Dangerous assets

Barry and his wife are in their mid-forties, and I’m sure don’t care the stock market was down 372 points on Monday. After all, she’s got an extra new baby and they’re obsessing over the student rental house they own in steely Hamilton. Like most people they see no connection. Too bad.

“I stumbled upon your blog a few days ago while doing some research to decide what to do. Hopefully you get to read my message, as it seems you get a lot feedback and demand from your audience (on all sides of the spectrum),” Barry writes me. “My wife and I are trying to decide whether to put an investment property we own on the market. My sentiment as a whole is in line with what I have read from your in that the current status quo cannot be sustained long term in the real estate market, or personal finances. My wife agrees to a point but reads other views and is on the fence, mostly because she is emotionally attached to the property.”

Mars and Venus. Only a mom could fall in love with a dorm.

Barry tells me they bought the place six years ago, and owe $250,000 on it with (on a good day) $75,000 in equity. It generates about $1,800 a month.

“We can try to sell now and cash our chips (probably clear ~50k after taxes and fees), or keep the property through the downturn and stay with it for the long run while slowly watching the mortgage decline and have some rental income in our retirement. We have $70K each in company pension plans, $30,000 in RRSPs (index funds from ING) and $30,000 in TFSA, in cash as an emergency in case we lose our jobs. Our home is mortgage-free. What should we do?”

I chose Barry’s email for a couple of reasons. One, it opens the door to a talk we need to have about the fate of real estate when the economy freezes over. Second, what can these fortysomethings tell us about investing?

In the past week I’ve said twice that real estate’s now the most dangerous asset class. Looking at stocks, oil, gold, commodities, you might not see this in comparison. But trust me, you do not want to have the bulk of your net worth in bricks and mortar for several years to come. If you restrict your exposure to your home, keep it at about a third of your net worth, and don’t expect to make money when you sell, then cool. But if you’re like most people (or Barry) and see real estate as a leveraged capital gains machine and a tradable asset, look out.

Housing was chilling on its own even before the market mayhem of the last few weeks. Now the descent is certain. Realtors will tell you that property is stable compared to, say, shares in Bank of America. But hidden in the value of almost all real estate today is emotion, which drove values higher for completely irrational reasons.

If 2008 is any guide (and it is), residential real estate over the coming winter months and into the Spring will likely see reduced sales and a bump in listings. Just like people are desperate to sell stocks and mutual funds which plop in value, so they’re hot to list in a declining real estate market. Realizing the economy is fading and top values will soon be gone, sellers rush to market in search of that greater fool who watches HGTV instead of BNN. The lucky ones score quickly. The rest push prices lower.

Falling stock markets hurt homeowners therefore, more than they wound equity investors. Stock prices can turn on a dime when good news surfaces, and anyone buying or selling has 100% liquidity. Losses can be restored as quickly as they were incurred. House prices take months, even years, to change significantly, yet properties turn illiquid overnight. There are now perfectly wonderful homes sitting in pockets around the GTA which have been on the market for a year.

Finally, if stocks are harbingers of tomorrow, then how can this be good for real estate? Slower growth, more unemployment, less business investment, falling commodity prices, or a recession – all of that spells trouble for family budgets and consumer confidence. In a month or two, who in their right mind would be willing to buy a house for what the owners were asking in July?

But the biggest issue everyone you know faces is simple. They’ve put all of their faith in a single dangerous asset. For most of us, a house is a financial plan, an investment plan and a retirement plan. But, it is none.

Finally, about Barry and his babe. Don’t know what their paid-for home is worth (Hamilton’s relatively cheap), but outside of real estate and a piddly locked-in corporate pension, they’ve just $60,000 in liquid assets, half of it in cash. At age 45, that’s failure.

Two kids, college costs looming, then retirement, and the potential that a glacial economy could freeze their real estate, trapping inside whatever equity exists. It was a gamble they could well lose, channeling all their cash flow into paying off real estate debt, then acquiring more, and ending up cash-poor at exactly the time in life they need money.

As for the rental income, as middling as it is, rents are one of the prime casualties when real estate values stumble.

So sell. Carpe diem, dude. Liberate the cash. Invest as I’ve detailed. Diversify now. And I mean it. Now.

174 comments ↓

#1 @crazyfasteddy on 10.03.11 at 8:56 pm

No, it’s not 2008…. it freaking 2007!

#2 Anonymous on 10.03.11 at 8:58 pm

Occupy Toronto. October 15th.

Expect us.

#3 timo on 10.03.11 at 9:08 pm

http://www.economonitor.com/blog/2011/10/china-will-retaliate-if-us-imposes-sanctions/?utm_source=rss&utm_medium=rss&utm_campaign=china-will-retaliate-if-us-imposes-sanctions

If the US goes forward with tariffs, the Chinese cannot let this stand because it would undermine the Communist Party’s authority domestically. At a minimum China will retaliate in kind. Potentially they could escalate. Depending on the size of the sectors affected – to date, we have seen tariffs on chicken, steel and tires – this could derail America’s nascent technical recovery, which I see leading to lower employment and output and depression

Damn, natural progression to finger point and pass blame. The world better wake up and fix this otherwise barriers are on the way and that is not good.

#4 vatoDETH on 10.03.11 at 9:25 pm

Last night I called oil to drop below $50 by Christmas.Today’s market seems to be pointing towards that prediction coming closer. It hit $33 when the first bust hit in 2008.

Everything bounced back over the last few years, but did not peak as high. Apparently that is typical of a boom, there is usually another peak shortly. This is followed by a decline back to the norm. I personally still believe that oil is a bubble.

The global economy is slow and never did recover. We’re falling back to reality now.

The foundations of the Alberta economy will crack a little more when oil drops. I personally don’t think that high oil prices justified the real estate market prices, but they did justify the hype. I’m not looking forward to unemployment in Alberta, but I’m looking forward to realistic housing prices.

If the timing hits Alberta with lower oil prices, higher unemployment and interest rates…

#5 LH on 10.03.11 at 9:28 pm

6.6% gross return (before expenses) is not bad
If the mortgage is floating at prevailing rates of P-0.5 or better I’d say hold on.

Property is illiquid and the Ontario (+Toronto for those lucky enough to be in 416) land transfer tax is a killer. Not to mention the agent’s cut.

#6 LH on 10.03.11 at 9:30 pm

One more thing.. if the mortgage is fixed then an early discharge can be VERY EXPENSIVE with current market interest rates where they are.

http://www.canadianmortgagetrends.com is a great resource for such issues

#7 Stinky the Fish on 10.03.11 at 9:33 pm

Sh-t I ain’t buying real estate.

#8 Calgary Illusion on 10.03.11 at 9:37 pm

“Realtors will tell you that property is stable compared to, say, shares in Bank of America.”

As soon as Buffett bought 5B in BAC, I shorted this piece of crap institution…..and loving it. As much as people tout Buffett – he is now a government shill

#9 Ward Cleaver on 10.03.11 at 9:42 pm

Garth, a mere few months ago you listed multiple rental properties on your blog. These were properties in Southwestern Ontario in cities such as Windsor. Why would you have posted these as potential investments in view of your overall view towards real estate? June and I need an answer on this one.

Own as much real estate as you want, but don’t put the bulk of your net worth in it – or any one asset. Of course investment real estate can be a valuable thing to own, but not to the exclusion of liquid assets. Tell June you need a corrective roll in the hay to restore perspective. — Garth

#10 vv on 10.03.11 at 9:46 pm

Just heard on CBC, the analyst actually saying that Vancouver real estate is in bubble and he see atleast 20% correction in housing market…..

#11 Kilt on 10.03.11 at 9:52 pm

Hey Garth.

They mention $1800 a month income. What is the monthly cost? If they are clearing a profit, then why sell. If they sell and take the $50,000 and invest in CASH or ING index funds, it’s not like they will be getting any real return on their money. Even if they stuck it in preferred, bonds, and trusts, they likely can only hope for 7 to 8% ($4000 a year). They may be netting more than that on the monthly income option and still have the tenants paying for the place.

If it is a rental, their only risk is if rents drop (unlikely for a dorm) or if they have to renew at higher rates (again unlikely considering the uncertainty in the economic outlook). They are talking about keeping it until retirement which is a long way off for a 45 year old. 20 years down the road the place will likely be worth 50% more than it is now and rent will be a lot higher.

Seems to me they just need to focus more on saving money – which they obviously are starting to do with the TFSA. They should buy some bonds in the TFSA so they get a decent return without the tax on interest. Then save up money in a high interest account for emergencies. Cash in a TFSA is pointless.

Kilt

#12 Victoria Tea Party on 10.03.11 at 10:00 pm

#3 Timo

“NEARER MY GOD TO THEE…”

Yer right about China OK, Timo; but Mr. Obama will have the right, if not the duty, to veto such hair-brained trade protectionist nonsense.

If, however, in trolling for more votes, Obama actually approves such legislation then it’s 1929 all over again. In fact, it probably already is! What the heck! With that in mind…

…ONCE AGAIN, A VISIT TO MARKET TICKER’S KARL DENNINGER.

This chap correctly predicted the 2008 market/economic disaster and has been pounding the doomsday drum ever since, because he says more bad stuff is still in the pipeline, so to speak.

Today he excoriated the US Congress (something he does often) and warned investors of upcoming market moves (manipulations) that will lead to tears:

“…Yeah, there will be bounces and there will be up days, but you can’t ignore the facts – the market is coming apart at the seams, the bond market and credit markets are telling you that credit is about to lock up again (look at “high yield”), base metals are telling you the economy is headed for a Depression (copper in particular), the European Union is on the verge of fracturing, China’s stock market is in freefall and what’s worse, firms that are reliant on credit markets with less-than-excellent credit ratings or otherwise are reliant on leverage are getting literally destroyed on a daily basis with 10% or greater stock price declines.

All of this says that a credit market lockup is imminent – either actions are taken to stop it now or you better hide under the desk….

You’re out of time and you’re out of scams Congress. Either face the truth or watch as what will happen unfolds – and yes, it’s your responsibility.

…Congress, you deserve what’s coming and the people should throw your asses — every one of you — into the street. You’ve had four years to resolve this with 100% knowledge of what happened and have intentionally, willfully and with full knowledge screwed every American sequentially — not once, but now twice with your lies, scams and schemes intertwined with those of the Wall Street “mavens.”

So there!

Continuing on this note, on Monday Toronto’s market was way down, again, just like last week, as was the Dow, Europe and Asian stock markets. Asia is continuing the downward slide as I write this stuff.

I know Garth continues to recommend equities and bonds in preference to buying real estate, but I believe some caution is called for by investors who are now considering putting more loot into the stock markets.

My suggestion would be to wait until prices are much lower as I believe they are headed in that direction for the next while.

Meantime, the USD seems to be the only “safe” investment, short-term, right now.

And THAT’S not saying much is it?

Caution, please.

#13 Smoking Man on 10.03.11 at 10:05 pm

Now thats a pic

#14 Smoking Man on 10.03.11 at 10:06 pm

2 Anonymous on 10.03.11 at

Make sure you give the homeless lady some lose change

#15 bigrider on 10.03.11 at 10:09 pm

Why and how is it that the average Canadian out there still cannot see that the greatest risk to their financial well being always lies in the asset they have the most of. In the overwhelming majority of cases, this is their homes.

Secondly ,why is it that as an asset declines in value people do not see the reduction of risk yet as it rises they see safety. Seems dyslexic.

Anyway a while back someone on this blog asked the difference between market timing and portfolio re-balancing. Market timing is the act of trying to guess the direction of an asset class and placing a financial bet . Re-balancing a portfolio is the act of removing some money from an asset in a portfolio that has appreciated to buy an asset in same portfolio that has declined in order to re-align portfolio to original allocation. The re-balancing is not a bet on market direction or direction of an asset.

In the most recent sell-off ,money managers are most certainly selling some bond holdings which have gone up to buy some equity holdings that have gone down in order to re-align to previously determined asset mix. It is not a call on asset direction at all simply a rebalancing.

Hope this helps.

#16 bigrider on 10.03.11 at 10:13 pm

Bidding wars for rentals now.
The pumping goes on and on..

http://www.moneyville.ca/article/1064037–condo-rentals-in-high-demand-as-bidding-wars-break-out-for-prime-units

#17 Keeping the Faith on 10.03.11 at 10:14 pm

#9 Ward Cleaver
Why are there so many idiots that come to this blog? “…Why would you have posted these as potential investments in view of your overall view towards real estate?”

A balanced portfolio of investments, i.e. real estate <30% of your networth is a world away from these screwed 40 somethings that couldn't spell 'asset allocation'.

Sometimes people drive me nuts by only choosing to understand the parts they like or in this case, dislike. It also explains the attraction to HGTV and how people will watch anything that supports their worldview.

By the by, Happy Tenants Day!
Renter-4-Life!

#18 timo on 10.03.11 at 10:17 pm

http://uk.finance.yahoo.com/news/Chancellor-Rules-Out-Public-skynews-2320486782.html;_ylt=AlR.eKE8AWWHLgP4bFDUQn_Sr7FG;_ylu=X3oDMTE4amJqdmcyBHBvcwMzBHNlYwN5ZmlUb3BTdG9yaWVzBHNsawNjaGFuY2VsbG9ycnU-?x=0

“The Chancellor has ruled out an increase in public spending and unfunded tax cuts, warning: “You can’t borrow your way out of debt.”

No stimulus in Britain. Seems the markets might just react to that because the private sector cannot stimulate. The public is going to get restless.

#19 Keeping the Faith on 10.03.11 at 10:18 pm

#11 Kilt

You shouldn’t be allowed to open your mouth around people when the topic of money comes up.

Wear a shirt, “Punch me if I mention personal finance”, it will be the best gift you could ever give your friends.

You’re a financial illiterate.

#20 Rob on 10.03.11 at 10:19 pm

Global BC tonight showed a story about young working people leaving the lower mainland (beyond Hope) due to high costs, long commutes, very high housing prices and low wages.
The subjects were heading to Ottawa and Newfoundland and at least one was born and raised in The Vancouver area.
We all know it can’t last, but I must admit that I was shocked that Global aired such a story.
I have never understood how working people could justify Vancouver. My DINK family unit grossed about $250k last year and with steady savings we are comfortable holding a mortgage on a house worth no more than $425000 with some equity.
I have lived all over BC and though I miss certain things about it I am 100% happier a little further east in Alberta.
We have more time and money to travel due to better jobs and higher income and lower housing costs. I also know that we spend far more time in the mountains than 99% of Vancouverites. 1% live it, 99% just look through their windows at it.
Oh, and an added bonus of more disposable income is we can escape to a place with Palm trees just about anytime we want.
If we lived in Van in a similar house and hood we would
only be able to afford to sit in the rain and tell ourselves how lucky we are.
No wonder young people are packing up. Keep praying for higher house prices you pumpers. You make your own bed people…careful what you wish for.

#21 Keeping the Faith on 10.03.11 at 10:19 pm

#15 Bigrider
Thank you for some sanity.

#22 bigrider on 10.03.11 at 10:20 pm

Not sure but could any of this be true. Multiple offers on condo rentals and people coming to showings for rentals with references and credit records in hand offereing to pay more? Not enough rental condo supply?

I know prices are overblown but what about demand?

http://www.moneyville.ca/article/1064037–condo-rentals-in-high-demand-as-bidding-wars-break-out-for-prime-units

#23 palebird on 10.03.11 at 10:21 pm

#4 oil may drop, I am pretty sure it will but not for long. It will never stay down below fifty or sixty a barrel, times have changed and it is becoming a scarce commodity. Demand in the western world may taper off somewhat but demand from the developing countries, even if we are all mired in recession, is still going to keep ticking up. Will the price over the next few years sustain the oilsands, don’t know but the oilsands are not going away. Was not too long ago and the oil sands were sustainable on peak prices..but peak prices have now become the norm..hmmm

#24 T.O. Bubble Boy on 10.03.11 at 10:26 pm

Dollarama up 2.6% today – one of only a handful of TSX stocks to post a gain.

The future is now!

#25 Smoking Man on 10.03.11 at 10:28 pm

What is the most re used and used most popular word in the schooling profession .

Note: I did not say Education.

1) Creativity
2) Problem Solving
3) Productivity
4) Consequences

If you guessed 4 ding, ding, Ding Winner, winner chicken dinner, yes smashed tonight.

#26 Tim on 10.03.11 at 10:33 pm

Finally a reason to come to this blog, keep up the pics Garth. Is it too late to short oil? Is it too early to buy Teck Resources?

#27 NAGA on 10.03.11 at 10:51 pm

Decision to sell not very smart.

Better option – but depends on mortgage terms – is to refinance to 80% of today’s market value – which may well be close to $400k. So you now have about $145K of cash to either buy solid stocks that have recently been beaten down – or even use some of the strategies that Garth has outlined on this blog.

If you find that the market is too crazy and unpredictable for your risk/stress level – then hang on to the cash for the coming RE correction and get yourself another rental property. After all even Garth believes that REITS are good value – so you can go one better and create your own REIT and save all those fees. You may want to diversify by type of RE and location.

Finally remember that the mortgage interest is tax deductable, all expenses can go against offsetting other income if they exceedes the rental income and also your vehicle and some other goodies become deductable expenses – put this in your formula for arriving at return on your investment.

Even if 20 years from now your property is worth same $ as today it will be mortgage free – and the income is still a very good return on your original investment.

BTW I am assuming that your wife is so emotionally attached to this propoerty that she sweats it out with you when the students head off for their summer and you both have to roll up your sleves to do repairs and maintenance. But hey it beats paying membership fees at fitness clubs.

#28 timo on 10.03.11 at 11:06 pm

http://www.fico.com/en/Company/News/Pages/09-30-2011.aspx?source=patrick.net

Housing Prices Unlikely to Recover Before 2020,
FICO Survey Finds 73% of bankers surveyed see elevated level of mortgage foreclosures for at least five years

This is not the best of news. Bloody credit bubbles.

#29 City Slicker on 10.03.11 at 11:09 pm

Garth speaking of BNN, I’m just watching it and Berman from Berman’s call just said banks are in trouble all over the world, except Canada. Maybe we’ll weather the coming storm?

#30 PesaMingi on 10.03.11 at 11:24 pm

http://www.zerohedge.com/news/some-fun-analogies-rhyming-history-and-repeating-futures

OK, OK, here’s the entire post:

We round out the evening with this simple SAT-type exercise:

Oct 3, 2008: SPX=1099.23; VIX=45.14 is to Oct 3, 2011: SPX=1099.23; VIX=45.45

as

Oct. 10, 2008: SPX=899.22; VIX = 69.95 is to ….

Time to buy that VIX ETF, whatsit called again, or that double short SPX one…

#31 Not 1st on 10.03.11 at 11:25 pm

So let me get this twisted logic straight;

– if houses or gold or commodities start to go down, thats a bail

– if equities or bonds start to go down, thats a sale

Doesn’t make sense at all and has never been explained in this blog since its inception. Because of liquidity? The stock market is no more liquid than anything, its all about price. Sure I can unload my stocks in seconds with a trading account but at what price? If I don’t have my price, I don’t have any more liquidity than anything else. Same goes for my house. I can have it sold in an afternoon, if I price it to move.

#32 WI BOOMER on 10.03.11 at 11:31 pm

BIGRIDER #15

I would hope your rebalancing is done on a predetermined periodic basis, say every 6 months or even anually. I personally do it semi-anually.

Right now I am looking to ADD to equities, but think there is short term downside movement ahead. Always best to buy lower if one can. Most bonds have had a surprisingly great run. Almost time for the Equity side especially the better dividend payers to get put into my ol portfolio bag. REITS look good after recent weakness as well.

Of course, who knows? We might be on the way to the toilet, especially when the politicians get inclined to “help”

Enjoy the wine, our time is short as our SMOKING MAN says, he has a great outlook on the entire vista!! Cheers

#33 Goldfinger on 10.03.11 at 11:34 pm

Garth writes: Stock prices can turn on a dime when good news surfaces, and anyone buying or selling has 100% liquidity. Losses can be restored as quickly as they were incurred.

Tell that to the Japanese. And neither the US nor Canadian markets have recovered to their 2008 levels and it is very very very very very unlikely that they will this decade. The lost decade of equities was 2000 – 2010, the lost half century of equities will be 2011 onwards. RE will ultimately trump equities by a country mile before this is all over but not before there is a bloodbath in RE and Equities. Unless you are a day trader or a Goldman Sachs insider, you will lose in equities, it is a rigged game, a casino and you ain’t the house.

#34 nonplused on 10.03.11 at 11:37 pm

Nice post Garth. I sense growing urgency in your tone, which I agree with. Time is running short.

I know a lady in a similar situation who owns a house and a condo which she rents out, mortgages on both but not levered to the point she needs CMHC. I keep telling her to sell the condo, which she wants to do because she’s grown to hate being a landlord and the condo board. But it’s always “later, after they fix the elevators and the market is stronger”. I’m like, you already paid the special assesment for the elevators. Sell. The condo board even painted her stall out of the parkade because it didn’t get used in August. She got it painted back in, but this is the sort of things the numbskulls that run a condo board will do. “Sell”, I says. “Yes, but later” she says.

#35 Tom from Mississauga on 10.03.11 at 11:38 pm

Is that 1,800 a month in rent not including the 3 or 4 summer months when students are back home. There is no way that property is cash flow positive on the year. Get out while the getting is good. Go with the REIT instead. They come with a professional manager attached.

#36 Nostradamus Le Mad Vlad on 10.04.11 at 12:23 am


1:09 clip Judge for yerselves. Garth’s pic or this?
*
“Too bad. Mars and Venus. . . because she is emotionally attached to the property. Dangerous assets.”

Describes roughly half or more of Cdns., however there is hope. Ditch the rental, pay the bills then re-align the portfolio using TFSAs and non-registered account — buy low, sell high. May take a few years, but it’s worth it in the long run.
*
James Turk says this collapse is large (may be an understatement); Japan could pay Greece’s debts. “That’s one way to solve the problem of a strong yen.”; Leaders if they can be called that) are leading the world into a depression. Dad (Nostradamus Jr.) has always maintained the US will bankrupt TROTW; Germany can’t leave the Eurozone, but can it resurrect the Deutschemark? Mad Hatter’s Tea Party (the Eurozone), Captain Hook Who is on the hook if Greece goes belly-up (the IMF) and Qatar Buying US$10 bln. of gold. I would invest in milk-chocolate wafers.

2:04 clip Anonymous says it will take down Dow on 10-10-11. Is Anonymous controlled by TPTB? Easy for them to manipulate the markets; Importing Shoppers Suggestion: Get rid of the TSA and DHS; Belgium, Greece and Manufacturing.

Warning Does contain some truths, but it should be mixed with everything else that’s going on, but it could go with this — Link in Martial Law? Everything is possible; Fukushima Ozone, Unintended Consequences Fukushima increased Arctic ozone loss and Cesium in Bay Area milk doubles in month and 6:38 clip Fukushima was safe. 143 reactors are safe; Disposable Nukes But where to dispose of it? Gibson Guitars There has to be a reason why the US Feds. are making life so difficult for the company; Obomba has a license to kill citizens; Arab Backing After the US cut the funding to Palestine, Muslim countries stepped up to the plate and replaced it; No Smart Meters Stick with analog, and Profits from Smart Meters (The Tyee).

Muslims winning, but no one will ever see this in the m$m; China suspending train projects, and China Becoming urban at record pace; Sketch, please Having fun at TPTB’s expense; Putin may not allow Eurozone to continue stealing Gazprom’s stuff much longer and this may expedite matters; ESPN drops Hank Williams from MNF.

#37 new-era on 10.04.11 at 12:36 am

Yeah American (the biggest ecomony) is going down the toilet and the Real estate pumpers says, its never been a better time to buy

How does American’s like Obama change

http://www.cnn.com/2011/10/03/politics/occupy-wall-street/index.html?hpt=hp_c1

#38 Mackie on 10.04.11 at 12:45 am

I really don’t see how you can say “failure” for this 45 year old couple, both with pensions ( most cdns) have no pensions. Mortgage free (most cdns in their mid 40s still owe a fortune on their mortgages.) 30 grand in RRSPs and another 30 in TFSAs as well as a rental property is hardly a failure in my book. I know plenty of 40 somethings who a fortune on a mortgage, no pensions, little to nothing insavings, Lines of credit maxed out… That’s “failure”

Get new friends. — Garth

#39 Analyst Analyzer on 10.04.11 at 12:46 am

Where are these houses that are sitting there for a year in the GTA? I’d like to take a look at these and send them some lowball offers.

Thanks

#40 Tom from Mississauga on 10.04.11 at 12:51 am

Garth, quick question, is a large part of the US deficit now because the US banks are not paying corporate taxes that they did during the boom. And will say, France, have the same problem with structural deficit if they forced say, BNP, to write a pile of Greek debt off. Asking cause you are the government revenue expert.

#41 vyw on 10.04.11 at 1:17 am

Nope.
They’re cash-flow positive. Keep the rental. Go floating at 2.2% = $250 a week for your mortgage payment. Gross rent is $1800. Subtract taxes, maintenance and throw all net profits at the mortgage principal and sinking fund for repairs. Try to be mortgage free by age 55-60.

The house is mortgage free – so they need to save the paycheque (charge yourself $500 rent) for the kid’s education.

Keep contributing to the TFSA and RRSP and invest in bonds for now. They may have to liquidate the TFSA in the future to pay for the rental mortgage if rates climb (3 years from now?) or if the kids need help with university (10 years from now?). At age 55, start to liquidate the RRSP before age 65 – calculate the extra dollars to the next tax bracket, pay the extra tax, pay down the mortgage.

In 20 year’s time, they have pensions, a rental home and their own home -> they’ll be fine, better than most of their cohorts.

Alternatively if managing a rental is too much hassle – then just sell it, invest elsewhere. They should get a good price because the cash-flow is positive.

#42 Morry on 10.04.11 at 1:24 am

“20% correction in housing market…..”…would be the best thing since sliced bread! Hope it happens soon. AND our family own houses! 20% of 1mill is peanuts! The market is also gong down by 10-15%

#43 Jane24 on 10.04.11 at 1:28 am

Don’t know about Canada but here in England rents are really going up as more folk either can’t afford homes or are waiting to buy. Well chosen rental property is doing very well and lots of good tenants around too.

We have a grand total of two furnished flats on the beach and they are never void.

Does help that here the tenant pays all utilities and the property (council) tax, which is billed by the local Council directly to the tenant.

So a balanced portfolio in my humble opinion does have room as Garth says for some RE rental. Nice income indeed for old age as I doubt that govt pensions will last much longer. It will be every family for themselves.

#44 NorthOf45 on 10.04.11 at 1:35 am

Good advice Garth. Being in Hamilton-Ancaster, I’m starting to see more and more SFH’s not selling, coming off the market and being rented. Cheap is a relative term. Living in Hamilton for 45 years, you get to see a city in ultimate decline but with no relief on city taxes or housing value. Prices here may seem cheaper to people in Oakville or Toronto, but if you’re from here, there are NO deals to be had. Anything that looks like a deal is typically a dump or is in the bowels of the city. Barely affordable new builds are located in treeless soul sucking surveys that “feature” 35′ lots and single car garages. The realtor-developer cartel here is a close-knit group and price stickiness is all too common. Developers would rather let a lot sit for 3 years rather than waive the lot fee to move it quicker. Imagine buying a $400K new build and having your kids still playing on dirt mounds next door 3 years later.

By the way, the flip down the street did not sell after 90 days and a 25K price reduction. Its now off the market. I forsee it being rented out shortly. I can’t see any further price reductions or flipper-boy is going to lose his shirt.

Lastly, if you get a chance, you should check out My First Sale on HGTV. Surreal would be the best way to describe this show. Example: Buyer is selling their Dallas home they bought 5 years earlier for $250K. They want out now so they list the home for $247K and because they “only” owe $235K on their mortgage, they hope to clear a $12K “profit” to put towards their next home. Unbelievable, there’s no mention of the interest they paid to the bank over the 5 years, ie. what the true net gain/loss is. That the sellers I’ve seen so far on this show don’t expect any true equity gain on their homes when they sell is freaky to watch from this side of the border.

#45 new-era on 10.04.11 at 2:28 am

#13 Victoria Tea Party

Totally agree with you on that. Problem is we don’t know what will be next safe haven.

It looks like China has A real estate bubble about to burst. Canada will follow soon after.

All countries in the world has huge debt which will never be repaid. In the coming months, I believe equities will get alot cheaper.

I would not put everything in gold either but would hold some just in case the Fiat currencies get re-based.
Its interesting times people. I would find a place to duck and hide and hope my future doesn’t get totally devastated!!!

The market looks like its going to take a hit too. But hopefully there will be some cheap Equities to jump on just like 2008 and the 1980’s

#46 Math is Fun on 10.04.11 at 2:59 am

Garth, you should have a limit placed on the length of comments left here. Some are just waaaay too long.

#47 gadzooks on 10.04.11 at 5:17 am

We have reached the end of the road for the Keynsian Libs whose notions of inflating in order to keep spending on bigger pay packets for unionized parasites has hit the wall. JM Keynes idea was to keep the inflation high at two percent ad perpetuum was idiotic….2 x’s 50 ( years of Keynsian idiocy) = 100……100% of anything…is everything…and we just got there. thats why Greece, UK, US and now Canada is broken. Keynes and the Libs didn’t have the intellectual power or the political patience to envision that the world would last 50 years after the 2nd World War economy was created to featherbed the unions and other civic ‘service’ parasitism.

What we will see in EU circles and here is financial capitulation by the people who actually control the wealth of this country….believe it or not that is the common folks. Governments will have to tax to spend the status quo…of course the parasites will bawk…as they are in the EU etc…but the fact is that YOU CAN’T GET BLOOD FROM A STONE and there will be revolution of sorts. But I fear it will be the people who suffer and the parasites who keep their jobs.

#48 European on 10.04.11 at 6:35 am

I’m not gonna be part of this system!!

The people in charge have created an environment of debt. With this current system filled with money injected by the banks there is no longer opportunity for the hard working Canadians and Europeans to have anything different to show for their hard work, possibly only more debt that the bank allows them to borrow, how ironic? Work hard so that you can be more burdened with debt hahaha, its ridiculous, its like working hard to be a slave to the banks. Any sane person should be able to see though this, but obviously the world, and people around us, aka our better halves will not let this be a sane place. I’m not gonna be part of this system!

We are part of a system where you have to borrow to buy something because everyone is allowed to do the same, and the majority of us, who are not in fact prudent or savers, will borrow as much as the banks will let them.

This is a system sponsored by the banks, for the banks, and in the benefit of the banks. How are the average Canadians winning in this situation. Houses are not more affordable when you can only afford them through a bank loan. People don’t realize that things eventually balance themselves out, instead they rush to catch the band wagon before its too late as the realtor tells them. Things don’t just appear, money doesn’t just grow on trees, you have to earn it somehow, and if you think you can borrow and escape just in time with a profit you are usually wrong, unless your damn lucky, or just damn good. Most people don’t look at the big picture in the scope of time…

And what happens when you let people with no money borrow excessively from others with the future hope they will pay it back?

That’s right, Greece happens!!!

Throw it to the ground!!

http://www.nbc.com/saturday-night-live/video/digital-short-on-the-ground/1163268/

I’m not gonna be part of this damn system!!

#49 European on 10.04.11 at 6:47 am

Throw it to the ground!!

http://www.nbc.com/saturday-night-live/video/digital-short-on-the-ground/1163268/

ohh, and I like in the picture.

Howw mucch?

#50 timo on 10.04.11 at 7:32 am

http://www.cnbc.com/id/44768475

“The similarities between now and the fall of 2008 are startling,” Goldman Sachs analysts wrote in a market note.

The slowdown in growth between the third quarter of last year and the second quarter of this year is “almost identical” to that between the third quarter of 2007 and the second quarter of 2008, they wrote.

Brent prices rose towards a peak near $120 per barrel in both periods, therefore “it is only prudent to ask if we once again find ourselves on the precipice of another sharp downturn,” the Goldman Sachs analysts added.

#51 Moneta on 10.04.11 at 7:35 am

really don’t see how you can say “failure” for this 45 year old couple, both with pensions ( most cdns) have no pension
——-
Current yields on government bonds are about 2%.

Most penson plans are still using more than 4.5-5% on their liabilities and more than 6% on portfolio returns.

Many plan managers are throwing in the towel and matching liabilities ans assets at all-time low rates, a guarantee of being left behind if rates ever shoot up.

Plans are being converted from DB to DC for the 45 and younger but the reality is that it does not make a dent in the short term. They will need to go up the age curve and write down benefits. Even if you do get your benefits, they porbably won’t buy you much.

If public plans are underfunded, you can’t expect Canadians from the private sector with no plans themselves to prop up public servant plans with tax rates or higher deficits.

http://www.theglobeandmail.com/report-on-business/canadians-unfazed-by-pension-funding-woes/article2189682/

Nortel’s plan was the canary in the coal mine. Why do you think they did not compensate Nortel’s employees?
Because they know there will be a lot more.

Wake up Canada.

#52 sam.i.am on 10.04.11 at 7:50 am

@north: the sellers I’ve seen so far on this show don’t expect any true equity gain on their homes when they sell

Finally, a reality show that lives up to its name!

#53 Ludwig Von Mises on 10.04.11 at 8:07 am

#32 Ludwig Von Mises

Great points made. The distinction in the different courses of action have never been explained.

#54 timo on 10.04.11 at 8:08 am

#38 new-era,

http://occupywallst.org/

click on Livesteam

Here is the live feed . They are planning something for Wednesday ,

The coverage yesterday afternoon was very entertaining and the kids are in good spirits even with the rain.

Ah, to be a rebel and young again….wish them well.

#55 Ward Cleaver on 10.04.11 at 8:09 am

#17 Keeping the Faith

May you be shipwrecked on a deserted island with Eddie Haskell…

#56 penpal on 10.04.11 at 8:19 am

@ # 23 and @ #22 and @ # 16

Did you even read the article?

One opinion – Brad Lamb who sells condos for a living (hardly talking his book, is he? / not biased?)

How else does he rope in the suckers, he’s run out of other BS?

Somebody overpaid 30.00 / month another 100.00 per month on a base of 1,900.00 / month. Bid deal!

two anecdotes

some “bidding war”

some “journalism”

give your heads a shake

#57 bigrider on 10.04.11 at 8:25 am

I am curious Garth or anyone, what should a mid 40’s couple net worth look like in order to be deemed a winner and not a loser. Garth we know the split between RE and financial assets(no more than 40% RE and the rest in a balanced diversified portfolio) but you have never given targets on total net worth at given ages.

It’s in my book. — Garth

#58 penpal on 10.04.11 at 8:26 am

@ # 32 Not 1st

How do you figure that?

If a person can’t get a mortgage to buy , you ain’t selling your house.

In a depression, you ain’t selling anything, plus you likely have a mortgage debt (subject to changes in availabilty and rate increases), shares aren’t leveraged the same way.

How do you sell part of your house – a couple bricks at a time if you need money?

Don’t be another simpleton, we already have enough in Canada, thanks.

#59 penpal on 10.04.11 at 8:29 am

@ # 48 Gadzooks

Can no one do math in this country?

2% annual inflation doubles prices in about 35 years (rule of 70) due to compounding, not 50 years.

#60 bigrider on 10.04.11 at 8:32 am

Jean Francois Tardiff, star ex manager of the sprott opportunities hedge fund on BNN yesterday. Under his management his fund while he was there earned a compound rate of return of over 21% while never having a losing year. I know I owned it.

He stated that, after much prying by the host, that his own portfolio was 70% in cash while the remainder was in high quality dividend payers and short term (under 5 year) corporate bonds. Some gold bullion, that’s it. Bearish in other words.

He went on to say that 5 to 6 % annualized should be the best people should expect over next 5 years at least. Such a return will beat the market was his statement.

He is a trader, not an average investor with two kids and a job in manufacturing. Unless people quit working to manage their financial affairs and rebalance continuously, as Tardiff does, you are better advised to get a solid, balanced portfolio and go on with your life. — Garth

#61 Captain Cap Rate on 10.04.11 at 8:37 am

Garth said,

“As for the rental income, as middling as it is, rents are one of the prime casualties when real estate values stumble.”

Garth, as rental real estate tumbles in price, don’t the cap rates become more attractive?

Not when rents fall, which was the meaning of my words. — Garth

#62 Beach Girl on 10.04.11 at 8:40 am

# 42 vyw

Regarding liquidating RRSP’s after 55. In the Financial Post, Feb 5/2011, The Wealthy Boomer showcased London based author and financial educator Talbot Stevens, about this theory. I saved it. If you can pull it up. Does this make sense? My mother died with too much RRSP’s. She should have spent them.

#63 tkid on 10.04.11 at 9:04 am

http://www.moneyville.ca/article/1064037–condo-rentals-in-high-demand-as-bidding-wars-break-out-for-prime-units

I’ve noticed on mls.ca that rental prices for units in Toronto have gone up. I rent a condo, but there is no way I will pay more than what I am paying now. If I have to I’d rather commute from Niagara Falls than pay $1400 plus for a freaking studio. There are times when I am convinced Toronto is insane.

#64 Dr. Nick Riviera on 10.04.11 at 9:06 am

#32 Not 1st

“So let me get this twisted logic straight;

– if houses or gold or commodities start to go down, thats a bail

– if equities or bonds start to go down, thats a sale

Doesn’t make sense at all and has never been explained in this blog since its inception. Because of liquidity? The stock market is no more liquid than anything, its all about price. Sure I can unload my stocks in seconds with a trading account but at what price? If I don’t have my price, I don’t have any more liquidity than anything else. Same goes for my house. I can have it sold in an afternoon, if I price it to move.”

——————————————

Excellent post! I’d like an answer to this question as well please Garth…

Concentrating wealth in one asset class is deadly, and yet people can’t help themselves when it comes to houses or gold. I can only warn, and point my hand in the direction of a better path, where people hedge their risk with diversification, have increased liquidity, freedom and choices. Real estate, especially, can entrap and then erase wealth. I truly hope more people here heed the lessons just learned by middle class families in Ireland, America, Britain, Spain and most of the western world. But if they do not, it wasn’t for want of my trying. — Garth

#65 Peter on 10.04.11 at 9:14 am

Dear Barry,
Peter from NYC here – you might check out a blog from a few days ago where I similarly asked for advice. Seems the crowd is a bit nicer to you than me. My advice to you is to sell this student housing. On $325,000 property rent of $1,800 per month represents an annual GROSS cap rate of 6.6%. From this return you need to factor all the costs of homeownership and financing. Not a great deal here. There are student housing units in South Carolina for $230,000 and they shoot off $2,500 per month for a gross cap of 12% + this covers all financing expenses plus property management (which is turn key – you never need to play landlord). Sell – take your $75,000 which I am sure you can clear – take a 7 or 10 year fixed rate on your current home – take out $165,000 and then take your $240,000 down south where you will get a much better return. Check with a US Accountant first – you want to make sure that you will be able to offset your SC Revenue against your Ontario interest expense. I know this can be done in the opposite situation (buying Canadian using a US mortgage) just not sure about the other way around. If you are seriously interested send me an email address and I’m happy to forward you details on this property. I AM NOT a real estate agent and I don’t get any type of referral fee. I actually bought in this development.

#66 Bruce on 10.04.11 at 9:27 am

Not 2008, Garth?

http://market-ticker.org/akcs-www?post=195357

You take seriously a person who writes this? “Until you withdraw your consent through lawful refusal to produce that which can be taxed, force political change to take place and the thieves and liars to be held to account, it’s not going to change. You will be shorn like sheep and occasionally one or more of you will be turned into lambchops and consumed.” This is not a victims blog. Go occupy Wall Street. — Garth

#67 bigrider on 10.04.11 at 9:30 am

#61-Garth to Bigrider on Jean Francois Tardiff- “He is a trader…. better to have a balnced portfolio and get on with your life.”

I totally agree. I only posted the summary of interview to give a perspective on an individual who has demonstrated an outperformance both from a bottom up stock selection and macro call basis.

He is very good.

#68 P on 10.04.11 at 9:53 am

Garth,

Do you have any general guidelines for someone starting from a cash position today and looking to invest in a balanced portfolio as you recommend in your book. More specifically, should you purchase all the selected assets at the same time or employ some type of phased approach? What things should one be considering?

Thanks for all the great information.

p

Buy what’s on sale, which right now are equities. Wait to buy what’s expensive, which includes bonds and preferreds. If you have six figures to invest, consider getting help. — Garth

#69 dddd on 10.04.11 at 10:04 am

trader alert

got a nice 10pct from yesterday in hxd

had to take it , hope for a bounce so i can get back in

dow 9k is getting closer everyday

#70 timo on 10.04.11 at 10:09 am

http://www.bloomberg.com/news/2011-10-04/spain-drugmakers-eye-7-billion-bond-sale-backed-by-unpaid-bills.html

I cannot pay the bill now, what makes you think I can pay it later? Kicking the can down the road will not solve anything because normal people are broke. What a joke.

#71 disciple on 10.04.11 at 10:18 am

Using the rule of 72 to estimate compounding periods:

To estimate the number of periods required to double an original investment, divide the most convenient “rule-quantity” by the expected growth rate, expressed as a percentage.
For instance, if you were to invest $100 with compounding interest at a rate of 9% per annum, the rule of 72 gives 72/9 = 8 years required for the investment to be worth $200; an exact calculation gives 8.0432 years.
Similarly, to determine the time it takes for the value of money to halve at a given rate, divide the rule quantity by that rate.
To determine the time for money’s buying power to halve, financiers simply divide the rule-quantity by the inflation rate. Thus at 3.5% inflation using the rule of 70, it should take approximately 70/3.5 = 20 years for the value of a unit of currency to halve.
To estimate the impact of additional fees on financial policies (e.g., mutual fund fees and expenses, loading and expense charges on variable universal life insurance investment portfolios), divide 72 by the fee. For example, if the Universal Life policy charges a 3% fee over and above the cost of the underlying investment fund, then the total account value will be cut to 1/2 in 72 / 3 = 24 years, and then to just 1/4 the value in 48 years, compared to holding exactly the same investment outside the policy.

#72 Dr. Nick Riviera on 10.04.11 at 10:21 am

Thanks for the clarification and answer to that question Garth, makes sense since you can diversify with investments to a much higher degree than bricks and mortar.

Gold IMO has a much higher level of liquidity than bricks and mortar (and you can take it with you if you need to head to your bunker in the mountains! …just kidding) but I do understand your point about the dangers of going “all in” with metals. It has a part to play in a diversified plan.

;)

#73 Smoking Man on 10.04.11 at 10:23 am

DDDD

Chicken. Why would u do that few more 1000 points to go mabey more

#74 disciple on 10.04.11 at 10:48 am

The powerful mathematics of compound interest are only lightly touched upon in our “free” education system run by the banks’ henchmen, no doubt. The universities and colleges hand out credit card applications with the curriculum materials, for goodness sake.

It’s about time Canada experienced a deflationary credit crunch. Because like snake venom, which is poisonous, at the same, time, it can also be a potent medicine if we use it right. So go ahead, banksters, bite me!

#75 The Millionaire Next Door on 10.04.11 at 10:55 am

#58 Big Rider Your question pertains to what a person should be worth at any given age. Here is the formula from the book The Millionaire Next Door.

The authors suggest that an Average Accumulator of Wealth (AAW) should have a net worth equal to one-tenth their age multiplied by their current annual income from all sources. E.g., a 50-year-old person who over the past twelve months earned employment income of $45,000 and investment income of $5,000 should have an expected net worth of $250,000. An “Under Accumulator of Wealth (UAW)” would have half that amount, and a “Prodigious Accumulator of Wealth (PAW)” would have two times

#76 Macrath on 10.04.11 at 10:57 am

#68 bigrider
Thanks for the explanation of timing vs re-balancing.

Jean Francois Tardiff hedge fund guru. They make 20% guaranteed, gambling with other peoples money. Now there`s a career. He would often mention Uni-Select as a good investment ( UNS.TO ). Explaining that we will soon all be driving clunkers and there will be strong demand for car parts.

#77 dddd on 10.04.11 at 10:59 am

DDDD

Chicken. Why would u do that few more 1000 points to go mabey more
——————————————–

cluck cluck…..

yes more downside – but a small bounce did happen – i can buy .35 cheaper right now, and i will soon

#78 Bailing in BC on 10.04.11 at 11:21 am

Utopia?

#79 disciple on 10.04.11 at 11:35 am

Gallup has come out with a new book: The Coming Jobs War. Here are the arguments by this gov’t shill operation:

-invest in entrepreneurs, not innovation
-double the number of engaged employees
-encourage small-business startups
-be smarter at winning global customers than anyone else
-put prevention at the center of healthcare policy
-wage war on the school dropout rate

I find the above self-contradictory, and title itself inflammatory. Mind control at its finest.

#80 Snowboid on 10.04.11 at 11:36 am

With apologies to BPOE…

http://thetyee.ca/Mediacheck/2011/10/04/BC-Best-Place-On-Earth/

#81 I'm stupid on 10.04.11 at 11:36 am

#16 #22 #23

You know brad j lamb built those units. They were for sale but he couldn’t find greater fools to buy them. So now they are for rent. Prime units my ass, if you like to hang out with the homeless and shoot heroin that’s prime for you.

#82 worrywart on 10.04.11 at 11:37 am

Garth can you kindly provide insight on where rental property prices are headed specifically in core of Ottawa. Given the future downsizing of public servants. Also, if boomers will be selling there suburban homes, they need somewhere to live that is to buy or rent. So would this not increase home sales and/or increase rents?

Rents always fall along with real estate values. — Garth

#83 bigrider on 10.04.11 at 11:52 am

Garth, another issue/question I would like you to address.

What is an acceptable level of volatility in a 40/60 fixed income to equity portfolio? In other words how much can it be allowed to swing before it is too much? In keeping with question, how much should such a portfolio be down from it’s recent peak

Markets are off 20%, as opposed to 55% in 2008. Just relax. You’re bleating again. — Garth

#84 disciple on 10.04.11 at 11:53 am

The Big 5 banks in Canada are guaranteed by CMHC at least the principal back on the mortgage loans they forwarded to their victims. Do they care if the borrowers ever pay it back? Does Garth love gold-lickers?

That fat mortgage you signed up for, to the bank, is like chicken on a stick dripping cash instead of fat. No sir, no more mortgages for me, thank you.

Consumer credit is already declining across the country. Maxed-out homeowners will need to liquidate just to buy inflated consumer staples. The delusion of grandeur will fade, stubbornly, but it will fade.

The banks’ henchmen, our traitors in government, have already been busy cooking up sneaky ways to implement tax increases. Because they must, or the banking system will fail. But guess what, we HAVE failed. Politics must now trump economics; therefore, the full mind-control bag of tricks will soon be unleashed upon us. You will need a guide through the mental maze.

I will be here to show you the way.

#85 worrywart on 10.04.11 at 12:09 pm

My experience in Ottawa in the late 90s was that property prices fell dramatically and rents increased because vacancy rates were very low, less than 1 percent. So wouldn’t the boomers keep the rents high by keeping vacany rates low? If they sell their Mc Mansions as your are predicting.

#86 Midas on 10.04.11 at 12:11 pm

Mike Brock in the National Post: The hidden Canadian housing bubble.

http://fullcomment.nationalpost.com/2011/10/04/mike-brock-the-hidden-canadian-housing-bubble/

#87 Dark Wettler on 10.04.11 at 12:15 pm

Sorry, gold is still up 17% this year. It has handily outperformed every other asset that you have recommended in the time you have spent trashing it on this blog.

People need to understand the historical role of gold from a global perspective; everybody seems to have a North American centric view.

Those are just the facts. Don’t know why you have such a hate on for the stuff.

Down another 2.5% today. For the reading-impaired, I will say this again. I do not hate gold, just lament for the people who bought into the emotional doomr, greed-infused claptrap and overweighted in the stuff. Hold 5%. More than that is too much. — Garth

#88 Living in AB on 10.04.11 at 12:15 pm

Garth, for the average Canadian how much should have one have in liquid assets say at 30, 40, 50?
Thanks

#89 Oscar the Oracle, BIL of Karnac the Magnificent on 10.04.11 at 12:18 pm

#83 Worrywart

“Garth can you kindly provide insight on where rental property prices are headed specifically in core of Ottawa”.

Worrywart, our all seeing, all knowing leader, the right honourable Garth Turner sees trends but does not have the precise, laser precision you request in your question. It is like asking Garth what he thinks of rental rates in the north end of Saskatoon.

#90 Karnac the Magnificent on 10.04.11 at 12:21 pm

Answer: 20% year to date and heading towards 55%.

Question: How far have financial markets in Canada fallen this year and where are they headed.

Fear is cheap. Knowledge isn’t. Suggest you invest a little. — Garth

#91 Genghis on 10.04.11 at 12:27 pm

Mike Brock: The hidden Canadian housing bubble

http://fullcomment.nationalpost.com/2011/10/04/mike-brock-the-hidden-canadian-housing-bubble/

#92 Dark Wettler on 10.04.11 at 12:27 pm

Down another 2.5% today. For the reading-impaired, I will say this again. I do not hate gold, just lament for the people who bought into the emotional doomr, greed-infused claptrap and overweighted in the stuff. Hold 5%. More than that is too much. — Garth

Your opinion. Hell, it’s just what I do for a living. But I’m open minded, I bought your book.

Now down 4%. — Garth

#93 Marnic on 10.04.11 at 12:29 pm

Markets are off 20%, as opposed to 55% in 2008. Just relax. You’re bleating again. — Garth

Cool, only another 35% to go.

The metalheads never quit. By the way, gold is down over $50 an ounce today, or more than 4%. — Garth

#94 disciple on 10.04.11 at 12:32 pm

A typical basic calculator you find in a retail store, less than $10, contains an enormous amount of complexity and materials, from the liquid crystal display and flat conical rubber presspad, to the conductive silicon paint and wafer thin circuitboard that is literally a plastic sheet. The solar panel and battery chip in it are almost dinosaurs compared with the rest of it. And less than $10? Entire generations of people used to live and die on the high seas just to acquire nutmeg from a tree.

Do you see now, why I say that eventually, everything will be free? The only things that still cost money are those that contain a portion of fraud. The old system of unequal reciprocity will eventually fall on its own sword, to make way for the dawning of the new age of humanity, free of mind-controlled insanity.

#95 Marnic on 10.04.11 at 12:34 pm

Re: exponentials and compounding. One of the things I am constantly struck by is the apparent failure of the vast majority to grasp this concept.

#96 vyw on 10.04.11 at 12:50 pm

#63
Everyone has a unique situation but if you are mortgage free and expect a pension and in Barry’s case – have rental income at $1800 a month in 2011 dollars, then what do you need an RRSP for?

Draw it down even if you have to pay taxes in your current bracket ie. try not to go into the next tax bracket. Use the money to pay off pay off debts, take a vacation, buy a piano, enjoy life or if you’re a saver, use it for the TFSA.

Why wait til you’re 65+ and maybe not as mobile.

Some people are planning to draw down the entire RRSP, keeping some savings in a TFSA and just relying on the OAS/GIS/CPP. There is a 50% clawback on GIS. Seniors are living this way in their mortgage-free house today – check out your older neighbourhoods – lots of seniors living by themselves, they don’t have million dollar RRSPs.

http://www.financialpost.com/Retire+early+cheaper/4226156/story.html

I doubt they have more than a couple of hundred dollars of positive cash flow a month, and it’s taxed as income – at their marginal rate. This is no strategy. — Garth

#97 vreaa on 10.04.11 at 1:05 pm

Breaking news: MSM in Vancouver runs a sensible piece on Real Estate:

Global TV – Young Couples Leaving BC – “You’re not putting all your money into the house itself.”

Transcript and stills:
http://wp.me/pcq1o-31b

Our comment:
Kudos, on this occasion, to Global TV and to Tanya Beja, for plainly stating aspects of the effects of housing prices.
The montage of clips from the ‘Best Place On Earth’ BC advert interspersed with voice-over questions about housing is the closest Global has come to asking real journalistic questions about our RE.
It’d be even better if Global went further, and joined some of the dots:
Given the prices and incomes, we’re experiencing a ‘speculative mania’ in housing prices, aren’t we?
And, given the effects on migration that they cite, and given that prices have been driven up by bubble-dynamics, are prices sustainable?
– vreaa

#98 Bill Gable on 10.04.11 at 1:14 pm

At London Drugs yesterday, and it was tumbleweeds in the store. The usually bustling computer dept was dead. The pharmacist that keeps me alive was not in his usual great mood. He had been with the store for 20 years and he says he has never seen it this dead.

I also like to keep an eye on Open House signs in the West End. I had five on my block. Not exactly lineups, even paid shills.

My gut says that people realize they waited to long to sell.

The penthouse we RENT – is in a building that has to be at least half empty. Chinese owners are losing a ton, because they can’t sell, and the rental pool has shrunk 30%.

#99 Ronaldo on 10.04.11 at 1:21 pm

#51 Timo – “The similarities between now and the fall of 2008 are startling,” Goldman Sachs analysts wrote in a market note.

Wonder if he is expecting Gold to drop by $900 and silver by $20.00 from where they are now if things are so similar…..

#100 Bill Gable on 10.04.11 at 1:26 pm

There are signs of trouble in the China’s real-estate market, which has the potential to ripple across the Pacific Ocean and affect Vancouver housing prices.

Writing on the American Perspective from China blog, Patrick Chovanec suggests that “China’s economy may be approaching a crisis”.

Chovanec, a professor at Tsinghua University’s School of Economics and Management in Beijing, adds that “one potential interpretation of this crisis is that China is entering the terminal stage of a bubble, and that what we are seeing are the early signs of a much broader collapse”.

“For the past several months, China’s official media have been touting official data indicating that while most Chinese cities are still seeing housing prices rise, a growing number of cities are starting to see a plateau or even decline in prices—evidence, they say, that the central government’s cooling measures are finally working,” he notes. “More significant, in my eyes, are reports — which began emerging in late August — that in several cities across China, prices in primary housing markets (developers selling to homeowners) have begun falling away from those in secondary markets (homeowners selling to other homeowners). The effected markets include not only 1st tier metropolises (Beijing, Shanghai, Guangzhou, and Shenzhen) , but also 2nd tier (Chongqing, Wuhan, Tianjin, Zhenghou) and 3rd tier (Ningbo, Foshan, Wuxi) ones as well.”

http://tinyurl.com/3crapqx

#101 Devore on 10.04.11 at 1:47 pm

#32 Not 1st

Very true, there is no such thing as an unsellable asset.

Even in the US, you can sell your house in a day, if you price it to sell. Well priced houses sell very quickly, so much so that some buyers are feeling like it’s bidding wars again. The problem obviously is that not too many people can afford to price like this (under water), and even more aren’t willing to “give their house away”.

All assets are perfectly liquid… at some price.

Try it, then tell us. — Garth

#102 Moneta on 10.04.11 at 1:55 pm

My experience in Ottawa in the late 90s was that property prices fell dramatically and rents increased because vacancy rates were very low, less than 1 percent. So wouldn’t the boomers keep the rents high by keeping vacany rates low? If they sell their Mc Mansions as your are predicting.
————
Cdns had skin in the game back then. If you had equity in your house, why would you leave?

When the real estate bubble bursts, loads of owners will have negative equity and leave their homes. Couples will split and many will go back to mom and pop’s. Vacancy rates will soar.

Everyone seems to focus on the fact that in Canada real estate is recourse. In the US, some states had recourse and others not. The biggest factor that will determine whetehr owners eill keep on paying will be the amount of equity in the home.

Trust me, by the time the SHTF here in Canada, defaulting homeowners will have understood that the social contract is dead. They will not feel any guilt towards the banks.

Bankers and CMHC will finally understand that you can’t get blood from a stone.

#103 Andrew on 10.04.11 at 2:14 pm

Bidding wars erupt for prime rental condos

http://oneillrealestate.ca/2011/10/04/bidding-wars-erupt-for-prime-rental-condos/

Garth is this for real I thought most new condo’s where being picked up by speculators.. and that their was a glut coming into the market,,, please provide you views on this

Crap story. Virtually every condo in the GTA has a landlord subsidizing a tenant. — Garth

#104 Peter on 10.04.11 at 2:19 pm

Dear R.H. Garth,
Just finished reading Money Road. Like yourself – I too believed that a hike in longer term (10 year govt) rates was in the cards. It hasn’t happened – they’ve gone down instead. It seems to me that you place a large part of your bet on declining res real estate in Canada on the catylst of a hike in LT interest rates. Is it your view that prices will decline whether or not we go through a painful adjustment upwards in interest rates?

And – oh by the way – for the record – I am not a huge bull on gold and silver at these levels – like you I think 5% insurance (actually as high as 25% is good to have).

Insurance against what? — Garth

#105 Kilby on 10.04.11 at 2:36 pm

North Vancouver. 881 active residential listings (about the same as tiny Penticton)

27 sales completed last week.

On a road trip last week in the interior, I was suprised at how many people think the Vancouver market is “hot”. Probably the same percentage of watchers of Global BC…………

#106 Beach Girl on 10.04.11 at 2:37 pm

#89 Living in AB

Garth, for the average Canadian how much should have one have in liquid assets say at 30, 40, 50?
Thanks

___
I too would be interested in this info.

#107 MGTF on 10.04.11 at 2:41 pm

Garth: “As for the rental income, as middling as it is, rents are one of the prime casualties when real estate values stumble.” I assume you are referring to residential rents as recently as yesterday you suggested there is still a role for REIT’s in a balanced portfolio. With markets going down and personal debts up, a lot of retail will be in trouble, affecting that rental market as well.. How do REIT’s deliver value into the coming economic challenges?

Extremely well. Good REITs own exceptional commercial properties (towers, malls) or large residential complexes. I expect cash flow will be minimally impacted by a recession, if it occurs. — Garth

#108 Peakoilist on 10.04.11 at 2:51 pm

#90 Oscar the Oracle, BIL of Karnac the Magnificent
what are you doing calling Garth “right” and “honourable” in the same sentence. He left that game a long time ago.

#109 bigrider on 10.04.11 at 3:14 pm

#84 Garth to Bigrider. “…your bleating again”

Geez Garth, it was an honest question. I am not ‘bleating again’. I want to know what would be an acceptable amount to have dropped peak to trough in a 40/60 portfolio, or from beginning of year.

I am off 13% this year from Jan 1st. Too much ? Anyone? About 16% recent peak to trough.

I am shocked at speed and ferocity of decline , I am not bleating and have very slowly been adding to beaten up areas.

That’s all . No bleating.

#110 Jack on 10.04.11 at 3:19 pm

House prices will keep increasing, predicts Victoria Real Estate Board president

“It’s hard to look (ahead) over a couple of years, especially with the instability in the world economy right now,” said Dennis Fimrite, president of the Victoria Real Estate Board and a realtor with Firm Management Corp., when asked about the future of real estate in the region.

“People in Victoria realize real estate is a safe place to put their money still. I think we’ll see prices steadily rise for the next few years.”

http://www.bclocalnews.com/vancouver_island_south/victorianews/news/131066118.html

#111 In Garth We Trust on 10.04.11 at 3:24 pm

#85 Disciple

You said, “I will be here to show you the way”.

Disciple, our leader Garth is here to show us the way. Let us get our leadership roles straightened out.

#112 Oscar the Oracle on 10.04.11 at 3:27 pm

#96 Peakoilist

For some of us, Garth is more right and honourable that those who currently go by that title.

#113 Mr. Lahey on 10.04.11 at 3:33 pm

#96 Bill Gable

You said, “The penthouse we RENT – is in a building that has to be at least half empty. Chinese owners are losing a ton, because they can’t sell, and the rental pool has shrunk 3%.”

The Chinese can add a new word to their vocabulary for this situation. Shithawk, Bill, the new word is shithawk and it is one word they will never forget.

#114 disciple on 10.04.11 at 3:38 pm

Ego means egg. The embryo of the self. It is the only aspect of our psyche that seeks differentiation, apart from the herd, away from the pack. It defends our autonomy while retaining all of the detritus from past human civilizations. That is why it’s so attacked by your mind-controllers. It’s growth is stunted by religion, or twisted by narcissism, prevented from healthy development.

It starts early in human cultures. Culture is your enemy. Oppression of the ego starts externally by the hammers of the psychopaths through puritanical ideals present globally, and oppression continues internally through repression of personal aggression while taunted by the other psychopaths on the other side of the moral spectrum.

We live in an oligarchy. We are happy with our chains because in our infantile state, our heroes will save us, so we think. But the chains are not around our feet anymore.

#115 AACI Home-dog on 10.04.11 at 3:39 pm

do you have a picture from the front angle, Garth ?

#116 Anonymous Truth on 10.04.11 at 3:40 pm

Ive been reading this blog for awhile now…And on the topic of real estate I beleive the buyer must take a step back and honestly look at the basics behind what he or she is buying (land, materials, and labour) in a residential property. With this in mind we are grossly overweighted in real estate. Where is the added value? Its hype, a misunderstanding of future profits…its basically greed and a lame promise from a guy looking to profit from you in the end.

My thoughts..

#117 harder on 10.04.11 at 3:43 pm

YVR – september

“There were 5,680 properties on the market last month. This was a stunning 21.2 percent rise over the previous month.”

http://www.straight.com/article-477631/vancouver/geater-vancover-real-estate-sales-rise-over-same-time-last-year-listings-increase-far-higher-rate

#118 AACI Home-dog on 10.04.11 at 3:44 pm

ps….just saw a public servant from CMHC give a talk….apparently Van, Vic. & Kelowna only down slightly so far this year in values and sales activity (up to 5% drops, I think it was)…only Prince George is up; 1% in values & 3% in sales activity.

#119 Devore on 10.04.11 at 3:50 pm

#95 disciple

Do you see now, why I say that eventually, everything will be free? The only things that still cost money are those that contain a portion of fraud. The old system of unequal reciprocity will eventually fall on its own sword, to make way for the dawning of the new age of humanity, free of mind-controlled insanity.

Sounds like a utopia.

And just who in this new age of humanity free of mind-controlled insanity will make things? Dig things out of the ground? Grow them? Transport them around? Repair things? Only the ones with fraudulent intentions apparently.

#120 disciple on 10.04.11 at 3:52 pm

Moneta, you said, “Trust me, by the time the SHTF here in Canada, defaulting homeowners will have understood that the social contract is dead. They will not feel any guilt towards the banks. Bankers and CMHC will finally understand that you can’t get blood from a stone.”

I think there will be a few defaults, but what does that have to do with the myth of the social contract (btw, did you as a boomer really believe in such a thing anyway)? Also, and this is very interesting … are you saying that boomers overextended into RE as an asset class because they believed that their government would bail them out in case of default? I just want to understand your comment because I value your input. Oh yeah, and the bankers and CMHC are trying to get blood from your future children, not from stones. My two cents, thank you.

#121 disciple on 10.04.11 at 3:57 pm

In Garth We Trust on 10.04.11 at 3:24 pm
#85 Disciple You said, “I will be here to show you the way”.
Disciple, our leader Garth is here to show us the way. Let us get our leadership roles straightened out.
——————————–
I was referring to the mind control aspect. Stop bugging me and go suck on a carrot, might help you to read better.

#122 Devore on 10.04.11 at 3:58 pm

#99 Bill Gable

The penthouse we RENT – is in a building that has to be at least half empty. Chinese owners are losing a ton, because they can’t sell, and the rental pool has shrunk 30%.

Don’t forget the 8c drop of the loonie against the USD, China’s currency peg.

#123 disciple on 10.04.11 at 4:05 pm

#120 Devore… You are devoid of humility and replete with elitist propaganda. Who will do the menial labour? Seriously? That is your response? Guess what, Caesar, I will. And armies of self-aware human beings, doing things because it is right, not in service to Mammon. I know it’s hard for you to fathom, but at least you tried.

#124 JohnnyBravo on 10.04.11 at 4:14 pm

Stock markets go stupid ballistic @ 3:18 on rumours–rumours, mind you– of a Dexia bad bank, or a European TARP, or a recapitalization of Euro banks. Take your pick. Does it matter?

It’s like a stampede of hapless cattle getting spooked by a loud bang. When markets can move 400 points in half an hour on a rumour, can you blame anyone for steering clear of stocks?

Just one question now: when’s the next flash crash?

#125 Moneta on 10.04.11 at 4:16 pm

disciple on 10.04.11 at 3:52 pm
—-
I’m Gen-X.

In the US, from 2005 to 2007, many homeowners kept on making their mortgage payments because of denial, shame and scarlet lettering. Paying your debt was part of the social contract.

Canadians are even more loyal to their obligations than Americans are. However, now that we are seeing everything implode around us and witnessing the emergence of revolts, I believe Canadian homeowners behind on their monthly payments will feel no shame… nor any obligation to pay back as they see the scam.

A lot of Gen-X are cynical but this real estate boom gave them new hope. IMO, when the value of their homes tank, there will be disgust and no shame in reneging.

Boomers overextended into RE because they still believe in Santa and the tooth fairy. I think Boomers really believed things were not that bad and real estate was safe and Canada is the BPOE and… because they are mostly innumerate in a world that requires a high level of numeracy.

#126 Standard Deviation on 10.04.11 at 4:22 pm

Another dimension to consider on all of this is that the tenuous condition of the province of Ontario’s finances means that taxes, fees and utility prices can only go one way. This will have a not insignificant impact on disposable income for the average family and so the spiral begins again.

#127 Bill Gable on 10.04.11 at 4:28 pm

Uh, Mr. Turner shall and always be “The Right Honourable” – and also a Privy Council member isn’t too shabby – Minister of the Crown, and MP. Et al. I could blather on – but Mr. Turner would kill me.
He spends 12 hours a day trying to help people save their collective fannies.
The bearded one is righteous.
If we had Mr. Turner on Parliament Hill instead of Harper, I would sleep a lot better at night.

How about you?

#128 Bill Gable on 10.04.11 at 4:31 pm

Addenda > look up “recourse and non-recourse loans” – some posts today seem to intimate you can just “jingle mail” – and walk.
Read it and weep.

#129 Dr. WAYNE on 10.04.11 at 4:42 pm

Another casualty of high real estate in Vancouver/BC is the loss of people to other regions of Canada. I figured Garth would hit the Global news piece of last evening. This year is the first year in about 10 years there has been more people ‘leaving’ BC than arriving here … people just can’t afford real estate and are moving to points east … like NL, if you can believe, but it’ more affordable for young families. Now what does all that outflow do for BC’s economics and work force? All the result of mindless real estate.

#130 Brad Mitchell in Calgary on 10.04.11 at 4:51 pm

I’m a real estate bear, like most visitors here, but I will repeat something that never gets talked about.

Pure speculation, of course, but even if real estate tanks across the country, I would say there is a high probability the government steps in and bails out the granite lovers. They won’t sit on the fence and watch housing values fall since that would be a final dagger in an economy already showing fragility.

They’ll do everything they can to prevent a housing collapse here.

So load up people.
After all, “Wide diversification is only required when investors do not understand what they are doing.” (Warren Buffet)

By the way, I have plenty to say about the very healthy and natural correction a certain something is taking. But a certain someone gets his panties in a bunch when I try to respond to his criticisms. So I’ll let the results over the next 24 – 60 months speak for themselves. Short term thinking means longer term opportunity costs…

#131 Steven Rowlandson on 10.04.11 at 5:01 pm

If it’s paid for and under your control it is safer than what is being financed or under the physical control of others. You have to consider how safe is a paper asset or an asset that is non portable in the event of war, ice age, revolution or other contingencies that render paper assets or none portable assets worthless.

#132 Devore on 10.04.11 at 5:10 pm

#124 disciple

Oh ok. Sorry to disturb you.

#133 ballingsford on 10.04.11 at 5:13 pm

There is something fishy going on. I checked the markets at 2:30 today and the TSX was down about $250 and the DOW was done about $150. I check after the markets close and the TSX was down by $73 and the DOW was up $153. Those markets went from down to up in about a half an hour!

What do you make of that Garth? Is there a huge investor out there (gov’t, public, or private) who is trying to manipulate the markets to make it appear that everything is OK?

Hardy manipulation. More like smart money. — Garth

#134 Ultraumatic on 10.04.11 at 5:13 pm

#124 disciple on 10.04.11 at 4:05 pm
…Who will do the menial labour? Seriously? That is your response? Guess what, Caesar, I will. And armies of self-aware human beings, doing things because it is right, not in service to Mammon.

Are you one of those Venus Project/Zeitgiest people? Because that stuff is pure fantasy land…

#135 Junius on 10.04.11 at 5:26 pm

#131 Brad Mitchell in Calgary,

You said, “I would say there is a high probability the government steps in and bails out the granite lovers.”

I have heard many people say this before – but how? What would they do? Nothing worked in the US or anywhere else. The market is huge and they have stretched people to the maximum.

The problem is that we have been subsidizing housing for years – either directly or indirectly. With 70% homeownership rates who is left to buy that can afford to?

#136 Junius on 10.04.11 at 5:29 pm

#130 Dr. Wayne,

You said, “Another casualty of high real estate in Vancouver/BC is the loss of people to other regions of Canada.”

Agreed. There is also lots of people who would not move to Vancouver because of the prices. I believe that when we see the statistics on inflow into Vancouver we will see a very slow year in 2011. Certainly enough for the “immigration will save all” crowd to ponder their position.

#137 Warren Buffett on 10.04.11 at 5:42 pm

#110 Big Rider – You asked Garth the following question:

” I want to know what would be an acceptable amount to have dropped peak to trough in a 40/60 portfolio, or from beginning of year.”

I don’t usually grace a pathethic blog such as this one, a term phrased by the chap who writes it, Garth Turner. I will however dispense some wisdom to you that others have paid big bucks to hear from me in a private luncheon. Here are the 3 rules of money management by the world’s greatest investor. Free of charge I might add.

Rule #1: Don’t lose capital.

Rule #2: Don’t lose capital.

Rule #3: Don’t lose capital.

Hope that answers your question Big Rider. See you in Omaha.

#138 Mister Obvious on 10.04.11 at 5:43 pm

#128 Bill Gable

“If we had Mr. Turner on Parliament Hill instead of Harper, I would sleep a lot better at night.

How about you?

Not me. Then he’d have no time to run this blog which is a greater service to the country than merely being head parliamentarian.

#139 Papa Luigi on 10.04.11 at 5:50 pm

#110 Big Rider

“Geez Garth, it was an honest question. I am not ‘bleating again’. I want to know what would be an acceptable amount to have dropped peak to trough in a 40/60 portfolio, or from beginning of year.”

Ciao Bigga Rider. I gonna answer dat question for you. The portofolio should always be a stuffa with lots of moneta. Moneta you a make from da real estata. This 40/60/40 sound like the measura of my nonna. The only portofolio is the one a you keepa in your pocketa. Capice Big Rider? You better no responda in Italiano or that pazzo head Gard Turnero, he gonna get really mad. Listen to the consiglio of Papa Luigi Bigga Rider.

#140 Nostradamus Le Mad Vlad on 10.04.11 at 6:13 pm


2:07 clip The Two Ronnies playing with words and a different take on the original Star Trek.
*
#26 Smoking Man — “. . . chicken dinner, yes smashed tonight.”

Hi Smoking Man. How does one get blasted on a chicken dinner (unless the gravy is pure brandy and bourbon?) Volatile mixture, but it may be worth it!

*
Re: The threat by Anonymous to hack the Dow on 10-10-11 (which is a holiday in the US): “Anonymous is either hijacked, or was a plant all along (I suspect the latter given their support for Assange). But any harmful attacks on the NYSE computers helps the government, not the people!” wrh.com. Like Wikileaks and Julian Assange, it’s probably a front for desperate govts. Denial Letter
*
Yield Spread says recession is a go; Hang A Banxter Day A new trend is taking shape; Hope springs eternal; Walk-away homeowners — seems you’re screwed one way or the other; Could the Euro die? Does shit happen? 3:53 clip Children of Babylon (us), it’s getting worse; Charade Crater a.k.a. Bailout Roulette; 5:55 clip Benny Baby speaketh, we numbnutz listen; Occupy Lost Wages.

Retirement “Translation: The US Government is already in default to its biggest creditor; the Social Security trust fund.” wrh.com. Wot about us? China and South Africa sign deals, do business properly, but Obomba seeks new debt collectors (for Wall St. cronies); The New Economy Local food and energy.

Honduran Farmers killed in the name of GW? War Of The Words Evidently, TPTB don’t come close to matching tech skills of TNG; Egypt “Israel will either order the United States to declare war on Egypt, or simply to force the US taxpayer to cover the extra costs and/or shortfall.” wrh.com; Tragically Funny “Another pathetic attempt to save the Federal Reserve by trying to portray OccupyWallStreet/OccuypyAMERICA as concerned with global warming and climate change!” wrh.co,m. disciple is correct — TPTB are toying with our feeble minds; NATO is pushing boundaries and US – Af’stan “The US/NATO occupation of Afghanistan will continue in perpetuity.” wrh.com. If there is a joint attack on Iran, it will stretch their forces so thin they will hardly have anyone left.

Al (Hoax) Gore Pix of his new US$9 mln. mansion. Where was it reported in the m$m? Ah yes, they are bought, paid-for and controlled; Oblunder At least he admits it. Tricky Dicky (“I am not a crook”) Nixon never went that far; Nobel Prizes Well, Gore and Obama both won NPs, so . . . .”CERN has confirmed there is no Higgs boson, which means the universe as envisioned in the Big Bang myth could not escape its own gravity well. Special Relativity directly contradicts the Big Bang theory.” wrh.com; Faulty Towers or Fawlty Science?

#141 Devore on 10.04.11 at 6:26 pm

#134 ballingsford

The last hour/half-hour ramp happens quite often, usually on Fridays. Who knows why. I’m not one to call a conspiracy. Could just be funds doing their large operations before closing. There might be some short covering tomorrow.

How about an over-sold market? — Garth

#142 bigrider on 10.04.11 at 6:29 pm

Hey has everyone heard yet? Forbes magazine ranks Canada as best place #1 to do business.

Looks like RE correction will be postponed a little while longer

#143 penpal on 10.04.11 at 6:29 pm

@ # 111 Jack

Like this guy is hardly biased?

#144 Karl on 10.04.11 at 6:56 pm

Whatever happens, happens. Frankly I’ve reached the point where I don’t even care anymore.

IMO, Western culture and society has sunk so far in the toilet that the only thing to do now is wait for the gigantic flush. I think the late George Carlin had it right all along. Society has been on a slow self-destructive past for the last 40 years. It accelerated in the 90’s, but there’s nothing left to do but watch the train go off the cliff. The economy, jobs, health care, the gap between rich and poor, rigged stock markets, corporate fraud, you name it. *EVERY* segment of society has gone to hell in a handbasket and we only need to look at ourselves in the mirror to understand why…

I think I head the same thing in the Sixties. — Garth

#145 Karl on 10.04.11 at 6:59 pm

#143, bigrider, IMO, Forbes lost credibility a LONG time ago. Much like Maclean’s here in Canada did, it’s downright tabloid material as far as I’m concerned.

#146 T.J. BONES on 10.04.11 at 6:59 pm

Sir Garth The Initiate ( teacher ) Garth great pic, but I don’t like the dude in the lower right corner with the, looks like a toodler in his arms. What is he doing with a young girl in what seams to be a strip club. Do not post this if you think I’m overly sensitive to what I consider bad parenting.

#147 Karl on 10.04.11 at 7:01 pm

“I think I head the same thing in the Sixties. — Garth”

Then you’ve entirely MISSED the point…

I was stoned. But impressed. — Garth

#148 jess on 10.04.11 at 7:16 pm

czech and bulgaria
“Besides, we can all see how the currency union is turning into a money transfer union, or even a debt union.”
==========
ben b. latest report says, ” unemployment is national crisis ”
10% y/y and 45% of the jobless are 6 months or more without work
=

#149 poco on 10.04.11 at 7:38 pm

#134 ballingsford

There is something fishy going on. I checked the markets at 2:30 today and the TSX was down about $250 and the DOW was done about $150. I check after the markets close and the TSX was down by $73 and the DOW was up $153. Those markets went from down to up in about a half an hour!
______________________________________________

the talking heads on BNN stated that there was a rumor posted on some financial blog that the euro zone big wigs had agreed to a bail out of Greece (TARP) and the markets took off—heard nothing more and decided to watch baseball instead

#150 Waiting for the Sun on 10.04.11 at 7:42 pm

>> By the way, gold is down over $50 an ounce today, or more than 4%. — Garth

No. Since this is a Canadian blog, you should be quoting in CAD. Gold (in CAD) was down a maximum of 1.9%, and ended the day down 1.5%. Yawn…

Gold is denominated in US$. Except when it hurts? — Garth

#151 ballingsford on 10.04.11 at 8:01 pm

ballingsford on 10.04.11 at 5:13 pm

There is something fishy going on. I checked the markets at 2:30 today and the TSX was down about $250 and the DOW was done about $150. I check after the markets close and the TSX was down by $73 and the DOW was up $153. Those markets went from down to up in about a half an hour!

What do you make of that Garth? Is there a huge investor out there (gov’t, public, or private) who is trying to manipulate the markets to make it appear that everything is OK?

Hardy manipulation. More like smart money. — Garth
************
Garth, I disagree with you on this remark! But i know that you know more than I know! The complexity of what’s going on now is too much for our average investor!

#152 Stevenson on 10.04.11 at 8:06 pm

#136 Junius

That is why you are not put in the position to make the decision on how to fix the problem? Well when and if there is a problem.

As for people who don’t want to move to Vancouver because of the prices. If you rephrase it, doesn’t that mean there are people who want to move there, but are turned away because they can’t afford it? It’s free market priced just like Toronto.

Also I would of never thought TSX would move into bear market territory before RE in Toronto gets a slightest hit.

#153 bigrider on 10.04.11 at 8:15 pm

#138 Warren Buffett.

Thank you for response but just keep in mind that Warren Buffett has not followed his own advice lately. Take a look at Berkshire Hathaway share price over past 5 and ten years…yuk.

#140 Papa Luigi- My nonno died last July at 96. I’m a gonna use a you to replace the wisdom of mio nonno. U and me ,we a paesanos.

“land is always land” La terra e sempre la terra

#154 bigrider on 10.04.11 at 8:16 pm

#146 Karl.

Very well. Your point taken but people read this stuff and you can’t say that it is not influential.

#155 Victoria on 10.04.11 at 8:16 pm

WE ARE OK IN VICTORIA. The rest of you are in trouble. Victoria though we are okay. Thank God! This guy says so. Party on!

http://www.bclocalnews.com/vancouver_island_south/victorianews/news/131066118.html

#156 sam.i.am on 10.04.11 at 8:19 pm

#147
What is he doing with a young girl in what seams to be a strip club.
===

Take your child to work day?

We are slow today. — Garth

#157 Smoking Man on 10.04.11 at 8:29 pm

#141 Nostradamus Le Mad Vlad

Hi Smoking Man. How does one get blasted on a chicken dinner (unless the gravy is pure brandy and bourbon?) Volatile mixture, but it may be worth it
………………………………………………………………………..

Thanks cause going to New Orleans for the week end and I better learn how to Spell Bourbon:

People are so fd——

Last St Patrick day when completely smashed I sent out a scathing email to the wife’s family and mine. Hell it’s so bad I can’t even read it again, get midway trough and I cringe.. It was awful………………

I’m in shock these people are nuts,

We just got invites from both camps for Thanksgiving saying all is ok come to dinner……………….

WHAT??????

Sorry but if some one sent me something like that I would never speak to them again………Never forgive or forget…………….

I let it all out that night, I exposed everyone’s secrets and weakness and what I really thought of them from the dark places in my soul……..for all to see in this broadcast email.
All of it was true…but dumb dumb thing to do…..

#158 Snowboid on 10.04.11 at 8:30 pm

#111 Jack on 10.04.11 at 3:19 pm …

Somehow I don’t think prices are up from their peaks in 2010 (from the VREB site) and they certainly don’t appear to have flattened from that time either.

Victoria SFH:

Jan 2010 (high) Av – $711,392 Med – $674,000
Sept 2011 Av – $591,416 Med – $557,500

Victoria Condo:

Mar 2010 (high) Av – $344,020 Med – $316,250
Sept 2011 Av – $335,524 Med – $275,000

#159 Smoking Man on 10.04.11 at 8:32 pm

#141 Nostradamus Le Mad Vlad on 10.04.11 at 6:13 pm

Julian Assange CIA 100%

#160 Smoking Man on 10.04.11 at 8:35 pm

#2 Anonymous on 10.03.11 at 8:58 pm

If you are cop and wearing black, and smashing windows, so your boys can get the tear gas out, heard a little rumor,,,,,,,,,,,,,,,,,,

Beware of the Hockey Players in Red and White Jerseys………………

#161 InvestorsFriend (Shawn Allen) on 10.04.11 at 8:47 pm

Warren Buffett at 138.

Agreed Buffett (you) says don’t lose capital. But the more complete version of his rule is don’t risk PERMANENT loss of capital.

Buffett is Okay with investing in something that goes down on the stock market as ong as the actual business is sound and there is very little chance that the value will stay down

In Warren’s 1966 letter he said:

“I am willing to trade the pains of substantial short term variance in exchange for maximization of long term performance. However, I am not willing to incur risk of substantial permanent capital loss in seeking to better long term performance.”

It was never Buffett’s opinion that the stock market price of a stock was necessarily correct. He definitely considered himself to be smarter than the market when it came to certain companies that he felt were within his circle of competence to analyse. Tempoary stock market losses have NEVER bothered him. Actual losses in true intrinsic value do bother him.

He said it clearly, short term variance (i.e. losses) were acceptable.

Hey, that being the case many of us are doing that…

I believe that the above ws Rule number 1.

Rule number 2 was, “don’t forget rule number 1”.

#162 timo on 10.04.11 at 8:51 pm

http://www.bbc.co.uk/news/business-15176947

Italian’s are feeling bloated and it hurt’s when your trying to pass a toxic bubble. ;)

#163 mousey on 10.04.11 at 8:59 pm

Well, here it is. The dream property you have all been waiting for. The description was very Smoking Manish and used the timeless prase (mispelling alos Smoking Manish….if he really is a he and real), rare, followed by the enticing promise, this is a good investment. This is in one of the hot Vancouver West Side HAM driven markets and a bargain at $1,468,000. A steal for a 33′ X 110′ tear down. MLS listing #V903867 – 3316 W.7th Ave. Made me laugh. You must look at the listing picture to appreciate the Pythonesque humour.

#164 April on 10.04.11 at 9:05 pm

156 – What else would you expect from the RE industry.

#165 Westernman on 10.04.11 at 9:19 pm

Smoking Man

You sound like a drunk and a dopehead – and you seem quite proud of it. Pitiful … just pitiful.

#166 Dan in Victoria on 10.04.11 at 9:25 pm

Victoria @156
Good to know…..
I’m going tomorrow to look at 4 houses…..
I can’t buy the lot and build them by myself for what the listing prices are.
Just starting I think, more to come I bet.

#167 sam.i.am on 10.04.11 at 9:38 pm

@sm We just got invites from both camps for Thanksgiving saying all is ok come to dinner……………….

===
Maybe you forgot to hit ‘send’ ?

I’m sure there’s an investing analogy somewhere in this post…

#168 45north on 10.04.11 at 9:55 pm

Garth on my Mac I don’t get the picture. In both Safari and Firefox the picture doesn’t load

until I click it

then I get the stripper and the message “There are no comments yet…Kick things off by filling out the form below.”

at work on linux with Firefox it loads just fine

#169 disciple on 10.04.11 at 10:18 pm

Devore on 10.04.11 at 5:10 pm
#124 disciple

Oh ok. Sorry to disturb you.
————————————
N-n-n-no, don’t apologize, sir. I was trying to push your logic to rise like a ball of dough becoming a loaf of bread via the heat of my rhetoric. The elites use monetary compensation to spur performance of menial labour, much like Scooby-Snacks. If Scooby and Shaggy could just see the scam and realize that currency is exactly that: Scooby-Snacks, we could progress further as a civilization without hierarchy.

#170 debtblues on 10.04.11 at 10:46 pm

According to the survey, debt isn’t a particularly scary word to the majority of Canadians. Nearly 80% agree that borrowing money is necessary to maintain their household.
http://www.pwc.com/ca/en/banking-capital-markets/publications/consumer-lending-survey-2010-12-en.pdf

Surprisingly, 78% of respondents still believe they have the capacity to borrow more.
http://www.pwc.com/ca/en/banking-capital-markets/publications/consumer-lending-survey-2010-12-en.pdf

#171 Pension Transfer on 10.05.11 at 7:05 am

[…] UK PensionIs your pension plan safe?Pension Annuity Rates Before You Do Investment And After As WellDangerous assetsRetirement Expert – 5 Factors to Determine If You Should Transfer Your UK PensionIs your pension […]

#172 disciple on 10.05.11 at 9:56 am

Ultraumatic on 10.04.11 at 5:13 pm
Are you one of those Venus Project/Zeitgiest people? Because that stuff is pure fantasy land…

Not a chance. We don’t need fantasy. What we need is a recognition that there is a small group in our midst that has been deceiving us for thousands of years in various ways using numerous and very effective methods, and that we are now in a position to identify them and stop them. We often sense there is trouble in the world, but we rarely identify the trouble-makers. Why?

This group of psychopathic families (about 300) have been mentioned by no less historical and contemporary figures than presidents, prime ministers, industrial leaders, religious icons, army generals, and most importantly, scientific geniuses the world over.

They have their claws in all facets of our society, from university research centres to the city towers of high finance, from municipal riding offices to the Supreme Court. Willfully blind people who refuse to see the obvious, especially in politics, just don’t understand why or how this grand scale of conspiracy would be possible.

This is how I explain it: When you have more power than God Himself, the only pursuit which satisfies your purpose for existence then becomes mass control. It is a game to them, that is all, and we are the victims.

#173 steve p on 10.05.11 at 2:14 pm

Families in Toronto make 27% more and yet pay 50% less for the average digs.

the average family makes $110,000 year?????

Get new batteries. — Garth

#174 Peter on 10.05.11 at 8:32 pm

Greeks are rioting again…best thing is Riot Dog is back!!!
saw clip on BBC looks like the same mutt!