices would continue to rise. She said her astrologist told her. I was impressed, who am I to argue with astrology, it’s a science. I mean, they launched the Hubble telescope so mankind could have pretty pictures to look at.

So I went to visit my bank to get a mortgage. I told them that my job was a bit shaky and I haven’t been able to save much money. They said no problem, will lend you $500K. I was impressed, so I asked how they are able to do that. The mortgage lady said that the bank takes no risk. Something called the CMHC insures all mortgages or something like that. They are floating this stuff on a bond market with the backing of the government. Wow, the CMHC sounds like one great hockey league. I told the mortgage lady if you, the bank, take no risk, I have $1 Million.

So I am now the proud owner of $1 million dollar house. All my friends are impressed. My real estate agent and her astrologer are really happy. I’m living the dream.

This wonderful story is brought to you by CREA, CMHC, your bank and the Harper government. “Live the Dream”.

#97 thinktank on 08.08.11 at 9:19 am

I agree about 70% with Garth … (sorry not 100%) – the masses will dump their positions out of fear at or very near the bottom. There are some serious deals out there on good companies to be had if thats your game. I dont invest – I trade so you need to know what your time frame is which again, Garth seems to be “vague” at best on. The tone of your piece is that this ship will right itself – perhaps Garth – but WHEN !!?? Thats an important piece of the puzzle. I have a DRAWING on my office wall of a clock that shows 10 o’clock and you know what – its right twice a day too. There probably will be a bounce – perhaps a huge one – who knows but if your a trader you can take advantage it (the possible bounce) but beyond that – I have NO idea – nor does Garth – nor does ANYBODY. A week ago Garth was implying that if you had shorted the US equity market, you were going to take it where the sun doesnt shine. UH – HUH (lol – readers insert your own comments) Do you not think it is more prudent to use disciplined stops and protect your capital on the way down and look to re-enter at better levels??? perhops Garth you do … I certainly do I just havent seen you mention that since this debacle began. FACT had you invested in 1998 in equities – 10 years later with a buy and hold mentality – you had NOTHING to show for it. NOTHING (2008 lows)- and now this articially stimulated market rally of the past 2 years is deflating before your eyes – again . BUY AND HOLD – PLEASE !!! I – know a balanced portfolio is sound advice … but are fixed income positions offsetting the equiity losses? I know this – there is serious opportunity in this volatility. Sell DEEP in the money covered calls on good quality companies. Take advantage of this volatility which is a major component in the price of options. VERY VERY low risk (far LESS than a traditional balanced portfolio approach) generating a REALISTIC 10-14% annual yield. Google it if you dont believe me or if you dont know how to do it. It’s honestly NOT THAT DIFFICULT! And buy and hold has gone the way of the typewritter in my opinion – even worse are long only mutual funds (I shudder)
good luck all !
!

The last thing average investors will do is use puts, calls or shorts. The best thing is to have an actively-managed, balanced portfolio and ignore the headlines. This is not a systemic financial collapse. — Garth

#98 Chiquita Banana on 08.08.11 at 9:31 am

The Willard Gardens house was seriously underpriced to get out the crowd and invoke a bidding war. Detached houses with parking in Swansea do not go for less than $700K. Instead of being disgusted with the buyers, we should perhaps applaud the sellers for taking Garth’s advice.

#99 timo on 08.08.11 at 9:31 am

Garth,

you have to admit this is getting comical. love the blog and love the comments.

buy r/e now before your rrsp implodes.

prediction end of Aug:
10,000k Dow
oil: 70
housing: down -all markets

then sanity

get the popcorn and start learning how to pickle.

#100 BrianT on 08.08.11 at 9:31 am

This is hilarious-AIG (yes AIG) sues BAC for 10 billion for “massive fraud”-remember the good old days when people would go to jail for massive fraud? http://finance.yahoo.com/news/AIG-sues-BofA-for-10-billion-rb-2884649640.html?x=0&.v=1

#101 jwkimba on 08.08.11 at 9:40 am

#69 you don’t need to be completely free of CDn ties to get non-resident, it just helps I applied in 1997 with some student debt and a car lease and was approved. I kept a single account open in canada to make those monthly payments. I was totally clear of debt by 1999 (CDN=0.65USD <:o) and re-sent in the form just to be sure…re-pat'd in 2005 and never had a problem.

#102 Kilby on 08.08.11 at 9:41 am

Interesting stock market this morning….Victoria, including Victoria West, last three days, 8 new sales, 4 SFH and 4 Condos. 723 active listings.

#103 infernalmachine on 08.08.11 at 10:03 am

From a planning /land use perspective, I suppose on its face the price makes some sense. It is a super area, walkable, good schools, etc. I’d want to live there. What would be nice is if our codes allowed for intensification (ie buy this house and build a lowrise on the lot).

Honestly, as a young person (late 20s) I have given up on the idea of ever owning real estate. Ever. it would be nice but at least I have my health, civilization, and indoor plumbing.

#104 disciple on 08.08.11 at 10:20 am

Youch! Dow Jones down ~300 points in 45 minutes since opening…where is the Plunge Protection Team? Got stuck in Brazil…

#105 The InvestorsFriend (Shawn Allen) on 08.08.11 at 10:27 am

U.S. DEBT DOWNGRADED BUT INVESTORS DISAGREE

Markets opened with the Dow down about 250 points.

Despite the downgrade of the credit rating on U.S. debt investors have bid the yield of the 10-year bond down substantially to 2.42% down 14 basis points. This is at about 10:15 am eastern time.

In other worlds actual investors with real money are rushing to buy U.S. debt and had to bid the price way up and the interest rate way down in order to entice others to sell to them.

As always, the messages are mixed and the future is hard to guess.

#106 Moneta on 08.08.11 at 10:28 am

I was shocked, when I bought my house only a decade earlier, I haggled with the seller over 5,000 dollars to the point that both realtors decided to cut their commissions so the sale would happen as myself and the seller would not budge
————–
In 2000, my brother haggled over 2000$ and nearly lost the house! That was a lot of money then. LOL!

When I see average earning people taking on 100K, 200K and 300K debt without batting an eye, I’m in awe.

Only people who manage to save 10K+ annually on an average salary can understand how huge 100K of debt really is. Since most Canadians are now saving less than 4K per year, it’s no wonder they’ve completely lost touch with the magnitude of their debt load.

That’s just one more example of why we are in a real estate bubble.

#107 Utopia on 08.08.11 at 10:30 am

What? Only a three hundred point loss on the TSX. “Hey, it’s only a little nosebleed ma. I will be fine” (no, I am not in the least bit concerned. This is just another set-up to buy so enjoy the opportunity to get back in cheap kids.
—————
#52 Bottoms_Up said….”How can companies thrive yet the economy gets destroyed?”

It is not that complicated really. Some of our biggest companies are earning their way in the growth economies of Asia. North America and Europe may be slowing but elsewhere activity is still pretty strong. This is just another reason you will want to be invested in the best-of-the-pack strong companies with good exposure to overseas markets. I would stick with defensives as much as possible until the smoke clears if you absolutely must buy right now though. I am waiting for a safe entry point myself. Can’t compete with the big players and my timing has never been the best. When I see that markets have stabilized again and the worst of the bloodletting is over, then I will return. There is no point trying to outsmart a freight train as it bears down on you. Just get the hell out of the way till it passes (like now).
—————————–
Smoking Man….I swear you write some of the most interesting posts I have ever read on this site. Party on man!

#108 disciple on 08.08.11 at 10:38 am

Oh my! Dow down 3% in one hour…Nasdaq over 4%. Another manufactured crisis to fleece the masses. One thing I question is that if most of the investor pool is comprised of institutional firms that should understand the wisdom of holding long, why the panic and flock to the exits? Are there that many individual self-directed investors out there to cause mass hysteria? I doubt it. Your real rulers sure know how to put on a good show.

#109 JohnnyBravo on 08.08.11 at 10:38 am

You don’t bid yield, you bid price. With that little nit picked, the reason the US dollar is rising and T yields are down is because the US is the best of a bad place for all that money to go right now. No other market is large enough, liquid enough and deep enough to take it. The US credit rating was downgraded, S&P did not say the US was about to fall into the Earth’s fiery core.

That said, the news feeds are showing that the downgrade, plus other planned downgrades, may be having some unintended consequences that are spreading fear. TSX down 440 points as I write.

#110 Live Under Your Means on 08.08.11 at 10:40 am

#96 Dave on 08.08.11 at 9:07 am

That was hilarious. Thanks for a good laugh.

#111 JohnnyBravo on 08.08.11 at 10:50 am

More talk of QE3. Could be very dangerous.

Keep in mind that the monetary and fiscal fiat masters have been supporting the markets for four years now with perpetual stimulus, securities purchases, capital infusions, rate cuts and all manor of financial and accounting legerdemain.

At some point another move, such as a QE3 will not have the effect most may expect. Instead of supporting the markets, it may, in fact, spook the markets as a sign of desperation. It could also be the move that finally causes America’s major creditors to throw up their hands and shun the dollar.

#112 Bottoms_Up on 08.08.11 at 10:53 am

#106 Moneta on 08.08.11 at 10:28 am
—————————————–
It’s true, if people actually had to use their hard-earned cash (i.e. savings) to pay for big purchases outright the price tags would be much less.

I recently bought a car off a lease and all-in I paid $32,000 for it. This is a sick amount of money (3 years of savings) but when I first got into the lease I didn’t realize what the total commitment was because I was too focussed on the monthly payments.

I’m sure the same thing happens all the time in real estate.

#113 westopia on 08.08.11 at 10:53 am

#8 tkid
Buy more gold. The Fed’s only option is to inflate their way out of this mess.

#114 mousey on 08.08.11 at 10:58 am

Is Smoking Man really a woman?

#115 fancy_pants on 08.08.11 at 11:01 am

The BofC key policy interest rate will remain low for some time. Read between the lines.
http://www.cbc.ca/news/politics/story/2011/08/06/pol-us-credit-flaherty.html

#116 Etobicokehead on 08.08.11 at 11:05 am

8 Willard Gardens:

3,283.46/mo over 30 years with 10% down at 4.5%
That doesn’t take into account the CMHC fees or repairs. Taxes are likely around $5k/yr.

I rent a similar size house a few blocks away in tony Sunnylea for $1800/mo + utils. My rent would have to go up A LOT for me to even consider buying. And of course it won’t because the gov’t is kindly protecting me from rapacious landlords desperate to shrink the spread.

#117 mythbuster on 08.08.11 at 11:06 am

Garth:

It’s kind of ironic that you, who speaks of a ‘correction then a melt’ in real-estate (unless you changed your tune about that) cannot see the same happening in the stock market…

Of 200 leading stocks I’ve been tracking for many months, NOT ONE has shown a true uptrend in months! And you talk of a ‘buying opportunity’.

The melt is no surprise to me – but I think it left you baffled, clinging on to a mistaken perception.

Technical analysis is obviously your Achilles Heel.

This time IS different. This is NOT a correction. This is the real mama of bear markets.

Are your bunions telling you that, because corporate profits aren’t. — Garth

#118 mackie on 08.08.11 at 11:08 am

Sold my gold and silver fund (CEF) this morning. I’m hoping it’s near the top (for now) and we get a short-term correction. Probably buy back in if gold corrects, if not I will be looking to buy low on some good dividend funds. But it’s not pretty out there….

#119 bigrider on 08.08.11 at 11:09 am

A 60/40 growth to fixed income portfolio has you down quite considerably this year. Although it is on the efficient frontier, it would not have saved you thus far.

Why was the comment I wrote earlier above censored Garth?

It wasn’t – ended up in spam. In general a balanced portfolio will decline about half of equity reversals, and recover twice as fast. — Garth

#120 disciple on 08.08.11 at 11:09 am

Nowadays, when you buy a car or house, you’re really buying the debt, and the car or house is thrown in as a promo. So a good piece of advice is that if you’re shopping around for a new car (or even a used one) just ask for whatever bells and whistles you want, including extended warranties. Be firm, hold steadfast, even after the first two replies of “No, my manager won’t accept your request”. Bring a certified cheque or bank draft to the dealership in the amount you’re willing to pay for the vehicle you want. —- I wish this was done for houses as well, but of course, that would never happen if you need a mortgage, since the lending institution never lends any of its own money in the first place….

#121 amarulaman on 08.08.11 at 11:14 am

Garth…Peak Oil has killed the infinite growth paradigm. You never mention limited and declining energy supplies in your opionions.

#122 Devil's Advocate on 08.08.11 at 11:20 am

Que Sera, Sera

makes life interesting…

#123 Opportunity on 08.08.11 at 11:24 am

S&P downgrades mortgage lenders and agencies linked to U.S. debt

Looks like S&P want to shake some trees.

#124 timo on 08.08.11 at 11:29 am

http://www.stratfordbeaconherald.com/ArticleDisplay.aspx?e=3244430

More than 40% of us probably won’t be able to make ends meet in the event of an emergency situation, according to a new Leger Marketing survey for BMO released Thursday.

#125 gladiator on 08.08.11 at 11:33 am

@Smoking Man:
1. love your rants
2. admire your rebellious mind
3. IF you were to “open a school”, as you wrote above – what would the textbooks be? I mean literally – what books would you recommend (about life)?
4. Also, what finance/trading/investment books would you recommend?

#126 Dontcallmeshirley on 08.08.11 at 11:37 am

The equity markets will turn around when big shooters like pensions, insurance companies and certain money funds see a yield % they like.

Their buying will give all the rest of us the confidence to get back in.

I think big shooters would like a 5% yield, which means the equity market has some falling to do.

Wait until you see the whites of their eyes.

#127 Calgary Illusion on 08.08.11 at 11:41 am

#89 $froma$ia

Gold is leveraged….about 100-1000X paper certificates for every 1 ounce in existence.

#128 Mr. Plow on 08.08.11 at 11:46 am

#3 DP Cooper

That’s kinda what I am thinking. I don’t expect the rates to rise, in fact I expect them to drop.

I also hope real estate drops cause there is going to be some great buys with some cheap money. Both in the various stock markets and real estate.

#129 45north on 08.08.11 at 11:46 am

Rudolf: Sales statistics released monthly by TREB or CREA are being cleverly manipulated to keep the impression alive that everything is copacetic in the housing market.

I just did a survey: the man over 40 knew what copacetic means, the man and the woman both under 40 didn’t

http://dictionary.reference.com/browse/copacetic

Smoking Man, Detalumis, Beach Girl: funny how the blog is a mask where we don’t see each other. I wonder what we would say if we found ourselves in the same room?

#130 Mr. Plow on 08.08.11 at 11:48 am

#7 T.O. Bubble Boy

How do you know it was financed? Some people have money that they would dump into the house. Could have happened here.

#131 Hoof - Hearted. on 08.08.11 at 11:54 am

Just got back after about 10 days in BC’s Interior.

Whoa Baby…

Eerie. The summer was exceptionally wet, which put a damper on sales, which in Recreational lot market, is in Spring and Fall.

Lots of properties for sale….NO SOLDS ….but eerily in cluster…ie about 5 out of 6 in one spot. Thats’ bad, and ripe for one neighbour to break ranks and chase the market down.

One of the ones for sale went quite high end when built 3 storey, log etc, rockwork….I think it will be the first of this McMansion in the woods to face reality, and their are way too many McMansion cottages(oxymoron?)….

The Local Building supply store a small ma and pa operation, is now a RONA….

The new big PUB is closed….one of the locals said that the tough drinking driving laws ( aka it will cost you about $5,000 and a year of legal hell) have scared people off, especiallf the pub and using equipment that has been proven to be faulty.

This was in the Interlakes area, down Highway 24….one can smell the death in the RE market.

I’m done in the area..it’s lost its charm.

#132 BrianT on 08.08.11 at 11:55 am

#111Johnny-Yes, but IMO what you are missing is the actual intent of QE. It is about getting the capital to the correct pockets, not about the MSM stated goal of “fixing” things or helping Joe Sixpack. IMO if you want to predict their behaviour, ask yourself what Angelo Mozillo would do if he was in charge (because basically his clones are in charge).

#133 Waiting for the Sun on 08.08.11 at 11:56 am

Victoria house sales in August so far are up 6% from last year….

116 sales for first 8 days of August
Extrapolated to full month of August 31/8*116= 449
Last Year (2010) July sales = 425
This year’s sales running 6% more than last year’s July.

(source: house hunt Victoria.. comments section)

#134 Mr. Plow on 08.08.11 at 11:59 am

#70 +1

Me too. Sold some funds off about 3 weeks ago and bought some greenbacks. Will see how long it takes though. Might be awhile.

#135 BrianT on 08.08.11 at 12:01 pm

#109Johnny-The US dollar is rising in what universe? http://finance.yahoo.com/echarts?s=USDCHF=X+Interactive#symbol=USDCHF=X;range=3m

#136 God on 08.08.11 at 12:02 pm

Invest in Death Inc, on the TSX, has shown stable growth, using most demographic models , and may spike when 666 is revealed, somewhere in Toronto.

Also hate to break this to you, but Leafs will never win the CUP, but I gave you a brain to figure that one out, though most Leafs fans have pawned theirs years ago.

#137 Devore on 08.08.11 at 12:05 pm

#45 Jsan

They were giddy as the thrill of bidding and winning rushed through their veins. They nervously laughed stating that they went around 100,000 dollars higher than they had intended.

Jeez… I went $100k under my budget, afraid of carrying too much of a debt load, figuring the bank was giving me plenty of rope to hang myself with, since they were clearly not conservative.

I gotta wonder though, with all those bidding wars going for 6 figures over asking, where do the buyers get financing? Presumably, they are already looking at houses at top of their price range, like most people do, especially first time buyers who have little capital to start out with. I mean, they can’t all be conservatively shopping for houses $100k or more below what their bank tells them they can afford, and then blowing their max on the bidding war?

#138 brett on 08.08.11 at 12:28 pm

This is not a systemic financial collapse. — Garth

In 2008 they told us we were hours away from global financial shut down, and only a massive infusion of cash (more debt) saved us. has anything gotten better since then, or worse? the system is clearly failing, and what most fail to realize is that it is by design…over time, everything is managed, there is no panic in bankster land, they are laughing today as they cover their shorts, and sell a bit of their gold to the new price chasers.
the coming bond/cash implosion will make the US RE collapse look like a bull market.
collapse is a tool for change, change is coming.

Have a nice collapse. Elsewhere. — Garth

#139 .9999 Silver on 08.08.11 at 12:30 pm

Hey..
I work in Vancouver, 40% of my quite good wages are kicked back to the companies I work for as a Tax Break.
$40,000.00+ a year. I pay half ….that including property tax’s..some of you pay the rest.
Thank’s.
The companies are all Non Canadian owned.

That’s very healthy for the Corporate Profit Line’s….but the shit’s for the taxpayer.

Personally I’d rather have lower tax’s and the Canadian service’s I paid for funded. Not looted to cover corporate profit margin’s.
And those artificially high wage’s have funded at least 200+ of those $700 thou.+ floating rate mortgages here that I know off .

healthy real estate market my ass…

Welcome to Methland, (BC RealaCracks the best).
silver

The plurals of tax, thank, line, service and wage are taxes, thanks, lines, services and wages. I am going to start a Greater Apostophe blog. — Garth

#140 mythbuster on 08.08.11 at 12:52 pm

Garth: You replied –

“Are your bunions telling you that, because corporate profits aren’t. — Garth”.

No. Your error is relying on what you think are ‘fundamentals.’ They are ‘funnymentals’ as was said before me.

I’ll send you my results of analysis, and performance in an email right now.

But, time will tell whose analysis holds water.

#141 westopia on 08.08.11 at 12:55 pm

“This is not a systemic financial collapse. — Garth”

I think it’s time to call a spade a you know what. It’s a currency failure – happening in slow motion. Can someone tell me what (paper) currency is worth holding right now?

You’re right. You can give that useless currency to me. — Garth

#142 JohnnyBravo on 08.08.11 at 1:06 pm

Hey BrianT

RE: QE
Since QE started, if you put three economists, two analysts and one trader in a room, you would get at least seven opinions on the objectives of QE. Your opinion may be a valid one, too. But that’s not my point. I think it may be possible that the Fed is equivocating on QE3 because at some point QE will have a negative, not positive effect on markets. Plus, who knows what’s going behind the scenes? Is China telling the Fed, enough is enough? See what Dagong is saying today.

RE: Dollar
First of all, you need to define your time frame. I was talking about today, as the market responds to the downgrade. Second, your chart is the US dollar v Swiss Franc. While the CHF is a safe haven currency, I think it makes more sense to use the DXY.

#143 Devore on 08.08.11 at 1:10 pm

#64 VancouverContrarian

Garth, how the hell does it make any sense for a 30+ couple to be in hock for almost $1 Million for a hunk of land that doesn’t generate any revenue for anyone?

Not that it makes sense for them to buy it, but a house you live in DOES generate income: the rent you’re not paying, ie, rent equivalent.

#144 BrianT on 08.08.11 at 1:13 pm

Now we can worry-the proverbial Kiss Of Death-JPM (yes JP Morgan) calling for $2500 gold this year http://www.zerohedge.com/news/shocker-jpm-sees-gold-2500-year-end

#145 thinktank on 08.08.11 at 1:34 pm

Hey Garth … still a fan of your blog – I dont agree with everything but you are right a lot more than you are worng and I respect ANYONE who is not afraid to make a call unlike 90% of the money managers who are paraded on CNBC daily – they are so wishy washy. Contrary to what you think you’d probably make a great trader if you have discipline.

One note/question … I read a lot of the comments throughout the day . how come you allow INDIVIDUAL STOCK picks being posted by some of your bloggers … Gold and Silver are one thing but individual picks ?? I specifically DONT do that when I post , out of respect for your blog … I thought you were against that your self

anyways … just my thought/observation (I have mentioned if i am long or short but no specific stocks – dangerous!) On that note … I am building my TRADING portfolio with CALLS right now into this selloff – NOT PUTS left – WAYYYYY oversold (short term) – I may have missed the very bottom … thats ok …hopefully I catch an oversold bounce in the next few days … they can be fast and uber profitable …

good luck all …

#146 Devore on 08.08.11 at 1:37 pm

#86 Macrath

That’s because gold is not money, and will not be in our lifetime, or even ever again. When things are tight, people will ALWAYS take money. They will also take other stuff, but don’t expect to get top dollar for them. Dollars, oh yeah. Anything that is not a dollar is only as valuable as it is liquid, whether it’s a house, a gold bar, or Nortel stock.

On the bright side, if you have gold coins, of the Canadian Maple Leaf variety, even if no one will touch them with a 10 foot pole, the mint will give you face value for them, so they’re not likely to go to 0. If you’re preparing for an emergency, you’re better off stashing away an envelope full of 20 dollar bills, which people will keep taking long after ATMs stop working.

#147 Cookie Monster on 08.08.11 at 1:45 pm

cabal of folks who root for US insolvency, a gold standard (because they have some),
—–
That’s not why I root for it. I own no gold. My money is fully invested. I root for it purely for economic stability, honesty, integrity and moral reasons.

I hate seeing wealth being stolen from savers, pensioners and businesses. I hate the lies and deceit. I cringe at the stupidity of society that accepts such an evil fraud as normal or ok or the way things are.

#148 The InvestorsFriend (Shawn Allen) on 08.08.11 at 2:10 pm

PENSION PAIN

Pity pension funds. Even with balanced investments they are likely losing money. But that is a minor issue.

The killer issue for pension funds is that these ulta low interest rates cause their calculated liabilities to go through the roof.

Their unfunded liabilities are going up. Leaping up as long-term bond rates crash down.

Commuted values, the amounts members get if they leave the plan (often usually only allowed to leave before age 55) are through the roof and spiking as I write this.

The pension contribution rates will be going up.

This will cost governments money and government employees.

The Federal pension plan is paid roughly 70% by government and 30% by employees but has no set ratio of who pays what to my understanding.

Most provincial governement pension plans are paid 50/50 by government and the workers (ultimately of course tax payers fund ALL of this).

I believe Teacher pension plans are also mostly funded 50/50.

Retirees of the government plans are safe. Turns out the pension contributions of tretirees were too low over the years. Not their fault. But now someone ahs to make that up.

Younger government employees are going to start to squirm at having 10% of their pay lopped off for pensions. Roughly, that is 7% for their own pension and 3% to make up shortfalls in the pensions of older workers and retirees. I think it is still a good deal for even the younger workers given the employer is matching that but it bites when the mortgage needs to be paid.

As to taxpayers, there can be no doubt that many government workers are over-paid (especially when counting pension and other benefits) compared to private sector workers.

Thinking of the U.S with their deficit problems. It is amazing that we have not seen Federal government pay cuts and layoffs. We are seeing a bit of that at the State and municipal level and that will contine.

#149 wes_coast on 08.08.11 at 2:17 pm

Chant with me …QE3 … QE3 … QE3. If Garth is right all will be normal one day. If the Gold bugs are right the system is going to go belly up but not before a whole lot of fiscal hocus pocus (QE3 ). Either way it will take more BS goosing of the system to get to either end. Just waiting for Bernanke’s next announcement and buying stocks while I wait.

#150 cory on 08.08.11 at 2:20 pm

#106 Moneta

I find your comments rather strange. How can any young person today buy a house and not take on at least 200K never mind 100K mortgage. A 100K mortgage is very small almost unheard of especially if it’s someone that is buying their first house.

You seem so shocked by those numbers. Where do you live Gatineau Quebec?

#151 new_era on 08.08.11 at 2:22 pm

Off topic but I wish the Obama administration would stop blaming everyone except themselves.

It pees me off to see such an dysfunctional government at work. I will they would get their house in order and move forward to solve some desperation needed problems that plague that country.

So playing politics and start to govern!!!

http://www.foxnews.com/politics/2011/08/08/white-house-downgrade-doesnt-matter-unless-its-tea-partys-fault/

#152 Victor on 08.08.11 at 2:22 pm

More property virgins about to get a lesson of a lifetime. $800K for a 1200 sq ft condo in Toronto, knowing full well they’ll be moving in the next few years:

http://www.torontolife.com/daily/style/from-the-print-edition/2011/08/08/the-chase-suburbia-downtown/

#153 Blacksheep on 08.08.11 at 2:35 pm

Garth #97,

“The best thing is to have an actively-managed, balanced portfolio and ignore the headlines”

Cherry picked and taken out out of context, yes,
but THIS statement is as MAINSTREAM as it gets.

A wise man said, “Only dead fish swim with the stream”

I will leave at that.

take care
Blacksheep

Actually only a small slice of people have a balanced portfolio. Mainstream is equity mutuals. — Garth

#154 timo on 08.08.11 at 2:36 pm

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

when Cramer freaks out i will go all in!

#155 westopia on 08.08.11 at 2:48 pm

#86 Mcrath
“When times are tough the liquidity of shinny metal dries up like dung in the desert sun”

I beg to differ. Times are tough, and everywhere I look I see advertisements in the paper, on TV and websites for individuals and companies desperate to buy gold and silver coins and jewelery.

#156 Ottawa on 08.08.11 at 2:54 pm

#145 thinktank

Can you please detail your strategy to trade? (No individual stock picks).

Thanks a lot for your time,

#157 Devore on 08.08.11 at 2:56 pm

So I am heading out this afternoon to pawn off some of my physical gold (oh noez), after 8 years they’ve served me well. I notice an interesting fact at VBCE web site:

1oz bar:
buy: $1,695 sell: $1,733

1oz coin:
buy: $1,698 sell: $1,768

While they buy coins at a $3 premium over bars, they sell them at a $35 premium. Not sure what this indicates. If the demand for coins (over bars) is high, wouldn’t the purchase premium be higher as well? Weird margins on that one. I will ask when I am there, maybe they will share some wisdom.

#158 BrianT on 08.08.11 at 2:59 pm

#142Johnny-There can be all kinds of “opinions” on QE, but who gets the money? Now BAC is going under unless it gets a new giant pile of taxpayer capital-contrary to sheeple opinion, there is not an unlimited amount of taxpayer capital to give to grifters. IMO people are finally waking to this reality.

#159 PTDBD on 08.08.11 at 2:59 pm

Ha, ha…the boyz have a laugh playing with the 666.6 level again, this time with the S&P60 Canadian large caps. $SPX

#160 CREA Circle Jerk on 08.08.11 at 3:03 pm

What a complete disaster in the markets. Dow down 525 Points as I type and gold up $56 dollars. JPM puts a new price target on gold of $2500 by year’s end lol. That price action right there tells you everything you need to know about the state of public debt.

I wouldnt be surprised if QE3 is announced tomorrow instead of Jackson’s Hole next week. I don’t expect QE3 to have nearly the same positive effects on share prices as QE2 did simply because everybody knows that QE2 did absolutely nothing for the real economy – all it did is boost stock and commodity prices. They are REALLy playing with fire if they introduce a massive new TARP program. This will stabilize share prices in the near term but boost inflation concerns medium/longer term. What a mess which continues to hit new lows, and WILL NOT get any better until a western grand restructuring happens – a real one whatever that is. Stocks might do ok since corporations are flush with cash and have no debt, although I expect a much slower rate of corporate earnings expansion.

#161 CREA Circle Jerk on 08.08.11 at 3:06 pm

I don’t expect QE3 to have nearly the same positive effects on share prices as QE2 did simply because everybody knows that QE2 did absolutely nothing for the real economy – all it did is boost stock and commodity prices.

And add a ton more debt, which remains.

#162 maxx on 08.08.11 at 3:12 pm

I keep hearing the talking heads proclaim “the markets are irrational today”. I call major BS within the constant stream of misinformation. Truth is, people around the globe are completely fed up with being lied to, manipulated and fleeced of their hard-earned money.
Cheap money needs to be sucked out of the system, not “injected” into it.

We are the system, dude. — Garth

#163 The InvestorsFriend (Shawn Allen) on 08.08.11 at 3:13 pm

Warren Buffett

Will no doubt be buying today… In fact Berkshire announced a $3.25 billion takeover offer on Saturday, seller has until end of today to accept the offer. I bet the offer gets accepted.

The challenge today is to keep our heads while all around us people are losing their heads and following a herd mentality.

#164 JohnnyBravo on 08.08.11 at 3:18 pm

We are going deeper and deeper into the mythical land of Shangri-La-Dee-Da.

Sherry Cooper, Chief Economist at BMO, just said that she does not believe we will have a double-dip. Rather, we will have a “growth recession.” The Orwellian Newspeak mouthpieces are out in full force now.

Then Miles Nadal of MDC Partners said that consumers’s balance sheets are in good shape right now. Yeah, maybe on Nibiru. He also gave a bunch of reasons why the stock market is a good buy. I don’t necessarily disagree, but when asked what is he buying right now, he said, “I don’t trade securities.” Yeah, way to put your money where your ass is. Maybe we should ask my butcher what he thinks about stocks.

#165 Unforgettable on 08.08.11 at 3:19 pm

Hope your readers took your advice to buy this emotional stock market. Uptrend should resume soon. Those who sold today are going to wake up later and say “Sh*t”!!

I did not advise buying this market. I did advice against turning paper losses into real ones. Buying days will come when volatility calms. — Garth

#166 The American on 08.08.11 at 3:21 pm

U.S. should still be AAA rated. Even Warren Buffet agrees. No worries on this end, though. It alo hurts S&P 500 index with the stupidity of their actions this past Friday. I wouldn’t call the move by Standard and Poors a very “smart” one. Its the only agency to act with a downgrade, and they’re getting annihilated by the press, U.S. Treasury Secretary, Warren Buffet, and senior economists for it. Oh, and yields on U.S. Treasuries went down again, which means investors are buying the shit out of them because they KNOW it is safe. It makes absolutely not sense in way of timing why the S&P downgrade would happen only AFTER the debt ceiling crisis was averted (yawn, we all knew it would be) and a plan for deficit reduction was agreed upon. Granted, the plan is not enough, but that is beside the point. A better plan will indeed come along. S&P has lost ALL credibility now with investors (like it had any to begin with, even after the banking crisis and their poor/ridiculous calls only AFTER it was too late). If the downgrade was to have happened, it should have happened long before any of the debt ceiling and deficit reduction plans were approved. Idiots. By the way, has anyone seen the value of the USD go up up up in the past 48 hours? This speaks volumes.

#167 Ultraumatic on 08.08.11 at 3:21 pm

I should have mentioned in my previous post that the rallying cry of anyone with roughly 10 years or less to go before retirement is, “I got mine, screw you!”

Yes, frustration still talking.

____________________________________________
#121 amarulaman Garth…Peak Oil has killed the infinite growth paradigm. You never mention limited and declining energy supplies in your opionions.

I’d love to hear Garth’s thoughts on this as well, a-man, but I’m not holding my breath. This is my frustration talking, but boomers tend not to give a shit about climate change.

#168 JohnnyBravo on 08.08.11 at 3:23 pm

That should have been “consumers'” not “consumers’s”

#169 Kilby on 08.08.11 at 3:28 pm

#133 waiting for the Sun.

Your figures are close for first 8 days in August but should look at whole 31 days of July 2011. Victoria and all outlying municipalities including Sidney, Langford, Colwood etc…

First 8 days of August 105 new complete sales.
July 2011 (31 days) 309 sales, compare that to last July and you will find a 27% drop….That’s significant

These are completed residential sales, SFH and Condo. Sourced from Victoria Real Estate Board.

#170 randman on 08.08.11 at 3:32 pm

Obama…The USA is still a AAA country!!!! =

Vancouver Canucks…. We really won the Stanley Cup!…no really ..we did!!!

#171 JohnnyBravo on 08.08.11 at 3:39 pm

#158 BrianT on 08.08.11 at 2:59 pm

I kind of agree with you. But there is really no technical limit on how much tax-payer money can be spent to save the banks–at least not in the US. It’s really a matter of politics and confidence. If that’s what you meant by saying that the people are starting to wake up, I hope you are right.

#172 randman on 08.08.11 at 3:39 pm

72% of Canadians in debt!

http://ca.news.yahoo.com/cibc-poll-finds-72-per-cent-canadians-debt-133257122.html

“The bank found that of those debtholders, four in 10 say their current debt level is an obstacle to reaching future financial goals.”

No S**T Sherlock!!

#173 randman on 08.08.11 at 3:41 pm

American…

Dumb comments from a smart guy…..

S&P Is the only agency with any credibility

Your comments sound like an Obama speech!

#174 robert james on 08.08.11 at 3:45 pm

If anyone should be “downgraded” it is Standard and Poors..

#175 JohnnyBravo on 08.08.11 at 3:49 pm

#166 The American on 08.08.11 at 3:21 pm

“Granted, the [deficit-reduction] plan is not enough, but that is beside the point.”

No, that’s exactly the point.

#176 BC Bring Cash on 08.08.11 at 3:53 pm

AIG sues Bank of America for $10 billion over massive mortgage fraud. You can view the copy of the law suit
here. Its only 193 pages.
http://dailybail.com/home/aig-sues-bank-of-america-for-10-billion-over-massive-mortgag.html

#177 maxx on 08.08.11 at 3:53 pm

Garth, Re #162:

True, but it’s broke and in bad need of a different kind of attention.

#178 timo on 08.08.11 at 3:58 pm

164 JohnnyBravo on 08.08.11 at 3:18 pm

We are going deeper and deeper into the mythical land of Shangri-La-Dee-Da.

Sherry Cooper, Chief Economist at BMO, just said that she does not believe we will have a double-dip. Rather, we will have a “growth recession.” The Orwellian Newspeak mouthpieces are out in full force now.

lol! ex-Realtor?

#179 westopia on 08.08.11 at 4:01 pm

@166 The American

“…S&P has lost ALL credibility now with investors…”

Except for the biggest one. I don’t see China blaming the S&P. They pretty clearly put the blame on US policy.

#180 thinktank on 08.08.11 at 4:10 pm

# 145 Ottawa

will try and keep this as simple as possible
buy XYZ stock say at 25
sell an IN THE MONEY CALL with a $20 strike (this means you are GIVING someone the right buy your shares AWAY from you at a price of $20)
but for that right the BUYER pays you a premium to do so. Options are priced with Volatility – the more volatile the more expensive the options contract (like right now)
soo … the option is COST (to the buyer) is the in the money component PLUS the time value or volatility … lets for argument say the option is $6 ($5 in the money + $1 time value) ..
your profit is the $1 time value. Does’nt sound like much right ? wrong … each contract you SELL (for profit) = 100 shares. $1×100 x # of contracts you sell)

Lets say you by 1000 shares of stock @ $25
Sell 10 – $20 CALL option for $6 ($1 is pure profit)
Options expire (unlike stock) so the buyer of the option is fighting the clock. Right now there is a REAL stock that is about that price ($25) and the 90 day (November option) is paying about $6 .
you WANT the stock to rally from these oversold levels
your breakeven is the current price (25)- premium collected (6) or 19 on the stock. Thats 24% downside protection of your capital … not bad and that works out to a 4% return over 90 days. ANNUALIZE that (which does NOT happen all the time – you need the volatility) and you get about a 16% yield … so …

This is why I like this strategy …. 24% downside protection … 4% return for 90 days …. and if the stock continues to sell off (which it can – a real possibility) … just sell the stock BEOFRE it hits your
$19 breakeven stop loss and buy the CALL back (at a discount no doubt unless volatility spikes even higher) that you sold.

Any way you slice it … VERY VERY VERY low risk trade .. AND … if the stock pays a dividend (as this one does) … you collect that as well provided the stock is NOT called away from you. (chances are it will be)

NOTE – YOU NEED TO KNOW WHAT YOU ARE DOING AND USE STOP LOSSES. Most online brokerages allow for everything that I have mentioned above. But it is NOT difficult.
And get this … you can do this covered call strategy in your RRSP !!
It is unequivocally the safest strategy around – much safer than just buying stock. Otherwise it would NOT be allowed to be used in your RRSP.

hope this helps but I STRONGLY advise you Google info on it. best site is the CBOE (Chicago Board of Options Exchange)

http://www.cboe.com/learncenter/default.aspx

#181 timo on 08.08.11 at 4:11 pm

http://www.bbc.co.uk/news/uk-14449675

riots are not only Rodney-king related but are fuelled by economic and social program cutbacks.

#182 new_era on 08.08.11 at 4:23 pm

Garth, I wonder how the retired people who invested in the market is going to do now.

They have a house asset and their stocks just got Kibosh. Can Canadian housing be next !!!

#183 Future Expatriate on 08.08.11 at 4:27 pm

-634.76 points. Can’t WAIT until tomorrow.

#184 VW on 08.08.11 at 4:27 pm

Just came across these numbers – so funny it hurts!

U.S. income: $2,170,000,000,000
Federal budget: $3,820,000,000,000
New debt: $ 1,650,000,000,000
National debt: $14,271,000,000,000
Recent budget cut: $ 38,500,000,000

Mind boggling numbers, to be sure.
But remove eight zeros and look at them as
a family budget.

Total annual income for the Jones family: $21,700
Amount of money the Jones family spent: $38,200
Amount of new debt added to the credit card: $16,500
Outstanding balance on the credit card: $142,710
Amount cut from the budget: $385

Puts things nicely in prospective.

#185 Macrath on 08.08.11 at 4:30 pm

#155 westopia

And not one of them will tell you what they are willing to pay. I really get a laugh from the tv ad where the lady sends in her bag of gold for a pair of Walmart shoes.

The margins on gold, diamonds, and jewelery are very high. You can always sell somewhere but you probably will not get what you expect.

As Devore explains, a tin toonie is always worth 2 bucks
and is redeemable anywhere.

#186 Moneta on 08.08.11 at 4:31 pm

cory on 08.08.11 at 2:20 pm
#106 Moneta

I find your comments rather strange. How can any young person today buy a house and not take on at least 200K never mind 100K mortgage
———–
I’m talking about 100K increments over the base. While these used to be a couple of thousand, now people increase their bids by tens or hundreds of thousands.

A typical household with a 70K income should not be carrying a mortgage over 200K unless they are looking for trouble. Some will get lucky, most won’t.

Therefore hundreds of thousands of Canadians should not be buying at today’s prices. I know it sucks but that’s how the cookie crumbled.

The fact that many don’t see a problem with more than 200K in debt with a 70K income is just one more example of why we are in a credit bubble.

#187 The American on 08.08.11 at 4:49 pm

@179: Westopia, China wouldn’t blame S&P. China’s been artificially devaluing its currency for years up to 40%, creating much of the debt crisis itself. It makes it all too painful to repay when the debtor is devaluing its currency; hence a major reason for QE1 and QE2. I could give a rat’s ass about China. They have their own economic implosion to contend with anyway. What goes around, comes around. Plain and simple.

#188 The American on 08.08.11 at 4:51 pm

At #175: JohnnyBravo, the point was then why didn’t S&P downgrade the U.S. PRIOR to any kind of action taking place? It makes not sense. In my point, I do not see this is enough to reduce deficits as quickly as needed. We need a deficit reduction plan at a minimum of $4Trillion. This is completely doable. At least there is SOMETHING in place now as opposed to when the downgrade ensued.

#189 Imstupid on 08.08.11 at 4:55 pm

#166 The American

Let’s play a game. Let’s assume my well being is your #1 priority. I know you just won the lottery, what do you think I will do?

Obvious answer, go broke so I can take your money.

You ask what thus has to do with your post? The banksters are putting republicans and democrats to the test to see how much more they can get. The media is having a feild day with this, institutional investors started this and the average Joe propelled it to the levels required for QE3. Institutional investors will slowly buy back in and make a fortune when QE3 comes while the average Joe will realize the loses both in the market and tax increases to fund it.

I my self will buy Bank Of America. For two reasons
1. the name. America will not let a bank bearing it’s Name go under. It’s vanity.
2. It will cause a cascade.

#190 new_era on 08.08.11 at 4:56 pm

Peter Schiff – has got it right again

http://www.youtube.com/user/SchiffReport

#191 Live Under Your Means on 08.08.11 at 4:56 pm

The Local Building supply store a small ma and pa operation, is now a RONA….

…………….

Our local Piercey’s will open as a RONA this month.

Chatted with a neighbour yesterday. Their son, DIL and 2 youngins were visiting. They have bought a house in PEI, but have have had their house on the market for more than 6 mos. with a neighbour’ss bro. Just changed mtg. agent. When I suggested they should consider reducing their price, father made NO comment. Father & Mom plan on selling next spring and moving to the Island.

Had not seen their son close up for several years. His 2 arms are covered w/tattoos. !!!! Think his father was disgusted. Son is still a good looking chap, wife is rather homely and has zilch personality (even according to my hubby). But, she has a good job. Thankfully, their kids don’t take after her.

#192 trinotuta on 08.08.11 at 4:59 pm

“A new provincial housing strategy aims to increase the housing supply and improve affordability through an eight-year plan that emphasizes co-operation between government, communities and industry.”

Read more: http://www.leaderpost.com/news/Saskatchewan+releases+housing+strategy/5223465/story.html#ixzz1UTLO11qA

— I’ll be such a happy vulture. I’m so tired of this nonsense. Last Friday I had the opportunity of listening to my co-worker talk about the house that he’s gonna buy. He mentioned that the price was about 450K, to what I reacted with a bit of shock. I asked him if he had a big downpayment for it. He looks at me, chuckles, and says “Dude, you only need 5%, duh…” Then he continued talking about the features of the house, the area, the neighbourhood, the cookie-cutter features…

The thing is that I had already talked to him about the current situation, suggested to him to read this blog, read other blogs, and get a bit more informed about the whole buying-a-house deal. Nope… no facts, figures, or analysis can convince him. He would never go against the flow. He told me: “Everybody’s doing it, and everybody seems to be perfectly fine. So…..” I had nothing else to reply.

#193 westopia on 08.08.11 at 5:03 pm

#185 Macrath

My comment was in response to your comment on the liquidity of gold. It’s not hard to find buyers (there were lots of them today). But since you brought it up, they would need to charge a helluva premium to surpass the capital appreciation of gold in the past 10 years. Conversely, your tin toonie you bought/earned 10 years ago is worth at least 2% less per year because of inflation.

#194 Nostradamus Le Mad Vlad on 08.08.11 at 5:05 pm


#48 WI Boomer — “Let the world blow up.” — Ahhh yes, the second half of 2011, when most, if not all Hades runs amok.

You are right, ‘tho. All universes are unfolding as they should, so all things are in their rightful place. There is nothing that anyone can do about anything at all, so WI Boomer and Smoking Man are bang on.

As for us, the carpets and lino are being replaced by hardwood tomorrow — Cdn. hardwood, exported to China then stained, after which re-imported back here and bought at Rona.

Hell, if we don’t spend the money we saved during our working lives, who the hell will?!

#76 timo — “If the US cuts social programs and retirement safeguards now it will drop spending off a cliff . . .” — Thus the western economy implodes. See #77 Jody’s post.

#77 Jody — “. . . the riots in London will grow, people seem to be very angry with the so called ruling class.” — Accurate. Lots of unemployed Brits, nothing left to lose. Better off in jail, where they get fed three times a day, don’t have to be concerned with income or property tax, rising food prices and inflation, stock markets, etc.

#131 Hoof – Hearted. — Good to see you back. Yep, you’re right — plenty of 4Sale signs. Last sale around this area was in April. Since then, a dog’s breakfast.

“I am going to start a Greater Apostophe blog. — Garth” — I lyke not would ‘r’ 2 numbnuts a member’s be you’re of blog new. Not qwite sure wot I’m blabbering on about anymore!

#149 wes_coast — “. . . all will be normal one day.” — Normal has left the building on Elvis’ arm!

#162 maxx — “I call major BS within the constant stream of misinformation.”
and
#164 JohnnyBravo — “Rather, we will have a “growth recession.” The Orwellian Newspeak mouthpieces are out in full force now.”

Aha! Both of you are right — constant stream of misinformation (propaganda) and growth recession, akin to a jobless recovery.

My, we’re all spin doctors now!

#195 Imstupid on 08.08.11 at 5:05 pm

Oh

As for Canadian real-estate it’s toast. Nothing will save it now. Consumer spending is going to seize, companies will not hire, no savings, unemployment will rise, and the result will be devastating.

Good luck all hope you saved some money. Lol, I’m going to buy a new car in USA. I love fire sales.

#196 Linda Pearson on 08.08.11 at 5:12 pm

The plurals of tax, thank, line, service and wage are taxes, thanks, lines, services and wages. I am going to start a Greater Apostophe blog. — Garth

Would you consider doing a contraction one too?

L

#197 betamax on 08.08.11 at 5:15 pm

#174 robert james: “If anyone should be “downgraded” it is Standard and Poors..”

Right. It’s their fault that the US racked up trillions in debt in wars and bailouts of bad loans, and Obama (Mr. Change) maintained the same old Ponzi credit-bubble scheme with the same crooks in place.

/sarcasm off

#198 JRL on 08.08.11 at 5:18 pm

750K for that little box? Can you imagine? Maybe if I was married to Angie Jolie – who cares about money if you’re married to Angie Jolie? Pay whatever…
Gold rocks! Mineral stocks are the only ones I held, dumped all other risk weeks ago. If you like hard, tangible asset gold, consider gold coins – they rise more and hold their value better in bad times due to scarcity, like double eagles, Krugerrands, English sovereigns, and such…and the added bonus is, they are liquid cash at any coin shop in North Americastan.
Of course, gold is just shiny rocks. Like monkey’s at the African Lion Safari humans like shiny things such as the chrome off your car. It has no more intrinsic value than chopped down trees with printing on it (money) – both backed by debt, promissory notes based on future production of unborn generations. Gold attained value because it was a malleable metal, people could pound it into jewelry and such. But it has no more intrinsic value than collecting hockey cards.
The market is all psychology – we made it up.
That is the real message of this web site, and Garth I thank you for saving me a lot of money by confirming my fears that the market was due for another big dump. This time I wasn’t the outhouse.

#199 Ryan on 08.08.11 at 5:22 pm

I don’t think you’re right Garth. This is the real thing. There is a lot of bad debt in the world. The growth of the past 3 years was just a result of government stimulus programs and spending. All of that is drying up now and austerity is taking over.

Here is the order of bad debt:

1) European Governments
2) US Muni Bonds
3) Chinese, Canadian and all other real estate bubbles worldwide
4) US Government

All of this is not under the shadow of stimulus spending. It is under the shadow of austerity and shrinking job markets. Tell me how all of these issues gets resolved right now. QE3 is not going to be as effective this time because it is not going to be accompanied by a huge stimulus program and bank bailout. The whole world’s financial system is about to be thrown into disarray.

#200 The American on 08.08.11 at 5:31 pm

At #135: BrianT, the USD has risen quite a bit in the last few days. Look at your CAD now compared to the USD. The CAD has dropped in value over $0.05 in less 72 hours.

#201 JohnnyBravo on 08.08.11 at 5:48 pm

#178 timo on 08.08.11 at 3:58 pm

If I was an ex-realtor I wouldn’t be joking about Shangri-La; I’d probably be asking what the property values are like there. ;)

#202 disciple on 08.08.11 at 5:48 pm

timo…I really like your posts and links. Informative, wide-ranging and thought provoking…where do you find the time…?

#203 BPOE on 08.08.11 at 6:03 pm

Running scared eh? Still home avaiable for you but hurry their going like hotcakes. Buffet has lost the magic touch. The old coot is off his rocker betting on America. What does this mena for housing. In America it means higher interest rates and lower house prices. In BPOE it means LOWER interest rates and higher prices
________________________________________
The American on 08.08.11 at 3:21 pm
U.S. should still be AAA rated. Even Warren Buffet agrees. No worries on this end, though. It alo hurts S&P 500 index with the stupidity of their actions this past Friday. I wouldn’t call the move by Standard and Poors a very “smart” one. Its the only agency to act with a downgrade, and they’re getting annihilated by the press, U.S. Treasury Secretary, Warren Buffet, and senior economists for it. Oh, and yields on U.S. Treasuries went down again, which means investors are buying the shit out of them because they KNOW it is safe. It makes absolutely not sense in way of timing why the S&P downgrade would happen only AFTER the debt ceiling crisis was averted (yawn, we all knew it would be) and a plan for deficit reduction was agreed upon. Granted, the plan is not enough, but that is beside the point. A better plan will indeed come along. S&P has lost ALL credibility now with investors (like it had any to begin with, even after the banking crisis and their poor/ridiculous calls only AFTER it was too late). If the downgrade was to have happened, it should have happened long before any of the debt ceiling and deficit reduction plans were approved. Idiots. By the way, has anyone seen the value of the USD go up up up in the past 48 hours? This speaks volumes.
.

#204 GTA Girl on 08.08.11 at 6:06 pm

Realtor sent out a email blast, saying that today’s market volatility shows that Canadian real Estate is the best sound investment in the entire world….

Its a shame you can’t shoot people.

#205 45north on 08.08.11 at 6:15 pm

brett: collapse is a tool for change, change is coming

change you can believe in

I knew a Brett, lived on Weston Road.

#206 T.O. Bubble Boy on 08.08.11 at 6:16 pm

Here’s a good summary of what many traders think of S&P right now:

Warren Buffett’s Empire Is Declared Unsafe

So Berkshire owns a huge pile of Treasuries. So what. They didnt suddenly lose value. On the contrary, the portfolio must have risen in value as the yield on ALL Treasuries declines. Lower interest r ates equals higher bond prices. Even Aunt Sadie knows that.

You think this move is going to reassure markets everywhere. If Berkshire’s rating isn’t safe– then some 40 years of investing and deal making has jusat been declared radioactive.

#207 Helicopter Ben on 08.08.11 at 6:18 pm

A National Debt Of $14 Trillion? Try $211 Trillion………… http://www.npr.org/2011/08/06/139027615/a-national-debt-of-14-trillion-try-211-trillion?ft=1&f=1001

#208 Robert Dudek on 08.08.11 at 6:31 pm

Bought some more oil+gas dividend plays. The dividends are really juicy.

Not worried about the short term hit; stock market will recover because Helicopter Ben will make sure of it.

Also getting ready to sell my PHYS soon as I see a near-term correction off the gold highs coming this week (about a $60 move I should guess).

#209 Kilby on 08.08.11 at 6:35 pm

#148 investor’s Friend.

You sure have it out for government employees. When one chooses a career it is either the private sector with high wages or the public service with low wages but a pension after you retire that you pay hundreds each month for your entire career, kind of gambling that you will live long enough to enjoy what you have put in. I was public, my wife private, I have a $1,000 a month pension but she makes over twice what I made….all works out. You do need employees to keep a country, province or city running, whenever there are “purges” in the civil service it usually takes about 6 years to get back to the numbers needed to do the job. Those layoff years are great for contractors of which the government pays a damn sight more for but they “Don’t show up on the books” This goes on ALL the time.

#210 jess on 08.08.11 at 6:53 pm

aussie thanks for that link

“How Do You Cure Injelitance?”

#211 ballingsford on 08.08.11 at 6:56 pm

How do you spell ‘we’re phucked’? The greatest minds on this world couldn’t pull this rabbit out of the hat.

How do you spell another greater recession or even a depression?

Anyway, you greater fools out there, buy your new or used homes soon! Stocks and homes always rise in value!
(This is meant as sarcasm in case the greater fools didn’t get it. Garth’s sainthood is coming up! We are so unworthy!)

#212 TurnerNation on 08.08.11 at 7:04 pm

Yesterday in a fit of doom I suggested Dow -800. Today we have Dow -630.

I’d expect a bounce this week, then another sickening plunge. Then, maybe, we’ll have a decent bottoming process.

#213 Devore on 08.08.11 at 7:07 pm

Attention YLO investors, other shoe drops:

Yellow Media Inc. to Support Business Transformation Through Debt Reduction

In order to improve the financial risk profile and capital position of the Company, the Board of Yellow Media Inc. (Yellow Media) has decided to reduce cash dividends to common shareholders from $0.65 to $0.15 annually.

Also moving to quarterly dividends from monthly payouts. There goes that 50% yield.

Close price today $0.83.

#214 Devore on 08.08.11 at 7:11 pm

#178 timo

Sherry Cooper […]

lol! ex-Realtor?

No, not has proven herself to be a great contrarian indicator! :)

#215 ballingsford on 08.08.11 at 7:29 pm

As mentioned in my previous post, we are in deep chitt. Some countries, governments, families, and individuals don’t have a pot to piss in! Yet, someone will lend them some more money to buy another piss pot. That’s great until it gets full again. Don’t worry though, you can always borrow some more for another one. Try to piss less in the next one though, but it hard to control when you’ve been accustomed to pissing whenever you want.

Hostility is mad in the Middle East, Africa, and Europe. They rebels don’t need their collective pot to piss in, they just want to be able to control their own piss pot and empty it whenever they want and make a few dollars from the fertilizer from it that grows the veggies and fruits that they’ll sell on their local market. (Deep analogy if you know what I mean.)

Finally, since the brightest on this planet (G20 and advisers for example) couldn’t prevent this world catastrophe then we need outside help!

E.T., where are you????

#216 Bottoms_Up on 08.08.11 at 7:29 pm

#154 timo on 08.08.11 at 2:36 pm
—————————–
hilarious, I always wondered where they got that clip on his show from.

#217 Bottoms_Up on 08.08.11 at 7:30 pm

#150 cory on 08.08.11 at 2:20 pm
———————————–
Gatineau is actually not all that cheap anymore….

#218 Markey on 08.08.11 at 7:33 pm

Anonymous alcoholics? Study finds web trolls get a feeling of abandon similar to drunks.

Read more: http://www.news.com.au/technology/anonymous-alcoholics-study-finds-web-trolls-get-a-feeling-of-abandon-similar-to-drunks-and-dictators/story-e6frfro0-1226080815072

#219 jess on 08.08.11 at 7:38 pm

growth recession – more jobs are destroyed than created

http://www.ctj.org/taxjusticedigest/archive/2011/08/the_worst_job_creation_idea_ye.php

#220 Calgary Illusion on 08.08.11 at 7:41 pm

#174 robert james
If anyone should be “downgraded” it is Standard and Poors..

– I congratulate S&P for FINALLY doing their job and having the balls to do what should have been done years ago. The truth behind this government debt charade is finally coming to light. The S&P decision actually restored some faith in markets again.

Did you applaud them giving AAA status to toxic subprime mortgage securitizations? — Garth

#221 new_era on 08.08.11 at 7:41 pm

OMG – grow ops moving south

http://www.digitaljournal.com/article/310076

#222 J on 08.08.11 at 7:55 pm

Gold is high and at some point is due for a correction. But it is still in a giant bull market that the public may talk about, but has NOT participated in. They will buy eventually………when it is MUCH, MUCH higher

#223 Nostradamus Le Mad Vlad on 08.08.11 at 7:57 pm


Sinking That’s what jobs are doing; Never Mind the Dow Germany and France may be next to lose their AAA rating; Greece bans short selling + other links; Jim Cramer saving his butt first; 0:17 clip All money into canned goods and shotguns! 4:30 clip Humor or truth? It’s Gonna Blow; More Propaganda “Let’s start with S&P’s lack of credibility.” Or the m$m’s; Decade Of Hell 2011-2020 – a decade to be avoided.

Muni Bonds Cascade effect? Overseas Here is where te trillions of dollars are going; Banxters want America to lose WW3; BoA The bank that took a whole load of toxic mtgs. about one or two years ago, is going somewhere, but it’s not up; Demise It’s unfortunate to see the curtain slowly drawing to a close.

7:02 clip First London, now Birmingham. Riots spreading; Just 17% In case one thinks riots will not happen here, think again; Daily Kos “Having discovered that Markos C. Alberto Moulitsas ZÚÑIGA (MAMZ) a.k.a. “Kos” of DailyKos) has a long history of activism for the Republican Party and, furthermore, he trained and worked with the US CIA between 2001 and 2003.”; Obama / Soros Commander-In-Thief.

Look Out Somalia Here comes the US; Guerilla Warfare Gardening Not a bad alternative; Selling Power Using solar power, couple sells energy to power company; Libya NATO war crimes; Super Congress — Super Dictatorship; Iran The US is learning its lessons, in more ways than one.

#224 timo on 08.08.11 at 8:06 pm

timo…I really like your posts and links. Informative, wide-ranging and thought provoking…where do you find the time…?

hurt back at work, off for 2 more months.

last time I was off due to an injury was 9/11. Seems when ever I am off work bad things happen.
:(

#225 The American on 08.08.11 at 8:14 pm

At #203: BPOE, not running scared at all. In fact, pretty pumped about it. Watch and wait :-) How’s that CAD working out for you? Its taking quite a plunge. That will continue. Also, I’ve been keeping a very close eye on Vancouver RE. Kinda sucks to be you right now. Well, sucks to be you most any time really.

#226 Imstupid on 08.08.11 at 8:14 pm

Garth now that housing is on it’s way down, what will you do with this pathetic blog? How will you spend your free time? Will you hang around realtor offices with a sign saying I told you so, as they are packing their desks up heading for the welfare line? Or maybe infront of the mortgage brokers offices throwing tomatoes? Fresh tomatoes as they deserve only the best quality. Please do let us know.

#227 Sitting by the Lake on 08.08.11 at 8:15 pm

Hi Garth. I noticed that Royal Bank Preffered Series A dropped 4.7 % today effectively wiping out its yield for the year. Is there something that is missing from this picture?

A change in capital value does not affect dividend payments. You buy preferreds for yield, not capital gain. But, relax, it will bounce back. — Garth

#228 robert james on 08.08.11 at 8:17 pm

#197 Betamax It is rather doubtful if any one cares if your “sarcasm” is on or off.. Did I say it was Standard and Poor`s fault that the US is in such a mess ?????? Where were Standard and Poor when all these scam subprime mortgages were being written up ??? They loved them !!!! In 2005 a con man bought 3 houses when on parole,,broke parole and got thrown in jail where he proceeded to buy 2 more houses while in jail.. A chimp could seen this disaster coming.. Where were the bloody downgrades then????? Sarcasm OFF

#229 timo on 08.08.11 at 8:20 pm

http://maps.google.co.uk/maps/ms?msid=207192798388318292131.0004aa01af6748773e8f7&msa=0&ll=51.558503%2C-0.055275&spn=0.114195%2C0.298691

saying a prayer tonight.

this might just kill the entitlement cuts.

man what a war zone

#230 Daisy Mae on 08.08.11 at 8:55 pm

“Actually only a small slice of people have a balanced portfolio. Mainstream is equity mutuals. — Garth”

I figure ‘slow and steady’ wins the race….

#231 Utopia on 08.08.11 at 9:04 pm

#192 Trinotuta wrote…..

“The thing is that I had already talked to him about the current situation, suggested to him to read this blog, read other blogs, and get a bit more informed about the whole buying-a-house deal. Nope… no facts, figures, or analysis can convince him”.
————————————————
I am having the exact same problem. A friend has just taken the plunge. There is still time for him to change his mind and so I casually suggested he do so.

“Do you realize that you have literally bought at very the moment of the markets peak”? I asked. You see, he and the wife had signed the final offer on the day the stock market was cratering last Friday and I already knew with a fair degree of confidence that more carnage was coming.

I also know what a confidence killer major stock declines are for real estate markets and prices. The flow of funds for big ticket items withers and buyers fade as worries over the economy overwhelm the urge to nest.

I explained all that to him and tried to gently herd him to wards the exits. “There is still time to change your mind” I suggested.

His response?

Well, Potash is booming in Saskatchewan and BHP Billiton is creating a few thousand jobs here. He told me that the payment was affordable due to the low rates, that he got the down payment as a gift and that home prices were still rising. Also told me about all the people moving to this province, that we are the fastest growing city in the country. What could go wrong? It was me who worried over nothing. And anyway, had I not already been warning of a real estate correction for over a year but house prices just kept going up?

You see, he had me there. Every word he spoke was true.

That is why you cannot convince young buyers that the timing is wrong. They do not understand the fundamentals to begin with and the simple, obvious facts they present are irrefutable.

I just shut up. He is a grown man. It is not my problem now.

#232 Moneta on 08.08.11 at 9:04 pm

this might just kill the entitlement cuts.

man what a war zone
———
That’s why I am convinced they’ll print.

#233 JohnnyBravo on 08.08.11 at 9:10 pm

#188 The American on 08.08.11 at 4:51 pm

Don’t get me wrong; I’m not defending S&P. And there were other ratings agencies that downgraded the US quite a while back. But because they are not agents of Wall Street banks they don’t get much press.

As for deficit reduction, the entire federal 2011 budget is around $3.8 trillion. Your deficit reduction plan would put the US into surplus this year by about $2.7 trillion. Clinton would be sooooo jealous.

#234 TurnerNation on 08.08.11 at 9:10 pm

Papers please! Peseants are revolting. We have a new world order, so to speak, out of chaos these days. A real re-shaping of the political, power, and economic landscape.

The world is a powerkeg these days. Vancouver hockey riots, Israel housing protests a few days ago, and London in burning.

http://www.guardian.co.uk/uk/2011/aug/09/london-boroughs-alert-riots-police

In north, south, east and west London, some 1700 extra officers dedicated to regaining control of the streets struggled to do so and faced extreme violence.

Police had already deployed section 60 powers allowing them to stop and search people in order to prevent disorder, in several London boroughs.

As images were piped into the police control room from Hackney, as well as buildings burning in south London, with reports from other areas of disorder, it became clear to the Met’s temporary leadership that the measures they had put in place so far would not be enough.
……….

And, evidence of a race riot in USA:

http://www.todaystmj4.com/news/local/126825018.html

WEST ALLIS – Witnesses tell Newsradio 620 WTMJ and TODAY’S TMJ4 of a mob of young people attacking innocent fair-goers at the end of the opening night of State Fair, with some callers claiming a racially-charged scene.

#235 T.O. Bubble Boy on 08.08.11 at 9:16 pm

@ #227 Sitting by the Lake:

Hi Garth. I noticed that Royal Bank Preffered Series A dropped 4.7 % today effectively wiping out its yield for the year. Is there something that is missing from this picture?

First of all, I don’t see any RBC Preferreds that dropped 4.7%??? The highest drop was 34 cents (-1.2%) on the N series. Some RBC preferreds even gained today (the L series).

Second of all – if they did drop 4.7% intra-day, you missed a buying opportunity.

#236 steve p on 08.08.11 at 9:20 pm

as bugs bunny would say “what a maroon”
or as barney would sing “ha ha hahahaha”

#237 ccen on 08.08.11 at 9:22 pm

Australia is cooked. Real estate started to go bust… It was different there like everywhere else.
http://globaleconomicanalysis.blogspot.com/

#238 Utopia on 08.08.11 at 9:32 pm

#192 Trinotuta wrote….

“He told me: “Everybody’s doing it, and everybody seems to be perfectly fine. So…..” I had nothing else to reply”
————————————————-

Exactly, exactly! It is hopeless with some people. I did not even tell you the best part in my previous post to you. You have got to read this though. The guy I know is buying a house that has literally tripled in value over the past four years.

Tripled!!!

I know that because I was offered a home in the same neighborhood, same vintage and roughly similar square footage for a song four years back. Vendor was even going to finance it but I was not interested as it needed so much updating.

The place was old, needed a new furnace, shingling, double pane windows and remedial work in the basement. I would have had to gut all the old wiring, reinsulate and then bring it up to code.

This is exactly the same situation as buddy has bought into but he is paying three times as much as the deal I refused. You may not know it but Saskatoon has had the highest relative price appreciation of any major city in Canada, bar none.

Buddy is screwed but no words of advice can persuade him that the time is stupidly wrong. He is buying at the absolute top and just ruined his future with his arrogance.

By my crude estimates this house will end up costing him an excess of 400,000 dollars over the life of the mortgage than it would have had he bought 4 years back…….or maybe even 4 years in the future.

Four hundred thousand bucks up in smoke. And that is conditional that rates don’t rise. A huge screw up and a bad way to start a new life. But my advice based on hard data and experience was not even worth the time of day. It has zero value to him.

You can’t open closed minds.

#239 Utopia on 08.08.11 at 9:46 pm

#184 VW on 08.08.11 at 4:27 pm

“Just came across these numbers – so funny it hurts!”
——————————-

That was a pretty good post VW. Really enjoyed your comparison. You are a natural. Maybe try politics since you have a way of getting a point across effectively.

#240 robert james on 08.08.11 at 9:53 pm

Betamax… This one is for you.http://www.cnn.com/video/#/video/us/2011/08/08/tsr.snow.sp.credibility.cnn?hpt=hp_t1

#241 Calgary Illusion on 08.08.11 at 10:12 pm

Did you applaud them giving AAA status to toxic subprime mortgage securitizations? — Garth

Everybody makes mistakes (even yourself), and as long as S&P learned their lesson and desire to run a tight ship again – I still applaud them.

#242 Utopia on 08.08.11 at 10:16 pm

#159 PTDBD

Too funny. You caught the code. Down day tomorrow too. No QE3 and no FOMC announcement. Not yet anyway. First the pain, then the medicine. There is not enough fear in the markets yet and the process has not run its course.

Just my opinion.

#243 TurnerNation on 08.08.11 at 10:33 pm

The ultimate in insider trading? Who else new, and took advantage before world markets closed for the week.

Obama briefed on S&P downgrade before leaving White House
ReutersBy Matt Spetalnick | Reuters – Fri, Aug 5, 2011

WASHINGTON (Reuters) – President Barack Obama was briefed in advance on Friday on Standard & Poor’s intention to downgrade the United States’ top-notch AAA credit rating and has continued receiving updates from top aides, an administration official said.

Obama left the White House for the Camp David presidential retreat outside Washington in late afternoon just hours before S&P’s announcement. “He was briefed before he left for Camp David and has been receiving updates through the night,” the official said

#244 TurnerNation on 08.08.11 at 10:34 pm

Oil $4 overnight, Dow futures -300, possible capitulation tonight or at the open tomorrow – look for short term buying opp.

#245 betamax on 08.09.11 at 4:36 am

#228 robert james: “#197 Betamax It is rather doubtful if any one cares if your “sarcasm” is on or off…Sarcasm OFF”

Yes, your indifference is obvious.

If you’re afraid that you’ve been misunderstood, then next time be less cryptic.

#246 stealth on 08.09.11 at 4:14 pm

Garth,
US Fed just stated that interest rates will stay low till 2013.
http://news.ca.msn.com/top-stories/federal-reserve-to-keep-rates-low-through-2013-1

CDN banks will probably mimic this.

Effects on real-estate?

Thanks