Why bother?

In the past year, Jan says, a ton of her friends have bought houses. She wrote me last night about three of them. “The first couple bought in Milton – they had their 20% down payment. They purchased a brand new house that has been built and they’ve been living in for almost a year. The next couple, tired of living rent free in their parents basement apartment in Mississauga, decided to buy in Brampton.  They had to purchase the CMHC insurance with putting 5% down. The third couple was tired of paying rent in a home in Ajax so bought a new house in Bowmanville.  It was purchased in January and we just moved them in this past weekend.  They also needed to purchase the CMHC insurance.”

These people had three things in common: The houses all cost around $400,000. They all think they’re geniuses. And they’re all about 25 years old.

Asks Jan: “I know you are calling for a correction, but in your opinion, do you think these areas of Ontario will be heavily affected by a housing correction or will they remain relatively stable?

Now here’s Tony, also compelled to write me in the past few hours, arguing it’s different in Vancouver. “Talk to any resident/analyst/realtor and they will all tell you that Vancouver is a different type of market, and perhaps they’re right,” he says. “The key issue as to why Vancouver is a different market from the rest of Canada comes down to one key issue: foreign money.”

This suitcase cash, Tony says, is here to stay. “As these wealthy individuals do not appear to be “flippers” – but more, “buy and hold” investors, or perhaps even purchasing a second homes from themselves, perhaps the Vancouver market will not suffer a 40% correction like what some people believe will occur in a few years. My premise is a Vancouver housing correction is unlikely because real estate purchases are not based on speculation, the credit rating of these foreign buyers is strong, and should housing correct there are many local residents on the sidelines who are currently priced out who are aching to get in.”

So, it’s different in the GTA, different in Van. Just like it’s different in Calgary (oil), in Halifax (new ships) and in Saskatoon (sex with socks). Seems a slowing economy, runaway debt, government cuts, rising listings and falling sales have failed to hit the masses on the side of the head. Like I said yesterday, don’t expect politicians or realtors to be doing anything about this, since tricking people like Tony and Jan’s friends is the best economic strategy they’ve been able to hatch.

But none of this changes the path we’re already on. Go back and look at the chart posted here last night. Household debt ten years ago equalled 57% of the Canadian economy. Today it’s 90%. And are you making twice as much now as you were then? Or just owe twice as much?

It’s simply no-fly that asset values (houses) can endlessly advance based on debt and speculation. Are Jan’s little friends not a great example? Two of three bought $400,000 houses with just $20,000 in cash (and most of that might have been a cash-back ‘gift’ from the bank). That means they took mortgages of about $398,670 (factoring in closing costs and CMHC insurance), with equity of $1,330. As we all know, house-lusty, first-job kids can only swing that kind of debt when interest rates are at the lowest point in history. Ironically, those cheap rates combined with our insane 5% down federal guidelines create the very demand which has young couples lining up overnight outside sales trailers in Milton.

Does that sound like a Ponzi to you? It should. It is. Houses are not being sold to people who actually have money – just to those who can afford the payments. The fragility of this is stunning. Job loss, rising gas prices, higher mortgage rates, or (Allah forbid) kids, can kick home ownership in the nads. The fact we’ve let real estate surge to 20% of the economy, with much of it based on cashless buyers, should have sane people laying rubber out of Milton, Ajax and Brampton.

And what of Van? Well, along with the nether regions of the GTA, this will probably define the housing correction that’s coming. Sure, there’s foreign money in the city, as there is in Toronto. No doubt this cash has helped raise prices in the top end of the market. It sure has been manna for squirming real estate agents who now scare the crap out of people like Tony, egging them into bidding wars with foreigners, real or imagined.

But let’s get a grip. There have been just over 28,000 property sales in Vancouver this year, up to yesterday. There are no statistics on how many of those went to Mainland Chinese with money belts, but if numbers from sister city Victoria (where they count these things) are any indication, it would be less than 3%. Even if we triple that to, say, 10% of the entire Greater Vancouver market, it still means 25,000 of those sales were between locals.

And did you know that people who live in BC owe more than anybody else in Canada? That they have a negative savings rate? That Vancouver families make just 71% the income of people in Calgary, where the average house costs 40% less? That they are nuts, like Tony?

Ah well. I said days ago, even before markets erupted,  this pathetic blog cannot save people from themselves, so why bother?

The era of the house is over. Love liquidity. And pray for the horny ones.

190 comments ↓

#1 lovely_houses on 10.27.11 at 9:42 pm

I have a house lust and I am not the first.

#2 BPOE on 10.27.11 at 9:44 pm

House Prices SKYROCKET. Put that in your pipe and smoke it American. Everything we have is AMAZING. SNBPOE Super Natural Best Place on Earth
********************************************
http://www.cbc.ca/news/canada/british-columbia/story/2011/10/27/bc-cambie-corridor-speculation.html

#3 [email protected] on 10.27.11 at 10:02 pm

With houses and children patience is a virtue to get the most desired outcome. For the ones on this blog (like Garth) who have seen recessions and recoveries – does the EU bailout fund and Greek haircut mean anything? my small brain says that Europe is still seeing a mean recession coming, anyone holding Greek debt is losing a lot of money and that China is slowing down; I can’t figure out the euphoria on the stock market?

Markets factored in a worst-case scenario, and today was a relief rally. — Garth

#4 Marc L on 10.27.11 at 10:07 pm

I am lusting for these baby!!

http://www.homesoftherich.net/

#5 Mike Rotch on 10.27.11 at 10:19 pm

I sometimes think I’m an idiot for buying a home………….and I had 20% down, and payments under 25% of my gross (at signing, it’s better now). Furthermore, I actually have a modest parcel of land in the 416, very close to my job, and good enough transit that we don’t need to pay the freight for two stupid moneypit vehicles.

Call me a pessimist, but just cannot see how anyone is stupid enough to buy a piece of suburban wasteland in the far-flung reaches of 905, and do so under far worse conditions than I bought into!

Ah, well, c’est la vie. Just trying to save/invest as much as I can and knock down as much debt as possible before this party is over……..Damned near everyone I know is already ‘house poor’ or bordering on it.

When the rates go up, and/or the banks turn off the taps, this is going to get real ugly real fast!

#6 timmy on 10.27.11 at 10:21 pm

The Chinese don’t move to Victoria because there is no shopping there.

#7 Habs76-79 on 10.27.11 at 10:24 pm

I have found that when most consumers have been using their emotional/irrational mind to buy what ever product especially a higher priced one that they will paint their own vision of reality to better justify the soon to be purchase. They will during this time often ask others, family, friends, coworkers for opinions about the product, market and such but often DO NOT want credible advice especially if it may pop the bubble of their emotional mindset about this purchase. They really want these other opinions to only VALIDATE their soon to be choice.

This is what happens on most/all consumer products and the higher the price the more emotional consumers often get.

Unless they can get their rational/logical and critical thinking mind in place to intercept the emotional/irrational lust of the purchase they will most often not heed truly wise and credible advice.

It’s one thing to be so giddie or orgasmic on say a t.v. a stereo, a lap top, pair of shoes, nice jacket, nice dress, or a suit etc. That may set you back a few hundred or a thousand or so dollars. But the impact of emotional only buying and often validated by irresponsible interfering, prodding by others to do it when buying a many tens of thousand dollars car/truck/suv or worse a house of some sort, well you can get a whole lot of trouble for not doing due diligence and not heeding a rational and critical thinking mind.

It matters not whether one is rich, middle or poor, whether one is male or female, religious or not , nor any race per se etc. Buying big ticket items especially housing at the top end of a market situation only on emotions will more likely kick you right between the eyes in due time.

The RE industry is like drug dealers, they push the high just as a drug dealer does and they take no responsibility to the damage they help create.

” Why Bother?” Yep, why bother other than some people still have a conscience and want to do their part to help get consumes to be better educated and more rational buyers.

#8 honest weights on 10.27.11 at 10:33 pm

It’s interesting that the low interest rate fact is rarely brought up in mainstream real estate discussions related to the Vancouver market. Vancouver locals actually believe that ‘EVERYONE WANTS TO LIVE HERE’. False. Sorry Economist magazine, It’s not a livable city if few can afford to live there. I laugh at ads promoting the Vancouver life style. Dining at 5 star restaurants after a long day of skiing, beach, hiking, biking etc – all done on a beautiful sunny day of course. It costs a family of 4 $100 dollars to visit the Vancouver aquarium – nice.

The homeowners who think these ridiculous house prices will last are like “a hologram wrapped in a chimera inserted into an illusion” (MK)

#9 dogman01 on 10.27.11 at 10:35 pm

76 – ts harpoon
Thanks for the Link, well worth 24 minutes

http://www.charlierose.com/view/interview/11961

Interesting, a few days ago the “one and only” Smoking Man made an observation about U.S Soldiers returning home and asking WTF happened to their country, watching their comrades in arms being unable to find a job. I have seen a number of references to US vets participating in OWA activities and once again in the above Charlie Rose interview.
I have worked closely with US Soldiers, they are patriotic and motivated. They can’t be happy with what has be done to their nation.

#10 2deep on 10.27.11 at 10:36 pm

http://www.amazon.com/Real-Estate-Boom-Will-Bust/dp/0385514352/ref=sr_1_1?s=books&ie=UTF8&qid=1319768972&sr=1-1

I love how the link to this book has omitted the “NOT” between “will” and “bust”. If this doesn’t hit home and make you think twice about our housing, nothing will.

Garth makes the perfect point, there are reasons in each area of the country that people give to defend real estate prices. Here in Sask we think we (our economy and prospects) are better than the rest of Canada, yet when you look at the data the whole nation is equally bubbly. The only thing that is consistent across the country is monetary policy, rising debt and herd mentality.

#11 I'm stupid on 10.27.11 at 10:39 pm

Firstly, I completely agree with you Garth. Let me ask you a question, let’s assume everyone took your advise, what would be the outcome? We both know the answer to the question. We need losers or winners could not exist. Let them think they are smart. One day after a life of servitude, with drool on their chin, poop in their adult diapers and living off cpp they will realize the got screwed in life.

#12 wes_coast on 10.27.11 at 10:39 pm

A buddy of mine bought a place against my advise. Its in a nice area of south Surrey. He’s since tried to sell it at a slight loss and still no takers. Prices fall. Listings can languish for months. Property can become value traps. Even in the BPOEEWIR (BPOE Except When It Rains). Anyone who says its different here kind of has a bias considering their whole lives depend on rising prices. Its mass delusion. Its emotion not logic. Stupid can happen anywhere and Vancouver is the capital of stupid right now. Toronto – your pretty much a close second.

#13 JO on 10.27.11 at 10:41 pm

Our Jimmy F and Carney are engaged in a very dangerous game of economic chicken, which leaves the average Canadian in ever greater debt and a higher cost of living.

The fact is most of the world’s economic and asset price damage has happened as nominal and real rates of interest have declined. In Canada, we are one of the very few countries that were LUCKY enough to keep the debt bubble going – inflating the cost of our housing and keeping the game going for speculators and senior execs in the RE and banking sectors – not to mention the policitians and PS unions.

This will end badly – many of these speculators will get wiped out WHEN their mortgaged renew 1-3 % higher within the next 10 yrs. Many will be trapped in their little debt castles – as property taxes rise 30-40 % over the next 5-6 yrs, and utilties and upkeep rising by about that much too.

This despotic neo liberal junk economic model is and will continue to slowly destroy us. They will not stop until they have put everyone possible into debt or otherwise paying elevated fees on savings and other products.

JO

#14 Robert Dudek on 10.27.11 at 10:47 pm

Garth, I’m disappointed that you have joined the ranks of those that misuse the term “Ponzi scheme”. A Ponzi scheme is a very specific type of fraud (no need to go into details, Wikipedia will suffice for the curious).

What we have here is a speculative mania pure and simple (i.e. bubble). A speculative mania occurs when people overvalue an asset, and price gains feed more demand for that asset, eventually reaching a point where the price exceeds all rational valuations.

There is really no overt fraud going on, except that there is heavy use of propaganda to induce people to buy overly expensive real estate.

#15 renters rule on 10.27.11 at 10:53 pm

“The Chinese don’t move to Victoria because there is no shopping there.”

News flash for you: the overseas chinese folks don’t shop in Vancouver either (I work in an office that is 80% populated such). They go back to the mothership (Hong Kong) to shop; they will not pay Van (or North America anywhere) retail prices…. and these can be folks who have lived here for more than a decade……

#16 noname on 10.27.11 at 10:56 pm

#5
Do you have family? Kids?

#17 Van guy waiting on 10.27.11 at 10:57 pm

Lots of illegal money floating around. The weed market is one of the reason why Van is so much more than everywhere see in Canada. But even that s slowly fading.

#18 Don on 10.27.11 at 10:58 pm

Larger Municipal ities get approx 6-7 % of revenue from developments/developers.

BPOE: They are putting high density housing in the Cambie Corridor and buying out home owners in order to do so.

Rainy Vancouver is delusional…act like Miami but not. Best way I can explain Vancouver – 12 years there.

Hope I never have to go back. Japanese in the 80’s, Chinese in the last ten years or may be last 20 years.
Easy Drug Money everywhere – just have to stand on Robson street and watch. It’s amazng how many young males in nice clothes and expensive cars are around during traditional work and school hours.

Van used to be a nice place, relatively friendly but not anymore.

#19 DMZ on 10.27.11 at 10:58 pm

Best letter to the editor I’ve seen in a while.

Young families don’t need a “New Deal,” They need a drastic attitude adjustment.

http://www.thestarphoenix.com/opinion/Live+within+means/5614973/story.html

#20 T.O. Bubble Boy on 10.27.11 at 11:00 pm

@ #2 BPOE:

Apparently you think that the “Best Place On Earth” is where homes are torn down to build 6-storey and 15-storey condos?

What about that story is the “best” exactly?

I read that article, and the main points seemed to be that developers are ruining yet another Vancouver neighbourhood and no one wants to live there?

#21 JessicaJ on 10.27.11 at 11:02 pm

Love the photo Garth! Thanks for the laugh!

#22 Peter B on 10.27.11 at 11:05 pm

A lot of the world is dependant on China.

The US government bailed out the banks and spent like crazy to avoid a depression with money borrowed from China.

Now Europe is depending a money borrowed from China for their bailout of Greece and possibly more countries.

Unfortunately, China has a huge problem with corruption. Outrage is growing and things could get nasty.

A recent hit and run of a toddler who 19 people ignored before a woman helped her shone a spotlight on how dysfunctional Chinese courts are. Nobody helped her because Chinese courts have a reputation of holding people who help responsible for the injuries.

Chinese developers with government cooperation often evict whole neighbourhoods for new construction projects.

Environmental problems are not dealt with and parts of China are toxic.

A real estate boom is making housing too expensive for many Chinese.

China is now bailing out Europe. A continent with a much higher standard of living then China’s own people have.

I hope things work out for China and the world. But I know they might not.

All these tensions are bubbling in a country which the Western world is becoming increasingly dependant on for credit and bailouts.

#23 T.O. Bubble Boy on 10.27.11 at 11:07 pm

And, BPOE, at least one candidate for city council is running on an “anti-real estate bubble” platform:

http://www.straight.com/article-502626/vancouver/sandy-garossino-vancouver-weve-got-housing-problem

#24 Junkmale53 on 10.27.11 at 11:09 pm

Buy of fear sell on fact. When the fear sets in across the country will you tell us to buy, buy buy??

Thanks Garth, love the blog.

#25 from kits on 10.27.11 at 11:10 pm

i hope you are right about housing in vancouver….these things take too long

#26 ExExpat on 10.27.11 at 11:11 pm

I totally got the same story as Tony from a regional manager in Vancouver. Conversation was something like – Man, the cost of living is expensive in Vancouver, how do you put up with it? Yeah, I know, we moved up to a bigger house, taking most of my cash, but at least it will appreciate in value, not like buying stocks. What if there is a correction in housing? No problem, we can ride it out, it may go down 10%, but long term it’s going much higher.

So, to sum up the wet coast retirement plan, purchase a much more expensive home than you can affort, live on KD for the next 5 or 10 years, then hope like hell a dumb nuveau rich mark flys in from MLC and hands you twice what you paid for the place. If you want to retire rich, buy two houses. If KD isn’t doing it for you while you wait to sell, make a few small equity withdrawals.

Nope, no red flags, go for it!

#27 Smoking Man on 10.27.11 at 11:14 pm

Problem with the Greek Bail out is, no one asked the Greeks…

See they just want to walk, pick up the monoply board and whack the bankers in the head with it…….

And start printing Dracmas……………………
Rather than being debt slaves for the next 20 years that they did not spend…………………

The fat Lady is just lip synicing…………she has not sung yet……..

You will see……………….

#28 Jimbo on 10.27.11 at 11:20 pm

Drive past a typical Victoria school and you’ll have to look hard to spot an Asian face. Drive past a typical Vancouver school (elementary right up to university) and you’ll think you are in China or Korea, with not a single Caucasian face anywhere across a sea of kids.

I’m betting that your 10% guess is pretty close… except it represents the percentage of NON-Mainland Chinese buyers in Vancouver.

#29 Ha, ha on 10.27.11 at 11:27 pm

Garth: “(sex with socks)”. I almost spit through my nose. Anyway, if you aren’t using latex, baby oil is the best “personal lubricant” around for the money. Why do you think they still sell it? Nobody puts it on the baby any more. Never did, in my experience.

#30 Willa on 10.27.11 at 11:33 pm

I have a house in Kingston, Ontario, which I bought in 1995, after the last bubble burst. For fun, I had it appraised this week. The price, which had doubled since we’d purchased it 15 years ago (as of last summer), has now fallen 15% over the past six months.

Kingston has a fairly stable economy (universities, colleges, staid factories, army base, prisons). The immense bubble that other cities experienced didn’t happen much here. And yet, prices are falling and listings are growing. Some entire streets are for sale, and it’s late fall.

Grow up, Van and GTA. You’re not immune.

#31 Humpty Dumpty on 10.27.11 at 11:38 pm

Marc Faber said. “For sure they will take wealth away from the well-to-do people one way or the other, and from the middle class they will take it away through inflating the economy and lowering the standard of living.”

The injections of new money supply also are harming the global economy and causing bubbles, one of which is in Chinese real estate, he added.

“If the Chinese bubble bursts one day, which inevitably will happen — maybe not tomorrow, maybe in three months, maybe in three years — when it happens it will have devastating consequences for the global economy,” he said.

http://www.cnbc.com/id/45046095

#32 Burnt Norton on 10.27.11 at 11:44 pm

#2 – Meaningless drivel. Overbuilt condos along Cambie will sit empty while prospective buyers wait for prices to fall lower. Meanwhile, SFH’s a block or 2 west and east of Cambie from False Creek to Marine Drive will see their values drop disproportionately as a result of proximity to new subway condos. Too bad city council has decided to ruin one of the most picturesque thoroughfares in town.

Thanks for the daily laughs BPOE. Keep up the comedy routine.

#33 Bill Gable on 10.27.11 at 11:46 pm

If you want to augment lessons from Mr. Turner – you have got to read “The Big Short” Inside the Doomsday Machine.
You will learn the difference between a CDO and an SIV and also some shocking truths.

This one is especially for Mr. Turner.

“Bakersfield California, 2003, a Mexican Strawberry picker, with an income of $14,000 and no English, was lent every penny he needed to buy a $724,000 home.”

Now, that might be an extreme – but what’s the difference as compared to our heroes today?

$400 K that you can’t handle, may as well be $724 K, and that’s what should scare the pants off a lot of these folks.

It’s called leverage. Mr. Turner has taught us the rules.

Here in Dumbcouver – there are people still thinking they can sell garages for $600 k.

Oh, and I think the euphoria over the throwing of Greece under the bus will be short lived.

Germany is the key.

DB was the centre of the Subprime mortgage pump – and not just from Spain. Bonds tranched out of Dusseldorf spread tentacles to every corner of this tangled world.

We are not out of the woods. I am very bearish, even with jump in US stocks today.

China is blowing chunks.

This is just starting.

#34 Debtisforever on 10.27.11 at 11:52 pm

For those who think the foreigners are buying up properties with suitcases of cash: then why do people in BC have so much debt? These are the people who cause the market to correct, not Mr. X from another country. Who cares if Mr. X wants to buy properties with cash? (though actually I’m beginning to suspect that a lot of those “cash” deals are backed by debt in the home country-from the stories coming out of China). It’s Joe Schmoe and his local neighbours who can no longer make the payments who will bring down the market.

#35 Cowboy Pete on 10.27.11 at 11:54 pm

“Sex with socks”
Garth, I actually know what this means, and it means you are a bad ass mofo, which means that you see clearly without pretence, which is why I trust your advice.

#36 nonplused on 10.27.11 at 11:55 pm

Markets factored in a worst-case scenario, and today was a relief rally. — Garth

This partly explains it, but we were also well oversold and below the 200 day moving average line in almost everything, and the trend is down. The technical traders had to come in on any news at all, things were so oversold. Add a few short squeezes, and vola! A big up day.

It’ll have a half life of about one week, which is about when the banks start saying that no, they are not going to accept that a 50% haircut is not a default by the terms of their CDS’s and start suing. They bought CDS swaps that gave them the option to put their bonds to the issuer in the event of default. I don’t think a 50% hair cut becomes “not a default” just because Angela Merkel and ISDA says it doesn’t equal a default. Every CDS has it’s own terms. The ISDA document is a template and their opinion means nothing. Every ISDA out there is customized between the parties that signed it, ISDA doesn’t supervise or enforce a standard contract, they only suggest. Expect this move by Europe to screw the holders of Greece debt to backfire. Actually, the blowback could be huge, worse than Leman. You can’t just say “Greece debt is now worth 50% on the Euro” (which is optimistic), and then also say “all private Greece debt insurance everywhere in the world is void”. Next up: Blowback. Over the next few weeks we will learn ourselves another lesson about the law of unintended consequences.

For those of you who don’t know the law of unintended consequences, here it is in 3 parts:

1. All actions have direct, unavoidable consequences.
2. Even if you don’t like the consequences of your actions or don’t mean for those consequences to be the result, it doesn’t matter. If you take actions that will have a certain consequence, whether you want it or not, didn’t think it through, or just acted emotionally, the consequence is on their way.
3. You cannot control the consequences and it’s your own tough luck if you cannot predict them.

However, today’s rally didn’t even get back to the 200 day average. In recent history, the 200 is hard to shake off its path. Up to 2008 it had been up for a couple of years. In 2008 it started down hard and didn’t reverse until after the 2009 rally was well underway. It’s been all up since then until the last few months, but it’s rolled over. It probably won’t reverse for at least a year.

Let’s not forget folks, these panic rallies are trumpeted by the media, but for every up there has been an equally spectacular down that isn’t mentioned. And the downs have been winning long enough that the 200 day average is now solidly pointing for the floor.

The Greek debt plan announced today only confirmed someone isn’t going to get paid. How that can be good news escapes me.

#37 dd on 10.28.11 at 12:04 am

Hey Tony,

I heard that some parts of Coastal China real estate is off by 30%. Since most of this cash into Vancouver is from China do you think this will affect Vancouver housing prices?

Think about it before you answer ….

#38 Nick on 10.28.11 at 12:11 am

Great post Garth. RE is now more expensive in Montreal, TO and Van than in any of the 7 biggest cities in the US. Go figure.

#39 smartalox on 10.28.11 at 12:12 am

@BPOE,
that increase applies to no more than 100 homes, at the expense of thousands that will be trapped in the shadows of this new density.

Way to polish that turd….

#40 subterranian on 10.28.11 at 12:21 am

#2 BPOE on 10.27.11 at 9:44 pm

House Prices SKYROCKET. Put that in your pipe and smoke it American. Everything we have is AMAZING. SNBPOE Super Natural Best Place on Earth
http://www.cbc.ca/news/canada/british-columbia/story/2011/10/27/bc-cambie-corridor-speculation.html
****************************************
These houses all sold 7 or 8 weeks ago… 8 houses directly across the lane for sale for at least a month for similar prices…… crickets.

#41 Big D on 10.28.11 at 12:26 am

#2 BPOE
Seriously? I’m from Vancouver and I feel embarrassed by the stuff you usually post, but this? Even bad for you. You’ve posted an article about an extreme form of speculation at the top of a bubble and somehow twist this into a reflection of a solid market?

What color is the sky in this little world you’ve created for yourself?

#42 andthen on 10.28.11 at 12:38 am

#3 Ronatdelta

I am not sure but a run up in the market might be from designated bond money that would rather risk stocks then another 50% euro loss on bonds.
Keep in mind I use a shovel at work so I might be mistaken.

#43 Nostradamus Le Mad Vlad on 10.28.11 at 12:40 am


“. . . this pathetic blog cannot save people from themselves, so why bother? Love liquidity. And pray for the horny ones.” — What if my prayers are answered and I’m drenched with liquidity? Who do I have to thank for that?!

“But let’s get a grip. . . who live in BC owe more than anybody else in Canada? Does that sound like a Ponzi to you?” — Either BPOE or you are on brain-exploding drugs!

As we’re all on the Highway to Hell, let’s just stop by Hwy. 61 revisited and see what’s cooking there.
*
Junk Fitch Global credit rating to garbage; EU wrong They finally admit they are clueless; Oil Profits Just in case you were wondering . . .; Orgies Lustful, expensive and sexual; What if? Elementary, my dear Watson. We’re sunk! Smoke and Mirrors The EU’s debt deal with itself.

Yes! It’s true! Someone actually makes more than a GS CEO; Link in BoA preparing for Chapter 11? PSS Virus “Currently, banks world-wide are allowed to individually create new purchasing power by simultaneously booking an asset and a liability when a new credit (‘loan’) is granted. Upon signing a contract, banks are allowed to add the amount of loan outstanding to the asset side of their balance sheet, while the borrower’s current account is credited with the same amount.”; CDS useless, Doon’t Worry, Be Happy! Hot Air Balloon and EU not saved.

Link in From seven billion (plus population) to 500 million (depopulation); Time (not the Floyd version). UK may put clocks ahead permanently; Parenting. Geithner / Bernanke / Obomba style; Smart Grids Smart meters and Intellistreets. This is one wacko world we’re in, and Smart Meters A lot of people don’t want them; United States of Africa The west certainly did not want that.

3:16 clip This shows the mindset of some of US military personnel. Kill all the insurgents! Plus 11:36 clip Obomba — A threat to humanity; Military Exercise Don’t forget the link earlier, which said the FCC is shutting communications off (could be in Garth’s previous column); Link in Mayan Calendar, A link posted some time ago showed a 35-year old documentary, hosted by Leonard Nimoy who said the Mayan Age ends Dec. 24, 2011; Theoretical Impeachment See headline; November is turning into a zombie woof month; ‘Net censorship, or BB interference.

#44 Carp on 10.28.11 at 12:46 am

I love my dividends …

#45 penpal on 10.28.11 at 12:57 am

most important line of the article tonight;

“They all think they are geniuses.”

Why is it that people who largely have little to no investment or financial experience, business acumen, math and logic skills nor financial success, feel that they are capable of making a “winning” decision?

(Especially when it involves, for most of them, the biggest financial transaction of their lives.)

Simple, it’s called “delusions of grandeur”.

These poor deranged souls are about to find out what ‘nobodies’ they really are.

#46 The thing in the basement on 10.28.11 at 1:03 am

“And pray for the horny ones” – Garth

I do but god isn’t listening to me as she rarely shows up.

#47 Never post under the same monicker on 10.28.11 at 1:04 am

27 Smoking Man on 10.19.11 at 9:59 pm
The above secret is gift it’s for me…
Time to hand the torch for someone else to be …
Crazy maybe, but not insignificant. Free gifts are never valued, with out trying, arm chair quarterbacks will declare better options. I liked the $20 in New Orleans, he worked for it, regardless of how it is seen by others.
Different people value different things, would a ballerina trade a perfect dance for a buck? I’ve worked for survival (tax/debt slave) and I’ve worked for pure joy, joy is better than money. Among other experiences one can have in Canada over the past five decades is other people. 60’s love em all, 70’s I’ll let you know when it comes back to me, but all agree it was our best times. 80’s fancy dressing and lots of messing, 90’s began the time of always looking up.
Through all of the times we will find ourselves in we must hold onto knowing real real from drug/alcohol real and $ real from real value. (money in itself has no value but value is obtained in what it purchases) sorry can’t remember who the quote is attributable to.
But here’s one from me to you – never do too much of something to put yourself in danger of not being able to ever do that again. Pink is not the same with unaltered states.

#48 neo on 10.28.11 at 1:25 am

Markets factored in a worst-case scenario, and today was a relief rally. — Garth

So are you saying the market is now overbought? Because you only seem to mention it when the market is oversold (which it never was in N.A. markets relative to global markets by the way). The truth is a 339 point day in the context of the past 2 months is probably barely in the top ten up/down movements. As I said in a previous post. I’ll believe this rally when the credit markets in Europe ease. Given that implicitly you can’t hedge your risk with CDS and a country can default 50% without triggering a credit event just makes attracting private capital that much more difficult which will leave Germany on an island by itself to foot the bill. That will only mean yields in Europe will be headed higher going forward not lower to compensate. Something to the effect of unintended consequences. Centrally planned economies don’t work and the European nations making it up as they going along isn’t cutting it. Capitalism is about taking risk and being rewarded or failing. There is WAY too much moral hazard on both sides of the pond right now.

I love the smell of singed doomers in the morning. — Garth

#49 westopia on 10.28.11 at 1:59 am

“Markets factored in a worst-case scenario, and today was a relief rally. — Garth”

Really, they’ve factored in the worst have they?

Let’s sum up the Greece deal shall we.

Calling a spade a spade, this was not a bailout for Greece, it was a default. And at that it was a default that wasn’t big enough as a 50% haircut only lowers Greece’s total debt by 22%. After the “bail-out”, Greece still has Debt to GDP levels of 130% with 120% forcast by 2020. On top of this the IMF is giving Greece $137B in loans.

So… Greece defaults… but gets $137B in new money (roughly what the default will wipe out) and is still expected to be insolvent by 2020. The Greece deal accomplishes nothing. Ignor yesterdays “pop” in stocks. This mess is FAR from over.

This aint 2008, it’s worse. Much worse.

Greece is yesterday. — Garth

#50 Hicksville Alberta on 10.28.11 at 2:32 am

Six cents on the dollar.

Thats the difference between my ex’s 1927 (tear down) house in Point Grey in Vancouver on a 41 foot lot now worth about $ 2 million or so and my youngest sons about 1927 house in Hicksville on a 50 foot lot just recently purchased for $ 121,000.

In addition there is real work here and a real chance for him to learn and get training on the job and within a few years without having to go to formal education and wasting those young years being able to be in a real good earning position as have the young kids around here that have focussed and worked at their jobs.

The further and best bonus is that he doesn’t have to commute more than a few minutes by foot to work to start his workday and as well he doesn’t have to put up with the city bullshit and baffle and get worn out and stressed even before he gets to work.

There is such a spread in prices and opportunities throughout this country that one would think we are all living almost separate lives from each other, and for the most part, maybe we are.

#51 Andrew from Saskatoon on 10.28.11 at 3:16 am

#87 refinow from yesterday

“It amazes me that the same qaulification calcualtions will be used for “Octomom” and a duel income family with no kids. Is that really fair to make nieve first time homebuyers believe everything is fine because the Bank says you qualify. ”

It doesn’t amaze me one bit, not with the CMHC government guarantees that we have in place. As long as the government is willing to cover the banks’ losses, why should the banks give a crap who they’re lending to? All the banks care about is approving mortgages that allow them to suck as much money from the borrower as possible while still qualifying for CMHC coverage.

#52 Dorothy on 10.28.11 at 4:51 am

It never ceases to amaze me that people on this blog get so angry at Realtors when they are simply doing their job. Realtors are SALESPEOPLE who work for people who want to sell their houses. As such, Realtors say and do whatever it takes (within legal limits) to make the sale at the highest price possible for their client. And as that client is usually the person who is selling the house, Realtors would be doing their client a disservice if they failed to do everything possible to close the deal for the best attainable price.

Anyone who hired a Realtor to help them sell their home would expect no less. So why all the anger?

When you are buying a house, or buying anything at all for that matter, it is incumbant on YOU to do your homework, compare prices, and negotiate the best deal possible. The Realtor can help with the legal wording of your offer, and give advice as to what clauses it should contain, but determining how much money you should offer for the home is YOUR responsibility. If you wind up overpaying because you didn’t check out the market first, you have no-one to blame but YOURSELF.

People who allow themselves to be drawn into bidding wars, or who buy properties sight unseen, are very foolish. Ditto for those who buy homes that are more than they can afford. It’s no good having a big, fancy house if you can’t afford to furnish it or if, after having furnished it, you have to live on Kraft Dinner for the next 20 years. People need to use a little common sense when making big purchases like this, and stop blaming others (i.e. Realtors) for their own mistakes.

#53 Sometimes leaning to far over on 10.28.11 at 4:57 am

#80 Young Old Fart on 10.21.11 at 10:01 am
So like I said, you looking long or short term……?
Garth’s reply;
In 30 years a condo building could well be in need of major structural repairs, over which unit owners have no control but must finance. This potentially devastates condo values and steals equity. A renter is impervious to this,…

As previously stated no one has a crystal ball to see too far into the future. As in most urban centers what was in the last real estate ad for a new apartment complex.
Senior complex – locked in. Low rental – public housing only – no working stiffs.
In some ways residence is a commodity, and tenancy is competitive.
As Young Old Fart states “rented basement”, no longer SFH, but takes care of the insurance requirement if you want to spend time away, without hiring property manager to check every other day. Or as social (taxpayer assisted) infill housing which quickly turns from SFH, to un-inspected basement suite & full time unregulated daycare of single mom’s with suddenly appearing full time working BF’s, but hey it’s nobodies business.
Apartment buildings are selling, but to converters, not ongoing renters. Who could blame them, instantly make your money back and have a locked in revenue stream from maintenance fees.
Look back to the mid 80’s when apartment owners were walking away from their mortages because of high vacancy rates, governments were assuming the properties and converting to public housing. Now no way out.
Tenants would love to have nice places to rent, with good landlords, just as landlords would love to have decent tenants, both may go the way of the dinosaur.

#54 Jas Girn on 10.28.11 at 5:20 am

As I get older, the more I appreciate the bearded messiah named Garth.

#55 David B on 10.28.11 at 6:54 am

Do not hold your hopes on Halifax being a boom for housing wrt new ships …. first Nova Scotia has a high rate of seniors who will listing their homes and moving rented apartments flooding the market and these people can afford to lower their prices. A drive around town will see far more apartments going up than SFHs and from what I see and hear SFHs are not moving and the listing are growing. Most people I chat with agree the ships will ensure that prices will not rise but remain about the same. There many people who already own homes here that work out west and will return to work and stay in their own home to which RE does not want to talk about.

#56 Alex MacKinnon on 10.28.11 at 7:21 am

@#2 BPOE – Those are all lots speculating on zoning changes and developers trying to put in midrises or decent size apartment buildings. Any street with a Subway running under it shouldn’t be lined with 66′ wide lots covered in Ranchers. Those will all be 6+ Flr. apartments within a decade regardless of a bubble.

Garth- with glee I’ve been noticing housing prices starting to decline in Strathcona, just East of Downtown Van. When you see a million dollar dump of a house drop $60K off it’s asking price after sitting on the market for a few months, you know things are starting to shake up. Nothing is moving in this neighbourhood right now.

One property which I’ve been watching (which has an detached convenience store for income) has been sitting on the market since atleast February when I started watching it. No movement in price even though it switch agents. Insane.

#57 Moneta on 10.28.11 at 7:53 am

Markets factored in a worst-case scenario, and today was a relief rally. — Garth
———-
http://www.institutionalinvestor.com/Article.aspx?ArticleID=2921936&LS=EMS581643

http://www.nakedcapitalism.com/2011/10/making-a-mockery-of-sovereign-cds.html

Nothing but… bluuuuue skiiiiiies!

I can see clearly now the rain is gone…

Exaggeration unbecomes you. Markets factored in a Greek default plus European bank instability as a result. That seems more remote, hence the move higher. It’s what markets do, unlike people on this blog. — Garth

#58 Taipan on 10.28.11 at 7:58 am

Lifes a bitch.

Beware the current bull trap.

Garth you and i are very close in our economic perspective.

Your too nice, to be brutal enough.

My degree was in economics 30 years ago when a single degree meant something and you had to work very hard to get one (leading aussie uni 20% got their degrees).

They taught this stuff in 101.

Im sorry Europe is rooted, USA is rooted but is approaching a bottom, (within 2 years).

Australia and Canada OMG!

And Garth this is why i bothered to follow your blog.

Its very simple. Way too much finance brought demand forward into previous periods, and now that demand has been exhausted while repayment of loans is now called forward.

And then we flip personal/corporate loans into sovereign debt. OMG

For your average person. Your not as dumb as you think.

You can only live according to your income. If you borrow, you may live better for a short while, before you must sacrfice income to repay loans.

Whether you are a house of a government the same broad principles apply

#59 Moneta on 10.28.11 at 8:00 am

Garth, I’m disappointed that you have joined the ranks of those that misuse the term “Ponzi scheme”. A Ponzi scheme is a very specific type of fraud (no need to go into details, Wikipedia will suffice for the curious).
——–
Semantics, semantics, semantics…

One thing I have learned in the last decade is that when people start arguing about the meaning of words, something ominous is upon us.

In 2005, the big blog fights revolved around the definition of the word bubble.

Now it’s Ponzi.

#60 Dave on 10.28.11 at 8:04 am

Chinese, Indian, it doesn’t matter. They don’t avoid victoria or any other city because of lack of shopping. They move based on existing communities and least number of flights to get into the country. If you want to go ‘home’ on a regular basis, you don’t want to have to include puddle jumpers.

Handy that all brown people think the same, isn’t it? — Garth

#61 bigrider on 10.28.11 at 8:06 am

#5 Mike Rotch “…suburban wasteland in the far off reaches of 905”.

The prevalent theme today in the GTA is that 416 is a safe, must have location long term and that anything in the 905 is doomed. Let’s examine that for a moment.

416 big costs, less square footage,shared bathrooms, no parking,no place to put snow, cars, smells and rotting old houses everywhere.

Yonge and steeles,hwy7, major mack..hmmn..subway not but 10 years most away, currently buses and access to 407 to 404 or 400.

#62 Tiglath-Pilesar III on 10.28.11 at 8:06 am

Markets factored in a worst-case scenario, and today was a relief rally. — Garth

Yesterday’s rally was market delusion and madness. Anyone who thinks that Europe has its problems under control is not playing with a full deck. Yesterday’s so called solution, that of creating more debt to solve a massive debt problem, is a temporary lull before the crap really hits the fan. Max Keiser sums it up well in this video.

http://www.youtube.com/watch?v=P8sK9gZEUac

No crash, no depression. no Judgment Day. Sorry boys. — Garth

#63 Novice on 10.28.11 at 8:08 am

#18 Don

You sound like a narrow minded bigot.
You live in Canada…the most diverse country in the world. Get over yourself.
This goes to you as well Beach Girl…

#64 The American on 10.28.11 at 8:22 am

AT #2: 19thBPOE (and falling fast), I think all of the counterpoint comments your post has already generated today pretty much speaks for itself. Are you really that ignorant?

The only thing getting smoked is you. But, for the record, those homes sold several weeks ago and they have been trying to buy the home next to this lot in the same fashion ever since with ZERO OFFERS. This is, again, a ploy to artificially raise prices. You should be embarrassed.

Now, if you’ll excuse me, I have to go and prepare my entry for Seattle’s HUMP Fest 2011 starting next Thursday.
http://www.thestranger.com/hump/

http://en.wikipedia.org/wiki/HUMP!_(film_festival)

#65 The American on 10.28.11 at 8:35 am

19thBPOE (and falling fast), Here’s some breaking news for you. It is now official (like we didn’t know it already) LOOKIE LOOKIE!!!! China’s Real Estate market is imploding and people are pissed! This is going to really suck for Vancouver. No really, its LITERALLY going to make a sucking sound with HAM being pulled away:

http://blogs.wsj.com/chinarealtime/2011/10/25/shanghai-homeowners-smash-showroom-in-protest-over-falling-prices/?mod=google_news_blog

http://www.capitalfm.co.ke/news/2011/10/protests-hit-china-as-property-prices-fall/

Property prices fall in MORE Chinese cities:
http://news.xinhuanet.com/english2010/china/2011-09/18/c_131144934.htm

http://www.china.org.cn/business/2011-09/19/content_23443033.htm

So, when the major implosion happens (it already is), how will this fare for liquidity? Ummmm,, not well. Bye Bye HAM.

#66 Smoking Man on 10.28.11 at 8:49 am

#9 dogman01 on 10.27.11 at 10:35 pm

You ain’t seen nothing yet.

At an Oakland Ca, OWS event a vetren US Marine was shot in the head on purpose with a tear gas canister.

If he dies, and his bros get involved in these events.

Advice, start hording water, amo and food. If you live down south………..

#67 Fan of Faber on 10.28.11 at 8:50 am

Forget the nonsense solution that the Europeans came up with yesterday. More debt to solve a debt problem. Marc Faber gives the straight goods on what should have been done.

http://www.businessweek.com/news/2011-10-26/faber-says-investors-should-accept-greek-writedown-of-90-percent.html

#68 Smoking Man on 10.28.11 at 8:54 am

#47 Never post under the same monicker on 10.28.11 at 1:04

Good advice, but Pink sounds good in any state of mind

#69 Where's The Money Guido??? on 10.28.11 at 8:54 am

Just had a chat with a lovely lady at our Coquitlam Boulevard Casino while watching that unbelievable World Series baseball game (GO CARDS!!!). She was with her brash friend who was insisting that she buy a condo in the Tri-Cities area, like she has for 300k (sold her house 4 years ago for over 500k). I couldn’t get her friend to stop and see the insanity of buying right now and her friend just wouldn’t leave it alone, insisting real estate always goes up and berating her good friend of 30 plus years for renting. I let her know that she is on the right path after finding out that her investments are covering her rent, so no problem there.
By the way, I hope lovely lady reads this, because she was a real doll, just sayin’…..Stay away from those young studs, ok!!!!
Of course I pointed her towards this site to inject a little sanity into the equation.
Just saw someone plunked down 3 million apiece for 10 houses valued at 1 million apiece on Cambie Street in Vancouver, same realtor. Now that’s insanity, even if it’s on the rapid transit Canada Line.

#70 Hammer1 on 10.28.11 at 8:57 am

#36 nonplused
great post..that’s the reason I keep coming here.the truth has to keep getting through. (garth’s musings are good too..sex with socks? )

#71 La Di Da on 10.28.11 at 9:02 am

I guess I just don’t get it. My husband and I live in San Francisco and visited Vancouver for a week a few months back. I warn readers to stop here if you are easily offended by opinions about Vancouver because I am going to speak my mind here. We thought it was a pleasant enough place, and the setting was pretty, but found it very dull and soulless at the same time. It felt like it did not have much of a culture. It is not nearly as big as the pictures make it look. Very deceiving because San Francisco is so much larger and San Francisco is considered a small city core. It rained half the time we were there and it seemed impossible to find a forum for a good live concert we would actually want to buy tickets for. The first two days were nice but after that it felt like we had accomplished everything there was to do like Kitsilano Beach, Stanley Park, Grouse Mountain, Robson Street which I just don’t get because we have far better and nicer shopping in nicer areas in San Francisco, China Town which felt like a big strip mall painted red, Granville Island and its version of a Pike’s Market although Pike’s Market trumps it, and the Vancouver Art Gallery which is awful and just way too small. Sorry, no offense with the gallery there but that was really bad. There were drug users on nearly every corner shooting up with their needles and we did not feel safe walking around at night even though we were told it is safe there. The city setting is pretty but the buildings! My god the buildings are so bland and monotonous! Everything looked the same and it looked really dated with all that green glass everywhere. The food was good enough and the people were very nice so we understood why anyone would make positive comments with those two elements. We scratched our heads and wondered why anyone would find this to be anywhere nearly as nice as San Francisco? I know I am partial but c’mon. Prices are high in both cities but my husband and I would not in a million years think about trading San Francisco for Vancouver as far as West Coast living is concerned. We would consider Seattle and Portland and maybe San Diego but would never consider Vancouver. San Francisco has awesome weather, mountains and water, amazing shopping, hip cultural scene, historic buildings everywhere, best food I’ve ever been able to find, terrific transportation options, enough art galleries you could not do in 6 months, so many more parks and recreation options, and our China town cannot be beat.

#72 Dr. WAYNE on 10.28.11 at 9:06 am

Garth … you say ” … this pathetic blog cannot save people from themselves, so why bother?”

I ask you … “Why do you bother when the lemmings will do it anyway?”

#73 More Debt Isn't the Answer on 10.28.11 at 9:09 am

Greece is yesterday. — Garth

Your sanguine outlook Garth is laughable. Greece and and others are going to make for a very bad tomorrow because the problem has not been properly addressed.

So, move to Athens and worry. No dominoes. — Garth

#74 PTDBD on 10.28.11 at 9:10 am

Mish has interesting Blog post on Shanghai RE

#75 allister on 10.28.11 at 9:17 am

“The fragility of this is stunning. Job loss, rising gas prices, higher mortgage rates, or (Allah forbid) kids, can kick home ownership in the nads.”

You forgot the biggy – one or two of the couples will likely experience divorce and have to sell, with all the associated costs of dumping RE and divorce legal fees.

Good luck to them.

#76 tkid on 10.28.11 at 9:17 am

I don’t know about Milton or Brampton, but $400,000 practically gets you a palace in Bowmanville. $280,000 still gets you a nice house and almost half the mortgage payment. What were they thinking?

#77 neo on 10.28.11 at 9:25 am

I love the smell of singed doomers in the morning. — Garth

Wrong again Garth. YOU were the doomer. Every time you were saying the market was “crashing”. I was saying no it’s not, look at the YTD numbers. There were far too many gyrations in the market to really call it a bear market and it was in technically bear market territory for what? 5 minutes at 1,074. C’mon now. You have been the one exihibiting the hyperbole. The Dow is positive for the year. Global markets even after this massive rally still are not. Perspective and objectivity Garth. I never believed in the doomsday fall or the hopium rally. Markets are somewhere inbetween and flat TYD suggests that. That is for now…. I’ll let you know when I truly believe all hell has broken loose. Don’t worry (-:

Humility works better. Try it. — Garth

#78 yorel on 10.28.11 at 9:28 am

A good book to read:

“Future Babble : Why Expert Predictions Fail – and Why We Believe Them Anyway” By Dan Gardner

#79 disciple on 10.28.11 at 9:37 am

OMG! So many red dots! mls.ca clumps them together and displays as one red dot to save space on my screen! Has it begun?!

#80 whiny on 10.28.11 at 9:44 am

I want to own in Vancouver. Garth, what will happen when the correction kicks in and there are a tonne of us who are priced out itching to get in?

If you buy on a false dip, you’ll be wiped out. Next question? — Garth

#81 whiny on 10.28.11 at 9:50 am

If you buy on a false dip, you’ll be wiped out. Next question? — Garth

OK… how do we know when to strike? Am I doomed to come crawling back here daily until I can learn to think for myself?

Yes. — Garth

#82 bigrider on 10.28.11 at 9:51 am

Interesting to note Garth, the article you pulled yesterday’s debt chart from, if you read it in entirety, seems to hold that Toronto RE prices are not over-valued.

Not my interpretation. — Garth

#83 Incubus on 10.28.11 at 10:00 am

Indeed why bother, let them fail.

Take a look of this kid in Montreal:

http://www.realestateinvestormontreal.com/2011/09/leverage-your-equity-increase-your-debt.html

#84 The thing in the basement on 10.28.11 at 10:02 am

23 TOBB from the link

“As an independent candidate I do not have the answer
to this problem, but win or lose I pledge this much: we
are going to start this conversation. ”

Wow. A wannabe politician who admits not knowing what to do but wants to talk about it.

#85 JohnnyBravo on 10.28.11 at 10:10 am

#52 Dorothy on 10.28.11 at 4:51 am

“[…] Realtors say and do whatever it takes (within legal limits) […]”

And sometimes not. But even many of the “legal” limits are beyond the limits of good business ethics. Don’t confuse the law with right and wrong. The law used to be woman could not vote.

Realtors game RE in ways analogous to how Wall Street games financial markets. And much of it is perfectly legal. Don’t forget, Goldman’s Blankfein was doing “god’s work.” Which god, he didn’t say.

#86 Where's The Money Guido??? on 10.28.11 at 10:12 am

RE: 65 La Di Da on 10.28.11 at 9:02 am

I agree with the drab look of the buildings compared to San Fran, which has much more style. No comparison there.
But you don’t get it. This is the best place to live in CANADA.
Just spend a winter anywhere else in Canada and you’ll see what I mean, unless you love 20 to 40 below for 2 to 3 months of the year and salt and gravel destroying your vehicle.
Oh yeah, we don’t have to drive 4 hours or more to go skiing either, and our smog is nowhere near as bad as it gets there. I lived up on the Twin peaks hills (facing south with a million dollar view!!!) and would watch the black goo roll in down from Golden Gate park and envelop the downtown at 2 pm almost every day for months during the summer. But those days from October thru December most years were fabulous!!!!
San Fran IS gorgeous and when I lived there (back in the late 80’s for 3 years) I just loved taking my 750 four stroke rice rocket out into the Santa Cruz hills and getting that all over tan that you Californians are known for. And there’s nothing better than blasting around the hills in the city on my bike.

#87 disciple on 10.28.11 at 10:18 am

A mortgage is a special type of usury, wherein, the interest due is front-loaded. The lender profits greatest during the first few years of the term of the “loan”. There’s also a limit to how much of the principal you can pay off in any year. That should tip you off to the pyramid scheme it is. If you plot the percentage of interest per payment over time, you get an inverted pyramid.

The lender would rather you not pay off the mortgage. They would rather you not be “prudent”, for them it’s an “investment” dripping in cash revenue.

This is much worse than any 80% payday loan shark, but you accept it as normal. Why is this?

#88 robert james on 10.28.11 at 10:20 am

It appears that the Chinese real estate bubble is beginning to pop as we speak and HAM does not take it all that well..lol http://globaleconomicanalysis.blogspot.com/2011/10/shanghai-homeowners-smash-showroom-in.html

#89 bill on 10.28.11 at 10:31 am

#2 BPOE on 10.27.11 at 9:44 pm
if you think that article is a good thing why do the resident fear their neighbourhood will be ruined?

#90 robert james on 10.28.11 at 10:36 am

OOPS!! #65 American has already posted those savy and very clever Chinese buyers learning the hard way about capitalism .. #71 La Di Da I enjoyed your post regarding Vancouver.. Don`t forget,,there is a very special kind of stupid in Vancouver..BPOE displays it here on a daily basis.. Cheers!!

#91 JohnnyBravo on 10.28.11 at 10:46 am

I have said in past comments that, due to the need for greater mobility and flexible employment, much higher real costs of living and home ownership, too much debt, and an exhausted housing market, we could see a generational revulsion of home ownership.

Is this evidence of that?

http://www.zerohedge.com/news/renting-new-buying-primer-housing-20

#92 Big Fan of this Pathetic Blog on 10.28.11 at 10:48 am

For my 2012 New Year’s wish, I will wish that you acquire your own TV show on CBC.

For educational, preceptive programming- and so FUNNY! Your sarcasm and wit make my day! Good grief, we need to learn to laugh at ourselves more…

THAT, I would tune in for faithfully! You rock Garth, don’t let the fearful get you down….

#93 Devil's Advocate on 10.28.11 at 10:54 am

Look at what it would cost you to buy a lot and then have a house built on it. Trades are more negotiable on their prices but not so much that it has pulled the price of housing down that much. Lots are less expensive but there still remains a healthy demand for them as we populate our country, cities and neighbourhoods with more and more bodies.

Look at the market dynamics all you want but don’t forget to include ALL that influences. The demand for new and resale housing tends to see-saw back and forth as it seeks a state of equilibrium but as soon as it nears one or the other capitulates or catches up as the case may be. Ultimately the cost of materials and labour create a floor of sorts to the extent housing can or will fall. The multiplier effect originating from the capital infusion from the very initial stages of house construction reaches out to a great many others that they depend upon that sector to maintain or resuscitate life into the economy. This is the free market and as competitive as the law of the jungle it is.

Our economy is not going to fail as so many on this “pathetic blog” predict. It can’t – the participants will not allow it. They are not going to roll over and quit. Each and every one of them is going to continue trying to better themselves and in so doing they will collectively negate the downward spiral foretold by the vocal minority which fears the worst. There is nothing to fear but fear itself – literally. It is fear and greed which moves markets but ultimately greed trumps fear. “Greed is good”.

What reason is there to believe anything other than as it was so shall it continue . We are all aspiring to the same collective goal since we first invented the wheel – work less, take home more. That has not changed since our cave dwelling days. That will not change. We will not give up. It is in our nature not to quit as we fight to survive and flourish.

House Horny is merely a new term for Cave coveting.

#94 Moneta on 10.28.11 at 10:59 am

Exaggeration unbecomes you. Markets factored in a Greek default plus European bank instability as a result. That seems more remote, hence the move higher. It’s what markets do, unlike people on this blog. — Garth
———–
Corporate profits are at all time highs. Over the last couple of decades the stock market kept on climbing well after corporate profits rolled over. In fact, markets seem to only tank when profits/gdp finally reaches zero.

Europe is cutting so the economy will slow. Ireland and others will be looking to get their fair share so problems are not finished there. Everyone will try to devalue their currency and this will sideswipe Canada. If China does slow down and pauses, meaning it stops building more empty cities for a couple of years, Canada will also surely feel it. Corporate profits are bound to drop.

Will markets drop… probably not. In fact, if history is any indication, they will probably keep on going up while profits drop. For some weird reason, the market seems to realize it needs to jump out only when profit/gdp are back at zero and not when profits start rolling over.

Therefore, markets are not climbing because of future profit growth. It’s still looking in the rearview mirror.

And next time the economy slows, companies will not benefit from refis at lower rates. First time in 30 years.

Markets will be going up because of money flows, not profits.

#95 AgAu on 10.28.11 at 11:00 am

Greece may be yesterday, but it sure looks like it’s Italy today…
===================================

#73More Debt Isn’t the Answer on 10.28.11 at 9:09 am
Greece is yesterday. — Garth

Your sanguine outlook Garth is laughable. Greece and and others are going to make for a very bad tomorrow because the problem has not been properly addressed.

So, move to Athens and worry. No dominoes. — Garth

#96 Van guy waiting on 10.28.11 at 11:03 am

Is there stats or reports of how many cmhc insured mortgages? Out of my group of friends, I don’t know anyone with %5 down. The smallest was %12.

#97 Moneta on 10.28.11 at 11:08 am

Just spend a winter anywhere else in Canada and you’ll see what I mean, unless you love 20 to 40 below for 2 to 3 months of the year and salt and gravel destroying your vehicle.
———
A fiend of mine went to study at UBC. She loves to golf but was so depressed becaus eit rained all the time.

Better to live in a cheap cold sunny city, buy a house for 300K and have enough money to travel the world.

IMO, the only ones who can truly love Vancouver today are the ones who have a few million.

#98 disciple on 10.28.11 at 11:22 am

Anyone making over 54,000 in Canada, is in the top 1% in the WORLD. So many wealthy whiners on this blog complaining about the gov’t punishing savers. You guys need to redefine “punish”.

The Occupy movement is a scam. You will begin to see the media turn their creation into “we must tax the rich”. As if they weren’t already paying enough taxes. The target is obviously the upper and upper middle classes, as the lower classes have already been plowed by the tax farmers via fiat inflation.

F has been talking about taxing the rich for years. I have discovered this agenda in the Occupy movement but I couldn’t have done it without you, my fellow blogdogs. Thank you.

#99 Van guy waiting on 10.28.11 at 11:23 am

I can see investors smash up developer show rooms in Richmond and False Creek South. Remember here in Van, we love to riot!!

#100 AACI-Okanagan on 10.28.11 at 11:26 am

“Greece is yesterday. — Garth”

Now that was funny! The wife and I just spent 5 weeks in France, and I can tell you that the euro mess is far from over. Greece problems are far from over, next up is Italy, then Spain etc.. France is in for 13.4 Billion dollars of greek debt, Germany is in 14.1 billion. Italy 2.4 Billion and get this, the greek banks are in for 62.8 billion, the US is in for 1.94 billion and so on. This proposed patch is not going to work because Italy is now starting to come undone. France carries 105 billion dollars of Italy debt, Germany 51, US 14+ Japan 29+ , the UK 12.7 .. it will be a domino effect just like what happened in the US.. having said that, I wish I was back along the french riviera ..

#101 live within your means on 10.28.11 at 11:30 am

So, it’s different in the GTA, different in Van. Just like it’s different in Calgary (oil), in Halifax (new ships) and in Saskatoon (sex with socks).

Re Halifax new ships – check out this new video – http://q104.ca/viewvideo.asp?mn=5&id=247&Category=Viral+Video

Then check out http://www.globalnews.ca/lions+share+of+combat+ship+contracts+to+go+outside+halifax+defence+management+expert/6442506258/story.html

OTTAWA – The Halifax yard that won the shipbuilding jackpot this week stands to hold on to only 20 per cent, or $5 billion, of the $25-billion contract, said one expert and one insider.

Part of the balance will be spent in Canada, but upwards of $15 billion may go offshore.

Don’t usually like to quote a Global News story, but couldn’t find the original news story that I had read.

…………..

A retired friend of ours, ex VP of a major high school & then a consultant, finally put her home on sale last week. She’s been divorced for years (3 kids, grandchildren), has a dog and lives alone. Lovely small 3 bed, 2-1/2 level TH overlooking Shubie Park – perfect for a couple w/o kids. Not sure what she’s asking, but I know she paid in 90K’s, IIRC, many years ago. She wants to rent and plans on travelling. She’s a smart lady.

Meanwhile, the home behind our next door neighbour has been on the marketsince late Spring and has been empty since late May – understand that the young chap’s Banker father bought it for him while he went to university here. Home on the same st. finally removed their 3 mo. listing.

And, neighbour across the street has been flooded for the 3rd time – only an inch, but enough to do lots of damage. When lots on our street became available, her DH (away on business) told her to buy the biggest lot available (about 30+ yrs ago). They had a home built, but seems the drainage system or table wasn’t correct. Long story & I can’t remember all the details. Anywho, insurance co. have been there all week ripping out all carpeting in the basement, removing furniture, & will have to remove lower part of gyproc, etc. Plus, their son & DIL were storing cardboard boxes of stuff as they put their house on the market in the spring – which never sold – not a great area. Son bought it before he married. He’s now a school VP and she has a good job. What a mess!! Neighbour says their insurance rates will be sky high. Last time the kitchen cabinets, etc. had to be replaced due to water problems. So much for buying the biggest lot available on the street. It’s long, but half of it is not usable.

Damn – saw a med sized ‘rat’ on the deck yesterday and again this morning. Thought we had got rid of them. We’ll put out some more poison & if the ‘red’ rats eat it, so be it.

#102 Devil's Advocate on 10.28.11 at 11:34 am

Be it rain, snow or sleet we need a “cave” to crawl into. Problem is we ran out of enough caves long ago. So we started building houses in one form or another. But before we could construct our abode we needed a piece of dirt upon which to place it.

Don’t mistake real estate for houses. Houses are a transient thing compared to the land they are put upon. Remember; location, location, location.

What has happened in the real estate market is really little more than a return to the fundamentals. The “correction” is not affecting those properties which resemble that lasting idiom “location, location, location”. When the economy is robust and prices are escalating into the stratosphere it is easy to overlook prudence and buy that which does not have such value. Value though is lasting where a cheap pretence is not. Greater fools abound in a robust market.

“Ice cream melts from the outside in” as Garth once said.

We merely took too much. We didn’t need a double scoop. And now while trying to navigate the road ahead we are having to deal with and keep the melting excess at bay.

Hint: Keep your eyes on the road ahead people.

#103 disciple on 10.28.11 at 11:46 am

While you have been distracted your whole life with Mammon in one form or another, the global ruling class for over 80 years has been developing chemical and biological innovations that encompass the vast Tranhumanism Project. You see, while you go to work everyday thinking you are serving the god you believe in, these 300 families have been awakening to their Brave New World, fashioned in their image. And they’ve been busy. But that’s what happens when you enjoy your work.

They are not human like you and I, or so they believe, so what does it matter if millions are force-sterilized? Or you are unknowingly experimented on? Or spider-goats are made to produce body armour in their milk? Or if you are eating insect genes in your corn? Or that they disguise nanotech as vaccines?

The facts are in. The facts are available. The facts cannot be denied. Cancers have tripled. Diabetes has doubled. Yet they have the audacity to declare vitamins as dangerous? It is the fertility of the human egg that is currently being targeted. Pure evil. But go ahead and keep your heads in the sand. To whom much is given, much is required.

#104 live within your means on 10.28.11 at 11:58 am

#97 Moneta on 10.28.11 at 11:08 am
Just spend a winter anywhere else in Canada and you’ll see what I mean, unless you love 20 to 40 below for 2 to 3 months of the year and salt and gravel destroying your vehicle.
———
A fiend of mine went to study at UBC. She loves to golf but was so depressed becaus eit rained all the time.

Better to live in a cheap cold sunny city, buy a house for 300K and have enough money to travel the world.

IMO, the only ones who can truly love Vancouver today are the ones who have a few million.

…….

When I spent 2 weeks visiting friends in BC in summer of ’75 who were originally from Mtl..Ottawa, they told me to reconsider because of the incessant rain. One has since moved to PEI when she retired. One met someone & moved to Cal & one still lives in Sooke & works for the BC govt. in victoria.

We may have more rain here than Mtl. but I doubt it compares to VCR. Sun is shining now & we have less snow than Mtl.

#105 Form Man on 10.28.11 at 12:08 pm

#93 Devil’s Advocate

You took up a lot of space to say very little. I agree with you that the replacement cost of housing is fixed. That doesn’t help when supply is greater than demand. As Garth and others have pointed out repeatedly; Canada has built many more homes than the household formation rate for years now. The free market can be very cruel and unforgiving when this happens. Greed is good except when it isn’t. It isn’t a free market when government housing policies skew it. Because of this market meddling, we will endure a much more serious correction than we would have otherwise. You portray a typical Conservative outlook: keep ignoring facts and tout ideology instead. Never waver……….it is like
insisting the earth is flat in spite of overwhelming evidence to the contrary……or insisting that the solution to a housing glut is more housing………

#106 Devore on 10.28.11 at 12:22 pm

#10 2deep

I love how the link to this book has omitted the “NOT” between “will” and “bust”. If this doesn’t hit home and make you think twice about our housing, nothing will.

Well, I hope you don’t think it’s some sort of conspiracy, or a purposeful act in order to to deceive, as is so popular here.

These automatically generated links, seen on lots of sites, often omit “glue” words and such, like “a”, “the”, “does”, “not”, punctuation, numbers, etc.

#107 MeltFouse on 10.28.11 at 12:22 pm

Investing advice from the lunch room

“There’s no stock market in North America that will give you the returns that RE in Vancouver will give you!”

This coming from a guy who had his west side house on the market for 7 weeks with no bites that he has just taken off. Apparently it’s the time of year. Guess that HAM dried up faster than he thought. :-S

Makes me happy I’m watching RE from the sidelines when I hear this…

#108 bigrider on 10.28.11 at 12:38 pm

#82 Garth to Bigrider-” not my interpretation”

Chart to look at called ‘home prices over the present value of expected rents’

Defends prices for T.O , does it not?

#109 MoneyMyHoney on 10.28.11 at 12:44 pm

Good boy Garth, this time, you did not mention anything about the interest rate going go up soon.

May be you got the message after peeping into Carney shrunken Stanfields that it is not a ‘hotdog’ anymore.

#110 Dorothy on 10.28.11 at 12:46 pm

#85 – Johnny Bravo

I agree there are unethical Realtors, just as there are unethical people in ANY profession. And, as always when dealing with sales people, it is up to the customer to use his/her common sense, do his own research, and ultimately MAKE UP HIS OWN MIND. Not allow him/her to be led around by the nose by a person whose only goal is to make the sale.
Same applies when reading news put out by people who have a financial interest in manipulating the facts for their own benefit. But again, this doesn’t just apply to news from Realtors; it also applies to news from banks, financial planners, even teachers. I was once told by a retired teacher that in 40 years of teaching she had rarely seen union recommendations purported to be for the benefit of “the kids” that weren’t actually more for the benefit of the teachers themselves. The bottom line is that we should never just blindly accept what ANYONE is telling us. We should do our best to find out for ourselves, and then make our own decisions based on what we have discovered.
That said, there are always going to be times when it’s simply not possible for us to verify what some salesperson is telling us, and that’s where the law needs to step in and protect us from those who would commit such fraud. Years ago Realtors were overseen more by government, whereas nowadays they are pretty much overseen by themselves. And that was definitely a backwards move. No organization, whether it be police, physicians, teachers, or Realtors, should be responsible for policing the actions of their own members. Independent bodies do the job much better.
So, by all means, let’s tighten up the rules to help protect the unwary, but that still doesn’t let people off the hook as far as exercising their own due diligence is concerned. Remember the old saying “Buyer Beware”.

#111 Devore on 10.28.11 at 12:49 pm

#11 I’m stupid

Let me ask you a question, let’s assume everyone took your advise, what would be the outcome? We both know the answer to the question.

No we don’t, actually. Please elaborate.

#112 The InvestorsFriend on 10.28.11 at 12:52 pm

Desciple at 87 said:

A mortgage is a special type of usury, wherein, the interest due is front-loaded. The lender profits greatest during the first few years of the term of the “loan”.

This is much worse than any 80% payday loan shark, but you accept it as normal. Why is this?

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

Well Deciple, there is more interest at the start of a mortgage because you owe more money at that time.

Pre-payments are limited because a bank needs to lock in the interest rate from its source of moneuy.

If a bank funded a mortgage a few years ago with GIC deposits paying higher rates, it cannot now let you pay off the morggage and refinance to today’s lower rates because the depositors are still being paid high rates on the GICs

Banks lend depositors money… but the bank and not the depositor is at risk if the loan is not repaid.

And PayDay loans are for a week or two and so calculations of 80% annual interest rates are nonsense.

PayDay loans are legitimate businesses. Anyone who does not like businesses lending payday loans to consenting adults should pack up and move to the likes of CUBA, a socialist nervana, I hear.

Failing that, they can lend the money themselves to these people who need payday loans.

#113 bigrider on 10.28.11 at 12:54 pm

Gord Nixon, RBC CEO on BNN just now ” Housing market is OK” . “debt levels are high but within upper level of band” .
“risks to servicability of debt are interest rates”.

“Canada not in a housing bubble” he concludes although “some areas may have gotten ahead of themselves’

The religious fervor over houses continues in this great land of ours

#114 Devore on 10.28.11 at 12:56 pm

#14 Robert Dudek

Garth, I’m disappointed that you have joined the ranks of those that misuse the term “Ponzi scheme”. A Ponzi scheme is a very specific type of fraud (no need to go into details, Wikipedia will suffice for the curious).

Oh really? A Ponzi is where new entrants are required to support those who came before them, allowing them to cash out at much higher rate than they paid in. Eventually, those who do not cash out find themselves holding the bag. Sounds like a Ponzi.

Isn’t this is what real estate is when prices exceed economic fundamentals? When assets cost more than their income stream indicates? When housing bubble bursts, isn’t that exactly like a Ponzi unwinding, where those left standing find they can only get pennies on the money they put in?

Don’t be such a literal retentive fuddy duddy. What next, you gonna quote the Websters?

#115 Mr. Plow on 10.28.11 at 12:58 pm

Had to post that I was on Squidly’s site a few days ago and saw that he referred to be as an “internet troll”.

How ironic.

#116 Devore on 10.28.11 at 12:58 pm

#14 Robert Dudek

There is really no overt fraud going on, except that there is heavy use of propaganda to induce people to buy overly expensive real estate.

And just because it is legitimized, does not mean there is no fraud. You should know better.

#117 Peakoilist on 10.28.11 at 1:08 pm

#71 La Di Da
that is the biggest load of crap I’ve read here in a long time..
California is so far down the shitter it isn’t funny..get your head out of your arse miss ladida
all you talked about was the mountains and the food and the galleries..so shallow

#118 Peakoilist on 10.28.11 at 1:20 pm

#93 Devil’s Advocate
Our economy is not going to fail as so many on this “pathetic blog” predict. It can’t – the participants will not allow it.
————————————————————
so you’re going to trust that collective bunch of psychopaths called the world financial banking cartel..also that vocal minority will be growing exponentially.

#119 GTA Girl on 10.28.11 at 1:28 pm

Has anyone noticed the funky advertisements some builders are doing for their condos in Toronto?

Previously the full page ads had pouting women with expensive handbags. They then went to female body parts, like hive pics of women’s lips or long legs.

But it has become bizarre. Look at tomorrow’s TO Star or today’s RE section in the Globe. Fullpage ads that make no sense. Picasso condos showing frowning 20 somethings hanging from the sky in a Dali-esque setting. Or Tridel’s little nightmare, showing a freaky vase with frogs holding hands.

I’m beginning to believe Toronto has a serious problem with too much money and too many drugs

#120 sam.i.am on 10.28.11 at 1:30 pm

Is there a VIX equivalent or proxy for RE volatility?

#121 Bobo on 10.28.11 at 1:32 pm

Interesting to note Garth, the article you pulled yesterday’s debt chart from, if you read it in entirety, seems to hold that Toronto RE prices are not over-valued.

Not my interpretation. — Garth
___

That’s exactly what it shows, at least in relative terms.

#122 Peakoilist on 10.28.11 at 1:34 pm

#98 disciple
I don’t think that you can prove that the Occupy movement is anything other than a grass roots protest, born out of the desperation of people. If you suddenly became hopeless, jobless and saddled with thousands in unservicable student debt, you might actually march too..I think we all would, if we’re being totally real. but its easy to create conspiracies from the comfort of a paid-for house and a healthy retirement plan.

#123 Daisy Mae on 10.28.11 at 1:41 pm

CBC reports on the ‘Cambie Street corridor’ in Vancouver, BC — 10 houses have recently been purchased by developers for $3.4 million each. The developers plan to build highrises, townhouses, whatever.

No wonder the public is confused…the world has gone crazy.

#124 Daisy Mae on 10.28.11 at 1:52 pm

CBC: “The Cambie corridor plan allows buildings up to 12 storeys in height, and leaves room for them to go even higher around the Oakridge Mall near 41st Avenue and at the southern end of Cambie Street near Marine Drive.”

#125 fancy_pants on 10.28.11 at 1:56 pm

Shanghai Homeowners Smash Showroom in Protest Over Falling Prices

http://blogs.wsj.com/chinarealtime/2011/10/25/shanghai-homeowners-smash-showroom-in-protest-over-falling-prices/

#126 fancy_pants on 10.28.11 at 1:59 pm

http://news.yahoo.com/protests-hit-china-property-prices-fall-062027680.html

#127 fancy_pants on 10.28.11 at 2:00 pm

http://us.ft.com/ftgateway/superpage.ft?news_id=fto102520111054041512

#128 disciple on 10.28.11 at 2:01 pm

Are you secretly a “Prepper”?

http://endoftheamericandream.com/archives/the-prepper-movement-why-are-millions-of-preppers-feverishly-preparing-for-the-end-of-the-world-as-we-know-it

#129 Moneta on 10.28.11 at 2:06 pm

disciple on 10.28.11 at 11:46 am
——-
Sheesh! Everytime I read your posts, I become a hypochondriac.

Now I see how those without money or those with big mortgages must feel when they read this blog. LOL!

#130 disciple on 10.28.11 at 2:25 pm

#122 Peaky… I’d like to believe it’s a grassroots movement, but the way the media is trumpeting it, and the fact it started in 1000 locations all at the same time, I dunno… Paid-for house and healthy retirement plan? I’m not quite there yet… I’m still in semi-mad scientist mode, and until I started reading this blog, never really kept up with the debt orgy that is real estate. As you can tell, I was occupied with other things, but you guys have shown me how RE relates to all the other conspiracies. That’s why I’m a renter for now…

#131 JohnnyBravo on 10.28.11 at 2:32 pm

#110 Dorothy on 10.28.11 at 12:46 pm

I agree. Very much so.

With regards to realtors specifically (since this is primarily on RE blog), keep in mind that a realtor is not just a salesperson. A so-called Realtor® is an agent. That means he/she, once retained, is obligated to act on your behalf and in your best interests. But in reality, how many of them actually put their clients’ interests first? I can tell you from personal experience, and from people I know in the business, not many.

In life there are certain people we need to be able to rely on. Are you going to second-guess your doctor? Ignore your lawyer’s advice? Rebuff the technician who tells you your furnace must be replaced or the CO leak may kill you one night in your sleep? You can always get a second opinion, but unless you are knowledgeable about that specific field, at some point you have to just trust your “advisor.”

And you should not be blamed when the agent acting on your behalf engages in activities not in your interests. At that point you are a victim, not a fool.

#132 2deep on 10.28.11 at 2:36 pm

@ 106 Devore

No, not an idiot or conspiracy crazy. Just enjoy a little irony, don’t read too much into it.

#133 Habs 76-79 on 10.28.11 at 2:43 pm

Peakoilist,

California is only fubard financially because decades ago voters voted in PROP 13 and since that stupid law it’s has been downhill in terms of govt. revenue generation. S.F. itself IS A WORLD CLASS CITY. It’s one of the most interesting, diversified and beautiful cities on Earth.

Vancouver has nothing over S.F. in any of the city living regards.

California along with 40 other US states may be screwed financially but you can’t fault the city of S.F. and its vibrancy for that.

#134 neo on 10.28.11 at 3:03 pm

Humility works better. Try it. — Garth

That’s the thing. NOBODY has this thing figured out, not me, not you. All I am pointing out and have pointed out numerous times is that with the tremendous amount of government intervention in the free markets the past few years TRUE price discovery in any asset has been completely distorted. The only markets that have been “semi” functioning is the bond and credit markets, moreso outside the U.S. however. They are telling a story that hasn’t changed throughout this political theatre. Case in point.

Garth,

what was the 10 yr and the Italy bond that preceeded this contagion risk?

Answer: above 6%

Where are we now after a bond auction in Italy today?

Answer: above 6%

So Greece is “bailed out”. The risk on trade is, well, on. But the risk as far as the credit markets is concerned is the same or actually worse than before. Why?

Because as I said in the first comment. Why would an investor put money is any of the other PIIGS nations if they cannot hedge that risk with a CDS. They will just demand a higher yield. Which is EXACTLY what is happening and that will produce the very contagion they are attempting to clumsily “ring fence”. This isn’t something theorical that I’m just throwing out there. It is actually happening.

#135 Timing is Everything on 10.28.11 at 3:04 pm

#123 Daisy Mae “…the world has gone crazy.”

Still?

http://www.youtube.com/watch?v=PpkTO95zeV0

#136 jess on 10.28.11 at 3:16 pm

Robert Dubek

Understanding Minsky’s financial instability
Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt by the NON GOVERNMENT SECTOR

A Minsky Meltdown: Lessons for Central Bankers, by Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco, April 16, 2009

3 types of borrowers that contribute to the accumulation of insolvent debt:

1) hedge – can make debt payments (covering interest and principal) from current cash flows from investments.

2) speculative – the cash flow from investments can service the debt, i.e., cover the interest due, but the borrower must regularly roll over, or re-borrow, the principal.

3) Ponzi – borrows based on the belief that the appreciation of the value of the asset will be sufficient to refinance the debt but could not make sufficient payments on interest or principal with the cash flow from investments; only the appreciating asset value can keep the Ponzi borrower afloat. Because of the unlikelihood of most investments’ capital gains being enough to pay interest and principal, much of this type of finance is fraudulent.

If the use of Ponzi finance is general enough in the financial system, then the inevitable disillusionment of the Ponzi borrower can cause the system to seize up: when the bubble pops, i.e., when the asset prices stop increasing, the speculative borrower can no longer refinance (roll over) the principal even if able to cover interest payments. As with a line of dominoes, collapse of the speculative borrowers can then bring down even hedge borrowers, who are unable to find loans despite the apparent soundness of the underlying investments.[5]

#137 Robert Dudek on 10.28.11 at 3:17 pm

… RE is now more expensive in Montreal, TO and Van than in any of the 7 biggest cities in the US. Go figure.

Due to the strong CDN$. If/when CDN returns to 70cents US it will be a different story.

#138 Bond junkie on 10.28.11 at 3:27 pm

Forgive the long post, but a MUST READ for all bloggers here.

Big rider #82, funny you should say that because I was thinking the exact same thing. The people that inhabit this blog should really spend more time doing their own due diligence instead of simply regurgitating the latest editorial comment churned out by THE Globe and Mail and/or worse, the Brad Pitt wannabe @ Zero Hedge. Having said all that, I do agree w/the incumbents calling for the doom and gloom scenarios unfortunately they tend to overlook one critical piece of this very elaborate puzzle. The political and populist will of the g20 and its governing parties with the assistance of their respective central banks to KEEP THIS PARTY GOING is utterly massive. It’s literally the only thing on their agenda right now (Greece is part of this) and it’s the basic thesis that Garth has been clinging to every time he refutes somebody on this blog that highlights the plain and simple fact that the stock market screaming higher while the world is awash in debt is f*cking laughable. Consumers are tapped, sov’s are choking on the gargantuan transfer of private sector liabilities now made public (ie. taxpayer’s problem), and yeah housing in Canada is massively overvalued, but you know what? It’s not going anywhere but higher in the near future (sorry Garth). How do I know this? Because of what was identified above. You can ring fence a country like Greece, and with a little precision maybe even Italy and Spain but not the entire G20. We’re all awash with debt but to keep the largest demographic in the world and their parents happy, not to mention maintaining the fabric of the social order we so currently enjoy, pension contributions must be made in a timely and orderly fashion (ie. no developed nation default), hence those debts must continue to be serviced. How shall we continue to service those debts? Tax receipts. Where do said tax receipts come from? Sales, consumption, employment, corporate profits, rinse, repeat. What motivates the former? Materialist lifestyle, asset inflation, goods inflation, housing… you guessed it, inflation!! Smoking man’s classic definition of the tax farm slave. To let tax receipts collapse during a period of record public debt to GDP amongst developed nations without the devastation of a full scale world war to repair and pass off as ‘growth’, leads to an alternative reality that is both politically and humanly unpalatable. So we get inflation instead. Rates in the developed world are not going anywhere anytime soon folks (read: YEARS). Carney just told us so and that’s why Garth was so upset with him yesterday. It’s not his fault though, his bosses told him to wait and so he waits. The central banks have about as much ‘independence’ from their political superiors as tax farm slaves do from their servicing their debt. Like it or not, we are joined at the hip with Fed and they are calling the shots. On hold till 2013 and beyond, sorry. Back to housing, something else to investigate while you’re perusing the latest copy of your RRSP’s Big 5 quarterly report. If you don’t have one on hand, don’t worry, they’re all reporting in December so you’ll get them soon. Comb the balance sheet, run the numbers. Look at the % of residential mortgages (both chmc insured and not) relative to total assets. Hint: it’s nowhere near the highs of 2005. Homework assignment number two, google ‘IMPP Canada’ and read thoroughly. The Bank of Canada owns nearly 75B of CMHC insured mortgages on their balance sheet, they bought them from the banks two years ago and funded them with selling 5y Canada bonds 1% lower in yield. It’s called a carry trade and it actually earns the Bank and very solid return for taxpayers believe it or not. Exercise number three, google ‘covered bonds’. In their current form they are issued by Canadian banks collateralized by CMHC insured mortgages. The structure of these bonds have insatiable demand in the U.S because all of the AAA FDIC guaranteed bank debt that was issued during the crisis of ’08-09 had an average term of 3 years. Now that the aforementioned assets are maturing, pensions, mutual funds, bank/corp treasury desks need to reinvest those proceeds in high quality assets because they either need to maintain their currently quality weightings and/or can’t give up on an attractive carry trade since the bonds are 0% risk weighted. Read up people. Much, much more room for residential mortgage credit growth on balance sheets in Canada. Couple that with low, low rates probably forever. Conclusion: higher home prices coming to a Canadian city near you.

782 words. Concluison, wrong– Garth

#139 allister on 10.28.11 at 3:40 pm

House poor – like Garth said everything in one asset. And the guy is a surgeon.

http://business.financialpost.com/2011/10/28/this-dream-house-has-got-to-go/

#140 Re-diculous on 10.28.11 at 3:46 pm

Message for BPOE: as a long time Vancouverite I must say you totally embarrass me. Funny how I find myself cheering at comments by The American that make you -someone from my own city – look like an imbecile.

#141 Robert Dudek on 10.28.11 at 3:47 pm

Oh really? A Ponzi is where new entrants are required to support those who came before them, allowing them to cash out at much higher rate than they paid in. Eventually, those who do not cash out find themselves holding the bag. Sounds like a Ponzi.

In a word, no.

All speculative manias rely on new money coming in to pay out old investors: if this did not happen there would be no mania. But a mania doesn’t have to be a fraud at the same time – it merely requires that the new entrants believe that prices will rise in the future. When you consider how gullible and greedy most people are, this is not a difficult thing.

A Ponzi is a specific type of fraud wherein investors are convinced that they will receive abnormally high often consistent returns, based on some secret method which turns out to be entirely bogus (this is the fraud component).

In reality, some early investors are paid back WITH THEIR OWN MONEY, not merely with new money coming in, or more likely they are convinced to reinvest their paper profits so the perpetrator doesn’t have to pay out (easy to accomplish for a good con man when greed is factored in).

For example, Madoff’s scam involved convincing people that he had a secret cutting edge trading algorithm that allowed him to beat the normal market returns by a large percentage. In reality there was no secret method, little or no trading was done and the financial statements produced for investors were completely fraudulent. As long as a limited number of investors wanted to cash out and as long as new investors were found, his scheme could have gone on indefinitely.

In real estate, people know what they are buying – there is no overt fraud, but the mania is being perpetuated by expectations of increasing prices. It is not one person or a small group of people committing fraud, rather it is a generalized euphoria – another aspect that marks this as being different from a Ponzi scheme.

This is another unremarkable example of a classic speculative mania, one of many in the history of the modern financial economy.

#142 Timing is Everything on 10.28.11 at 3:47 pm

#130 disciple – “That’s why I’m a renter for now…”

Where’s your conviction, man!? Rent for life.

#143 Bond junkie on 10.28.11 at 3:53 pm

Don’t worry it’s getting late in the day, nobody will read it anyways.

#144 Robert Dudek on 10.28.11 at 3:54 pm

#136

Ponzi finance is Minsky’s term. An unfortunate one because speculative bubbles existed long before Charles Ponzi. I would prefer a term like “manic speculative” finance or “bubble finance”.

But he does not use it to describe a Ponzi scheme as such. A Ponzi scheme is a deliberate attempt to defraud. Most people who misuse the term usually are not using it in the Minsky sense.

#145 Mister Obvious on 10.28.11 at 3:58 pm

#14 Robert Dudek

“There is really no overt fraud going on, except that there is heavy use of propaganda to induce people to buy overly expensive real estate.”
—————————-

That’s close enough to fraud for me, Robert. Just substitute ‘propaganda’ with ‘lies’ and there you have it.

#146 poco on 10.28.11 at 4:05 pm

131–JohnnyBravo

With regards to realtors specifically (since this is primarily on RE blog), keep in mind that a realtor is not just a salesperson. A so-called Realtor® is an agent. That means he/she, once retained, is obligated to act on your behalf and in your best interests. But in reality, how many of them actually put their clients’ interests first? I can tell you from personal experience, and from people I know in the business, not many.
______________________________________________

just throw in a nice fat juicy “bonus” to the realtor bringing in a buyer for any property and watch the “realtor ethics” get thrown out the window –unbelievable what 2 or 3k can do to a stagnant property

sad part is, the buyer never knows there is a bonus being offered to their realtor if they buy–secret stuff between selling realtor/owner and the buyers realtor

how many buyers have overpaid just because of the bonus? i know a few sellers who are laughing…….

#147 Moneta on 10.28.11 at 4:08 pm

Bond junkie on 10.28.11 at 3:27 pm
——–
When the Canadain dollar was 63 cents and Sherry Cooper was saying that we should peg it to the US currency, my colleague and I had a good chuckle.

He’s one of those with an amazing memory who also holds onto everything. He opened his drawer and pulled out one of her reports where she stipulated the US economy was firing on all cylinders. We checked on Bloomberg to see when this recession actually started and it coincided with the date on her report.

Me thinks it’s time to see what Sherry has to say. LOL!

#148 Form Man on 10.28.11 at 4:13 pm

#138 bond junkie

what part of the demand/supply equation do you types not understand ? it is grade 3 math…….( maybe grade 2 ). Once supply is greater than demand, prices fall……..one can propose all sorts of financial engineering, but the market will correct…….that is a fact……

#149 vancity on 10.28.11 at 4:15 pm

“I was in Van for 3 days and all it did was rain.”

Duh – it’s called Winter – go get a ski pass

May through Sep has comparable precipitation to any other Canadian city.

#150 penpal on 10.28.11 at 4:33 pm

@ # 138 Bond Junkie

More like simply Junkie, cause you would have to be seriously drug addled to believe that Canada alone can evade the dynamics of a bubble bursting.

For someone who fancies himself an informed financier, you simply cannot do math.

I sincerely hope you do not manage anyone’s money but your own.

#151 Devil's Advocate on 10.28.11 at 4:35 pm

#105Form Man on 10.28.11 at 12:08 pm

#93 Devil’s Advocate

You took up a lot of space to say very little. I agree with you that the replacement cost of housing is fixed. That doesn’t help when supply is greater than demand.

Do you really believe that so much of the resale inventory is being offered by seriously motivated sellers? Not a chance. I’d say at best something less than 50% of what is on the market is seriously for sale – probably more like a third of the inventory is seriously for sale. The rest of it is put out there by sellers hoping they didn’t miss the peak by too much. AND THEY DIDN’T because it’s not dropping nearly so much as they were led to believe it might. But they are of unrealistic expectation anyway. They have their heads up… well you know. Seriously, I see and deal with it every day. In my world maybe a third, at best, of all the properties for sale are actually offered by serious sellers and not people “fishing”.

But you are in new development and I know your market is a bit different, right? Not so much really. As I mentioned new and resale tend to see-saw back and forth seeking equilibrium but not sooner does one get there and the other screws things up for it. My market and yours are one and the same and our market is really no different than the guy trying to sell you a new sofa or pair of shoes.

Keep your eyes on the road ahead my friend.

#118Peakoilist on 10.28.11 at 1:20 pm

#93 Devil’s Advocate

Our economy is not going to fail as so many on this “pathetic blog” predict. It can’t – the participants will not allow it.
————————————————————
so you’re going to trust that collective bunch of psychopaths called the world financial banking cartel..also that vocal minority will be growing exponentially.

Yup… pretty much. Hasn’t it always been so in one form or another? Why would it ever change? Villains and underdogs come and go. The world keeps turning.

Try as they might, and I really don’t think it is anything more than an excuse to raise a little hell and a “little” hell is all they are raising, the “Occupy” movement, should they be successful at all, will only cause a vacancy soon to be occupies by another they can eventually vilify and take issue with too.

Or are you so paranoid as to believe there is a same select, possibly secret, sect of “villains” which transgresses the ages?

Every age has its own ”villains”. Get rid of them and they will soon be replaced by another. Power corrupts and absolute power corrupts absolutely. Just look a Muammar Gaddafi – oh ya he’s dead now isn’t he. Thing about such villains – they more often think they are doing the “right thing”. Our jails are full of innocents.

Ultimately the notion of majority rules tends to prevail… some just grow impatient of the wait. Others take it for what it is and work the system as it is.

Ultimately we are all hypocrites it’s just a matter of where you draw your own line in the sand. Just as to preach sustainability without discussing population control is intellectually dishonest. Who wants to be first?

#152 penpal on 10.28.11 at 4:37 pm

@ # 139 allister

“And the guy is a surgeon.”

Which makes him what – an investment genius?

Hardly.

Doctors (of all specializations)and dentists are among the worst investors and most gullible financial fools.

#153 penpal on 10.28.11 at 4:42 pm

@ # 137 Robert Dudek

The level of the Canadian dollar has no direct bearing on affordability.

Canadians still pay their mortgages in after tax Canadian dollars.

No difference.

Pretty basic dudek.

#154 penpal on 10.28.11 at 4:55 pm

@ #93 Devil’s Advocate

How long have you been a Realturd?

You have obviously very little experience or a very faulty memory if you think “replacement cost” is somehow a price support for RE.

I have bought literally millions of dollars of residential and commercial RE well below “replacement cost” over the past three decades during severe RE MARKET DOWNTURNS from fools that thought otherwise.

I have also witnessed, with much glee, many, many Realturds leave the business during these times, especially ones espousing the same crap as you have posted here.

F’ing laughable.

#155 Steve from Young Real Estate Investor on 10.28.11 at 5:14 pm

@Incubus
Definitely, in French or English, you are the same!
Even though prices “might” go down in Montreal, I won’t necessarily fail. Why? I have 65 000$ of revenues from my 2 buildings, and it pays way more than all my expenses (including mortgage, insurance, taxes, renovations). So if prices go down… I will just wait 25 years! I purchased it to hold it 25-30 years.

#156 Moneta on 10.28.11 at 5:23 pm

#139allister on 10.28.11 at 3:40 pm
———
“A storm of bad luck had driven them from prosperity to near poverty”
————–
The odds are 1/3 of getting cancer, never mind all other diseases and he goes and builds a 1.2 million dollar home that he clearly can’t afford if life happens.

On top of it, his wife is only 55. With such an age discrepancy, they need to have even more money if they actually want to both enjoy some retirement time together.

It’s not bad luck. It’s life.

#157 eaglebay - Parksville on 10.28.11 at 5:26 pm

#71 La Di Da on 10.28.11 at 9:02 am

From a US blog.

Naive Tourists or Newcomers: Beware

Helpfulness

lulusweet 1 reviews
A native New Yorker, who is well-traveled in the United States and world, I lived in San Francisco for a few months in 2008. It was my first time going to San Francisco. I traveled there for a job and wanted to try out San Francisco to see if I would like living on the West Coast. Having lived in New York my entire life, I had never been so afraid for my safety before. My father traveled to San Francisco with me initially – he too also lived in New York since the early 1970s and as a former Marine, he too also felt unsafe in San Francisco. I was working in the Tenderloin so I had to commute there everyday and would sometimes venture out for lunch. Fortunately, the area of Golden Gate Avenue I worked near was not terrible because it was a business area in the day, but I would recommend do NOT venture further east into the TL on Golden Gate Avenue past Van Ness INCLUDING during the daytime. In the TL, you will see the same crackheads daily asking for money, I saw a pregnant prostitute on the corner near the KFC soliciting for men, you see people shooting up drugs in broad daylight and the poverty is on another level. One day I missed my bus stop on my way to work in the morning, and ended up deep in the heart of the tenderloin. The bus let me off not to far from the Glade Memorial Church (featured in Pursuit of Happyness) and there a lot of people and homeless milling the streets in the morning looking for trouble. My father one day after leaving me near my work office walked the “wrong way” and saw a line of black men (we are also black) staring at him in a menacing way, wondering why he was new to their hood. He quickly and frighteningly walked out of that area. The area near the Macy’s on Market Street is also very sketchy and if waiting by anyone near the Macy’s or the mall (Civic Center/TL/SOMA), just be aware of your surroundings and try not to wait too close to Golden Gate Avenue. At night in the Tenderloin, you will see and hear police sirens, prostitutes screaming, broken bottles and other noisy activity.

When I initially moved to San Francisco, it was to stay with family in the Bayview’s/Hunter’s Point Area. Like I said earlier, this was my first time venturing out into SF. Bayview was the worst neighborhood I had been in my entire life. There were bullet holes in the Bus station glass, blood stains from murders on storefront sidewalks, crackheads and drug addicts galore, and it is not safe as a young woman to walk Anywhere alone – not even to Walgreens, to a store, restaurant, nor barely even to catch the city train. Believe me when I say after a few days, I moved right out of that area and into Inner Richmond which is a more expensive area, but I rather be safe than fear for my life every morning when going to work or trying to enjoy myself as a young person in a new city. Cars are broken into as a normal occurrence; radios are stolen; and car parts. I would also avoid the Western Addition and Fillmore areas which while I was staying here had murders frequently on certain blocks and you would not want to be in the wrong place at the wrong time. In the Financial District one night, I saw a homeless man yell at two tourists who were retrieving money from an ATM machine because they would not give him any money. The tourists were shocked and did not seem to know it was a bad idea to take money out (even in a “good area” of San Francisco) after dark. I don’t know if they eventually gave him some or all of their money.

Some SF residents are in denial about how unsafe their city is compared with other major cities in the USA. New York City is like Disneyland in terms of how safe you feel on a day to day basis as compared with San Francisco. I guess in NYC you have more options as to which areas you frequent and larger portions are the city are very safe with a small minority of neighborhoods in the extreme, but in SF, the crime is block-by-block and unsuspecting tourists or newcomers have no idea what they are in for. Needless to say, I decided San Francisco was not the city for me.

Read more: http://www.virtualtourist.com/travel/North_America/United_States_of_America/California/San_Francisco-755471/Warnings_or_Dangers-San_Francisco-Areas_to_Avoid-BR-1.html#ixzz1c78Ryuj5

#158 Bigrider on 10.28.11 at 5:28 pm

# 138 bond junkie and # 108 bigrider .

Garth why aren’t you addressing either of these posts.
Your link to those charts yesterday really have a glaringly obvious one as I posted in 108 that defends current T.O prices.

I maintain my bearish outlook on GTA prices but chalk this one up for the bulls.

Chime in on this one, oh bearded sage.

#159 Nostradamus Le Mad Vlad on 10.28.11 at 5:29 pm

#27 Smoking Man — “Problem with the Greek Bail out is, no one asked the Greeks…” — Spot on! Same as Libya, Iraq, AfPak — they were all getting along just fine without the west’s intervention.

Some (like Libya) had a central bank and a currency backed with gold. The IMF, UN, WTO, US, etc. didn’t like that one bit, as they were all pulling ahead in the race to nowhere. #33 Bill Gable made a good comment — “This is just starting”.

#69 Where’s The Money Guido??? — Rangers in seven!

#70 Hammer1 — “. . . sex with socks?” — Could be Chelsea Clinton’s cat, but in general, it’s just a male disorder!

#94 Moneta — “Corporate profits are bound to drop.” — I differ from you, in that as much as western money keeps moving east to build new plants and not having to expend as much on hourly wages (hence, union busting here), corporate profits may stagnate slightly, but on a long-term basis, they will continue increasing. My two cents worth.

#125 fancy_pants — Good link. Shows how angry people are becoming with their perceived loss in value, but as there is nothing they can do about it, then it becomes a vanity thing — “My home is worth more, because housing always goes up”. It doesn’t.

#134 neo — “. . . with the tremendous amount of government intervention in the free markets . . .” — Indeed. If govts. are intervening in the free markets, they’re not free anymore, and can easily be manipulated by outsiders.

#160 Westernman on 10.28.11 at 5:56 pm

2deep,

We in Sask. think or economy and prospects are better than the rest of Canada … god, I can’t stop laughing!
Your brains are frozen in Sask. and your pre-frontal lateral neo cortexes have shrunk to the size of raisins from all the inbreeding. You dim-witted hillbilly’s are going to find out real soon about how much better you are than the rest of Canada…
There is no delusion like a Saskatchewan delusion…

#161 Peakoilist on 10.28.11 at 6:11 pm

#130 disciple
so you are a scientist…cool…enjoy your posts and smart renter !

I believe the way the OWS movement has taken off is due to the power of social media and the time was ripe for people to react to such a force…maybe there’s a tipping point when a certain number of a population begin to become impoverished ie Egypt. I have been reading for a least two years now, pundits ie. Gerald Celente, predicting the emergence of such a movement. He also predicts some sort of crackdown like Martial Law by Globalists to extinguish it.
who knows..interesting developments in the days and weeks ahead.

#162 Moneta on 10.28.11 at 6:23 pm

#94 Moneta — “Corporate profits are bound to drop.” — I differ from you, in that as much as western money keeps moving east to build new plants and not having to expend as much on hourly wages (hence, union busting here), corporate profits may stagnate slightly, but on a long-term basis, they will continue increasing.
———
As companies spend, assets increase and revenues lag.

While revenues lag, you get increasing amortization and interest payments on debt supporting these new investments. This compresses the spenders’margins.
So what about those companies getting that investment money…

Since corporate investments have been in a large part imports, businesses taking advantage of the high Cdn dollar, local companies are not not benefiting from that money as much as we’d like.

On top of this the consumer is receding, China is slowng and government is being stingy.

Corporate profits jumped because of the bailouts and stimulus. Profits are now topping and soon rolling over. But if you superimpose both charts, market and profits, you will see that it always takes the market a few quarters to notice the profti erosion.

http://www.statcan.gc.ca/pub/11-010-x/2011010/ct065-eng.htm

#163 Moneta on 10.28.11 at 6:30 pm

But if you superimpose both charts, market and profits, you will see that it always takes the market a few quarters to notice the profti erosion.
——
Sorry, I should specify corporate profits/gdp.

#164 Smoking Man on 10.28.11 at 6:52 pm

#138 Bond junkie on 10.28.11 at 3:27 pm

You might have a point…………………..

Normally Central banks raise rates when large amounts of tax farm slave have jobs They do that to slow things down, because if to many are working wages go up and you can’t put rising wages back in the bottle. NOT WHEN THE PRICE OFF GOODS GO UP as we have scene with out own eyes…

They have been so efficient at it for the last 20 years that even in a big bad down turn corporation are sitting on mounds of cash…They ain’t spending it…..

Now the Kings and Queens that rule the world from behind the scene are walking up. Bilderberg types, (I would love an invite) They finally get it, you got to throw away a few winning hands if you don’t want to get shot at the poker table. They will allow our pre selected leaders to have a policy of some wage inflation, they need to or face the possibility of losing there crowns and perhaps there heads with it.

Love to be a fly on wall when the elite get together. Got to be some serious infighting going on…….

And only 202 words

#165 Form Man on 10.28.11 at 7:14 pm

# 151 Devil’s Advocate

While there are always some unmotivated sellers, the proportion doesn’t change much from market to market. Why would someone put a property up for sale in a soft ( and falling ) market, enduring the inconvenience of ‘showings’, if they were not motivated ? Your thinking is seriously addled. You have been trying to carry the flame for too long buddy. There are support groups to help you. Read my post #148 again…..it is straight forward math. You can do it.

#166 Smoking Man on 10.28.11 at 7:30 pm

Time Bank

What if you are the richest man in the world, and no one worked for you, they refused you tried to get people from other countries they said no……..You would then be at par with the poorest peasant in the street. Look at Kadafy,200 billion and his last known address was a sewer. LOL

Let’s take money out of the equation, lets assume there was a bank that you banked time. And each task had a time value + in other words if you cut someone’s hair, 30min of time, you get a credit of 30 min. You are doctor your time is worth a bit more as you spent more time learning than the barber, so your customers agrees to give you a premium of 2 hours for 30 min. So we all work for each other and bank time credits.
That we exchange for goods and services…………..

The govt can’t tax your time, they don’t know where you are or what you do..They are out of business…The banks that charge interest can’t charge your time……..There out of business.

It’s happening in Greece, they basically are saying to the people that want to make them debt slaves F-you………………

Love it

#167 bigrider on 10.28.11 at 7:37 pm

Here you go, three high profile RE pumpers.

http://www.canadianpropertymanagement.ca/VReportforOctober2011.aspx

#168 Devil's Advocate on 10.28.11 at 7:55 pm

#154penpal on 10.28.11 at 4:55 pm

I said they see-saw back and forth #$&*! You make my point well. That you were able to buy in lows property for less than its replacement cost is signal that things are indeed about to turn. For the see-saw is close to an equalibrium between the two that will not last (resale vs newly built).

Also strategically located land never really does go down in value. It is the inappropriate improvements upon the land, depreciating themselves as do all transient things, which devalue the land as it is not meeting its highest and best use and requires the cost of demolition in addition to the cost of what you paid for those useless buildings before setting the land right again.

Me thinks you not so much as you claim to be penpal. But me? Yes I am a lowly Realturd but not one you will see forced from the business for any other than choice of my own I’ve ridden through the storms before and believe this one to be near an end. Which is not to say robust times are near at hand but that we will get through it better for it.

#169 Westernman on 10.28.11 at 7:57 pm

Peakoilist,
Disciple is not a scientist,fool – he’s a burnt-out hippee… and this OWS nonsense is just a bunch of lazy losers getting together to share their misery and ape for the cameras. The only movement they should be doing is moving their asses to find some kind of productive work… bums – all of them.

#170 45north on 10.28.11 at 8:11 pm

eaglebay -Parksville: it is not safe as a young woman to walk Anywhere alone

thanks for the update on San Francisco, I was thinking of you as a man. My wife and I went to NY City in May, we had a great time. My son and his wife live on 9th street. My father went to San Francisco in the 50’s, I remember the postcards. Sounds like San Francisco is not a good place.

#171 Nostradamus Le Mad Vlad on 10.28.11 at 8:13 pm


Euphoria Hangover The EU is well hung-over; Capitalism or fascism by any other name; 49% Pay Hike Anyone here seen those kinda figures? GG What Greece thinks of Germany; Bernie Madoff Good enuf reason for OWS, but Madoff and family can keep Fortune Greece President is a traitor?

5:03 clip Nigel Farage. US to bail EU out, and James Bond to bail US out and Firewall; Obviously As govts. continue to steal from us, the angrier people become; 4:36 clip GS and Trump ripped off Gadaafi; Military “Trillions for war! Not one penny for the people!” (The original version appears to have been garbled.)” wrh.com; Leverage rhymes with porridge, doesn’t it?

Pakistan – China “China just sent a warning to the US to stop all this invasion nonsense.” wrh.com, and new bases; Master Of The Universe (not) “. . . the United States of America is the epic center of global terror;”; US – NATO Just as the west went in under false pretences, now the term “Human Rights” is beginning; Peru ‘Quake time.

Longstanding US Policy Killing Gadaafi; Oakland “Where the people fear the government you have tyranny. Where the government fears the people you have liberty.” — John Basil Barnhill

“Victory lies in making the government more afraid of We The People than they are of Wall Street or Israel.” wrh.com; 3:04 clip CSNY – Ohio (relevant to today); CC It only snows in October; TEPCO Make mistakes, lie about them and profit handsomely.

#172 Todd on 10.28.11 at 8:16 pm

@ #8 – “It’s not a livable city if few can afford to live there. I laugh at ads promoting the Vancouver life style. Dining at 5 star restaurants after a long day of skiing, beach, hiking, biking etc – all done on a beautiful sunny day of course.”

Couldn’t agree more. Add all that together for you and the hubby…
Skiing Cypress – $120+tax
Capilano Suspension Bridge – $66
Half-day bike rental in Stanley Park – $60
Dinner at Gotham – $200

So you’re paying a minimum of $260 per DAY for the advertised “Vancouver lifestyle” if you don’t count living expenses like food, clothing and housing. I’ve lived here for 7 years and can honestly say something akin to the first three things MIGHT happen on a biweekly basis, maybe. The last one is maybe 4 or 5 times per year. My household income is in the top 3% for Vancouver, which isn’t saying as much as one would think. We’ve also got 6 figures in investments (none of which include real estate, unless you count REITs). I can only imagine what the “Vancouver lifestyle” looks like for other Vancouverites who have mortgages and kids and an average income (which is about 50% of mine).

And Garth, I do pray for the horny ones on a regular basis. I pray they get everything they deserve.

My plan has altered a bit from what it was in the past. I now hold no allegiance to Vancouver. I have no plans to buy into the impending bottom of the market in a neighbourhood that’s probably going to change demographics on the way down. Too scary. God only knows what this place will look like in 5 years. I do, however, like the pacific northwest. So, in a few years when my lady is ready to take the next step in her career, we’ll move to Seattle, where the job prospects are much brighter (particularly for her career aspirations) and the cost of living (food, housing, etc) is significantly less.

Vancouver house zombies, if you’re reading this and have learned to actually comprehend critical words about your time bomb of a city, you may want to recognize that people with the brains to get the bankroll they have are probably thinking similar thoughts at this point. Stop hoping for that magical trifecta of Rich Stupid Chinese people to save your property values ad infinitum. The slightly more existent Rich Smart Chinese people are thinking along the same lines I am. They didn’t become rich by paying double the price for essentially the same product or buying in at a clear peak.

Wow, i just re-read that and my stream of consciousness is just plain asshole-ish. Yeah, not changing anything.

#173 Todd on 10.28.11 at 8:29 pm

#88 robert james on 10.28.11 at 10:20 am

“It appears that the Chinese real estate bubble is beginning to pop as we speak and HAM does not take it all that well..lol http://globaleconomicanalysis.blogspot.com/2011/10/shanghai-homeowners-smash-showroom-in.html

Just imagine how this will look when this happens to people who riot over the outcome of a hockey game.

#174 disciple on 10.28.11 at 8:32 pm

Greek creditors are Wall Street banksters. That should explain the media pony show to you. The published size of the default is about the size of the GTA economy. Not a big deal. It’s the insurance bets on the defaults that is not discussed and why everyday you hear on AM radio, “more worry jittering the markets this morning on the EU bank bailout” – TRANSLATION, “will the banksters collect on their bets that the Greeks would default?” Get the picture?

#175 disciple on 10.28.11 at 8:40 pm

Classic banking and insurance trickery. Notice I didn’t use the term fraud, as the trickery is perfectly legal. They lend out non-existent money, make a side bet with their insurance subsidiaries (their friends) that the poor victims will default, collude with their gov’t puppets to orchestrate sudden credit restriction, then play the TBTF card, and steal from your unborn children to pay their insurance friends, who then split the money with them. They just made money from thin air – quite legally.

These “derivatives” have no paper trail. Well done.

#176 disciple on 10.28.11 at 8:51 pm

I thought I would sneak this in at the end of the blog day as Garth was preparing the next posting – no harm done.

A child’s experiment turns into a lesson on the toxins in our food supply.

http://www.youtube.com/watch?v=exBEFCiWyW0&feature=youtu.be

The best thing posted on here all day. — Garth

#177 Painted Toenails on 10.28.11 at 9:19 pm

I concur about San Fran. Was there this summer for a few days and was stunned by the massive increase in poverty/crackheads/gangs who loitered seemingly everywhere.

It was beautiful driving into the city over the Golden Gate at 8 am but by 9 we had already had obscenities screamed at us. We think our crime was driving in a convertible. I’m no wuss, trust me, but we elected to put the top up rather than be spit on. Yes, spit on! Genuinely ugly. Menacing. Chinatown was still great tho’, excellent food, great vibe. Sadly, that was pretty much it. And frankly, the weather sucks.

I’ve spent lots of time in NYC over the years and agree with a poster above, it’s Disneyland compared to SF.

#178 Devil's Advocate on 10.28.11 at 9:28 pm

#165Form Man on 10.28.11 at 7:14 pm
# 151 Devil’s Advocate

While there are always some unmotivated sellers, the proportion doesn’t change much from market to market.

I disagree, and am so baffled by your post at #151 and #148 that I am at a loss for words. Can you imagine that?!? Me Devil’s Advocate at a loss for words!?!

Form Man I have said it before and will say it again… you need a new marketing team.

#179 JohnnyBravo on 10.28.11 at 9:31 pm

#146 poco on 10.28.11 at 4:05 pm

Yeah, they play all kinds of “games.”

#180 jess on 10.28.11 at 9:40 pm

disciple

http://www.guardian.co.uk/business/2011/oct/11/goldman-sachs-interest-tax-avoidance

“In the 1990s, Goldman Sachs set up a company offshore in the British Virgin Islands called Goldman Sachs Services Ltd, which appears to have been designed to conceal the size of their bankers’ bonuses. Goldman Sachs also begrudged paying its share of UK national insurance on these six-figure bonuses.

The company, along with 21 other investment banks and other firms, purchased blueprints for an avoidance scheme called an employee benefit trust (EBT). It took the Revenue until 2005 for the courts to rule that these EBTs were merely illegitimate tax avoidance devices. Whilst the other firms surrendered and handed over what they owed, Goldman Sachs refused to pay its £30.81m bill.

By 2010, it is estimated that the unpaid bill with accumulated interest had mounted to £40m.

In April 2010 a judge threw out the claim from the bankers that their true employer was in the British Virgin Islands. In July 2011, HMRC’s own QC, Malcolm Gammie, gave “broadly positive” advice that the government was in a strong position to get all of its money.

However, it has been reported that on 30 November 2011, a high-level HMRC committee heard that their top expert, David Hartnett, had met Goldman’s tax director, Mike Housden, and as a result “a late submission had come in about a deal on which Hartnett had ‘shaken hands’ with Goldman Sachs”. The government was not going to get its full £40m, but only £30m.

The legal action will put further pressure on David Hartnett, Permanent Secretary for Tax, as it follows the leaking of documents which show how top tax officials shook hands late last year on a secret settlement with the multi-billion dollar bank, an agreement that UK Uncut Legal Action claim was contrary to HMRC’s own policies and strategy and therefore unlawful.”

#181 JohnnyBravo on 10.28.11 at 9:42 pm

#176 disciple on 10.28.11 at 8:51 pm

You know what really scares me? That little girl’s experiment did not shock me one bit.

#182 The thing in the basement on 10.28.11 at 9:52 pm

87 Disciple

“This is much worse than any 80% payday loan shark,
but you accept it as normal. Why is this?”

Because you dont seem to understand it.

104 LWYM

“We may have more rain here than Mtl. but I doubt it
compares to VCR.”

Are you in ‘fax? About the same total precip as downtown
Van. North Shore gets more, Richmond less.

#183 Bond junkie on 10.28.11 at 10:05 pm

#164 SM- you got it man, bang on! The game must continue or else the oligarchs risk the possibility of losing their respective place in the well established hierarchy we call ‘society’. Couldn’t have said it better myself. For those who criticize my powers of arithmetic deduction, give your heads a shake. I understand the basic dynamics of supply/demand thanks. I cut my last comment a bit short solely because I did not want to saturate my post with too much information. I thought you guys all came here to get informed/educated? Guess not. Did any one of you bother to google IMPP or covered bonds or were you too busy pointing out the several elementary observations that have already been thoroughly documented by the mainstream media? Yet 2brm houses in zi Beach are still fetching well over 600k. Why is that?? Yes household debt levels are at excessive levels in CAD, yes low rates are motivating dangerously speculative behavior, yes home ownership is getting beyond levels that existed in the U.S before they imploded. I get all that, but who’s to say ownership in this country doesn’t get to 80% while F and friends do their part in being good banking allies in the g20 global reflation regime? The game must go on folks, banks need to make dough, and as long as John and Joe Sally can afford to service a mortgage, they give not a thought to the ultimate principal repayment. They will keep taking the money if it’s available (and it certainly is). You think the 25 y.o personal banker gives a $hit handing over 400k to a person of similar age with no established credit and a 5% dp for a townhouse in Milton? It’s not their money, CMHC’s got it taken care of. All the PB’s care about is making their bench for the week. Step one approval, step two book revenue, step three insure w/ CMHC step four securitize off balance sheet, rinse, repeat. I agree with Garth’s ultimate thesis, the housing orgy in this country cannot continue indefinitely. But we could still well be 2,3, 5yrs from the peak. As the old adage goes, even a broken clock is right two times a day. Timing is EVERYTHING, read and educate yourselves. There’s a lot more information out there if you’re willing to look for it. I’m done for tonight

#184 disciple on 10.28.11 at 10:11 pm

The THing in the Basement is telling me, the recipient of several trophy-included math contests, that I don’t understand how mortgage interest is calculated? Yes, me. A dupe who’s been making mortgage payments for over 20 years. You could be right, Thing.

I just recorded my 7 and 5 year old in a wrestling match which I will be showing to their grandma…LOL. Good night comrades…

#185 penpal on 10.28.11 at 10:20 pm

@ # 168 D A

My purchases have also included land, handsomely positioned, both developed with structures and without.

Again, how long have you been in the business?

Me, over 30 years – residential, commercial, land development, all as the principal.

Been through numerous cycles, watch so called ‘professional’ Realturds never get ahead because they ALWAYS end up eating their own cooking and washing it down with the koolaid of the times.

Realturds should really stick to being the scumbag salespersons they are anyway. Not one in 50 has the brains for anything else.

Don’t worry, next time I won’t sugarcoat my opinion of Realturds and I’ll tell you what I really think.

It’s always ” a good time to buy” with you a-holes.

#186 Westernman on 10.28.11 at 10:24 pm

Disciple,
You won trophys for your math prowess? And you been paying on a mortgage for over 20 years?
Who was running the math contests? Baboons?

#187 Don on 10.28.11 at 10:35 pm

#18 Novice

Narrow minded bigot for what I said about Vancouver.

Really! Can you read! are you not aware the Japanese came to Vancouver in numbers in the 80’s and I think the world of their culture, they believe in honor, integrity. And it is a fact that people from China and India have been making the latest move.

People like you are the reason I wouldn’t want to live in Vancouver again. Really…lol you are Naive not a Novice. I agree with you about Beach Girl though. Oh sorry is Novice really BPOE. It is you isn’t it. Nutbar

#188 Don on 10.28.11 at 10:37 pm

Sorry for my latest post Garth re: Novice or whoever that is. Sometimes I wish you could slap the stupid out of people.

#189 GregW, Oakville on 10.28.11 at 11:41 pm

Hi #176 disciple, Thanks for the video link, excellent!!!

#190 La Di Da on 10.29.11 at 8:59 am

@187 Don I hate to correct you but as of 2011 the Unites States and Brazil are the most diverse nations on Earth. Canada places 3rd place. Then the rest fall into place as follows:
England/UK
France
Singapore
Australia
New Zealand