Risk management

For those who misinterpret things, get their money in the wrong places and take their advice from realtors, doomers or idiot BILs, this will be a tough winter. No 2008, but scary enough. We’re now paying back the years we just borrowed from the future. Always a bitch.

But there’s a way to slide through. How to do that in a moment.

There are four immediate problems for Canadians.

  • Jobs. Pay attention to this Friday morning’s news. In the second quarter, we added 109,000. In third quarter, only 16,500. Soon we’re expected to match the US, where job growth is zero.
  • The deficit. The monthly shortfall in Ottawa between revenues and expenditures has tripled, thanks to a plunge in corporate taxes and sales taxes – both economic harbingers.
  • Oil. Just posted its biggest decline since the crisis of 2008, off 17%. Demand’s being erased along with growth in China, the US and Germany. As I detailed on the weekend, other commodity prices are following suit, which is sinking Canadian growth.
  • The dollar. I told you last week the 10% fall in the value of our currency is wildly inflationary as the cost of imports (especially food) rises. Traders are selling dollars to buy greenbacks to offset equity losses, while investors globally huddle into the safety of the US currency.

These are some of the reasons the Canadian stock market – heavily overweight in commodities, energy and mining – has declined the better part of 15% from its 2011 high. As you might expect, it’s taken the value of the largest 60 companies down with it. The ETF known as XIU reflects this well. Here’s its performance over the last three months:

As for commodities, gold is as good a barometer as any. After soaring on the expectation of inflation, endless government stimulus and a plunge in the value of the US dollar, the big boys (hedge funds, institutional traders) took their profits and left the little guys (who read this blog) holding the bag. As it becomes clear deflation, global slowdown and a flight into American dollars and bonds are in the future, here is what’s happened to gold in 90 days:

It seems a decent bet that commodity prices will stay soft for months, until we get past issues like defaulting Greeks, the US election, European austerity and whatever the hell the Chinese are doing. And while contrarian investors buying resource stocks, for example, at cheap prices will do splendidly in the future, lots of people wonder how to protect themselves now.

After all, sticking your fortune in the orange guy’s shorts is hardly a solution, when interest doesn’t even match inflation, and you still have to pay tax on 100% of the return. So, are there relatively safe assets that may provide a better return without losing capital?

Here are a few suggestions.

Real estate investment trusts, which hold commercial properties (office towers and shopping malls for example), or multi-unit urban residential complexes. They allow investors to participate in the cash flow these properties throw off. This income is not correlated with the inevitable correction in residential housing, nor are REITs correlated with the stock market. In fact, REITs last year jumped about 20% in value and paid a 5% income stream. You can see from the chart below (using the exchange-traded fund XRE) that not only has the income continued over the last three months, but (after a temporary 8% decline) investors still have all their original money.

Bonds, both government and corporate. A year ago I urged you to add a bond component to your portfolio, to mitigate against possible stock market drops. Hope you did. In general, bonds are negatively correlated with equities, so when people jump off stocks they stream into the safety of bonds. That sends yields lower and prices higher. Your bonds become more valuable, giving you a capital gain, proving that fixed income is not just for collecting interest. Below, to illustrate is the exchange-traded fund XGB, tracking the safest bonds (government-issued) for the last three months. No losses here.

Preferred shares. These are preferential shares issued by many large companies, which act like bonds. Fixed dividend payments mean you always know the income to be received, and it comes in the form of dividends, so taxes are minimal. Those dividends have to be paid before common stock shareholders receive theirs, and as the chart below shows, preferreds have shown virtually no volatility during the current market mayhem. These are Scotiabank preferreds, which dropped only 0.8% in the August slaughter, then rebounded. Meanwhile investors continued to collect their 5% income stream and pay half the tax a GIC generates.

These assets mentioned above are not for everyone. No one investment strategy suits us all. But I hope you see in these few examples investing does not mean just stocks, gold, houses or GICs, as the constant comments to this pathetic blog suggest. There’s a raft of excellent securities which can provide both income and peace of mind, as well as gains, for conservative investors.

It’s time to learn this. Now.

199 comments ↓

#1 mississaugasold on 10.02.11 at 5:11 pm

Fabulous Garth, you could not have made it more obvious for those who do not want to do so.

I am 100% on board and already hold preferreds (loving them). I am now researching REITs and which ones to holds.

In addition I am researching utilities and have already enjoyed good gains on some I held.

Thanks again Garth!

PS: Early post no? Off to a nice party tonight?

#2 JRH on 10.02.11 at 5:17 pm

Thanks for the good read lately !

#3 Financial Uproar on 10.02.11 at 5:18 pm

I agree with the first commenter. While I enjoy the real estate posts, I’d love to read more stuff like this that gives investors ideas about other asset classes.

Then maybe it’ll shut up the gold bugs in the comment section. Yeah, not likely.

#4 Smoking Man on 10.02.11 at 5:31 pm

1 mississaugasold on 10.02.11 at 5:11 pm

Enjoy your party tonight and lets see how you enjoy your pref’s next week……………………

This is the week kids and monday will be amazing for anyone who is short……………………….not talking about height

#5 mississaugasold on 10.02.11 at 5:43 pm

#4 Smoking Man on 10.02.11 at 5:31 pm

Thanks for the tip Smoking Man, I for one really do enjoy your posts.

Luckily for me, I am still young and have a long term horizon and am still over 75% cash.

Any reductions is a great opportunity for me as I am a long term and short term investor.

PS: I am shorting too ;)

#6 Smoking Man on 10.02.11 at 6:06 pm

Good Grief its coming here now……

http://www.theglobeandmail.com/news/national/canadian-version-of-wall-street-occupation-planned/article2187950/

#7 City Slicker on 10.02.11 at 6:14 pm

If Greece defaults watch out gold will go balistic!

Hardly. It is assumed there will be an orderly default. — Garth

#8 City Slicker on 10.02.11 at 6:15 pm

And other currencies default, where else will everyone run. Thats right gold!

No currencies will ‘default.’ Are you in grade school? — Garth

#9 Thoughts on 10.02.11 at 6:18 pm

Only a fool invests in gold these days, the real independent investor is moving into Bitcoins. They are going up! Up! UP!*

*May not actually be going up.

#10 Peter on 10.02.11 at 6:20 pm

So, are there relatively safe assets that may provide a better return without losing capital?

Here are a few suggestions….
________________________

Garth,
Good for you in introducing some new asset classes for your readership. However you might be a bit more careful how you word things here. I wouldn’t call these investments relatively safe. Just open up the time frame on the charts for each so you can see XRE took a close to roughly 60% hit during the crisis. BNS Preferred also took its lumps down close to roughly 50%. Mind you I would prefer to be in either one of these investments to a typical equity stock because of the cash that each throws off.

However – I am just curious to know – after having just finished reading Money Road – is there ever a time where you believe that return OF your investment is more important that return ON your investments?

Is there ever a time where you would move your balance portfolio to cash (and just maintain your 5% gold position)?

(1) All assets were sold off in 2008-9. Focus on what recovered quickly, and kept paying you in the meantime. (2) No. — Garth

#11 Smoking Man on 10.02.11 at 6:29 pm

Hate to say I told you so but now big name rocket scientists are saying Dark Matter theory is wrong. Pushing Galaxies away.

http://www.bbc.co.uk/news/science-environment-14948730

It’s so obvious to me what’s going on. Been on that ride once, got a tour of the Universe by a gorgeous stripper angle who taught me everything about the cosmos, woke up in the hospital said I drowned but was revived. Or was it way back when experimenting with LSD. It was either or.

Hello idiot schooled fools it’s Universal shrinkage. I have seen it with my own eyes.

Never question The vison of the Smoking Man

Remember Kids who told you about it first…..

No I just sit and wait for the Nobel Prize

#12 GIC Jimmy on 10.02.11 at 6:38 pm

#55 Big Rider on 10.1.11

myself have averaged about 5% a year on my balanced portfolio between 2008 and 2010. Now my balanced portfolio this year is down somewhere between 6 and 7% so my gross gain since the beginning of 2008 is about 8%

Yoy probably are aware of this but here is the painful reminder. The GIC crowd is ahead of you since the start of 2008. Painful but true.

#13 Oasis on 10.02.11 at 6:45 pm

(1) All assets were sold off in 2008-9. -Garth
________________________________________

Gold was up in 2008, and 2009.

Oh really? — Garth

#14 Papa Luigi on 10.02.11 at 6:50 pm

#62 Big Rider on 10.1.11

Russian dude that I know of, well off financially, has bought 12 condo units in the development at Allen rd. and Sheppard, next to subway. He put 25% down on each.
Curious to see how he makes out. He says ‘stocks are a scam’ by the way. RE has made him his millions so he s

Your a Russiano paesano not the only one to maka millioni from da real estata Bigga Passagero, I mean Rider. I comma to dis paeso with justa mia suitacasa and I maka da milioni too. I don no the differanza between the stocca marcato and the marcato dat sella da fruita but I got the milioni in da banca from the reala estata. I think I gonna talka to you at a spozalizio some tima and show you howa to maka the serious moneta in da reala estata paesano.

#15 Smoking Man's Son on 10.02.11 at 6:53 pm

Ohhhhhh….Dad……what happened.

Bilderberg autograph party….why do I feel like this?…..ooohhh

#16 cool on 10.02.11 at 6:59 pm

Went to see an open house today afternoon in Red Deer.

http://www.realtor.ca/propertyDetails.aspx?propertyId=11144902&PidKey=-1631597091

Was there for about 20 minutes, saw only one old lady (with grand son) at the open house.

I told the realtor that the house is atleast 20% above the asking price in the area of the similar or better houses like in the link below.The house on first link below is not sold after 6 months on market also.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10933756&PidKey=2132165927

http://www.realtor.ca/propertyDetails.aspx?propertyId=11130938&PidKey=1035193999

The realtor was a young guy and looked like he agreed to price with seller only to get the listing.

we will see what happens to this listing…..my prediction – will stay on market for ever.

#17 Smoking Man on 10.02.11 at 7:01 pm

#5 mississaugasold on 10.02.11 at 5:43 pm

Enjoy your youth cause bone killing arthritics comes faster than you know. Don’t be to consumed or obsess with money.

Wealth is not how many gold nuggets you have under your mattress, the head count of number of ladies you have had fun with. Nor is it your house stocks or bonds. Those are just things that we were brought up to believe give us happiness, nothing is further from the truth.. Been there done that…….

Wealth is between your ears your ability to survive and prosper under any condition. Wealth is living with out fear and always looking forward to the next day no matter how grim things appear.

The richest person in the world is a homeless lady that sits on a grate on bay street between Front and Wellington on the west side. She has been there for years every year surviving, smiling and singing songs………

Don’t know one CEO or world leader that can do that for even one year, and survive let alone sing songs……

#18 G-Unit on 10.02.11 at 7:11 pm

This is the best post ever!!!

#19 Moneta on 10.02.11 at 7:18 pm

Linda Pearson on 10.02.11 at 5:17 pm
#209Moneta on 10.02.11 at 1:55 pm

There’s a reason why teaching was a vocation for hundreds of years. A shakeout is coming folks.

……………………………………………………………………………
For my clarification, Moneta, are you suggesting that teachers should teach for no or very little remuneration? That is what vocation means, I believe – a sideline or hobby, not worth being paid much.
———-
I think teachers work very hard and I truly wish they could make good money but after running some numbers, it sure looks like salaries and benefits need to drop, classes need to get larger or the rest of the population starts paying more taxes or earning more money.

I really think current teacher remuneration is based on a type of pyramid scheme. We have been able to increase pay and pensions because:

1. We have had population growth and a baby bust
2. thanks to the boomer generation

For teachers to stay at these levels of remuneration vs. the averge working Canadian, we would need a value shift in the Western world.

Like I said the average Canadian would need to pay 22% in taxes on income until the age og 65 just to pay back his or her education costs. That’s not counting other services. In order for teachers to keep on making their current pay an benefits, Canadians would need to pay much more taxes or cut in many areas. This would mean forgoing a car, opting for a smaller house… These are choices we could make but will we?

#20 Oasis on 10.02.11 at 7:31 pm

Gold was up in 2008, and 2009.

Oh really? — Garth
_______________________________________

from your own link,

2008 Opening Price for Gold – $862.80
2008 Closing Price for Gold – $879.50

gold has been up 11 consecutive years. try and stick to the facts, not your biases.

During the crisis, gold moved from $1,033 to $681 – a decline of 34%. — Garth

#21 Smoking Man on 10.02.11 at 7:33 pm

#15 Smoking Man’s Son on 10.02.11 at 6:53 pm

Shouldn’t you be at basic training by now

#22 OttawaMike on 10.02.11 at 7:38 pm

Judging by the number of Porsche Panameras, Lambos , 7 series Beemer wagons and other shiny wheels I observed at the Aegean Sea this week in Slovenia at the Italian border, Europe is still partying like its 1999.

Protips: Belgrade street cars move fast, drive carefully.
Also 50 Euro cash donations(for bank deposit) to Serbian police solve pesky radar speeding stops for 40 Kph over.

http://werbas.blogspot.com/

#23 Smoking Man on 10.02.11 at 7:53 pm

#19 Moneta on 10.02.11 at 7:18 pm

I would have no problems paying teachers if:

1) They did not mark you (separation and hierarchy building)
2) They did not give you home work (obedience training)
3) They encouraged students to be different beyond the boundaries set.
4) Teach the kids how to teach themselves.
5) Remove the Master Serve relationship by telling the truth and saying there is no right answer or wrong answer.

If they did that we would have people on mars, Cancer would be a thing of the past,
And the world would be a better place.

Right now I would fire them all, les off course they practiced 1 to 5

on second glass so my wisdom will get wierd so thats it for tonight kids

#24 Steady Eddie on 10.02.11 at 7:58 pm

QE3 is a done deal. Bernanke is going to make markets beg for it this time, that’s all. The final bubble will be in bonds. Capitalism 2.0 will take flight and we will all be equally poor.

I suspect a couple of more beatings for gold and silver but there is still money to be made. Majority of technical charts indicate gold at $2000/oz and silver at $60-$75/oz. Sorry PM haters, but its still a bull market even though technical damage was done.

Have a balanced portfolio, 20% Guns, 20% Girls, 20% Gold, 20% US Treasuries, 20% Non-perishable food and you will come out a winner. HAHAHAHA!!!

I’m looking for a nice triplex or duplex in Toronto too… after the bust of course. Living in the wilderness is hard. I just own a single loin cloth so I’m sensitive when I have to wash it.

#25 Onemorething on 10.02.11 at 7:59 pm

Yup, sold gold at 1850, sold CHF at .74 to USD and all back into CASH and divedend paying stocks.

Real Estate is moved down my priority list 15 more spots this year to number 42 out of 50!

Now one spot below breeding iguanas!

#26 Waiting for the sun on 10.02.11 at 8:06 pm

((( Garth: As for commodities, gold is as good a barometer as any. After soaring on the expectation of inflation, endless government stimulus and a plunge in the value of the US dollar, the big boys (hedge funds, institutional traders) took their profits and left the little guys (who read this blog) holding the bag. 
—————-
Nonsense. Look at a graph of gold, priced in CAD, for the last 5 years. 
Steady increases, with much greater return and less volatility than your “safe” alternatives. 

The comparison was between various asset classes over the last 90 days. — Garth

#27 bigrider on 10.02.11 at 8:07 pm

#12 GIC Jimmy to Bigrider.

No not painful and I agree with you. The condo and house humpers ahead of us both.

I don’t think GIC’s and houses/condos will win in the long term, so holding fast to my diversified and balanced portfolio. Time will only tell if right move or not.

#28 rosie on 10.02.11 at 8:08 pm

Smoking man, on education:
Ten or so years ago I was the the union rep at our high school. A teacher told me he was in big shit for kicking a kid in the balls. I was concerned. He explained the situation. The kid and father were called into the office to speak to the teacher and principal; I was also involved. Turns out the kid had returned from Florida with a “really cool” pen. When you gave it to someone and they clicked it you got a “really cool” electric charge through your body. I decided that the teacher had had an involuntary reflex reaction. We all agreed and the father of the nasty boy dragged him out of the office in a very rewarding manner. You sound like the boy. L.O.L.

#29 Nostradamus Le Mad Vlad on 10.02.11 at 8:09 pm


Exc. column, and great advice. More than anything else, I have learned tons (for free) from your posts, other bloggers and our CFP. Thanks!
*
#17 Smoking Man — “Wealth is between your ears your ability to survive and prosper under any condition.”

Well said! Sheeple place way too much attention on this passing roadshow of a planet / life, and look where it’s got them — caught between a rock and a hard place.
*
9:59 clip 2012 — Ron Paul says let’s end the Fed to Wall St. protesters. Talk about shit disturbing! 10:17 clip Silver oversold. Whether up here or not, not overly sure and 14:02 clip Naked shorting and gold suppression (is that sexual?); JPM “I received several emails claiming that the J.P.Morgan donation story was a hoax and demanding I remove it. Well, read it and weep; it is true.” wrh.com. Donation of US$4.6 mln. to the NYPD; Greece Fire the workers! No, wait — Keep the workers, Fire the IMF! JPM “Enter Mr Markopolos”, to take JPM down a few notches.

4:18 clip Anonymous. The m$m blackout has begun (don’t they want us to know what TPTB have planned for the rest of the year?); 4:16 clip Anonymous. You (all of us) control the world; 2:59 clip Now Seattle plus Portugal; Freedom Although this article is written for US citizens, the same can also be applied to Canada; Gardasil Avoids saying anything about deaths; Iran Uh oh. Look who is swimming underwater; Clip Remember the Cold War? Prodding a bear will only make it fight back.

[From the I said this was gonna happen sooner or later dept.] — Canada’s Wall St. protests; Flu Shots Individuals’ freedom of choice; 0:38 clip Bill O’Reilly doesn’t like his own poll. Not many like a loud-mouthed liar. “We had to take Ron Paul out. We just had to!” — Faux News”; Fukushima – US – Israel “In early 2007, Vice President Dick Cheney flew to Tokyo with his closest aides. Newspaper editorials noted the secrecy surrounding his visit – no press conferences, no handshakes with ordinary folks and, as diplomatic cables suggest, no briefing for U.S. Embassy staffers in Tokyo.”; 8:04 clip Headline says a lot — ‘NATO worse than Nazis’.

#30 Smoking Man on 10.02.11 at 8:09 pm

#24 Steady Eddie on 10.02.11 at 7:58 pm

Have a balanced portfolio, 20% Guns, 20% Girls, 20% Gold, 20% US Treasuries, 20% Non-perishable food and you will come out a winner. HAHAHAHA!!!

best post of the night lmao

#31 bigrider on 10.02.11 at 8:09 pm

#14 Papa Luigi to Bigrider !!!

LMAO !!! HOWLING !!!!!!!!! Can’t get off the floor !!!!!!!

#32 Signpost in the bushes on 10.02.11 at 8:10 pm

Garth, XRE-T pays an annual distribution of $0.75 We know that direct ownership of a REIT causes the distributions to be taxed as interest income.
Would the $0.75 distribution be taxed as interest income or dividend income through ownership of REITS in this ETF?

#33 Signpost in the bushes on 10.02.11 at 8:12 pm

Garth, XRE-T pays an annual distribution of $0.75 per share (5.1%). We know that direct ownership of a REIT causes the distributions to be taxed as interest income.
Would the $0.75 distribution be taxed as interest income or dividend income through ownership of REITS in this ETF?

It is taxed as income, not dividends or capital gains, because it’s a distribution of cash flow within the REIT (as I wrote). Solution: TFSA. — Garth

#34 Smoking Man on 10.02.11 at 8:15 pm

#22 OttawaMike on 10.02.11 at 7:38 pm

Enjoying you Serbian advetures keep em coming on your blog

I like you better smashed. — Garth

#35 LMBO on 10.02.11 at 8:15 pm

Smoking Man you really exposed yourself. You are a kid trolling on the internet aren’t you? Take off your robe and wizard hat, no homework is right out of Alice Cooper.

#36 bigrider on 10.02.11 at 8:17 pm

#14 Papa Luigi

Piacere.

Consente di avere un espresso al prosimo spozalizio.

Si parla di terra.

#37 Smoking Man on 10.02.11 at 8:25 pm

#28 rosie on 10.02.11 at 8:08 pm
Smoking man, on education:

Lets not mix up schooling and education they are two different animals……

And yes something like that happend to me, but suger in the teachers gas tank and four flat tires worked for me.

#38 bigrider on 10.02.11 at 8:29 pm

Papa Luigi- ” I dunno the differenza a la Stocca marcato and the marcato dat sella da fruita”

Classic ..LOL

Passagero ..how about ‘succhiatore’ for la stocca marcato instead …LOL

#39 I LOVE DEFLATION on 10.02.11 at 8:36 pm

Garth I hope we get DEFLATION worse then the 30’s Deflation is THE BEST thing that could happen. In 2008 I was KING since I had money and all the debters could get a penny in credit if they begged the banks. Canada is in the biggest CREDIT bubble/ponzi in it’s history. This credit bubble allowed the greatest housing bubble in Canadian history to take place. Realtors , bankers , Harper and all the other CONs know it. Even the maxed out and worthless 5% home owner/bank renter knows it. Let the crash/party start. I’m going to shop shop shop during deflation just like I did in 2008. Deflation = good

#40 bigrider on 10.02.11 at 8:41 pm

lei affato tutto questo la scuolo di economia e avete capito niente.

la terra il la primo valore della terra va sempre a

Papa Luigi, mama leoni, fratello babalucco, sorella facile

This not a blog for impotent Italians. — Garth

#41 Smoking Man on 10.02.11 at 8:41 pm

Don’t worry Garth will be posting from New Orleans next week end Completly Smashed

Talk about being stuck between a rock and a hard place.

Note book on lap, Wife to the left, Salesmen son on the right, on glass three.

Question pops up, son say nothing wrong his friend who has a girl friend meets a girl in the bar that wants to have sex right there and then, he see’s nothing wrong with that, Wife has a big problem.with that.

They are waiting for my take………………
Do I say what I really feel and keep the code……..Or sell out and stay out of the dog house…………..

Time for a smoke……………………………

#42 neo on 10.02.11 at 8:51 pm

During the crisis, gold moved from $1,033 to $681 – a decline of 34%. — Garth

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

Ok Garth. Since it is now October we are 3 years removed from Gold at $681.

What was the Dow at that point in October 2008? Around 9,000? Where is it now? 10,913. What’s that 21% higher.

Alright, what is Gold now? $1,629. Up over 230%.

Even if we take the March lows in 2009 the Dow is only up what? Like 55%.

Do you think Gold will decline 34% this time Garth?

If it does, we will have the repeat of 2008 you are saying won’t happen. If it doesn’t the stock market is still going down furthur. If you TRULY believe in this deflation you are trumpeting then that will result in an improvement in purchasing power which Gold provides a hedge for which is why in that case Gold would decline. Assets in general are extremely volatile because we have never in Global history printed so many trillions of dollars and had it stay dormant because there is no velocity of money due to debt saturation and the underlying deflationary forces so strong. In this environment price discovery is a challenge/impossible which is part of the reason I feel we have a 90%+ correlation in stocks/indexes globally right now.

P.S. We already had the crash in 2008 like the 30’s had the crash in 1929. To use your own words what we have next is the slow melt for a few years, not another crash per se.

#43 JohnnyBravo on 10.02.11 at 8:53 pm

#221 Steven Rowlandson on 10.02.11 at 4:17 pm (from previous blog entry)

“Can you define the absolute objective value of a dollar?”

How about, take the country’s GDP and divide it by the number of dollars in domestic circulation? Just a suggestion.

You know, I can understand the arguments for gold. But to say that gold “is the source of its own value” is bunk. First, let’s assume you’re talking about market value, not sentimental or religious or occult value. Anything only has value at market because of two things: supply and demand. It is the relation between these two that determines its market value, or price. Nothing is magically imbued with its own “value” save life itself. If people did not want gold, (let’s say Auric Goldfinger’s plot had succeeded) it wouldn’t be worth anything.

Don’t get caught up in the whole gold cult. It’s a hunk of metal that people buy. That’s about it. If you think demand will continue to grow faster than supply, then buy it.

When Timinco stock was climbing to its peak, one so-called trader told me he was going to hold it forever and retire on his gains. I told him he would be lucky if he didn’t lose his shirt. He drank the Kool-Aid. I kept my cool. And sold before TIM crashed.

#44 NON-SMOKING DRUG-FREE SOBER MAN WITH SPELL CHECKER on 10.02.11 at 9:01 pm

Suggestion:

Maybe this Blog could look into getting an “IGNORE” feature like some stock-related Message Boards have.

It could be used to put various regular posters on “IGNORE” whenever their drunken, drug-inspired ramblings indicate that they are so full of dung that they need to go to the potty.

Whenever such a person’s smoking causes the oxygen supply to his brain to be cut off, and his spelling and grammar degenerate to the point that they are not worth trying to decipher (probably because he is some sort of degenerate), he can be put on “IGNORE” and all the future shameful messes that the fibbing slob will make can be kept out of sight so as not to drag the innocent reader down to his level.

Of course, those who get curious about how the dregs of society are doing would be free to take them off “IGNORE” and peak into the sewer from time to time.

#45 Papa Luigi on 10.02.11 at 9:04 pm

#36 Big Rider

L’offerta e accettato.

#46 bigrider on 10.02.11 at 9:20 pm

#40 Garth to Bigrider.

My brother Anthony Sabato Jr. told me to tell you your women have said otherwise.

#47 Harvard Grad on 10.02.11 at 9:26 pm

Excllent Post G – simplistic and to the point.

Just returned from glorious Boston, the town was blue due to the Red Socks folding the past month and missing the playoffs. Nothing seems to be moving – you can count the number of sold signs after driving through the city – None! But autumn in Beamtown is awesome – the women are beautiful and life is good there.

Driving home from Buffalo (cheaper to fly out of Buffalo then Toronto) I drove through those multi-million dollar estates which line lakeshore road – block after block are littered with for sale signs..and not one was plastered with a sold sticker….if that’s not a sign of things to come, what is??

#48 Waterloo Resident on 10.02.11 at 9:27 pm

if you want to buy a bond fun, XBB.to is going up at twice the rate, and has 4-times the volume of XGB.to , so I would select XBB.to instead.

Everyone talks about how bonds cannot get any lower, well that’s not exactly true. Take 2% and divide by 2 and you get 1. Take 1 and divide by 2 and you get 0.5. Keep dividing by 2 every 6 months and you get an idea of where our interest rates are heading for the next few years, down and down, closer to zero with each month. Along with this the bonds will rise up.

#49 mississaugasold on 10.02.11 at 9:29 pm

#17 Smoking Man on 10.02.11 at 7:01 pm

Oh how wise of you Smoking Man. Obsessing about money is not fun, I think I am a slow learner so this may take some time.

And honestly I have seen that homeless lady, she’s pleasant until she threw coins at me once.

#50 Smoking Man on 10.02.11 at 9:31 pm

This not a blog for impotent Italians. — Garth

You’re on roll tonight garth, you been drinking :)

#51 Waterloo Resident on 10.02.11 at 9:40 pm

A few months ago when there was trouble with the Euro market then Gold USED to go up, but not now, for some reason when there are huge losses in the European markets then the big players unload their Gold shares to pay for their losses. This wasn’t happening just a few months ago, so from that I can see that the trend in Gold has changed, its changed in a NEGATIVE way, at least for now. So if you’re thinking of buying and holding onto Gold please be very very careful.

#52 Ronaldo on 10.02.11 at 9:51 pm

Great post Garth. Thank you.

#53 Aussie Roy on 10.02.11 at 9:52 pm

Great subject today Garth, as you know risk management is totally ignored, especially by those who don’t see any risk. Risk is always present, those who identify it and manage it are those who can sleep easy every night.

Aussie Update

Household assets drop despite rise in savings

Total household financial assets fell by $23 billion, or about 1 per cent, in the June quarter, Australian Bureau of Statistics figures showed yesterday.

http://www.theage.com.au/business/household-assets-drop-despite-rise-in-savings-20110930-1l1am.html#ixzz1ZgAeKPTW

Its different here, the states have non recourse loans.
Sure but only in a few states.

Florida – Joseph Reilly lost his vacation home here last year when he was out of work and stopped paying his mortgage. The bank took the house and sold it.

Mr. Reilly thought that was the end of it.

In June, he learned otherwise. A phone call informed him of a court judgment against him for $192,576.71.

It turned out that at a foreclosure sale, his former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest.

http://online.wsj.com/article_email/SB10001424053111904060604576572532029526792-lMyQjAxMTAxMDAwMTEwNDEyWj.html?mod=wsj_share_email

#54 I'm stupid on 10.02.11 at 9:52 pm

Garth I love the post.

But the Greek problem will not go away anytime soon. A court ruling just allowed Greeks that are unemployed the right to default on debt without penalty. This will throw a curve ball on another rescue package. Couple this with the fact that their tax office are on strike based on wage cuts and we have an abrupt default not an orderly one.

#55 T.O. Bubble Boy on 10.02.11 at 9:55 pm

Just don’t accidentally buy a Chinese REIT:

http://etfdb.com/2011/can-the-china-real-estate-etf-survive-bubble-fears/

http://www.marketwatch.com/story/china-real-estate-stocks-drop-in-hong-kong-2011-09-30?link=MW_latest_news

http://www.bloomberg.com/news/2011-09-27/china-developers-may-not-survive-30-sales-slump-s-p-says.html

#56 pulse on 10.02.11 at 9:56 pm

Now, here is some Risk Management from the top of the OTC Derivative Dealer’s mountain of Counter Party Exposure….

http://www.nakedcapitalism.com/2011/10/is-jp-morgan-getting-a-good-return-on-4-6-million-gift-to-nyc-police-like-special-protection-from-occupywallstreet.html

and from the grassroots, fields of green may yet be found for our children. Who will be crushed by the burden of this timid generation’s excesses of entitlement and worship of ‘Safe Investments’? ….

Dylan Ratigan visists Occupy Wall Street;

http://www.youtube.com/watch?v=tOfQvJ8SS9o

#57 I'm stupid on 10.02.11 at 9:58 pm

Here is the link

http://www.zerohedge.com/news/100-debt-discharge-decision-greece-sets-troubling-precedent-greek-banks

#58 Dr.NickRiviera on 10.02.11 at 10:13 pm

This real estate focused blog seems to have transformed into an anti-gold blog…

Like all other assets, gold is fine in moderation. A few people just don’t get that. — Garth

#59 $fromA$ia on 10.02.11 at 10:28 pm

Yup and my resource metal short trades made 10% for the month of August alone… But your my Hero!

So when is this RE correction going to happen?

#60 Victoria Tea Party on 10.02.11 at 10:31 pm

SQUATTERSVILLE USA “OCCUPY WALL STREET”

Things are starting to get ugly out there in downtown NYC and Boston as the cops start busting demonstrators taking part in the “Occupy Wall Street” 24/7 campaign, now three weeks old.

In other major American cities, and soon in Canada, various dissafected people/groups of all ages and classes are starting to push back against the effete yet brutal American Imperial Elites.

Protestors are bitching about the way the “system” has got them fired from their jobs, evicted from their homes, gipped their kids now saddled with college debts and no “professional” careers, worries about medical care and pensions for ageing boomers.

WALL STREETER BANKSTERS AND THE FED are to blame they shout. They’re partly right. BUT our way of life is ALSO to blame: too much debt, too few left to pay it off. Thanks a LOT Mr. and Mrs. Demographics!

Who’ll win this street-side bun-toss is too soon to tell.

But its potential ramifications are absolutely alarmingly huge, especially if the Dow Jones Industrial Average heads back down to 6 grand or lower, as it did in late ’08
(That, tonight, seems an eventual possiblity as Far East stock markets tank, Greece announces its reneging on debt repayments (!) and the Dow futures look bleak. Again.).

The demonstrators say they have no leader; it’s the social media that’s brought them together in first a Wall Street demo and now a country-wide incipient movement.

It seems to me that this is a soon ripe-for-the-plucking “social movement” looking for what will surely turn out to be a demagogic leader.

And that will be dangerous.

Twentieth Century history is replete with know-it-alls who came, saw and conquered their hungry, pissed off masses, with vengeful dreams, then wound up destroying all in its good time.

MEANWHILE, ON THE HORIZON: WORLD-WIDE DEPRESSION?

Back in the real world of money and economics, London Telegraph newspaper columnist Ambrose Evans-Pritchard has penned this alarming headline and story dated Oct. 2/11 (sorry for the length):

“Protectionism beckons as leaders push world into Depression

The world savings rate has surpassed its modern-era high of 24pc. This is the killer in the global system. It is why we are at imminent risk of tipping into a second, deeper leg of intractable depression.

The International Monetary Fund (IMF) expects the savings mountain to rise yet further next year as the governments of Europe, Britain, and the US tighten belts, in unison, by up to 2pc of GDP.

This is double the intensity of the last big synchronized squeeze in 1980.

…They will do so before the private sector is ready to grasp the baton, and without stimulus from the trade surplus states (Germany, China, Japan) to offset the contraction in demand…

…Ajay Kapur from Deutsche Bank said investors have to decide whether the market slump of recent weeks is a “panic (and then an investment opportunity)…or the first leg in what could eventually be a pervasive global recession. We believe it is the latter.”

He said the triple warnings from US leading indicators…all point to recession, while China is “probably over-tightening” into a global slump.

In Europe, policy is still on deflationary settings…Michael Darda from MKM Partners said the ECB has made such a hash of monetary policy that nominal GDP for the whole eurozone may even start to contract.

…If correct, there is no hope of averting a debt spiral in Italy and Spain. Any such outcome will test the EU’s bail-out machinery to destruction within months (warns UK central banker Mervyn King).

So, the Occupy Wall Streeters, now outside for three weeks and counting and with similar 24/7 demos cropping up everywhere else, lead the rest of us into a winter of serious trouble for one and all. There is nothing festive about these gatherings BTW. Totally focussed.

A little prayer…

#61 Suede on 10.02.11 at 10:32 pm

Solid post tonight and some witty comments. Must be HBO season again

#62 Joe on 10.02.11 at 10:38 pm

Nice look to the blog today. If I knew better I’d say you’re giving us a sneak peek at your new book. Hmm…

#63 Smoking Man on 10.02.11 at 10:39 pm

#54 I’m stupid on 10.02.11 at 9:52 pm

I am fan now good post

Rosie do you even know the differance between scholling and Education……………..

Ya point out the speeling mistakes your so special and wise

How can you

#64 Smoking Man on 10.02.11 at 10:48 pm

#49 mississaugasold on 10.02.11 at 9:29 pm

she threw the coins at you……………….

do you not see the power or that………the freedom and wealth she has…………………..

#65 debtified on 10.02.11 at 10:50 pm

#34 Smoking Man on 10.02.11 at 8:15 pm

I like you better smashed. — Garth
***********************************************

Me, too. So sad, so many post, so little humour.

Anyway, Greece to miss deficit targets: http://natpo.st/ps3j9p

#66 Smoking Man on 10.02.11 at 10:51 pm

#44 NON-SMOKING DRUG-FREE SOBER MAN WITH SPELL CHECKER on 10.02.11 at 9:01 pm

Obviously this guy/girl is a teacher……Boy they get sore when you point out how usless they are

#67 Life_ain't_so_bad on 10.02.11 at 10:55 pm

City slicker:

If Greece defaults watch out gold will go balistic!

Hardly. It is assumed there will be an orderly default. — Garth

When has there ever been an orderly default?

#68 martin on 10.02.11 at 11:08 pm

to whom it may concerN:

now is the perfect timing to go Short on any gold positions and bullie the gold down,

i really gotta say that garth adviced everyone to sell gold a while ago as it probably was its max

peace

#69 The American on 10.02.11 at 11:12 pm

At #13: Oasis, you have no idea what you’re talking about. Oh, by the way, how is that loonie working out for you? Yes…. That’s right – I told you so! The USD will continue to garner strength. I do distinctincly recall you stating to me the USD would not ever be worth more than the CAD, and I told you it would only be a month or so until a reversal of fortune would be seen in the market with many currencies, including the loonie. Well, pal, the ole greenback is going to continue the path upward. Like I said, watch and wait. Gold is screwed long term, and a commodity-based economy isn’t going to fare well in the next several quarters. Sorry. Well, not really sorry to a-holes like you.

#70 Life_ain't_so_bad on 10.02.11 at 11:13 pm

I’m not a gold bug or a doomed, but I noticed something about Garth. But you will trash gold as investment anytime you get a chance. You also said gold was down 34% during the crisis of 2008. But don’t you always preach that it’s only a loss when you sell. Most people are predicting gold will touch $2000 oz. By the end of the year.
Why the hate?

No hate. I just regret seeing people getting squished by their own emotionally bad decisions. Gold, Van houses or LinkedIn stock. Whatever. — Garth

#71 BZLDAL on 10.02.11 at 11:14 pm

Perhaps one more post like this per week, and one less about Shirly who’s neighbour can’t sell his/her bungalow in WestVan. Those are fun, but these are a lot more memorable.

#72 Dinottawa on 10.02.11 at 11:19 pm

Garth,

excellent post tonight!!

#73 Mister Obvious on 10.02.11 at 11:20 pm

I thought some might like an update on the ‘Village on False Creek’, formerly the ‘Millennium Water Development’ and prior to that, the “Great Vancouver Jock Festival Dormitory Fiasco’.

I stroll down there on the occasional Sunday since I live not far away. I’d heard recently that the units were ‘beginning to sell out’ or some such nonsense.

Well, its true there’s a bit more activity in the area than in previous months but the streets remains quite empty. There is a Terra Breads and a Liquor Store operational near the center open area and perhaps forty or so people and a few dogs milling about. The London Drugs that has been ‘opening soon’ for two years is still doing just that.

Real estate offices are open but they seemed rather quiet. Much of the complex still retains the look and feel of a college student residence after everyone has gone home for spring break.

The sell out is fiction and there is an unmistakeable paucity of soul. It’s certainly not the worst place one might end up in this world but it was hard to see the attraction today.

On the way home I walked past the ongoing construction of literally thousands more adjacent concrete boxes that, when complete in the next year or so, will offer even more sterility and less heart than the misleadingly named ‘village’. Some days, you’ve just got to wonder…

#74 Linda Pearson on 10.02.11 at 11:33 pm

#44NON-SMOKING DRUG-FREE SOBER MAN WITH SPELL CHECKER on 10.02.11 at 9:01 pm

…………………………………………………………………..

(pssst…that’s “peek”, not peak)

#75 Timing is Everything on 10.02.11 at 11:54 pm

Like all other assets, gold is fine in moderation. A few people just don’t get that. — Garth

Gold-Licker Intervention….with Dr. Garth.

#76 BPOE on 10.02.11 at 11:55 pm

Here’s what’s really happening. Greece defaulted.
You want to be in CASH until the whole eurozone nightmare gets sorted out. From there gold will soar to $2000 by Christmas this year. The world has its eyes on Vancouver the ultimate safe haven. The City is transforming before our eyes. Streets clooged with Lambo’s Mercedes, Ferrari’s. The RICH are coming folks and they pay in CASH

#77 Stevenson on 10.02.11 at 11:59 pm

Where is this RE correction?? It seems that everywhere else seems to be struggling, but as many have held their point that Canada is different? So far it’s true since we are just slowly settling in.

#78 BPOE on 10.02.11 at 11:59 pm

Thanks for the comedy act American The only reason the greenback has come back is due to the eurozone crisis. The american dollar is finished and anyone with half a brain knows that. Check back at Christmas time and see where your beloved greenback is compared to the only real money there is – GOLD. America screwed up big time. Watch and learn
__________________________________________
.#69 The American on 10.02.11 at 11:12 pm
At #13: Oasis, you have no idea what you’re talking about. Oh, by the way, how is that loonie working out for you? Yes…. That’s right – I told you so! The USD will continue to garner strength. I do distinctincly recall you stating to me the USD would not ever be worth more than the CAD, and I told you it would only be a month or so until a reversal of fortune would be seen in the market with many currencies, including the loonie. Well, pal, the ole greenback is going to continue the path upward. Like I said, watch and wait. Gold is screwed long term, and a commodity-based economy isn’t going to fare well in the next several quarters. Sorry. Well, not really sorry to a-holes like you.
.

#79 timo on 10.02.11 at 11:59 pm

Great one today Garth and it looks like Asia is feeling ill tonight.

#60 Victoria Tea Party,

I’ll bow my head with you. Freedom for all

http://mobilebroadcastnews.com/NewsRoom/Global-Revolution-LIVE

#80 shanks on 10.03.11 at 12:07 am

nice post Garth, i hear the message loud and clear. I am to go and bury all my cash in the backyard tonight. Consider it done!

#81 Nostradamus Le Mad Vlad on 10.03.11 at 12:18 am


2:22 clip Saying goodbye to an entire neighborhood in Detroit; IMF Christine Lagarde’s action plan; Supercomputers Frankenstein is taking over everything; Underwater mtgs. could drown America.

Benny’s Cold Feet on Eurozone bailout; Germany No more to bailout fund, and Banxters expect a Euroquake within twelve months (how about 12 weeks); Link in Greece. Bridge under troubled waters; Trade War, Debt lives on and Meltdown A four-part documentary; Expanding Business Thieves, that is.

1:45 clip Anyone ever seen the Led Zeppelin baby? Heatwave ends, snow replaces it; Tripping The Light Fantastic London – Sydney just under two hours; Human Rights being changed in UK; Don’t Worry, Be Happy Tritium found in water in Georgia. Drink up! ‘Net Neutrality Laid out for everyone; 1:03 clip Revolutions will not be privatized; Cloud Facial Recognition Orwell is rolling in his grave.

Canary Islands ‘cano and 3:17 clip from Auntie Beeb. Getting ready to blow? Everything else is, and 2:35 clip Comet (or something) hitting the sun, leading to huge CME. Wonder if this could kickstart the Canary Islands ‘cano? And this; Bee Deaths in Florida; Interesting Nuke spending goes through the roof, while ranks are being reduced; Eugenics While all this fiscal stuff drags on, TPTB are increasing the killing fields.

#82 Math is Fun on 10.03.11 at 12:20 am

Garth, for the record, I’m not a gold bug…I just like math.

But, when a bubble pops, doesn’t that mean decade like losses (ie. US real estate, nasdaq), that no amount of zero interest rates or fed bs can goose it back up?

Gold was in the 800’s in 2008. I don’t want to argue over technical, short term price levels. Today it is still north of 1,600 –even after increased margin requirements and hedge funds running for the exits to pad their quaterly numbers.

How does this qualify as a bad investment?

It’s not, in moderation. Why do people here think in extremes? — Garth

#83 BPOE on 10.03.11 at 12:20 am

Default news to follow
http://www.marketwatch.com/story/asia-stocks-plunge-on-european-chinese-concerns-2011-10-03

#84 Sky on 10.03.11 at 12:21 am

@ #44 -NON-SMOKING DRUG-FREE SOBER MAN WITH SPELL CHECKER on 10.02.11 at 9:01 pm:

“Of course, those who get curious about how the dregs of society are doing would be free to take them off “IGNORE” and peak into the sewer from time to time.”
****************************************

Suggestion: Before delivering your next spelling lecture you might want to check into using an editor in lieu of spell check.

It’s PEEK into the sewer, not PEAK. Artificial intelligence only gets you so far- spell check doesn’t help you with the dreaded homonyms. Apparently neither does sobriety.

My own posts are certainly far from letter perfect. But then, I’m also not riding the grammar high horse.

#85 new Era on 10.03.11 at 12:24 am

Heng Seng index went from about 25K to 16.7 K in less than a year, that is shaving off almost 40% in that period.

And the sad thing is… I think its about to take another nose dive. So let see how many rich chinese will be left after the dusk settles.

http://finance.yahoo.com/echarts?s=%5EHSI+Interactive#symbol=^hsi;range=1y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=;

#86 pablo on 10.03.11 at 12:30 am

If we’re going down to 0 job growth, possibly negative job growth, food’s more, all imports are more, our dollar going back down to .65 cents, the u.s. in termoil til the next election is over and they can begin rebuilding (yeah right), so just who is going to be in the malls and shopping centres spending money to keep the tennants in place to pay rent to support the cashfow on those reits? If there’s no job growth and unemployment increases because no one’s spending any money(consumer and corporate) and there’s no demand from the u.s. cause they’re deeper in the shitter than we are, just who’s going to be buying the goods and services of the companies that occupy all those commercial towers, how will they stay afloat and pay their rents, again they support the cashflow and value of the reits? If the banks aren’t lending cause no one’s got any credit left, and again nobody’s buying anything, then the banks will see credit demand drying up, their commercial customers will be without cashflow with the lack of or declining sales, they won’t be at the bank getting any loans for inventory or equipment if the economy is contracting, and some of them will be closing their doors either voluntarily or not(read as bankruptcy/receivership). The value of goods and services declines, the banks start to tighten their belts, more people out of work. Everbody afraid, and nobody buying sod all, except the necessities, if they can still affford to. There goes the value and dividends of all those preferred shares in the banks and blue chip companies. This isn’t going to turn around in a year or three or five, it hasn’t stopped falling yet, china’s going into the shitter, you can’t float a ponzi economy indefinitely. Besides who’s going to buy their plastic walmart shit when they’re freaking over the rent, mortgage, food, utilities. Oh snap, that’s more people out of work, and again lessened demand for all those corporate goods and services. The dollar stores, the grocery stores, all those fashionable retailers at the mall and shopping centres will be empty, with their racks full of wares and very few buyers. The banks won’t be lending, they’ll be too busy with collections to get some cash into their coffers. Loan and mortgage defaults, increasing, and profits declining, oh darn, no dividends for preferreds, or common shareholders, but don’t worry about the ceo’s and their cronies, they’ll still get their piece of the pie.
So just who is left to prop up this bloated fraudulent system that requires infinite growth to feed on? Who will buy all the bits and bobbles at the big box stores?
Damn it, more closures, more people out of work. Nobody’s buying sod all, now.

#87 Where's the money Guido? on 10.03.11 at 12:36 am

Re: #19 Moneta on 10.02.11 at 7:18 pm

You did the calculations on teachers….Could you please do the same for politicians and see where they sit in this pyramid?
Seems to me that they aren’t worth anywhere near the perks they’re geting.
I bet they’re worse than those snakes on Bay and Wall Street too with heir huge bonuses.

Also, great topic and explanation today Garth, but I do remember someone mentioning before on this blog that minor investors (moi included) cannot get their hands on preferred stocks, unless you purchase a certain amount (in the thousands) or the brokers won’t touch them. I guess the internet (discount brokers) way is the only way?
The reason I ask is I’m just getting started and would like to speak with a real person to get a feel of how this trading works. Or maybe clue us in to a couple books/websites that will explain the whole trading scenario (other than Wikipedia, even though that has helped). For example, how to read the stocks symbols-charts and all the vernacular associated with such investing.
I read yesterday’s reply about Jesse Livermore and am very intrigued and want to get my feet wet finally. It’s never too late is it?
Thanks a bunch you two…..

#88 pablo on 10.03.11 at 12:36 am

phew, I feel much better now that I got all that angst out of my system, oh, gotta run, the nurse is coming with my pills, it’s medication time again.
oh yeah, #17- smoking man. good post, can a brother get an amen in this tabernachle of greed, lust, and realestate?

#89 Into the Sunset on 10.03.11 at 12:53 am

A couple of observations.

Gold corrected 7 times in 2010 and kept going up.

There is an unpublicized war in process and will continue to escalate in the middle east.
Sunni against Shia – Iran (Shia) supports Yemen controlling “Gate of Tears” – 3.3 million barrels /day passing thru supported with billions by Iran and Straights of Hormuz 17 million barrels/day passing controlled by Saudia Arabia and a target of Iran.

Obama has just sent 20,000+ more troops and two fleet battle groups committed recently.
Watch for news.
66% of oil and gas reserves on the line.

#90 Bobby on 10.03.11 at 1:04 am

I took a look at a number of open houses today here in Victoria. With the exception of one, every house was empty and again with the exception of one, each needed a major reno.
The one that was updated was nice but significantly overpriced. Had been on the market forever with no offers. The realtor admitted that it was priced much too high but that was what the sellers wanted.
In one house the realtor admitted it was a buyers market and the vendor would appreciate any offer.
It is starting to get rather ugly out there!

#91 cj on 10.03.11 at 2:07 am

Great post, Garth. Many of us are getting the message of the need for a balanced portfolio and examples of low risk investing

#92 Sky on 10.03.11 at 4:23 am

@NON-SMOKING DRUG-FREE SOBER MAN WITH SPELL CHECKER:

To be fair, you did have a point.

The flip side –

The Apostrophe Apocalypse

What’s happening? What’s happening?!
I think my brain’s evaporating.
I used to get my spelling right.
My punctuation was good n’ tight.

But this is now and that was then.
Books were king. As were paper and pen.
Along comes the net. Everything changes.
Very swiftly my brain disarranges.

Homonyms used to be easy as pie.
Now they’re a bitch. Why should I lie?
I’ve seen them misspelled-more often than not-
And my own grammar is starting to rot.

My eyes have seen what they should not see-
The missing or extra apostrophe.
So, is the apostrophe in absentia
A sign of early-onset dementia?

No. I fear it’s much, much worse.
It’s all part of the cyberspace curse.
Bits and bytes rule. So does electronic confusion.
To think grammar will win is simply delusion.

#93 VanLarry on 10.03.11 at 4:57 am

Are there any good reason to hold GICs or CSB these days? Considering the lock in period and negative returns (inflation/tax adjusted) I can’t rationally see any.

#94 LAST on 10.03.11 at 5:12 am

Garth what about dividend stocks (ETFs) companies with a good history of raising dividends as an alternative to preferreds?

Would that not be better for someone a few years away from retirement who doesn’t need the income but wants less risk.

#95 Peter on 10.03.11 at 5:34 am

Garth
Until it becomes clear to me that the Europeans are capable of putting together some type of bailout plan on the order of what the US Fed and treasury were able to muster in 2008/09 I have moved to the sidelines in early September and will stay there until around March to check the weather then. Holding my gold for now but other than that it’s pretty much cash.

#96 timo on 10.03.11 at 6:15 am

The movie Collapse :

it will make you think , and probably want to build a bunker. ;)

http://www.dailymotion.com/video/xlev0i_collapse_people#rel-page-under-1

#97 Keeping the Faith on 10.03.11 at 6:29 am

#58 Dr.NickRiviera
Relax …

#98 Onthesidelines on 10.03.11 at 6:42 am

(1) All assets were sold off in 2008-9… — Garth

My tripple A crown backed bonds continued to earn 4% during this time.

I said sold off, not reduced in yield. — Garth

#99 The American on 10.03.11 at 7:33 am

At #78: 16ThBPOE and falling… Interesting that it is only you who responds in the past when I direct my comments. As suspected BPOE is Oasis and vice versa. The writing style and bleeding stupidity between each are identical. Also, for the record, I was right and you were wrong, regardless of your smoke and mirrors routine. The USD is now higher than the CAD. The CAD will continue a fall against the USD over the next few months. The USD is the global safe haven in which investors are clearly seeking a flight to safety. BPOE/Oasis, you LOSE! By the way, how’s that Van West treating you? LOL You had better get used to it, especially in BC, because it is only getting worse from this point on. Wanna try me?

#100 Herb on 10.03.11 at 7:39 am

#92 Sky,

BOOTIFUL!

#101 Karnac the Magnificent on 10.03.11 at 7:45 am

Answer: Stock indices dropping all over the world.

Question: What happens when Greece misses its debt reduction target?

Why do people on this blog think they know more than the markets? Greece defaulting was factored in to most equations long ago. — Garth

#102 Marcello on 10.03.11 at 8:01 am

When Garth said the orange guys shorts, who is he talking about. I’m not getting the reference

#103 Jesse Livermore on 10.03.11 at 8:19 am

#87 Where’s the money Guido?

I read yesterday’s reply about Jesse Livermore and am very intrigued and want to get my feet wet finally. It’s never too late is it?

I wrote a book on how to trade in stocks about a year before I committed suicide in 1940. In it I share all my strategies in picking stocks. It is in print today and selling better than when it first came out. The principles apply to today’s market as they did to the markets of 1939. Why you ask? Let me give you the answer.

All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis.

Here is the book. I hope it helps and good luck trading.

http://books.google.com/books/about/How_to_Trade_In_Stocks.html?id=9c3nOSrRCTIC

#104 pbrasseur on 10.03.11 at 8:24 am

I think too many people give too many advices to presumably help us manage risk. And that includes our friend Garth.

Yet most people don’t even understand what kind of risk they are trying to prevent.

First you should know why you are investing, what is your goal. If like most people you are investing for retirement then you should be thinking about long term goals and long term risks. For most the only risk they should consider is not having enough money when they’ll actually need the money, that is 10, 20 or even 30 years away. They shouldn’t care so much about short term fluctuations.

This is important because the solutions to diminish long term risks are quite different than those used for short term risks (such as avoiding the next 40% drop in the stock market). Not only they are different, they are often contradictory.

If you think short term then you should be thinking cash, bonds or even “balanced portfolio”. That will help prevent steep short term losses but will also exclude you from bull runs.

But if you are really thinking long term then you should think quality investments, musty stocks of great businesses making business all around the world, quality being measured by productivity and sound management. In the short term however it may look like a roller coaster.

In the short term markets may look totally crazy and often are, but in the long run they are almost perfect and will always reward quality.

#105 mississaugaboy on 10.03.11 at 8:34 am

#102 Marcello on 10.03.11 at 8:01 am

ING

#106 daystar on 10.03.11 at 8:35 am

Excellent post once again, Garth. Just want to add that the barometer I use is the TSX:V (Ventures) index. That chart:

http://tmx.quotemedia.com/quote.php?qm_page=23387&qm_symbol=^JX

Is off from a high of 2465 to a 1467 close on Friday, down 40%. Ventures is a commodity laden smaller cap Canadian exchange as most seasoned commodity investors know and is a major indicator of just how much of a hammering commodities has taken in Canada. There is likely another selloff today, it looks like things are rough overseas in the markets there and copper and oil are down again this morning. Thats all I have time for! Have a good one Garth and Co.

#107 Onemorething on 10.03.11 at 8:39 am

S&P under 800 YES! Can you please tell me where GOLD was when the S&P was at 666! You may wanna wait!

DEFLATION-DEFLATION-DEFLATION

#108 bigrider on 10.03.11 at 8:57 am

#101 Karnac- Garth replys ‘Markets have already factored in default’

Yes but my question would be what happens to condo and house prices in T.O after default.?

To the moon ! as the greeks swim over…LOL

#109 Sky on 10.03.11 at 9:20 am

Thanks, Herb. But DO NOT encourage me. Doggerel comes naturally to me.

Oh, what the hell. One more.

I’ve got time on my hands- temporarily down for the count and on steroids ( bad wasp karma yesterday). Nothing on TV…EVER. Was a greedy pig and read all the good fiction in my younger years. I’d kill for some good fiction right about now. So, I need some entertainment too.

For Smoking Man…love him or hate him….he does get a reaction:

Put away your whips and chains
All you stuck-up spelling brains.
Is the problem with my grammar
Enough to wish me in the slammer?

Who cares if my punctuation deviates
It’s not my fault. Blame Bill Gates.
If stupid spell check can’t get it right
Then why should I put up a fight?

And what about that bastard homonym?
I’d like to tear the inventor limb from limb.
It’s or its ? Your or you’re ?
Their or there ? What a bore.

Subjunctive clauses or pluperfect tense
This is just nuts. It makes zero sense.
Learning this crap won’t make me rich
Life is too short and grammar’s a bitch.

So snipe away. But at the end of the day
I could care less and I have this to say:
Chill out. And stop with the hissy fit.
If my grammar sucks – Then get over it !

– Sky :-)

#110 Terry Coleman on 10.03.11 at 9:38 am

This was a great article on alternative investing Garth. My questions are, where do you go and how do you purchase these vehicles? Why doesn’t my CFP offer these investment options?

Terry.

Does he work for a bank? — Garth

#111 T.O. Bubble Boy on 10.03.11 at 9:40 am

@ #94 LAST

Garth what about dividend stocks (ETFs) companies with a good history of raising dividends as an alternative to preferreds?

Would that not be better for someone a few years away from retirement who doesn’t need the income but wants less risk.

There should be room for both — treat Preferred Shares as a type of bond, i.e. include them as a part of your fixed income component of your investments. These shares will hover around $25/share (the normal offering price for all Pref. Shares in Canada) and keep paying their 5%-6% without much movement at all in share price… when interest rates and bond yields finally rise, there will be some impact on the price (but not the payouts).

#112 jshum on 10.03.11 at 9:58 am

A quick question if you have time Garth How do you buy prefered shares? I am guessing there is a minimum investment which would be a problem for me

#113 Stevenson on 10.03.11 at 10:08 am

#85 new Era

You expect the Chinese to go broke just from the market? They monster diversify and one of the very minor percentage goes to Vancouver real estate and stocks. An 900 sq ft. property in Hong Kong would bring in about 8k a month. A commercial property that size would bring in about 80K cdn a month. It’s pretty ridiculous.

#114 bigrider on 10.03.11 at 10:12 am

Interesting to see if we test the lows in the markets made in March of 2009. I don’t think we will but if we do it should effectively destroy any confidence in the financial markets for at least a generation.

Unfortunately, it will be at that point that global multi-national companies will be most attractive and will see greatest upside over the next decade.

Oh so few will participate.

The markets in 2009 dropped 55%. Now they are down 15%. What are you smoking? — Garth

#115 Ultraumatic on 10.03.11 at 10:14 am

#11 Smoking Man on 10.02.11 at 6:29 pm

Hate to say I told you so but now big name rocket scientists are saying Dark Matter theory is wrong. Pushing Galaxies away.
http://www.bbc.co.uk/news/science-environment-14948730

That’s not what that article says. Not even a little bit.

#116 Smoking Man on 10.03.11 at 10:14 am

Nice one SKY roger waters will be proud of that poem.

The battle of the RoBo-Botts(Equities)

The short Botts are pushing hard, the Long botts fighting back.

If the short Botts can get the TSE to around 11200

I unleash the Basterd Rumor Algo to get it below 11,200 then the long Botts say screw this we are joining the party………..

$$$$$$$$$$$$$$$$$$

#117 Ultraumatic on 10.03.11 at 10:19 am

I should clarify, your conclusions about this particular headline are not what this article suggests is actually happening. Since you’re not big on nuance, or intelligence, I thought I’d spell it out for you.

But then again, you’re not big on spelling either.

#118 househunter on 10.03.11 at 10:25 am

From Sept 30th: “Here’s something to chew on. Not a single detached new home was sold during September on the west side of Vancouver.”

Not true. There were 2 sold, lot value in the Cambie area within hours of listing.

Doesn’t sound like a new home. — Garth

#119 dd on 10.03.11 at 10:32 am

…gold is as good a barometer as any. As it becomes clear deflation…

The 10 year bond could soon be around 1%. The inflation rate about 4% if not higher in the US. This is a real negative rate of at least 3%. This is highly inflationary.

There is no correlation. — Garth

#120 dd on 10.03.11 at 10:33 am

Deflation? Wait until default is priced into the markets.

#121 Waterloo Resident on 10.03.11 at 10:34 am

Want to hear of something TOTALLY NUTS ! ??

In America people who have lost EVERYTHING they have are now getting sued by the banks for hundreds of thousands of dollars on what the BANKS LOST in profits !

At a time when the U.S. government is trying everything that they can to get people to borrow again, and start buying homes again, the banks are now coming along and KILLING what little bit of desire there was.

Here is the article, read it yourself:
http://online.wsj.com/article/SB10001424053111904060604576572532029526792.html

The funny thing is that the whole housing mess was caused by the banks taking worthless mortgages, bundling them up and selling them to investors. Now the very same thing is happening all over again and it is threatening to kill the American economy once again. This is what the article said:

((( ” expects “a massive wave of these cases as banks start selling the judgments to debt collectors.”
In a paradox of the battered housing industry, trying to squeeze more money out of distressed borrowers contrasts with other initiatives that aim instead to help struggling homeowners, including by reducing what they owe.
The increase in deficiency judgments has sparked a growing secondary market. Sophisticated investors are “ravenous for this debt and ramping up their purchases,” says Jeffrey Shachat, a managing director at Arca Capital Partners LLC, a Palo Alto, Calif., firm that finances distressed-debt deals. He says deficiency judgments will eventually be bundled into packages that resemble mortgage-backed securities.” )))

So that’s it, you can pound the final nails on the coffin, the American economy is now truly dead, no bringing that puppy back to life.

The only way people in America will be able to walk away from their housing debt is to DECLARE PERSONAL BANKRUPTCY, and I have a feeling that millions upon millions of Americans soon will be doing just such a thing. In fact, the American government might just try to make a law prohibiting it soon.

I wonder how much longer Canada’s housing bubble will continue to inflate with America in such a mess?
For God’s sake, i still see BIDDING WARS on homes up here in the Waterloo area, 3 bedroom homes are selling for $620,000 !

#122 dd on 10.03.11 at 10:40 am

#110dd

There is no correlation. — Garth

Negative real rates and gold are highly correlated.

Why not change the topic? — Garth

#123 Waterloo Resident on 10.03.11 at 10:51 am

#106 Daystar said: (“I use is the TSX:V (Ventures) index”)

Well, here’s a bit better 3-year chart of that same index:

http://stockcharts.com/h-sc/ui?s=$CDNX&p=D&yr=3&mn=0&dy=0&id=p67203332245

#124 bigrider on 10.03.11 at 10:56 am

#114 Garth replies to Bigrider. “The markets in 2009 dropped 55%. Now they are down 15% what are you smoking”

Better stuff than you apparently or maybe you should take your riding shades off to read. I clearly said that I do not think they will drop that much again but if they do ( a very slim possibility you must agree) the devastation on investor psyche will last a generation at minimum.

#125 foolsrushin on 10.03.11 at 11:03 am

“investors globally huddle into the safety of the US currency.” Now that’s gambling!

“gold is as good a barometer as any. After soaring on the expectation of inflation, endless government stimulus and a plunge in the value of the US dollar” As your well aware, investing in gold goes far beyond inflation protection, its insurance against the soon to be worthless paper currencies of the world. By the way, inflation is well on its way and will return with even more vengeance when the US dollar dives again, and it will. The US government, Goldman Sachs can play all the games they want in the short term driving PM down but some of us know how the end game will play out. Just watch for the US dollar to top out and things will reverse very quickly, hedge funds will trade it right down to next to nothing. By the way the BRIC countries, who actually have a real economy and some money are actively backing PM.

“It seems a decent bet that commodity prices will stay soft for months” – So Europe stays weak, the US dollar stays stronger and commodities stay weak. Possibly, but I’m not so sure. Yes we have watched Europe and the US volley back and forth for who’s got the worst economy/biggest problems but I think there is enough room for them to share the same stage. If China surprises and joins in then we might have to build a bigger stage because Canada will surely follow if it hasn’t already. PM I believe, will move more into the forefront.

“until we get past issues” I don’t know if there is a broom big enough to sweep this mess away. Governments unwillingness to let capital markets work the way they were intended are only creating bigger problems for us all down the road. Yes, admittedly things will be fixed but things are going to look a lot different on the other side.

“sticking your fortune in the orange guy’s shorts is hardly a solution” – So you always have to be fully invested. Can’t sit on the sidelines and watch and move in when the time is right. Buy and Hold. Gee I’m sitting on the sidelines in some cash, gold and bonds and I’m content to ride out the storm, FOR NOW. The time will come to re engage, be patient, let it come to you. You make it sound like if you go to cash you will be there forever.

For a lot of people needing cash day in and day out, preferred stock in the banks make a great deal of sense because of their more limited downside potential and income flow. I do worry about the many seniors desperate for income chasing yield that have taken on more risk then they realize.

Real Estate is dead and most of us hopefully realize it by now. You’ve spun it front to back and sideways so many ways that those who could be helped have taken advantage of the advice and that’s just what it is, advice. Only they can make the decision for themselves. Real Estate die hards are going down with the house. Up until now it was their choice, soon they will have limited expensive chioces or they won’t have one at all. I’m glad this blog is moving forward to discuss investing and other topics that are of equal importance. That last thing this blog needs for the next few years is I told you so, it’s too late for you, your fried!

#126 dd on 10.03.11 at 11:09 am

Deflations = the contraction of the money supply.

Inflation = the expansion of the money supply.

Fed to fan more inflation soon.

http://www.huffingtonpost.com/2011/09/30/bullard-fed-will-act-if-_n_988910.html

Not exactly. Inflation can occur simultaneously with asset deflation, like now. — Garth

#127 Q on 10.03.11 at 11:12 am

it would be interesting if statscan put value to their job loss/creation figures. Meaning, how many 70K per annum jobs were lost and or replaced by minimum wage McJobs? Anything paying under say $9 per hour or having a work week consisting of less than 25 hours should not be counted….the results would be frightening….

#128 Tony on 10.03.11 at 11:15 am

#1 mississaugasold

Just like in America many of the REITs will drop to zero. This isn’t the time to get greedy and stupid at the same time.

What an idiot comment. — Garth

#129 Waterloo Resident on 10.03.11 at 11:15 am

Garth said that gold was down 34% during the crisis of 2008. Well, here’s the proof, take a look at this chart of $GOLD from Jan 2008 to the end of 2008 and you will see, it went from $840 to $880.

http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&st=2008-01-01&en=2009-01-01&id=p69281660408

Hey wait, that’s a gain in price ?

But look closer at the chart and you can see that it hit a high of around $1000 and then fell to $710, it was all over the place !

So I guess if you take that small time frame in 2008 you can see that YES, gold DID fall by about 30%.

If you look at $GOLD now,

http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&yr=1&mn=0&dy=0&id=p34302306966

it has gone from a peak of $1900 down to $1620, a drop of about 15%, so from that it can be argued that gold still has about another 15% to fall.

To further emphasis this point, look at this chart:

http://stockcharts.com/h-sc/ui?s=GLD:$CDW&p=D&yr=3&mn=0&dy=0&id=p81171496120

Normally the chart falls down to the blue line, (or just a bit above it) before Gold finally begins to pick up again. From this chart you can see that its fallen only half way there, still has a ways to go yet.
See way back in Feb 2009, it took about 5 months of sideways drifting (with lots of rallies and crashes during that time) and the line fell well under the 200 day moving average (blue line), and I would say that the same thing will hold true again.

#130 Steven Rowlandson on 10.03.11 at 11:20 am

Garth to understand the price action in gold you must come to understand the power of banks, governments, the media and short sellers over the price of gold.
You have to accept the truth that gold prices are manipulated to the detriment of producers and owners and that this is improper but it does not make gold a bad investment. It is merely a more challenging one
that not only requires the right strategy and tactics but also a cast iron stomach and the patience of Job.
Believe me Garth. The gold wars are far from being over.

All assets are manipulated in value. It’s called the market. — Garth

#131 Hicksville Alberta on 10.03.11 at 11:35 am

#86 – Pablo

Great post.

The snake is about ready to start eating it’s tail and when that happens those that are out trying to pick up nickels in front of a steamroller may well end up crushed.

With so much volatility and risk everywhere why be so concerned with trying to get a win or a yield on one’s funds?

Why not just try to be happy just sitting on the sidelines and just watch the circus go by while you look after your nest in a more simple cautious manner?

#132 Hammer1 on 10.03.11 at 11:40 am

#96 timo on 10.03.11 at 6:15 am
thanks for the vid..saw it when it first hit theatres..I remember there were about a dozen people in the theatre in downtown Toronto back in ’09. Just shows you how f**kd up this society has become. Anyhow, I wonder how many on this pathetic blog will sit and watch the whole movie? it’s only 59 minutes or so..how many here even know who Michael Ruppert is?

#133 martin on 10.03.11 at 11:51 am

To: The American

i can tell that you are a Forex trader !!

and you are right on!!

The Green will always make it back

good luck

#134 Smoking Man on 10.03.11 at 12:02 pm

#117 Ultraumatic on 10.03.11 at 10:19 am

Of course they haven’t figured out universal shrinkage yet, Their not me.

But they are finally figuring out that the theory of Dark Matter may be wrong , you know the stuff supposedly pushing galaxies away from each other.

They will get their one day……………Lucky you for you have found the oracle who figured it out first. Right here on this pathetic blog…..

#135 InvestorsFriend (Shawn Allen) on 10.03.11 at 12:05 pm

Waterloo Resident at 121…

You lament the big bad banks going after distressed borrowers… to collect what they owe to the banks.

Another name for those distressed borrowers is deadbeats who failed to pay their mortgages as agreed. I think these deadbeats had a major role in causing the sub-prime problems.

Have you always been a socialist? (not there is anything wrong with that… to each his own).

#136 When the Credit Stops on 10.03.11 at 12:07 pm

#121 Waterloo Resident

I wonder how much longer Canada’s housing bubble will continue to inflate with America in such a mess?

Our housing bubble will last as long as the Canadian banks keep the credit flowing. The US housing collapse began when the great credit ponzi scheme of sub prime loans came to an end. In Canada, the banks continue to loan like drunken sailors. When the credit stops, housing will collapse just like it did in the good ol US of A.

#137 jess on 10.03.11 at 12:10 pm

update
U.S. Attorney’s Office
September 30, 2011 Southern District of Florida
(313) 226-9100
http://www.fbi.gov/miami/press-releases/2011/rothstein-associates-sentenced-on-conspiracy-to-commit-wire-fraud-in-connection-with-fraudulent-investment-scheme

…”The evidence presented in court established that these defendants were employed by the law firm of Rothstein Rosenfeldt and Adler P.A. (RRA) in the IT Department. Renie was employed as director of information technology and Corte was a systems engineer. Renie and Corte created a fictitious website counterfeiting the legitimate website of TD Bank. At Scott Rothstein’s direction, the defendants posted false account balances and fraudulent incoming and outgoing wire transfers on the fictitious website to make it appear as if the accounts were well funded. On more than one occasion, the defendants modified the fictitious TD Bank website to reflect that RRA held up to $1.1 billion on deposit at TD Bank. In fact, however, no such funds were in the accounts. The false account balances were shown to investors to induce them to invest into the fraudulent investment scheme.”

=

implosion of rothstein 1.2 billion ponzi scheme
http://blogs.browardpalmbeach.com/pulp/2009/11/bill_scherer_rothstein_lawsuit.php
============
Labor and employment settlement fund indeed!

http://blogs.browardpalmbeach.com/pulp/2009/11/banyon_by_the_numbers.php

#138 jess on 10.03.11 at 12:13 pm

InvestorsFriend (Shawn Allen)

Why no comment on Private Equity types
Is it because they dress better?

#139 Karnac the Magnificent on 10.03.11 at 12:15 pm

Answer: Lower than the start of this year.

Question: Where will financial markets close at the end of this year?

(They don’t call me the all wise, all knowing sage from the east for nothing).

Did you not read the post about alternative asset classes? Apparently not. — Garth

#140 Marnic on 10.03.11 at 12:20 pm

Greece defaulting was factored in to most equations long ago. — Garth

You’re kidding, right? You’re predicting no negative market reaction the day the “official announcement” is made that Greece can’t pay?

Temporary, knee-jerk market reactions are inconsequential. — Garth

#141 Davey Boy on 10.03.11 at 12:26 pm

In Vancouver (BPOE)

Umbrella stocks definite buy.
Unload sunscreen stocks.
Spandex remains a hold. (no more than 10% of portfolio)

#142 Sean on 10.03.11 at 12:48 pm

Which investment gets taxed the most? Is it best to store REIT and Bonds in TFSA and dividend stocks in a normal account?

Income and interest are taxed at your marginal rate (highest). So, shelter assets paying you in this form. Capital gains and dividends are taxed for most working people at half the marginal rate, so hold assets producing these in a non-registered account. — Garth

#143 Smoking Man on 10.03.11 at 12:57 pm

S & P 500 just breached 1120

Get out of the way……………………….Free falling and im free falling

Got to addmit it folks Im good

#144 TaxHaven on 10.03.11 at 1:06 pm

“Temporary, knee-jerk market reactions are inconsequential.” — Garth

Up 15% Y-O-Y. How many more years of such performance will it take to convince people that the (new normal) threat of capital destruction ~ NOT inflation expectations! ~ is driving gold?

#145 dddd on 10.03.11 at 1:14 pm

October the new August?

2011 the new 2008?

risk shrinks with lower prices but sentiment rules the market – anybody got the f(x) for herd behaviour?

#146 Adviser on 10.03.11 at 1:21 pm

Smoking Man,

Good call on the market today. Made myself some minor coins with SPY puts. Where do you foresee the remainder of the month, year?

Thanks in Advance,

#147 Smoking Man on 10.03.11 at 1:50 pm

#146 Adviser on 10.03.11

Days not over yet can You say KerPlunk lol

watching my P & L Skyrocket. Im in the corner laughing like a mad scientist……………….

I will advice further when I see batman standing on his head, and bad news galore, and we have a small up tic.

Keep tuned to this Bat channel………….

#148 dddd on 10.03.11 at 2:08 pm

s & p took out 1120 with ease

down on a good news day – the herd is marching

tsx even worse

is a’gettin mighty ugly out there – but hxd is working well

the stock market is a much swifter and sterner teacher than the RE mkt!

#149 Bigrider on 10.03.11 at 2:11 pm

Smoking man you should be running a hedge fund.

#150 Bill Gable on 10.03.11 at 2:16 pm

Smoking man is starting to think this is his personal blog.

Not to sling bad vibes, but I come here to learn from a man I admire very much, and catch the, mostly, brilliant discourse – I am getting sick of your psychotic ramblings – Mr. Turner – is there an ignore function in the database?

#151 mississaugaboy on 10.03.11 at 2:27 pm

143 Smoking Man on 10.03.11 at 12:57 pm

Haha nice. Glad I’m shorting this crap.

#152 disciple on 10.03.11 at 2:29 pm

#17 Smoking Man — “Wealth is between your ears your ability to survive and prosper under any condition.”

You are starting to sound more and more like me, what, with all the conspiracy talk and now this…anyway, the above quote does not explain the phenomenon called:

Dubya.

#153 disciple on 10.03.11 at 2:46 pm

#86 pablo…

Paragraph, pablo, paragraph. I and others want to understand what you have to say but it’s hard in that format that made my eyes lose focus a few times.

I would say look for solutions to the problems you wrote about.

#154 jess on 10.03.11 at 3:10 pm

Dexia board in emergency talks

world finance investment management awards 2011

???
News – 2011 07 Best Sustainable Financial Institution … – Dexiawww.dexia-am.com › News

#155 Junius on 10.03.11 at 3:11 pm

#136 When the Credit Stops,

You said, “The US housing collapse began when the great credit ponzi scheme of sub prime loans came to an end.”

You don’t have it right here. The crash in the U.S. came when a number of people could not make their existing mortgage payments. It is not driven by new bank loans but existing loans that go bad. In the US it happened initially to people who had loans that reset at higher interest rates. These were the teaser rate mortgages.

It does not take many defaults to tip the market. It could be less than 10% of existing mortgages or even as low as 5%. Hard to estimate but the crash happens on the margin.

Classic bubble theory (Minsky) holds that it requires a triggering moment or perhaps a tipping point. Certainly if interest rates rose dramatically there is no question the Canadian market would crash. However that appears unlikely for now.

Without a shock the market may just drift down under the pressure of current factors such as record high home ownership, stagnant economy, high consumer debt and changing demographics. Certainly we have a large number of people who are living pay check to pay check. It would not take much to tip the Canadian market at this point.

It is hard to predict when it will crash or collapse. We may just muddle around with prices gradually dropping for a long time before they correct significantly.

#156 Math is Fun on 10.03.11 at 3:12 pm

Thanks for the cander Garth. For the gold bugs (of which I am not) I guess they just feel you lump them in with Tulips and Worldcom sometimes.

ps. Great blog – I live in Vancouver so pleeease keep up the good work. This is my only sanity in a city of fake HAM and “almost 60% sold!” villages by the water that have been for sale for 2 yrs and seen 40% price reductions. Ohh and my brother-in-law is a jerk.

#157 Ludwig Von Mises on 10.03.11 at 3:29 pm

As our fearless leader has pointed out in post #126

Not exactly. Inflation can occur simultaneously with asset deflation, like now. — Garth

The above is a once in a lifetime phenomenon of price inflation (food and gas for example) existing with asset deflation (houses in the US of A and soon to be followed in Canada when our real estate bubble goes kabang). The US of A has never in its history experienced what it is experiencing now. Asset deflation coexisting with price inflation. For example, the dirty 30s saw deflation of prices and assets and the 1970s saw inflation of prices and assets. We live in interesting times…

#158 timo on 10.03.11 at 3:35 pm

#132 Hammer1,

Yup, it explains why since the 80’s manufacturing was pushed offshore to slow down north-American extraction of oil past the peak.

Or he could be nuts ;)

weighing all sides of the debate.

#159 mac on 10.03.11 at 3:43 pm

Garth,

What about canadian senior corp. debt?

#160 timo on 10.03.11 at 3:51 pm

http://www.google.ca/finance?client=ob&q=NYSE:BAC

wow, we are going back people……….

#161 smw on 10.03.11 at 3:56 pm

For those that believe a default of Greece means a big payout in bullion. Click the link below and compare the time frame of the defaults to that of the price of gold and/or silver during that period.

http://calculatedriskimages.blogspot.com/2010/07/sovereign-defaults-1981-to-2003.html

So if you believe the financial collapse of Greece will send us back to trading silver and gold at the Wal-Mart, dream on. What’s really scary is the amount of people here pumping bullion and have no idea W5; other than some theories based on the great depression when gold was fixed, which are all useless in the current scenario anyways BTW.

It’s exactly why Garth is so adamant about keeping a balanced portfolio, so you don’t hurt yourselves.

#162 Claudia on 10.03.11 at 3:56 pm

“…nor are REITs correlated with the stock market.”

Really?

“What Does Real Estate Investment Trust – REIT Mean?
A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.”

Read more: http://www.investopedia.com/terms/r/reit.asp#ixzz1ZkZyJ8j1

Really. — Garth

#163 Smoking Man on 10.03.11 at 4:02 pm

I have to Say Old Gartho I am very impressed…

You are more than a guy with a hair dye beard……….

BNS.PR.K up .15 How is this posable on a 400 point drop.

I just might buy your new book…..Can always learn something new……………….

#164 timo on 10.03.11 at 4:02 pm

http://www.bloomberg.com/news/2011-10-03/strategic-mortgage-delinquencies-as-high-as-27-jpmorgan-says.html

Amherst Securities Group LP analyst Laurie Goodman said lenders need to reduce principal for homeowners to stem the foreclosure crisis, which otherwise may engulf more than 10 million additional properties, she estimated.

A record of almost 33 percent of the $1.2 trillion of so- called securitized non-agency loans are at least 30 days delinquent

Credit bubble is deflating ….quick find qualified buyers.

#165 Smoking Man on 10.03.11 at 4:04 pm

#150 Bill Gable on 10.03.11 at 2:16 pm

Even if there was an ignore button you would still peek.

#166 Bill Gable on 10.03.11 at 4:23 pm

SM – at least you have a good sense of humour. That, I appreciate. Cheers. Nice day on Bay street today = gevalt.

#167 young & foolish on 10.03.11 at 4:25 pm

I read about an interesting portfolio allocation recently (that has done 8% over the last 35 years)

25% – Cash
25% – Gold
25% – Equities
25% – Bonds

rebalanced to preserve ration once a year

sounds pretty simple … huh?

Simple is its only attribute. — Garth

#168 Ronaldo on 10.03.11 at 4:39 pm

#126 DD – “Not exactly. Inflation can occur simultaneously with asset deflation, like now. — Garth”

As in mid 70’s when house prices crashed and we endured next to runaway inflation and subsequent “Wage and Price Controls” (a failure in both U.S. and Canada) , lots of foreclosures, lots of bankruptcies, lots of strikes by public servants and industry, high oil prices, etc, etc.

http://www.canadahistory.com/sections/eras/trudeau/wage_&_price_controls.htm

#169 jwkimba on 10.03.11 at 4:50 pm

{off topic rant}
Saw an ad on TV last night for Dodge RAm truck. It’s 1/2 ton that carries a ton and a half and has a 400 horspower motor. Clearly, every man NEEDS one of these.

The thing was they had 0% financing for…up to….84 months. Eighty freaking four months. When I bought my first car, cash of course, the guy next to me was haggling for the sporty little thing he wanted. eventually the sales guy came back all smiles because he got special permission to use 48mo financing, instead of the then normal 36month. That way he could ‘afford’ it. Now there is 84 months on TV. For everyone. At 0%. This will not end well!

Guess what it’s worth after 7 years? — Garth

#170 bigrider on 10.03.11 at 4:59 pm

This chart says a lot about how bad stock market conditions have been over past 12 years.

http://ca.moneycentral.msn.com/investor/charts/chartdl.aspx?PT=11&showchartbt=Redraw+Chart&compsyms=&J0=1&CB=1&D4=1&D5=0&DCS=2&MA0=0&MA1=0&CF=0&D7=&D6=&symbol=%24us%3Aindu&nocookie=1&SZ=0

No secular bear market ? Really(laughable)?

I thought you were going to stop bleating. — Garth

#171 Nostradamus Le Mad Vlad on 10.03.11 at 5:37 pm


Thought For The Day! — “A state of war only serves as an excuse for domestic tyranny.”– Aleksandr I. Solzhenitsyn (wrh.com.)

Guess who is leading the wars on the MEast under false pretences, and which countries have tyrannical govts. in power? The west. Curious how Obomba was awarded the Nobel Peace Prize, yet he is way worse than dubya for wars. But he is just doing what he is told. TPTB run the show.
*
End the Fed “. . . the Fed is a government agency, in reality it is a completely privately run entity that has since 1913 had total control over the U.S. monetary system.”; GDP How about changing he GDP to a deck of cards? 2:26 clip Jacksonville man takes empty homes for vets.; Oct. 17 is when (supposedly) Greece runs outta money completely; Tarred and Feathered “Before Louis XVI and Marie Antoinette had their appointment with Madam Guillotine, the French Revolution started by beheaded numerous bankers. They had good reason to!” wrh.com;90% is a clear majority, and the majority is usually right; Banking Crisis Just as the protests heat up, banx choose to have a convenient credit crunch.

Joe Stiglitz supports protests; Superpower Suicide “The gridlock lies in the Federal Reserve, which by issuing all public currency as an interest-bearing loan perpetually creates more debt than money.”wrh.com; US Yuan Trade war time?

Indonesia ‘Quakes are continuous now, just like the Canary Islands (just in time for economies to extinguish themselves; Proof of the above quote and 5:22 clip The latest from Libya; Protesters return. They’re not giving up; 7:35 clip Turns out the NYPD confiscated a lot of signs. Freedom of speech? Obomba Introduction is curiously interesting; Protests Growing faster than a speeding snail.

Obama Fried Chicken KFC, please stand aside! Palestine Nearly there. My understanding is that Palestine can use one of the subsections of the UN Charter to join, so it doesn’t matter what the US decides; Facebook Not all it seems.

#172 bigrider on 10.03.11 at 5:38 pm

#170 Garth to bigrider -“… stop bleating”

Not bleating at all just laughing at your ‘not in a secular bear market’ comment from the other day.

Anyway ,good luck to you gathering assets in the coming months. Your advice is sound for sure but you will be swimming upstream with a possible proverbial Niagara falls just behind you.

#173 bigrider on 10.03.11 at 5:47 pm

Oh and by the way Garth, your advice to own a power generator best of all, I’m not being sarcastic either, you are a survivor.

I’m buying a really good one along with a few other things you have mentioned just in case.

My father, love him to death, knows how to grow a garden and I’m gonna learn.
.
He no afraid a no ‘deflationaria busta’ ( small ,smalla chance no?)

#174 dddd on 10.03.11 at 5:49 pm

163 Smoking Man on 10.03.11 at 4:02 pm

BNS.PR.K up .15 How is this posable on a 400 point drop.
————————–

are you serious ? 9k vol, looks like 5 trades all day, last buyer just overpaid thats all – utterly meaningless.

stay on the down train with sp closing UNDER 1100

How does the S&P affect BNS preferreds? This blog astounds me most days. — Garth

#175 Ronaldo on 10.03.11 at 5:49 pm

#163 Smoking Man – how about CWB.PR.A, down .05 for the day at 27.45 and down from 27.71 since beginning of the year and paying 6.59% dividends.

I originally bought the common shares of this one in February of 09 at 10.00 and it later dropped to 7.50 on March 9th/09 (the bottom of the market). They went over 31.00 (I sold at 28.00). Bought the warrants at 7.00 (sold at 14.00). The bank repurchased them at a bit over 17.00 in July this year. One of my better moves for certain. There is no doubt that the preferreds are far less volatile and 6.5% is nothing to sneeze at either.

#176 Ronaldo on 10.03.11 at 5:55 pm

#167 young and foolish – this portfolio sounds like the one that the famous Harry Browne was talking about back in the early 70’s..

http://www.getrichslowly.org/blog/2009/04/20/fail-safe-investing-harry-brownes-permanent-portfolio/

#177 Tim on 10.03.11 at 6:01 pm

I have to say as a cross border shopper that I am saddened by the canadian dollar’s recent plunge below parity. Still a deal to buy dairy meat and taxable items, just not AS GOOD a deal.
Oh well….

#178 Peakoilist on 10.03.11 at 6:18 pm

#165 Smoking Man on 10.03.11 at 4:04 pm
that is is true..sometimes you want to look away,..but you can’t ! We’ll still peek from time to time.

#179 doctore on 10.03.11 at 6:23 pm

Some good listening material.

http://www.youtube.com/watch?v=CaRp3TRK7BA

#180 JSS on 10.03.11 at 6:26 pm

Hi Garth,

Question – i am interested in an ETF that pays a higher-than average dividend. When I called the financial company, they told me that some of the dividend is given back as “Return of Capital”.

What the heck is this, and is this dangerous?

Return of capital is giving you back money you gave over to be invested. Not dangerous, but not exactly investing, either. — Garth

#181 I'm stupid on 10.03.11 at 6:42 pm

For you Garth.

Time to piss everyone off.

http://www.financialpost.com/m/news/blog.html?b=business.financialpost.com/2011/10/03/a-great-haircut-for-u-s-debt

#182 grouchpeach on 10.03.11 at 7:04 pm

Anybody want to weigh in on this? We are boomers and we sold our large house last summer in a desirable western part of the GTA. My husband is a contractor and we did a total renovation on the house. ‘Did pretty well on it but wanted to put half of what we got away & spend the other half on the next house.

We leased a house with the intention to wait for some better prices on a more modest home. We have been looking and watching the insanity continue for 14 months now. Just this last week or so, a little better prices seem to be starting to happen. This past week our rather difficult landlords told us they are selling the house – not sure where that leaves us. I think that it will be sold for some crazy amount for lot value so likely we can stay for awhile.

Coincidently we saw a house this weekend that was not priced too crazy. It needs a lot of work – hasn’t been touched since the original owners bought it in the 70’s. The bones are good but my husband is pretty busy with other work right now so it will be tight to get the work done time-wise. I put in an offer on it the other night and heard that there were others interested and there was actually another offer being tendered. My offer was not full price but there were no conditions and I was willing to close in less than a month. I have the cash so there will be no mortgage. Apparently the other offer was higher in price but not as clean an offer. Given that it is unoccupied etc. & with my fast closing offer, the seller’s adult child who is negotiating the deal was attracted to our offer and decided to work with this offer even though it is less. They came back with a very modest reduction form the full price. Anyway we came up some in money but we are still about $20,000 apart. My agent just called and said that they are sticking to their guns on their original reply to our offer and there are others waiting in the wings so we need to tell them whether we want it at their slightly reduced asking price by 9 o’clock tonight.

I don’t know what to do. It is NOT a dream house but it could be a nice place for about $200,000 more in improvements…that is with my husband doing most of the work. At the same time, it was the first house that was not listed for a lot more than it’s assessed value around here and I have a hunch that there are going to be more of those coming up. I do not want to over pay and I really did not want to get involved in a multiple offer situation. I guess I am also a little pissed that even my agent kind of implied that I better just cough up the price they want and be done with it. I am really starting to dislike even the nice agents. I just have so much distrust of them and their motives. I know that part of why I feel like telling them that we are passing on it is because I feeling (right or wrong) manipulated.

I am not sure what I think that anyone here can say in the next couple of hours that would help me in this decision. Maybe just reassurance that there are other houses…because I am leaning towards saying we are out on this deal. Anyway, I have about an hour and a half before I have to decide so if this hits the board and you feel like telling me what you think, thank you in advance.

Don’t let a realtor pressure you into a snap decision. There are thousands of houses about to come on to the market. — Garth

#183 Moneta on 10.03.11 at 7:32 pm

Where’s the money Guido?
———-
Why bother, it’s like preaching to the converted. Everybody knows politicians, not matter the party, will be destroying value.

However, a lot of Canadians still think their DB pension plans are guaranteed.

I’m trying to wake them up.

#184 smartalox on 10.03.11 at 7:42 pm

I see F & H are pushing hard to move Mr. Carney out of his position at the BoC. Is this how heads roll in Ottawa? Is this a good or bad move for Canada? I’m tempted to think bad, with a potential for more influence from PMO on BoC. Any thoughts?

#185 Nostradamus Le Mad Vlad on 10.03.11 at 8:03 pm


Idiots 80% of Congress have no business background. Not sure what the figure is for Canada, but I would hazard a guess the figure is pretty high (most are lawyers); Huge Leverage goes to four banks in US; Re-elect Obummer “Who BENEFITS by scaring you away from supporting the OccupyAMERICA movement? Obama and the existing totalitarian government.” wrh.com. This is becoming more confusing by the second! Families in poverty join queue for food, and 0:22 clip F^)k the poor; UK too; Koch Brothers It’s okay to break laws, ‘coz we’ll just have new ones written up! Mayor Bloomberg “No, you Wall Street whore; we are protesting against the people who made it impossible to make ends meet on $40-50,000 a year!” wrh.com.

5:27 clip Economy about to tank, with ‘quake-o-canoes going ballistic; 5:42 clip Greece can’t pay off their deficit; Credit Unions here we come! Reasons why the occupy brigade will be difficult to beat. One is that people are mighty pissed off at crooks walking away scot-free; Stop Blocking Traffic That will only antagonize the situation more; Debts – Deficits US$95 bln. one day increase, excluding trillion dollar bailouts.

1:42 clip US cuts aid to Palestine; Mandarin Mandatory at a well-to-do Long Island school; Just as one ma set himself on fire in Tunisia last year, starting the Arab Spring Revolution, so twelve students started Wall St.; 11:08 clip Drones are wonderful. Just ask the war profiteers.

Expiration Dates Medicines, not us; GMOs to be labeled in California? TV pitchman commits suicide, just before trial for fraud.

#186 Smoking Man on 10.03.11 at 8:04 pm

175 Ronaldo on 10.03.11 at 5:49 pm

I hate to stroke Garths Ego it’s almost as big is mine and he is so easy to poke fun of and he takes it well. However his way is slow, steady, safe and boarding as hell. But he knows his shit……..

Which brings my to 70 of you, The other day when I posted my website http://www.keysme.org I hade 70 downloads directed form this site.

Are you people insane, I could easily have some code in there to suck out and FTP your emails, your spreadsheets, your word docs, and at the same time push Child Porn to your hard-drive. Lucky for you guys I’m an nice guy..

Never Ever download an exe from a website without first going to whois domain register pasting the URL. If it’s private as mine is, stay bloody away……….If you get a number call it and make sure there is a people at the other end…………

I blame your teachers…………………….

Another good leason from the Smoking Man

#187 harder on 10.03.11 at 8:12 pm

in other (related) news..
http://www.straight.com/article-476826/vancouver/developers-china-slash-housing-prices

#188 45north on 10.03.11 at 8:23 pm

grouchpeach: I am not sure what I think that anyone here can say in the next couple of hours

in the US, as house prices fell so did the market for tradesmen. The best had their income cut in half.

I do believe that what happened in the US will happen here for the same reason. The consumer is tapped out. So if you buy this house, your husband will have to turn down jobs so he can fix it. Later as work becomes harder to find he will have to find it to pay for the materials on your house.

This not a risk you can take.

#189 Smoking Man on 10.03.11 at 8:23 pm

#174 dddd on 10.03.11 at 5:49 pm

If I had to bet on the turtle or the hair, I’m sure you know my pick.. Even though the tail says he lost the race. I don’t believe that tail…………

How ever not everyone is a gambler, its an addictions, I will be short till I see batman hunging upside down. Kind a looked like it at todays close, but we had bloody good US data and S&P still caved….

So staying short. Would need a 1000 point + to have me capitulate and take a reduced profit.

#190 Dan in Victoria on 10.03.11 at 8:44 pm

Grouch peach @ 182
Walk.
Listen to your gut.
Your story is parrallel to ours. We sold a few months ago and have been watching the market here on southren Vancouver Island.
There is a definite change in the market, actually my realtor phoned today and said wait its going down.

Think about it how many contractors are bidding on this property ?
Renos always cost twice as much as they should and take twice as long. (Figurately speaking) You know that.
Unless this thing is way way way below market value call their bluff.
Oh yeah, send the realtor packing.

#191 Waiting in Chilliwack on 10.03.11 at 9:06 pm

#183Moneta on 10.03.11 at 7:32 pm
Where’s the money Guido?
———-
Why bother, it’s like preaching to the converted. Everybody knows politicians, not matter the party, will be destroying value.

However, a lot of Canadians still think their DB pension plans are guaranteed.

I’m trying to wake them up.

I have a DB PP , should I worry ?

Garth , what financial forums would you recommend ?

#192 The thing in the basement on 10.03.11 at 9:23 pm

184 Smartalox – from BOC website

“If a profound disagreement on the conduct of monetary
policy were to occur, the Minister of Finance, with the
Cabinet’s authorization, can issue a written directive to
the Governor specifying a change in policy. No directive
has ever been issued.”

The whole intent being that the BOC acts without direct political interference. But the idea would be to appoint “like-minded” people to the board so that you dont become the first to order that directive. Conversely,
as governor, you may want to keep your job, so you toe the line.

I think Mark Carney (who could be the smartest guy in the room and dresses real snappy) wants to pull the
trigger on interest rates, just to show he means
business. Rates could go up a quarter or a half to just
send that message. He has been repeating this for some
time, and the current flight to the US$ is a good
opportunity.

I didnt know there was an obvious move now to replace him. Link?

#193 Grouchpeach on 10.03.11 at 9:35 pm

Thanks 45, Dan & Garth. The realtor called me back wanting my decision before the time was even up so I told her that I was feeling pressured, that I had not even been given enough time to discuss it with my husband who was still at work so I decided to pass. I then came here and read your responses – which made me feel better.

#194 bigrider on 10.03.11 at 9:49 pm

#182 Grouchpouch.

I second that piece of advice from Garth. Lots of houses about to come up on the market with greater and greater price reductions. You have the cash which mean you are in the drivers seat.

My buddy is in line to plunk his money down on one of those four seasons 400 sq ft. boxes for 450k at yorkville.

Asked me to buy as well and told him I would buy his 3 to 5 years from now for low 300s..maybe less.

#195 45north on 10.03.11 at 9:51 pm

Garth: on my Mac your picture doesn’t load

first time I had this problem

It’s embarrassed. — Garth

#196 smartalox on 10.03.11 at 11:22 pm

@ that thing in the basement:

http://www.theglobeandmail.com/report-on-business/economy/carney-touted-for-top-global-banking-job/article2188964/

“This is truly the global stage, so it’s going to take somebody of his fortitude, of his backbone, of his intellect, of his education, of his experience, to be able to go toe-to-toe and say, ‘I am not backing down,’’’ he said.

Finance Minister Jim Flaherty confirmed Monday that he is actively promoting Mr. Carney for the job, saying the central bank chief is “highly qualified.”

Unlike other central bankers, as head of the FSB Mr. Carney would attend all G20 leaders’ summits like the one coming up next month in Cannes, and as such would have an even bigger profile in the world’s leading economies for years.

Mr. Carney could not be reached, but a government official told The Globe and Mail that Mr. Flaherty is putting his name forward on the assumption that he would be able to continue at the Bank of Canada, where he is in the middle of a seven-year term that ends in 2015.

I believe that in an earlier version of this story, there was a passage that actually implied that the presidency of the FSB might not remain ‘part time’ during these ‘troubled times’ – but I only read this very briefly.

#197 Robert Dudek on 10.04.11 at 4:34 am

Garth wrote:

(1) All assets were sold off in 2008-9. Focus on what recovered quickly, and kept paying you in the meantime.

You mean gold and silver, I think.

No, the comment was with regard to preferred shares, which pay investors to own them. — Garth

#198 Robert Dudek on 10.04.11 at 4:51 am

Political leaders should study philosophy, not commerce or law.

#199 live within your means on 10.04.11 at 4:52 pm

DH backed up and reloaded my laptop w/Windows 7 on the weekend. Still don’t like it. Oh well. Forgot that I had to re-enter all my passwords, etc.

Weather network is calling for 60-100Km winds this eve/tomorrow. DH is outside battening down the hatches. Frig – those darn teak chairs aren’t going anywhere. They’re so heavy I can hardly move them. He just moved our cars onto the street, out of the way of the big maples out front. If I have a worry, it’s about the 4 100’+ hemlocks next to the back deck.