Iconoclast

So here’s my day. Sat for an hour across from a guy who’s been selling real estate for a quarter of a century in the same place. Muskoka’s always been the preferred playground for those in the nation’s largest city who can afford monied leisure, and Sammy’s been catering to them. “I used to make two hundred a year,” he says. But kiss that off.

Sales have tanked, and the average price is down  “at least 15%. There are more powers-of-sale (foreclosures) than I have ever seen in my career,” Sammy tells me. “And nobody is being given a true picture of what’s happening.”

He works for one of the biggest real estate outfits in the nation – you know, the guys who are always pumping out reports with headlines like ‘Stage is set for one of the best recreational property markets in years.’ But it’s crap, Sammy whispers. “A few big sales and the average numbers jump to the point of being meaningless. They know it. I know it. They just hope everyone else doesn’t get it.”

Two hours later the tech finished servicing the standby power generating equipment at the Bunker. (Big outage last week had the plant running all night on its emergency gas reservoirs.) He started talking about the amazing real estate deal he’d just scored in an upscale commuter town twenty minutes to the east, on the northern border of the GTA.

Century brick home, thick with oak trim, on a huge lot just steps from Main Street shops, restaurants and theatre. “Bought it for a song from some mortgage company,” he crowed, “in a power of sale. Previous owners walked. Sure, needs work, but that’s nothing for me. I couldn’t believe what they let this thing go for.”

But the grin ended there. He’d bought firm, then listed his own house, expecting a quick sale in a market that’s been buzzing for years. But nothing. “No showings,” he said. “Hell, the phone hasn’t even rung once. I’m starting to worry. I don’t need two houses.”

Jasmine doesn’t want one at all. She sold her Mississauga home with all that equity in it almost two months ago, so she and her husband could trade real estate wealth for actual money. “It’s a dream,” she’d told me. “Finally, some independence, investments paying my rent and the freedom to travel or do whatever we want. Now I know what all those mortgage payments were for.”

Her voice was anything but confident when she rang me today in the truck, looking for guidance. Turns out the people who bought their home, without conditions, had a house of their own to sell – also in densely-populated Mississauga. A few days before closing, Jazz was told there are no buyers for their buyers. No offers. No nibbles. In the space of two months, the market’s turned. What was beyond believing sixty days ago has become real. And while she has every right to sue for damages after closing day comes and goes with no ink, it’s a massive complication.

One day. Three people who’ll never meet. One story.

For a painful eternity this blog’s been bleating on about our housing market’s foundation of debt and duct tape. In the absence of robust economic growth, rising wages and lots more jobs, real estate values cannot continue to rise. Forget cheap money or horny foreigners. Those factors may lubricate slack markets, but they cannot fuel an endless ascent. Besides, rates will inevitably rise, and even China’s in the throes of a real estate bust.

Recall the news of recent days. The Bank of Canada says the economy will barely grow (0.8%) this quarter. We lost 72,000 full-time jobs last month. And on Thursday Stats Can told us wages are falling – down last month after a year of being flat. In fact, at about 1%, wage growth is less than half the rate of inflation, as we crawl back to 2009 levels.

So what’s the incentive for families who are falling behind, with record debt levels and stressed out over jobs, to go property hunting after getting sexed-up on four hours of HGTV? Is it any wonder the market’s shriveling after a decade of near-uninterrupted, unbridled house lust?

The Economist thinks not. The influential mag this week points out our real estate is “uncomfortably overvalued,” that prices are too high by 25% and (along with financial deadbeats France and Belgium), it “looks more overvalued than in America at the peak of its bubble.” Worse, Canadians (it adds) have more debt relative to income than US families ever did.

Granted, there was a time two years ago when this degenerate blog’s warnings attracted only people who dig latrines and eat bugs. But it never was a voice of doom. Far from it. The message has been as simple as it’s been repetitious. The era of the house is done. Chuck the old icon. The new god is liquidity. The antichrist is debt.

Understand this, and it’s all good.

 

176 comments ↓

#1 Stasis on 11.24.11 at 10:33 pm

……Ever try to pay off a mortgage early in Canada? Get ready to be whacked with penalties. In the U.S., many states ban such fees, at least for conventional mortgages.

The most popular type of U.S. mortgage allows homeowners to lock in an interest rate for 30 years and prepay any amount at any time. Nothing like that will ever be available here. No banker in his right mind would ever offer it—too risky—and no politician would ever demand it…….

Globe & Mail Nov 24 2011
http://tinyurl.com/c4etpue

#2 Nick on 11.24.11 at 10:34 pm

WOW!

#3 sam.i.am on 11.24.11 at 10:37 pm

Stayin’ Alive, Six and Five. Flexed Arm Hang.

#4 rosie on 11.24.11 at 10:40 pm

Your correct. But what about Europe? Beware Germans bearing bunds.

#5 Steven Shaw on 11.24.11 at 10:42 pm

A very similar story is unfolding over here in Australia

#6 Danforth on 11.24.11 at 10:48 pm

Garth,

Renting and trying to one day own in the Danforth (Pape & Danforth). All I see is prices continuing to skyrocket around me and people happy to outbid each other till the cows come home. PLEASE do a piece on this area and what your forecast is around these parts!!!

Thanks!

#7 Renters Revenge on 11.24.11 at 10:56 pm

Liquid and debt free. Preach it brother!

#8 Joe on 11.24.11 at 11:01 pm

Anybody know whether this is a good bond ETF PIMCO Canada Bond Index Fund

http://etfdb.com/issuer/pimco/

I was looking at another but would need to pay $39 commission each time I bought bond units. Any alternative to a fee upfront?

#9 Eastern Man on 11.24.11 at 11:03 pm

“This degenerate blog”. Hey, what happened to this pathetic blog?

Evolution. — Garth

#10 Kilby on 11.24.11 at 11:07 pm

I wrote the “Guardian” after yesterday’s blog. They will be reading the blog now if they haven’t already. F and M can be responsible for ruining the economies of three countries instead of just ours………..

#11 From kits on 11.24.11 at 11:09 pm

Listing in January..hope Europe doesn’t fall apart by then

#12 Heloguy on 11.24.11 at 11:09 pm

Stasis wrote:

“Ever try to pay off a mortgage early in Canada? Get ready to be whacked with penalties. In the U.S., many states ban such fees, at least for conventional mortgages. The most popular type of U.S. mortgage allows homeowners to lock in an interest rate for 30 years and prepay any amount at any time. Nothing like that will ever be available here. No banker in his right mind would ever offer it—too risky—and no politician would ever demand it……”

I paid off my completely OPEN mortgage last year and it was the only type of mortgage I ever had, other than being able to lock in for 30 years. You just have to look for them.

Cheers

#13 JohnnyBravo on 11.24.11 at 11:11 pm

For all those hoping for house prices to drop the aforementioned 25%, understand that lower prices do not necessarily mean better affordability. Prices drop because of decreased demand relative to supply. Demand doesn’t decline for no reason.

Those who could benefit most from lower prices are those with cash. But in an RE bubble that’s fuelled primarily by debt, most people simply don’t have the cash. So there will be very few average folk who will be able to afford houses even at much lower prices. Cue the US.

Also, if we have a generational revulsion to home ownership, as I suspect we may get thanks to our uncertain, volatile, wage-staganting, globalized globe (again, cue the US?) even those with the cash to spend on depressed houses may themselves become depressed when they see their bargain trade remains a bargain, or worse, for a very long time.

I don’t think most people appreciate the size of the debt bubble we’ve blown over the last 30 years or so; or how long it could take to deflate back into balance with reality. Mathematically, there is no reason why real (inflation adjusted) house prices could not drop 90% in the years ahead, as some have predicted. Impossible!, you say? Remember when RIM was $150?

Or Ottawa can simply borrow more future tax payer money and do another prop job (or at least they could try).

#14 Mr. Lahey on 11.24.11 at 11:11 pm

With the risk of being tedious in my response, these three stories all point to one thing. We are entering into the greatest shit storm since the tumble weeds blew across our open prairie fields in the 1930s. Take cover everyone, it is going to get ugly. “ Randy get me a drink this is getting scary. “

#15 Tim on 11.24.11 at 11:13 pm

If prices are too high by 25% according to the Economist, I’m assuming this is for Canada as a whole, then in Vancouver they must be too high by about 60%

#16 HouseBuster on 11.24.11 at 11:16 pm

A 50% drop in real estate is coming. That is a fact so prepare for it.

#17 Marc L on 11.24.11 at 11:16 pm

Perfect article. The goose is cooked.

#18 City Slicker on 11.24.11 at 11:17 pm

I wonder where gold will go when Europe falls apart?

One bank now targets it at $1,425. A mighty fall. — Garth

#19 Côté on 11.24.11 at 11:18 pm

Realtors made up the monthly number using “conditional sold” properties which they bought in but unable to flip out. Many such “sold” properties kept coming back for sale again and again!

#20 Côté on 11.24.11 at 11:20 pm

How about get CRA do a quick math: audit the realtors tax based on their reported sales?

#21 Wicked as it seems on 11.24.11 at 11:22 pm

100per cent liquid, debt free, living in a cheaper country during Canadian winters, monitoring direct investing online from abroad. Cashed out of real estate two years ago and have sufficient funds in a balanced portfolio of mainly fixed income to live on a small well managed monthly budget. Sixty years old and repaying myself for a lifetime of hard work in the sunshine totally free.

#22 Stevenson on 11.24.11 at 11:23 pm

Same old stuff different smell. Show the facts. Vancouver and Gta is still selling just fine. Mind you bidding wars in the low season still exist. Why buy muskoka when you can use the funds somewhere else lie your primary residence? Also if you bought 3 years ago, you will still be better off unless you expect a deeper correction then the US.

Same old realtor, same smell. — Garth

#23 edmonton mortgage broker on 11.24.11 at 11:26 pm

today’s pic is outdated. business is slow. that plate is on my dodge neon now.

#24 Stasis on 11.24.11 at 11:28 pm

Garth,

you may want to consider a solar array to supplement that diesel generator….what do you think?

The camo mesh blocks the sun. — Garth

#25 MarcFromOttawa on 11.24.11 at 11:34 pm

Laisse-moi te dire de quoi monsieur Turner.

J’aimerais mieux vivre au Canada en France ou en Belgique que les états-unis meme si le marché d`immeuble est plus abordable.

Pourquoi? En raison du blog? — Garth

#26 Ben on 11.24.11 at 11:35 pm

“pay off that 30 year mortgage early”

People now days use that 30 year figure like it’s meat and mashed potatoes, like it’s never ever been anything else.
When I was house horny and buying it was 20 or 15 years! Of course homes were under $200,000

#27 Keeping the Faith on 11.24.11 at 11:37 pm

#22 Stevenson

… you will eat your words.

and you will keep changing the years …
“If you bought 3 years ago, you’re still better off” will become “… If you bought 5 …7 …. 10 years ago, you will still be better off”

Such a simple solution, if you would have studied your grade 9 math textbook, you would be better off today.

“How do you like them apples?”

#28 Keeping the Faith on 11.24.11 at 11:39 pm

#11 Kits … too late, missed your window.

… time to occupy hastings and main with the kids in tow.

#29 Midtown girl on 11.24.11 at 11:41 pm

After doing a lot of research and reading this blog, I listed my condo in midtown Toronto in Sept, it is still not sold! No showings started in mid Sept. Serious decline!

#30 JohnnyBravo on 11.24.11 at 11:49 pm

Speaking of decreased demand, the best way to decrease demand would be to tighten credit while lowering real wages (and/or reduce employment).

Two very smart people, former Wall Street banker and US Federal government official, Catherine Austin Fitts, and former Wall Street economist, Michael Hudson, both have proffered the idea that one of the main goals of Wall Street, the government, and the Fed is to lower wages. Hudson goes so far as to claim they are trying to cause a severe recession.

Lower wages are good for corporate profits; and wage deflation is being used to offset monetary inflation (for the benefit of the banks and government). And the Fed.

Jim Rickards says the Fed’s balance sheet is so bloated that a mere 2% drop in the value of its assets would wipe out its capital. So the Fed tried (and failed) to get Congressional approval to issue its own bonds. Instead, they cut a deal with Treasury to stop remitting interest payments.

Aside from the fact that all these games are pretty terrifying, it’s fascinating to see the wild schemes they rehash or dream up to keep pretending that red is really black.

I wouldn’t be surprised if one day it is revealed that, after all these years, the Beard at the Fed, who on tv looks like a living, breathing human being, turns out to be nothing more than a surplus automaton from “It’s a Small World.”

#31 Foggy on 11.24.11 at 11:56 pm

Vacation properties are the first to show the signs of real estate weakness, when finances get tight. Dump the cottage – it’s not a necessity. Simultaneously people stop looking at cottages because money is tight. And then things change quickly. I sold mine in Ontario in Nov/2007 which was probably the top. Sometimes you’re lucky…

An August article on “bully bids” for a Beaches Lee Ave semi for sale:

http://m.moneyville.ca/article/1042408—bully-bids-symptom-of-housing-market-gone-mad

#32 Van guy waiting on 11.24.11 at 11:59 pm

Boo to the boonies. These towns are dropping because it’s not a city. More $ flowing through large cities. It will definitely take time for city people to realize reality

Mississauga has 750,000 people, seventh largest city in Canada. Next theory? — Garth

#33 Not 1st on 11.24.11 at 11:59 pm

I run a business, therefore I have debt. Is there anyway to run a business without some sort of credit facility hanging over your head? If I had the 2 million in my pocket to start the business in the first place, I would have never started it.

Debt isn’t over, its a critical part of what makes the world economy work.

#34 Unistar38 on 11.25.11 at 12:01 am

Just finished watching Hot Property on CP24. A caller (the voice sounds like a boomer) asked the panel’s opinion about her recent purchase of the pre-construction condo along Sheppard between Don Mills and Victoria Park (another 43 storey glass one). After the usual realtor talk, the host then asked what will be the value appreciation once the construction is done. This is what the real estator guy responded:

Expect 15-20% rise of value! And he said that without any hesitation!!!

Folks, the above said condo is already priced at $500-$600/sf!

Sad…

#35 JohnnyBravo on 11.25.11 at 12:06 am

#31 Not 1st on 11.24.11 at 11:59 pm

“Debt isn’t over, its a critical part of what makes the world economy work.”

Debt that is used to finance productivity and generate jobs and increase real wealth is good. It’s also referred to as “self-liquidating” because it is repaid with surplus wealth.

Debt that is used merely for consumption is not so good. And when that debt gets out of hand (like now) it’s just plain bad. Which type of debt do you think fuelled the housing bubble?

#36 WI BOOMER on 11.25.11 at 12:15 am

If anyone KNEW when the Ritz would hit the fan, no one would be covered in Ritz. The RE market, like the stock market, tends move in longer trend lines. I think the stock market since spring has been in a down draft. That doesn’t mean one couldn’t have waited til late Oct to get out mostly whole, or even with a tidy profit. THAT does not change the trend line.
The world is seeing shakey soverign credit because governments have over- borrowed.
Most areas are seeing job stagnation, or loss -or in the US continued loss as jobs have not well recovered since 2008’s mess. Whose country is immune here??

When potential buyers are nervous about making a comittment, only time, or a price adjustment downward can move an otherwise qualified buyer. Now if somebody bought your place, and they have a home to sell, and they bought it 2 years ago with zero down or a 5% /40 yr. mtge they probably can’t afford to sell it for even exactly what they paid for it. As the market is stagnant or dead, what might motivate their buyer? Yup, price cut. Therein IS the problem, few will be able to pony up the cash to sell their place. While Greater Fools may be less in number, have no fear, the world will not soon run out of them.

I’m waiting for that Dowto hit near 8,000 or gold at $1400 to make some money moves.
I don’t have to make any deal, right now…or ever.

#21 I get to join your position at years end.
No payments. Good funding. -except I hate HOT
climates!!

#37 Renters Revenge on 11.25.11 at 12:15 am

Canada has a great big super scary ticking demographic time bomb.
“The inconvenient truth that must be faced by Canadians and their governments is that existing demographic forces are so large that governments at all levels will soon need to make even larger adjustments to their fiscal frameworks.”
http://opinion.financialpost.com/2011/11/24/demographic-debt-wall/

#38 TaxHaven on 11.25.11 at 12:24 am

Some of thse faux-Georgian particleboard-and-vinyl houses in Mississauga or Abbotsford are SO very similar.

There are thousands of nearly identical houses, right?

Makes me wonder why one can’t SHORT real estate…borrow from any delusionary developer or flipper with the promise to return an identical property in a year’s time…

#39 Bobby on 11.25.11 at 12:25 am

Sitting here in Victoria, there are a lot of homes for sale. A nearby condo building has 6 for sale signs that have been there for awhile.
There are two homes I am watching, both empty both just sitting.
Went Christmas shopping today. No problem getting any service as the stores certainly weren’t busy.
It is going to get ugly out there.

#40 Brad in Calgary on 11.25.11 at 12:34 am

I wonder where gold will go when Europe falls apart?

One bank now targets it at $1,425. A mighty fall. — Garth

what happened to “this is not a gold blog” ?!?!

oh, that’s right, you are perfectly willing to comment on gold when it serves your own agenda but when people (with better credentials than you) point out the reasons gold will be over 2000 soon, you huff and puff and spew out “this is not a gold blog!”

I answered a question. And I’m very sorry about your bullion investment. Really. — Garth

#41 City Slicker on 11.25.11 at 12:50 am

I wonder where gold will go when Europe falls apart?

One bank now targets it at $1,425. A mighty fall. — Garth
————————————————————
A bank eh, that figures. Time to back up the truck.

#42 Jane on 11.25.11 at 1:00 am

Thanks, Garth. Good post.

#43 MrHulot on 11.25.11 at 1:10 am

Garth, you better be right or you’re coming off my Christmas card list.

#44 Van guy smokin now on 11.25.11 at 1:11 am

Garth,

No more theory’s. Or maybe Dec 21,2012???

#45 Nostradamus Le Mad Vlad on 11.25.11 at 1:18 am


“The new god is liquidity. The antichrist is debt. Understand this, and it’s all good.” — Onemorething said that, and it’s dead on.

Sooner or later, Mikey the Realtor and BPOE will understand this, but they are here for entertainment purposes only.

A Salvation Army spokesman said on the radio that the demand for xmas hampers was way up from last year. People cannot afford the basic necessities of life anymore.
*
#227 The thing in the basement on 11.24.11 at 10:47 pm — “Keep the links comin’.” Certainly!

#5 Steven Shaw — “A very similar story is unfolding over here in Australia”

Everything is closely co-ordinated. Once one domino falls, the rest of the west follows.

#7 Renters Revenge — “Liquid and debt free. Preach it brother!” — That is the best revenge on those who keep howling Buy! Buy! Buy!
*
Lost Jobs So the UK is considering a Cdn.-style housing mess, with further job losses. This is clear, concise thinking; EU costs Fifty mln. pounds a day? RE Prices Barmy, esp. with this and this; Gold-Backed Currency? Libya had one which worked just fine, the US (until 1971) had one; Taxing TPTB Let’s see if politicos have the balls to do it; Debt or Taxes The battle.

Germany sold a whole buncha gold; Global economy Where is it? EU Budgets Are they of any use with a single currency? Slowdown in corporate profits; Eurozone run; Funny Munny Hunny; ZIRP ends abruptly; The Widening Gap, Junk Food can cause countries to slow; Investment Banking, One Eurobond and Perils of Pauline.
*
Immigration So much for political talk. Lead para. is enough; Fukushima Running outta medical staff; Naval Exercises At least China is standing up for itself, and the Koreas are active; Matt Sludge “The fact of the matter is that the Chinese Communist Party was the corporate sponsor of the Democratic Party.” Hence, Soros and Obomba, both Marx followers, are now running America into the ground.

8:19 clip Agenda: Grinding America down, and weakening the military is one way of doing it; Superflu from man-made created bug. Depop?

#46 BPOE on 11.25.11 at 1:23 am

The Economist is so yesterday news. They have been DEAD WRONG about real estate for years. They even allowed musings by fool Shiller. Take anything posted in that rag with a grain of salt. There “news” musings have been posted elsewhere for quite sometime. They remind me of the CBC, not enough cash in the kitty to report uptodate news
*******************************************
The Economist thinks not. The influential mag this week points out our real estate is “uncomfortably overvalued,” that prices are too high by 25% and (along with financial deadbeats France and Belgium), it “looks more overvalued than in America at the peak of its bubble.” Worse, Canadians (it adds) have more debt relative to income than US families ever did.

#47 BPOE on 11.25.11 at 1:25 am

Are you saying a person who bought in Vancouver 3 years ago has not made $$$$$. Get real!!!!!!!!!! No smell in this post at all
***************************************
Stevenson on 11.24.11 at 11:23 pm
Same old stuff different smell. Show the facts. Vancouver and Gta is still selling just fine. Mind you bidding wars in the low season still exist. Why buy muskoka when you can use the funds somewhere else lie your primary residence? Also if you bought 3 years ago, you will still be better off unless you expect a deeper correction then the US.
Same old realtor, same smell. — Garth
.

#48 Ozy - TRUE. GAME OVER on 11.25.11 at 1:28 am

TRUE. GAME OVER, many home expire and many more listings appear. Patience.

Patience is a virtue, but not a kanatian one yet.

#49 The thing in the basement on 11.25.11 at 1:35 am

1 Stasis – paid off my mortgage in 7 years. Only penalty I paid (3 mo interest <$2K) was when I switched lenders
after first two years. The trick is getting favourable terms
in the mortgage agreement then having the income to do
it.

33 Not 1st – if your biz has lots of equipment or inventory it is hard to do, and maybe not wise as it can hamper
expansion, upgrades etc. This is where the low interest rates are supposed to help. Hope it all works out for you.

#50 45north on 11.25.11 at 1:36 am

you can only see the top in retrospect. Sounds like we’re over the top. We sold the family home two years ago. Better two years too soon than a day too late.

Danforth: Renting and trying to one day own in the Danforth (Pape & Danforth).

my other brother-in-law lives on Mortimer. Pape and Danforth is the best real-estate bet I can think of. Too rich for my blood.

Mr. Lahey: We are entering into the greatest shit storm since the tumble weeds blew across our open prairie fields in the 1930s.

are you from the prairies?

#51 Soylent Green is People on 11.25.11 at 1:46 am

Looking at apts 2 br in toronto, some very stange low prices

http://toronto.en.craigslist.ca/tor/apa/2716681522.html

.
.
.

#52 UVZ on 11.25.11 at 1:47 am

Where can one get accurate Canadian real estate stats?

#53 scared on 11.25.11 at 1:50 am

There are 2 theories –

1. HAM will flee China and run with their billions to the safehaven of Canada where they do not care if their 6 million dollar homes drop 50% in value because it was bought with dirty money anyways.
2. HAM will flee Canada and take their money back to China because the opportunities are limitless.

If our government is stupid enough to give HAM free education and medical care, then the rest of us can’t do anything but bend over.

The only people that gets screwed by this crazy economy is us regular folks.

#54 UVZ on 11.25.11 at 1:51 am

#15 Tim

The 25% figure could be a statistic (i.e. the incisive analysts at the influential mag calculated 24.73%).

I suspect otherwise.

You need to be a fly on the wall at the mag’s editorial offices to know what was going on.

#55 Dorothy on 11.25.11 at 2:02 am

There are far too many generalizations about real estate prices on this blog.

Real Estate always has been, and always will be, a very LOCAL market. So its not unusual to see price increases in one area, while experiencing price decreases in another. It’s always been that way, and always will be that way.

While the overall trend is most definitely downward, the percentage drop is bound to vary, and there will always be pockets where prices remain stable or even increase. Particularly in areas where the job market is fairly stable.

As for those making specific predictions about the percentage change in future prices, no-one can accurately predict what’s going to happen in this uncertain world of ours, because we’re all in uncharted territory. There’s never been a global economic crisis on the scale of this one, and even the so called “experts” are unsure of what to expect in the future. If there’s another credit crisis and we end up re-visiting what happened in 2008, even the money you’ve invested from your house sale may be at risk.

I own a home, and in my area prices have already fallen substantially, and my guess is that they’ve still got a ways to go. But I’m also worried about my investments, not just the price of my house. And I see no value in selling my house to invest and potentially lose a lot of my capital. The way I see it, if I hang onto my house, at least I’ve got a roof over my head. But if I invest every penny I have and what happened in 2008 reoccurs, I’d be totally screwed.

Keeping my paid for house, while still having some money invested, is a form of diversification. Something that Garth is always advocating. Whereas if I “put all my eggs” into the investment basket, I’ll be more at risk if the worst happens.

Given the demographics, real estate will probably never go back to where it was at peak. But history tells us that it won’t stay at depressed levels forever either. The economy will eventually improve and the current fear will pass, and we will return to that more balanced market that Realtors are always talking about. Selling now, on fear, is just as foolish as selling stocks when they’re on the way down. The best thing to do is to sit tight and hold, and hold and hold, until the market begins to improve.

Don’t make the mistake of buying high and selling low. If you don’t HAVE to sell, and can afford to hang on, then just stay put and wait.

#56 DonDWest on 11.25.11 at 2:09 am

Expect vacation homes and personal storage facilities to take a sharp drop. A lot of money to be made; provided being a vulture works within your conscience. Suits my conscience just fine. By the way, you don’t want to actually buy the vacation house, but you should be very interested in scavenging all of the excess material out of it.

As for primary residences; I see people clinging for a long time. Canada isn’t like the United States; you don’t simply get foreclosed on and then told to walk away. I’m afraid we may deal with a Japanese styled stagflation.

#57 domain on 11.25.11 at 2:10 am

It is about time.

I know when this housing burst is in full swing that the economy as a whole will be affected, but we need a slap in the face as a society.

I long for the days when people again look at their houses as a place to stay warm, spend time with family, and create memories as opposed to an investment scheme.

If you aren’t sitting on a good rainy day fund, or have a solid job with low debt, get ready to lower your standard of living.

Actually, just lower your standard of living anyway, you will be better off when you do it by choice, not by necessity…

#58 The American on 11.25.11 at 2:15 am

At #15: Tim, Bingo. This is why Vancouver will have 40%+ market correction. I said it months ago, quoting how much the Canadian market was overvalued (Toronto is about 27% overvalued, Vancouver is indeed hovering around 50% overvalued. Now The Economist is making this same claim with respect to the Canadian market as a whole at around 25% overvalued. I’m saying it again that the forthcoming Canadian correction is going to be worse than what was seen in the U.S. Every reason Garth made in his post today will be but only a portion of the procuring cause for it.
1. Home values in Canada are overvalued more than what values were in the U.S. at time of peak
2. Canadians now have more household debt than Americans ever had
3. Canadians’ saving rates are less than Americans’
4. Canadian banks as a STANDARD practice lend on or close to the equivalent of the ARM loans that got the U.S. into that mess in the first place. Meaning, money is lent on 5 year terms, amortized over 30 years at a low rate with little money down (and yes, you better believe Canadian banks are lending left and right to people with poor credit too). At the end of the term, terms reset and people get hurt.
5. Emergency rates have been in place for over two years in Canada, continuing to further perpetuate/pump artificially high values. These rates WILL END one way or another.

Truly, its beyond me why on Earth anyone would think for one second it is going to be a-okay in the Canadian real estate market. Its the perfect case study for everything NOT to do in creating a healthy real estate market. Its rather funny to step back from it all and realize how it isn’t a matter of a market that averted a collapse, but instead it is a market that continued to inflate its bubble to epic proportions. People just don’t realize it it yet. Seems like everyone continues to turn a blind eye and takes a Polly Anna attitude toward the reality of the economic situation in which Canada currently sits – well, except now for the IMF, The Economist, analysts, real estate publications, etc.

Perhaps its because Canada doesn’t even realize the severity of the situation at this point because it really hasn’t FELT the hurt…yet. The media, CREA, government and banks cannot afford for truth to be heard and made fully transparent to the public. But, I have a sneaking suspicion that it is getting harder and harder to keep this information at bay as each day passes. Don’t ask me why because I won’t go there. Anyway, what ever happened to all this “conservative” bullshit in which everyone always has taken pride? Well, the world is about to see just how much stink was coming from the Canadian government and its banks.

As an American who has lived through this for the past 5-6 years, its unf*cking believable that Canada of all places would not heed this warning, but instead would take it to an entirely new and never-before-seen level of greed, arrogance, insanity, and denial. I have family in Canada currently working through it, and yes, it really pisses me off to no avail when they present the “we’re different” story. Seriously, this “we’re different” mentality is probably the biggest statement of ignorance, arrogance, and weakness that will ultimately bring it all to a screeching halt.

Remember, if a national market is 25% over valued, it means it will correct by 35%+ at first, and then eventually settle to find the mean. This is a process that does not happen overnight or in as little time as a year – No no, instead it take several years to complete this process. Markets that are grossly overinflated almost ALWAYS over correct when the bubble bursts – much like a pendulum on a clock. Markets like Florida, Arizona, Nevada, and California are prime examples of this behavior.

Please, wake up, citizens of Canada. Stop and THINK, ask the right questions to the right people, do not believe all that you read/hear from your media, and maybe being a tad bit more cynical and suspicious may serve you well and better in the long-term. Is that forward enough?

#59 Chico on 11.25.11 at 2:18 am

Hey Garth,

News from the west coast.

Spoke with a business owner today of a marine shop, and he’s closing down his business. I asked him why and he says people don’t have the money to spend on extras like boats.

Less than a block away, a lady who is in the leisure plane business says that very few planes are flying anymore, the price of fuel and way less discretionary income.

Another guy who runs a spring and axle shop can’t spare the coin to replace his sign in the front of his shop that looks like crap.

Another lady who is in the junk car business says it’s been bad, the entire car industry, since right after the Olympics ended.

It’s like you’ve been saying for a while. Too much debt and too little money for anything beyond the basics.

#60 Jimbo on 11.25.11 at 2:30 am

#18 City Slicker…

> I wonder where gold will go when Europe falls apart?
>
> One bank now targets it at $1,425. A mighty fall. — Garth

There would be no mighty fall in gold when priced in Canadian dollars if, at the same time, the US Dollar increases by 15%. This has been the risk-on / risk-off track record over the last few years: Gold up, US dollar down. Gold down, US dollar up.

The price of gold in Canadian dollars has been increasing in a very orderly manner, with little volatility, over the last 10+ years.

#61 Andrew from Saskatoon on 11.25.11 at 2:32 am

“Mathematically, there is no reason why real (inflation adjusted) house prices could not drop 90% in the years ahead, as some have predicted.”

Absolutely agreed 100%. I’m just guessing numbers here, but I think the average home in Canada sells for about 5 times its real, intrinsic value. We have the greatest credit bubble in history stacked upon the greatest demographic (baby boomer) bubble in history. By all (un)common sense and reason, we should be on our way to the most underpriced real estate in history over the next 2-3 decades. It’s only sensible that real estate would fall beneath its real, intrinsic value in that environment. An average 90% fall nationwide, peak-to-trough sounds about right.

People say real estate can’t go to zero because it has intrinsic value. Fresh, running water also has intrinsic value, and yet it’s so plentiful that getting it for free is extremely easy. That’s where real estate prices will be when the boomers are all gone.

#62 Bailing in BC on 11.25.11 at 2:36 am

#34 Unistar38

What’s the bet the caller starts spending that money now? Ha ha.

#63 Aussie Roy on 11.25.11 at 6:05 am

Aussie Update

Mish

Erdos is an inner-Mongolia city with rich natural resources. However, it’s a ghost town with many buildings but few people. Home prices just crashed 62% in a few months.

Let’s take this story starting from the beginning.

http://globaleconomicanalysis.blogspot.com/2011/11/home-prices-crash-625-since-september.html

What an irony it would be if, just as our esteemed leaders finally squeezed their resources tax through parliament, there were no super profits left to tax.

If things keep heading south on world markets, the most the Mineral Resources Rent Tax will raise is a few musty old coins and some pocket fluff.

But that is the least of the government’s worries. As outgoing Commonwealth Bank chief Ralph Norris has told BusinessDay, the sovereign debt crisis in Europe is threatening to descend into a fully-fledged credit crisis where banks stop lending to each other.
http://www.theage.com.au/business/property/house-prices-at-risk-from-europe-crisis-20111125-1nxsm.html#ixzz1ei5GQaH8

OUTGOING Commonwealth Bank chief executive Ralph Norris has warned that the European debt crisis has entered a dangerous phase, likening the current turmoil to the global financial crisis of three years ago.

Mr Norris said global money markets ”effectively froze” this week as Germany failed to sell the entire stock of €6 billion ($8.2 billion) worth of long-term bonds.

http://m.smh.com.au/business/gfc-ii-on-its-way-norris-20111124-1nwx1.html

What a relief to find an industry player summarising ongoing conditions in such a realistic fashion. What Deloitte doesn’t say, though, is that 5% aggregate mortgage growth is a recession for house prices. This level of disleveraging will guarantee further house price falls, probably in the vicinity of those seen in the last year. The concern of course is that if Australia’s 1.1 million negatively geared property investors suspect this new normal, they are unlikely to sit on their hands.

http://www.macrobusiness.com.au/2011/11/the-new-normal-in-mortgage-growth/

#64 Aussie Roy on 11.25.11 at 6:19 am

Aussie Update

Oh how expectations can change and change quickly, just a year ago the majority thought house prices only ever go up. Now?

Poll: How will house prices change over the next 12 months?

Fall >10% – 41%
Fall 0 – 5% – 28%
No change – 22%
Rise 10% – 4%
Rise >10% – 5%

Comments on this story also worth reading, Are Aussies finally getting it?.

http://www.theage.com.au/business/property/house-prices-at-risk-from-europe-crisis-20111125-1nxsm.html#poll

#65 In Garth We Trust on 11.25.11 at 7:02 am

I think you can now change the name of this blog to “Garth told you so”. I have talked to several agents in what has been a hot area of the Toronto market recently and they confirm the above three stories. It’s over folks.

#66 In Garth We Trust on 11.25.11 at 7:06 am

Hey there Johny Bravo. Good comments today. Yesterday you asked what the bad auction of German bonds meant. The beginning of the end of the Euro as you know it comrade is what it meant. We are all watching a slow moving train wreck unfold before our eyes…

#67 Smoking Man on 11.25.11 at 7:15 am

Nope.

I think we have one more hot spring regarding prices, a peek, a line and in 2014, get out of the way.

#68 Easternman on 11.25.11 at 7:33 am

#34 Unistar

Sad indeed that the mindless minions swallow the koolaid spewed out by these morons. They will have to retitle the program to “Formerly Hot Property” and replace the real estate clowns with bankruptcy specialists.

#69 David B on 11.25.11 at 7:35 am

Yup, no debt is good …. and for the very most part it is good across the whole page …from Joe the labour guy to Dr. Who. Some things never change …. right now it is not the time to have a very big man named “Bubba”(mortgage) in your life.

#70 jerry on 11.25.11 at 8:04 am

Recently I was watching a news broadcast in which Canada was thinking of introducing internet search services similar to the USA Zillow, or Trulia. These are great as they provide a wealth of information about actual house prices, solds, days on market, neighborhood averages etc.

The news show in Canada featured some realestate guy who attempted to demean such services in Canada as this type of information would apparently would be too sensitive and complicated for the average buyer/seller to understand without the guidance of a realtor.

Any idea if such a service will make it here?

#71 housedoc on 11.25.11 at 8:22 am

#6 Danforth

Been here 20 years.
I believe we suffered 15-20% during the 90’s.
But there is some CRAZY S**T going on around here lately.
One neighbour sells a couple years ago for 625. Motherf***er demolishes it and is building the worst tin-roofed, oversized window, stucco POS imaginable (I’m sure the appliances will be great) that he’ll probably try to sell for 1.5M.
Second neighbour listed a couple months ago for 1.249M. I thought that was a little steep.
Sold in a week for 1.325.
Of course there’s that shell of house at the north end of the park that listed at 699, sold for 1.03 and I’m pretty sure will be flipped for what, 2?
Money is way too cheap.

#72 bigrider on 11.25.11 at 8:24 am

I’m down 9% so far on the year on my portfolio. Had a great 2010 bettering 20% +. Maybe a bit to aggressive as my mix 70/30 . I know I know, all the geniuses posting here on this blog are all up on the year, right? Ya I’m sure.

Anyway, a CA on BNN yesterday, has a book out, extolling the virtues of GIC’s. Says the yield bubble we are in (preferred’s and bonds) going to deflate. Everyone horny for yield, dangerous. Says more people should be in GIC’s and aggressively retiring debt. He also said housing was a dangerously over-inflated asset and buyers beware. Those with too much house should scale back.

Anyone care to argue with him. Sounds like some common sense advice for sleeping well at night.

You have averaged 11% over two years. What are you whining about? — Garth

#73 bigrider on 11.25.11 at 8:47 am

Just curious, anyone out there in the world of professional advisors/portfolio managers or investment gurus bullish on stocks?

I ask this question for a simple reason.

12 Year ago, at the top of the bull market, everyone owned stocks, paying three times book for S&P and MSCI believing ” a new era was upon us”. Real estate at the time had been in the shitter for 8 years or so. No one buying yet RE started to rise and has continued to do so, inexorbly until now and stocks have slid to produce negative returns “the lost decade”

Fast forward to today, nobody wants stocks, trading at less than 1x book and RE is all the rage.

Are we making same mistake again?

#74 Hammer1 on 11.25.11 at 9:00 am

Garth, can I put you on speed dial too?

I don’t talk to people named after tools. — Garth

#75 edmonton mortgage broker on 11.25.11 at 9:09 am

#70 jerry on 11.25.11 at 8:04 am

try zoocasa’s zoopraisal

http://www.zoocasa.com/en/zoopraisal

I’ve found it to be surprisingly accurate especially for cookie cutter homes in established areas. still very rudimentary compared to Zillow but it’s a start.

#76 jess on 11.25.11 at 9:25 am

2005 -07
canadian dollar Average (428 days): 0.87773
———————————————-
http://www.newsroompanama.com/business/3621-panama-gets-another-tax-havenhit-from-france.html
==================

Monday, November 21, 2011
Cayman directors: ‘next big scandal’ for hedge funds – FT
The Financial Times has an important article looking at a subject we have written about many times in the past.
http://www.ft.com/cms/s/913e31b6-114a-11e1-a95c-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F913e31b6-114a-11e1-a95c-00144feabdc0.html&_i_referer=http%3A%2F%2Ftaxjustice.blogspot.com%2F2011%2F11%2Fcayman-directors-next-big-scandal-for.html#axzz1eiuFVB27
http://taxjustice.blogspot.com/2011/11/cayman-directors-next-big-scandal-for.html
A small group of Cayman Islands “jumbo directors” are sitting on the boards of hundreds of hedge funds.

Securitize Canadian Receivables
http://www.blakes.com/english/view.asp?ID=1878

#77 Kilby on 11.25.11 at 9:27 am

Penticton BC.
723 active residential listings. Last 7 days there have been 8 sales. Two condos and 6 SFH. Apex ski condo, ski in, ski out, 721 sq. ft. Asking $85K, sold for $70K. Most expensive SFH sold for $432K after 50 days on market.

#78 T.O. Bubble Boy on 11.25.11 at 9:30 am

Despite the fact that we’re into the slow months for RE sales, some sellers are still reaching for the ultimate Greater Fool to snatch up their stupidly overpriced property.

I posted this place (194 Soudan Ave) a month ago, and it is still out there — to no one’s surprise:
http://www.realtor.ca/propertyDetails.aspx?propertyId=11245522&PidKey=-1658512751

Recent listings for this house:
September 25, 2010: $850k
October 6, 2010: $799k
November 18, 2010: $789k (-7.3% below original price)

October 20, 2011: $899k

And – it gets better: there is now a competing “$899k 18 foot wide McMansion wannabe” a few blocks over (at least this one is a detached new house vs. a reno-ed semi-detached)
http://www.realtor.ca/propertyDetails.aspx?propertyId=11297328&PidKey=102683882

I’m thinking that desparation will soon be in the air, when people suddenly realize that there isn’t a big market out there for “million dollar homes” on 18-ft lots.

#79 In Garth We Trust on 11.25.11 at 9:32 am

#40 Brad in Calgary

“oh, that’s right, you are perfectly willing to comment on gold when it serves your own agenda but when people (with better credentials than you) point out the reasons gold will be over 2000 soon, you huff and puff and spew out “this is not a gold blog!”

Sorry Brad baby but the Garthster is right on his gold call. Speaking of credentials, here is what Al Friedberg did with gold in his hedge funds at the end of the 3rd quarter of this year. When it comes to credentials, Al Friedberg ranks among the elite traders of the world. Go to his site and see the amazing gains his funds have had this year (and this year is no fluke, he has a 40 year track record).

“The gold position was reduced to almost insignificant levels by the end of the quarter (from an exposure
equal to as high as 70% of net assets), in the belief that the market had become dangerously overbought
and was passing into the hands of weak individual speculators and highly unstable hedge funds. We firmly
believe that the secular uptrend remains in place, provided real interest rates continue to stay close to zero.
Nevertheless, the ongoing correction is likely to extend for some time, providing the necessary technical
base for an eventual move to new highs.”

Gold is not going anywhere anytime soon Brad.

http://www.friedberg.ca/webpieces/reports/quarterly/Third%20Quarter%202011-%20Quarterly%20Report.PDF

#80 Junius on 11.25.11 at 9:32 am

#58 The American,

Great post (as usual). Agree 100%.

You said, “Perhaps its because Canada doesn’t even realize the severity of the situation at this point because it really hasn’t FELT the hurt…yet.”

I think this is precisely the point. When the US, Iceland, Ireland, Greece, Spain, etc. began to crash people here began to brace for change as well. Nothing happened for reasons we know well. Then time went by and people started believing the hype and that it was “different” here. Now we see the only difference was in the timing.

#81 Onemorething on 11.25.11 at 9:33 am

Canucks and Aussies WILL GET IT! They will get a good lesson in how it feels to have been manipulated!

LEARN AND LIVE!

The Chinese (Asian) investors will finally look at RE as the unsafe investment!

The Eurozone is just a reflection of what is happening worldwide and what the USA has managed to window dress for now.

I agree with Garth it wont happen overnight as there is massive more manipulation that can take place as the middle class boomers still have money to feed the rich.

But until that is done, we wont see a bottom!

#82 Easternman on 11.25.11 at 9:34 am

I have my popcorn ready for another day of Westernman’s witty retorts versus the crowd.

#83 Kilby on 11.25.11 at 9:37 am

Qualicum Beach.

207 active residential listings. Last 7 days there have been 3 completed sales. All SFH, most expensive was 1993 1,660 sq. ft.. .25 acre, double garage and RV parking. Sold for $350k after 160 days.

#84 betamax on 11.25.11 at 9:38 am

#59 Chico: “Spoke with a business owner today of a marine shop, and he’s closing down his business.”

I drive past a GVRD marine shop regularly and the lot is full of unsold inventory left over from the summer. I’ve never seen it anywhere near so full in winter before.

#85 House on 11.25.11 at 9:45 am

Royal Bank released a report Friday morning which stated that things are going to be stable. In BC they say mortgage payments are only 90 percent for pre-tax income. Luckly they do not have to pay tax so they have 10 percent for food. I wonder what exactly they taught(?) in economics classes in the last twenty years.

#86 Incubus on 11.25.11 at 9:51 am

I think that prices are too high by more than 25%.
In Montreal condos are at least 50% too high. Time will tell.

PAYBACK TIME: Citi Warns Of A Coming Decade Of Deleveraging

http://www.businessinsider.com/demographics–deleveraging–housing-disaster-2011-11#ixzz1ej0D7HRD

#87 Sean on 11.25.11 at 10:06 am

haha… just enjoying yesterday’s comments….

stay tuned for today’s episode as the gay bashing / sexual tension between Form Man and Western Man reaches new heights…

just get a room, you two

#88 CountryLover on 11.25.11 at 10:12 am

I also have witnessed firsthand that things are definitely deflating in real estate. Friend’s Inlaws had their gorgeous custom built $1M+ home on market, 3 mins to Miss and it never sold this year. They only had a handful of showings. ‘Not enough stainless or granite’ was a common comment, “Don’t want to have a Brampton address’ was another theme. The house is custom made 3,000 feet top quality ($60k just for the roof shingles), huge lot, mature trees, hardwood, lovely views throughout, but is 20 years old and doesn’t have granite or stainless. They took it off the market after 6 months and no offers (even with a price reduction) and will re-list in the Spring.

Fingers crossed it sells as it represents a huge weight on their shoulders. They should be retired, but cannot until the house sells, and they are stubborn about its ‘worth’. The situation reminds me of Garth’s comments that people want a sale price that they would never themselves be willing to pay. What is interesting is that all along everyone said that they would have no problem if they ever want to sell and in fact over the years did have some offers they refused.

Glad we bought 6 years ago before prices got totally crazy. However, just got the value reassessment from MPAC and it is up $100K (for 2008 value) so hoping property taxes don’t do a big jump next year.
Very thankful for Garth’s daily reminder to keep control of our spending and diversify. We made some mistakes years ago (consolidated debt on mortgage, line of credit), but we got rid of the line of credit, accelerated the amortization of the mortgage and keep a weekly eye on our expenses partially thanks to Garth’s daily wisdom. I highly recommend his book too and have shared it with my co-workers.

#89 jess on 11.25.11 at 10:16 am

More evidence of wholesale asset-stripping in the Congo. Read my press-release first then view details of 45 shell companies and some of the people involved.

DRC shell companies
http://ericjoyce.co.uk/wp-content/uploads/2011/11/drc_shell_companies.pdf

In the latest of a series of releases detailing bumper windfalls made at the expense of the Congolese people, Eric Joyce today has published a list of 59 shell companies that have directly or indirectly bought assets in the DRC over the last several years.

The list contains 29 companies that can be directly linked to Israeli businessman Dan Gertler, a personal friend of DRC President, Joseph Kabila. Of the remaining 30 companies, 22 of them have the same registered agents as the principal agents for Dan Gertler’s shell companies.
Almost all of these shell companies have been incorporated within the last four years. Some of them were only incorporated weeks before being awarded mineral assets in the DRC worth $ billions, often at $ billions below market value.
http://ericjoyce.co.uk/2011/11/congo-fire-sale-4/

#90 Joe Bloggs on 11.25.11 at 10:49 am

“Understand this, and it’s all good.” – this part of your rant I like the best.

So, Garth, the presumption is that you understand. Here is news for you: you are going to be disappointed – big time. Mark my words.

Done. Meet me here in a year. — Garth

#91 Van guy smokin now on 11.25.11 at 10:58 am

Garth,

You said Van burbs are cooked. It seems like the same as you are pointing out for GTA???

#92 C on 11.25.11 at 10:59 am

Listings in Burlington, Ontario area still falling hard:

“House”, $300,000 – $400,000:

Nov 6th, 2011 301
Nov 11th, 2011 294
Nov 12th, 2011 289
Nov 15th, 2011 294
Nov 16th, 2011 286
Nov 17th, 2011 284
Nov 18th, 2011 244 !!!!
Nov 19th, 2011 272 ???
Nov 23rd, 2011 256 !!!
Nov 25th, 2011 246 !!!

#93 Brad in Van on 11.25.11 at 11:06 am

@58 – The American – Your post scares the hell out of me. My wife and I know you are right. We all need to wake up and demand the truth from our media and government. I also think our correction is going to be huge. I have lived through the one while living in the States and I can literally feel it churning in the air here. We live in Kits and it feels like when the U.S. had peaked and then stalled for several months. The only thing different here is that our real estate prices are even higher relative to income and that is a huge problem that we are not prepared to face. You are correct in saying the markets return to the mean. I think our city’s correction will be even more than what you said and I think my fellow Canadians are being very naive to think any kind of correction will last for only a little while. Our neighbourhood is already taking a hit but we see zero stats that would show otherwise. This is why our suspicion is at heightened levels.

#94 sam.i.am on 11.25.11 at 11:09 am

bigrider…not a pro but i do have one managing some of my accounts (us, series 65 adviser, individual stocks mostly) , and i am comfortable being in stocks with 20+ years to retirement. sticking mainly to value companies with solid management and strong balance sheets. you are down 10% the s&p is approx -7, tsx havent checked, if the returns get too far below the averages, that is a red flag and perhaps some corrective action is needed. -10 ytd this terrible year isnt great but seems within tolerable limits.

#95 Bigrider on 11.25.11 at 11:16 am

Legendary hedge fund manager Jean Francois Tardiff who ran the Sprott opportunities hedge fund before retiring wealthy at 40 with a compound rate of return of over 21% , is currently 70% in cash.

He days 5 to 6 % a year will be good for long corsets le future. In an age of deleveraging the headwinds will be too difficult for equity markets to surmount.

He holds a little gold bullion, some oil and gas which he says will be best place to be and a few ( not much) high quality dividend payers and has bought farmland.

What stands out most in his somewhat dire warning: 70% cash!!

#96 Bigrider on 11.25.11 at 11:20 am

Corsets le future meant to say , long foreseeable future..LOL damn this spellcheck iPhone.

#97 sam.i.am on 11.25.11 at 11:22 am

in the interest of full disclosure, my professional adviser’s twirr ytd 2011 is -1.3%, 2010 was 20.8, beating the market by enough to justify the management fees, and letting me sleep at night.

#98 amos811 on 11.25.11 at 11:30 am

Garth,

I hope you are right, really do. if not, who will be the greaterfool?

How can I be wrong about liquidity, debt freedom and diversification? — Garth

#99 Bigrider on 11.25.11 at 11:36 am

Sorry my mistake , you did say two years.

Wind still whistling in my head.

#100 eaglebay - Parksville on 11.25.11 at 11:49 am

#84 betamax on 11.25.11 at 9:38 am

Great news for me as a boomer.
I’m in the market for a new fishing boat this spring.
Cash deal only.

#101 Timing is Everything on 11.25.11 at 12:00 pm

#51 Soylent Green is People

Bedbugs are extra.

#102 JohnnyBravo on 11.25.11 at 12:10 pm

“We firmly believe that the secular uptrend remains in place, provided real interest rates continue to stay close to zero.”

Preface: I’m neither a gold bug or bugger, I just try to look at realities.

I think the gold story has legs for several reasons: negative, real interest rates; currency risk; sovereign risk; financial system risk. With the global economy in a funk and debts too high, nations are trying to devalue their currencies with the US taking the lead. While nations can devalue via the exchange rate mechanism for the purposes of propping up exports, ultimately you can only really devalue against real stuff. The real stuff benchmark of choice for thousands of years has been gold.

Even after the world was forced by the US to drop any kind of gold standard in the early ’70’s, central banks all around the world, especially the Fed, never gave up their gold. Think about that. They don’t hoard silver, or copper, or chickens. They hoard gold. And they have the military guard it for them at places like West Point and Fort Knox. This should tell you something. Namely, that when all other currencies fail, gold is still real money.

Gold could very well be the trump card; the last resort if all hell breaks loose. It can also play a role in a new global currency. Remember the Fed is a central bank, but it’s still a bank, with assets and liabilities. Russia is buying gold. China is taking as much as they can from local mines. Other countries are starting to question the soundness of using the New York Fed as their gold custodian (they want to hold it themselves).

Will gold go up or down? Yes. It’s volatile and it can have massive swings. Gold could drop like rock if there is another rush to cash, or if/when there is a fundamental change to the factors mentioned above. But until then, it looks like the secular gold story is intact. Sounds like the venerable Mr. Friedberg would agree.

Sovereign debt issues lead investors into the security of US dollars and treasuries. Commodity prices fall as a result, gold included. I totally disagree with this view, and also with the doomer sentiment this blog is oozing today. You people need more love. — Garth

#103 Mr. Lahey on 11.25.11 at 12:13 pm

#50 45 North

“Mr. Lahey, are you from the prairies?”

I am not. Sunnyvale is my home, in the lovely province of Nova Scotia.

#104 maxx on 11.25.11 at 12:21 pm

We were lucky, “got out” and are now living a dream come true. Lucked out on a large 2 bedroom condo with world-class views. Our land lady is a dream come true.
We’ll be taking our 4th trip overseas this year and are planning another for January…without dipping into capital.
My point is that life with options is a life of great quality. I don’t wish to exclude RE as a potential addition to quality of life, however RE with excess debt is a suckers game. The final price tag is an atrocious figure, even with low rates. That atrocious figure is a fiscal blight that stands squarely in the way of wealth building and by extension, life options, whatever they might be.
I find (as many of you do) the RE rhetoric spewed by realtards, big finance and facilitators of all stripes to be repulsive, manipulative in the extreme, disingenuous, self-interested and a complete free-for-all with zero accountability for damage caused.
My wish is that increasing numbers will more rapidly see this for what it is and reappropriate their options. The first option is not to buy RE in a declining market.

#105 Shy Guy on 11.25.11 at 12:24 pm

Fresh off the press — Canadian Wages Plummet

This should be of no surprise. Looks like we are about to enter a tailspin

http://news.ca.msn.com/top-stories/canadian-wages-plummet-70

#106 disciple on 11.25.11 at 12:24 pm

#89 jess… as usual highly useful post on the DRC. Absolutely disgusting how we hardly hear anything about the Congo in Western media, yet it’s natural resources are fatally crucial to consumer tech products…

#107 Junius on 11.25.11 at 12:32 pm

We can only marvel at the continued audacity and

Coming to an MSM news report near you:

ineptitude of those rubes over at the Conference (Confidence?) Board (Bored?) of Canada and their constant positive spin on the world. Today’s report is no exception.

The report begins by basically saying that Europe is a risk but they are going to proceed based on the belief European leaders are going to figure things out. Say what? Not a chance at that as clearly the Eurozone is going to undergo major changes whatever they decide.

So basically throw out the entire report.

Here are some highlights:

“Most provinces can expect their outlooks to improve in 2012 and 2013”

“Private sector activity will pick up in 2012, helping to offset sharp declines in federal and provincial infrastructure spending,” said Marie-Christine Bernard, Associate Director, Provincial Forecast. “But despite little direct exposure to European markets, provincial economies would be affected if the EU sovereign debt crisis spread globally. As a result, risks to the forecast remain elevated.”

Since the European debt situation is spreading globally they will be effected.

“Central and Atlantic Canada will be hampered by sluggish growth in the United States, weak consumer spending, and fiscal austerity measures. The Western provinces will once again be the growth leaders in Canada, thanks to high commodity prices and robust investment in the energy sector.”

High commodity prices? To whom? China is in free fall right now.

Energy sector? Are not lots of these new refineries being put on hold?

“Alberta is poised to enter another period of prolonged economic expansion. Growing demand for energy from emerging markets is expected to keep oil prices elevated. The construction sector and service industries will also reap the benefits of expected investment in the energy sector. Real GDP growth will accelerate from 3.1 per cent in 2011 to 3.6 per cent in 2012.”

Again, are most of these not on hold? Is demand really keeping pace from emerging markets? Note no discussion of consumer debt.

“British Columbia’s economy will grow at a more moderate pace of 2.6 per cent this year and 2.5 per cent in 2012, due a decline in government expenditure in infrastructure, and modest growth in consumer spending.”

Consumer spending? Are you kidding? What a joke.

Vancouver in particular has had a significant amount of government spending on infrastructure dues to the run up to the Olympics. Now that that is done it is having a significant impact on the local economy. We are probably in a recession now and it will not get better.

Such a bunch of crap. Who pays these people?

#108 GTA Girl on 11.25.11 at 12:43 pm

Hearing that a 2000sqft condo at the RitzCarleton in Toronto is on fire sale. Original buying price was $1.8mill. Buyer has to sell. It’s priced at $1.2.

He is dumping it.

#109 Trev16 on 11.25.11 at 12:47 pm

Garth,

It’s amazing to me that people are commenting and making such a big deal “that you are right” in terms of your call on a housing correction? For me who is in real estate…..I would just say……history always repeats itself with markets going up and going down. In other words it’s a no brainer that real estate markets will correct.

However in terms of gold…..for those gold haters out there…..there are two markets? The physical market is on fire as it is getting harder to buy gold and silver as you have to wait for delivery in many cases and the paper market which is totally manipulated on COMEX. The financial news only covers the paper market. It is unbelievable how corrupt Wall Street and the SEC are and why anyone would believe any of the financial numbers coming out is beyond me? The evidence of the corruption is overwhelming and the non existent coverage by the mainstream media is just another example why you shouldn’t waste your time with it……unless it’s for weather or to catch up on the lastest celebrity scandal.

It is clear we are on a path of destruction when it comes to currencies and it’s not going to end well for many people who are highly leveraged. I just love going to Costco, etc and watching the prices to continue to creep up. As the financial meltdown evolves there will be a lot more people like yourself Garth who have a generator and live in the bunker.

As you say….It’s all good.

Cheers,

Trev16

Great career moves Trev, into real estate to gold. — Garth

#110 Pr on 11.25.11 at 12:49 pm

The era of the house is done…Understand this, and it’s all good.-
“Good luck happens when preparedness meets opportunity”. Tell your friends to read this blog and act, you may save their bacon.

#111 "Toronto Star" is EVIL on 11.25.11 at 12:52 pm

O M G:

Title of Article: “Low interest rates making home ownership slightly more affordable, RBC says”

http://www.moneyville.ca/article/1092433–low-interest-rates-making-home-ownership-slightly-more-affordable-rbc-says?bn=1

Best Quote from Article:

“Those lower rates are helping to cushion the impact of rising home prices in many cities even as the economy slow and consumer confidence weakens.”

Good thing our “Canadian Press” is now owned by the “Toronto Star” as well!

What would we do otherwise for honest news?

#112 Form Man on 11.25.11 at 1:05 pm

#233 Phoeey yesterday

Exactly my thoughts. Angry, small-minded little bigots such as westernman have no clue how dependent they are on our society. Canada, on the other hand, would be well served by identifying these social parasites, and deporting them. If they are so self-sufficient, they should be forced to truly forage for existence on their own. They would quickly run blubbering back to mother Canada, looking for comfort and someone to wipe their snotty noses.
A western separatist is really no different than a Quebec separatist. When it is pointed out that they will have to pay off their share of the national debt before leaving, the scream with indignation, and then go quiet as the realization of their ill-conceived notions hit home.
The science behind retrieving oil from the tar sands was developed with the help of substantial subsidies from Canadian taxpayers for years ( and these subsidies still exist). The fact that the lion’s share of this money was transferred to Alberta in the 1970’s by the Trudeau Liberals is a fact westernman ( and his ilk) ignore. It is also true that it was the baby boomers parents who actually contributed to society’s wealth. It is the boomers who are busy squandering it.
Indeed it is possible that the so-called ‘wealth transfer ‘ to the baby boomers may evaporate if the equity and housing markets continue the current slump for much longer. Many of our economic problems have solutions, but the solutions won’t be welcomed by the immature, nasty, and irresponsible westernmans of the world; so I say au revoir to the unproductive little whiners.

excellent posts lately Garth !

#113 RL on 11.25.11 at 1:06 pm

I can see from the comments that some folks are angry (read “worried”) that Garth is right!

In my opinion, the only reason the Real Estate Industry gets away with what they are doing is that the mainstream media releases their propaganda as “Press Releases”.

In my opinion, if they put this stuff in the media as advertising they would be challenged by Advertising Regulators for false advertising.

#114 Mr. Lahey on 11.25.11 at 1:17 pm

Folks, we are witnessing the greatest credit collapse in history. Canada will not be immune to this and with the global credit implosion goeth Canadian real estate… “Barb, it’s time to dump some of the trailers while you can!”

NEW YORK (CNNMoney) — In yet another sign of Europe’s deepening crisis, two Italian debt auctions drew weak demand Friday, sending bond yields soaring and keeping investors on edge.

“We are fast running out of options,” wrote Deutsche Bank strategist Jim Reid, in a client note. “The great hopes of the last few weeks for Europe have fallen one by one.”

http://money.cnn.com/2011/11/25/markets/bondcenter/italian_bond_yields/index.htm

Failure of bond sales by risk-prone issuers is hardly a credit collapse. This blog is in heat. — Garth

#115 scared on 11.25.11 at 1:21 pm

I live in Richmond, BC. Drove my kid to school this morning 10 blocks away and counted 9 construction sites each building monster homes. Who the hell has the money to buy these ugly things? Certainly not the locals. I guess we’re expecting more HAM?

#116 A Bond Anyone? on 11.25.11 at 1:30 pm

Europe is between a rock and a hard place folks. Here are the two options they face and the consequences of those options:

“So there are now only two REAL outcomes:

1) The ECB prints (and Germany walks) resulting in the Euro losing at the minimum 30-40% of its value

2) Massive defaults and debt restructuring accompanied by systemic failure in Europe

These are the facts. I know that the mainstream financial media and other “experts” like to proclaim that Europe can somehow muddle through this, but they’re wrong. The EU kicked the can down the road for over a year in terms of debt restructuring for Greece. Now it’s facing a problem it CANNOT possibly bail out: Italy.

In other words, the can has finally hit up against the wall. The market is not willing to lend to Italy at present levels. Nor is the market willing to lend to the EFSF. The only two potential backstops for the EU are now Germany or the ECB. And Germany WILL NOT allow money printing/ debt monetization to take place.

Folks, I don’t know how else to say this, but if Europe experiences just a 2008 type event, it will be LUCKY. The entire European banking system is leveraged at 26 to 1. At these levels even a 4% drop in asset prices wipes out all equity.”

http://www.zerohedge.com/contributed/either-ecb-prints-and-germany-walks%E2%80%A6-or-eu-sees-domino-debt-collapse-followed-systemic-f

Actually, eurobonds would be a nice solution. — Garth

#117 disciple on 11.25.11 at 1:30 pm

“Sexually awakened women, affirmed and recognized as such, would mean the complete collapse of the authoritarian ideology” —-Wilhelm Reich

All authority of any kind, especially in the field of thought and understanding, is the most destructive, evil thing. Leaders destroy the followers and followers destroy the leaders. You have to be your own teacher and your own DISCIPLE. You have to question everything that man has accepted as valuable, as necessary.–Krishnamurti

“A man who doesn’t have good sex resents life living itself; he wants to force and control it; he identifies with priests; he thinks business and sport, war and politics are more important than home building and garden tending, wife cultivating and child rearing; he no longer remembers his youth; his feelings, like his environment, are simply something to be dominated and destroyed; he is not moved by the Living……—-J.James

” Heaven and Earth have their opening and closing. Yin and Yang develop from each other. Mankind is created through the union of Yin and Yang and embodies the sequence of the seasons and elements. If one abstains too much from sexual union, then one’s Spirit will not develop; since the harmonious interchange of Yin and Yang energies will have ceased. Through regular practice of Healing Love, it is possible to derive great benefit to one’s health from the enjoyment of the senses, through sexual intercourse “. – Yi Shen Fang

These fundamental errors mean that modern sexology has not realized that sperm is the source of erectile power, not nerve endings. The casual complacency displayed by doctors when they talk in terms of ‘how many times a man can make love in one session’, etc., clearly shows that they are ignorant of the higher function of sperm, which is to generate and store sexual energy – orgasmic energy.

Every organ pays heavy tribute to the glands that produce the sexual seed energy. The reproductive glands receive the essential elements of sexual energy from the blood. The blood withdraws the precious vitality of the life-force (Chi) from the organs and glands of the body, including the bone marrow, spinal fluid and brain. In a scientifically literal sense, sperm originates from the pituitary and pineal glands in the brain. Semen derives some of its essential nutrients from the cerebro-spinal fluid. This is why constant sperm loss causes backache.- Not many people know that! Backache in women is often caused by orgiastic congestion, through lack of lengthy bouts of deeply fulfilling penetrative sex.

#118 disciple on 11.25.11 at 1:39 pm

I was surprised at how quickly the homes are still selling in my area of West GTA, but then I realized they all had rental suites in the basement. It’s the only way to carry the mortgage for some. But it’s turning the typical suburban street, a sort of giant condo turned horizontally, a highly overpriced, cold, damp basement type of horizontal condo.

#119 Sky on 11.25.11 at 1:44 pm

Your math is off, Garth. If bigrider was up 20% in 2010 and was down 9% in 2011, this does NOT average out to an 11% gain over 2 yrs.

Using hypothetical round numbers here:

Invest 100k

Gain first year @ 20% is 20k for a total of $120,000.00

Loss during the second year is 9% of $ 120,000.00 :

9% of $ 120,000.00 = $ 10,800.00

$120,000.00 minus loss of $ 10,800.00 = $109,200.00

Gain over a 2 year period is $ 9,200.00

That’s a little over 9%.

That’s the hell of the market. If you lose 50% in your portfolio… you then need to make a 100% gain to get back to where you started.

At 9.2% he’s still a whiner. — Garth

#120 Junius on 11.25.11 at 2:05 pm

#113 RL,

You said, “the only reason the Real Estate Industry gets away with what they are doing is that the mainstream media releases their propaganda as “Press Releases”.”

I think you mean that the media reports their Press Releases as factual news items. That is the problem.

The massive consolidation of the media business over the past few decades has systematically eroded journalism standards and left the media prey to their major advertisers. A Press Release like today’s Confidence Boared of Canadja Release will now lead the news on radio and probably on TV as they have nothing else to say.

Over the past few years Garth and others have shown how coordinated these reports and releases are from the major Real Estate firms such as REMAX and others. It is pure manipulation but there is no one at the media companies who cares or knows enough to do anything about it.

Look at the timing of today’s Conference Board Report. Is there any doubt in your mind that the report is timed to pump up the consumer before going into their Christmas shopping cycle?

Considering the situation in Europe we should all be tempering our spending habits. However here comes the CB of C to tell us that all is well so we should spend away. Pathetic.

#121 Trev16 on 11.25.11 at 2:07 pm

Sovereign debt issues lead investors into the security of US dollars and treasuries. Commodity prices fall as a result, gold included. I totally disagree with this view, and also with the doomer sentiment this blog is oozing today. You people need more love. — Garth

Now that is funny!!!!!!!….”lead investors into the security of US dollars and treasuries”…..and yet you are currently right despite the US being technically bankrupt,15 trillion dollar debt and growing, their 5 big banks are insolvent, 1 in 6 people on food stamps, states and cities laying off police & firefighters, 18-20% unemployment…..gun sales at record levels. Now if these aren’t signs of strength, I don’t know what are????

The US is doomed financially and will drag Canada down as well…..the big question is will the money masters be able to keep it going until the next US election or will we be side tracked with an Iran war?

It’s all good.

Cheers,

Trev16

Only a fool would bet against America. — Garth

#122 Bill Gable on 11.25.11 at 2:13 pm

Picture this. Highrise – right on English Bay (one of the toniest addy’s in the 604). 65% of this building is owned by speckers from God know’s where – but mostly China.

We RENT (*Heh, I am a Turnerite) a gorgeous Penthouse for a song. We had been in one apt. owned by a woman from San Francisco, who had also thought it brilliant to snap up a Whistler Condo. She had to sell BOTH properties. *Fire sale prices – because US property tanked; so – gave notice – moved to another rental downstairs in the same building – soon as we moved in the owner from Shanghai listed the place – and we were going to have Open Houses every weekend. NO. Told her that wasn’t gonna fly – she waited a year – on our two year lease, and started again – we gave notice – and moved back upstairs.
That old suite is still empty. They have had 2 people look at it – Open House every week – tumbleweeds.

Wait for it.
Condo board gets together and says to many rentals – chopped by 1/3.

So NOW, the woman that owns the place we moved out of has to sell, because she has dropped 16 apartments on the rental list (*The concierge says TEN years it will still be empty at this rate).

The Mgt company finds out that owner is renovating without permits or telling the board.
BIG FINE. Today she gave up. Want a nice 1000 sq footer for a Million?

One guy bought all three apartments above us – wanted to turn it into a 4,000 foot showcase. He spent a few million on that deal – OOPS – “no heat exchanger allowed on balcony and NO you can’t change the entrance because of fire regulations”.

Yawn from owner – SELL! As if!

BUT – the point is – NOTHING is as it was here in Dumbcouver.

People are cash poor and Real Estate encumbered.

Jobs? What jobs? And if you get a job – how do you afford to live here?

This is going to get really interesting and fast.

My best pal is one of Vancouver Top Agents. He is beyond reproach, and is honest as St. Paul = I just had coffee with him and he quit today.

He had been selling in this part of Vancouver since 1974. He said, in no uncertain terms, the Lower Mainland is going to be a disaster zone.

He had bought and sold 5 properties with us and the RE business just lost a great Agent. It’s true – not all Agents are built the same.

I’ll miss him – and I am sure glad that a certain guy in a Bunker told me to sell all my RE….at the TOP.

Thanks, Mr. T.

#123 mac on 11.25.11 at 2:22 pm

For the fans of BPOE,

It depends on what you bought in 2008. If you bought something of interest to a Mainland Chinese buyer–you’ve hit the jackpot.

I am currently sitting in a condo bought in the doldrums of 2008 in Kits for 70K under top-of-market. A steal at the time at 510K.

Since then, the guy has put in 32K in repairs and 20K in maintenance & taxes while taking in 46K in rent–unfortunately he had it empty for a year. But if it had been fully rented he would have realized 82K.

That’s a whole 30K profit in 3 years, taxed as income. Most of his would-be profit will be going to the agent when he sells. He better sell soon because the front patio/roofing is being budgeted for next year at 15K for his unit. So far, every repair has come in higher than estimated. We’re talking water here, so it takes time to figure out where it’s coming from and where it’s going and what damage it’s done behind the walls.

The price now is 550-580K. No unit has sold for more than 580K in the intervening years. Not what I’d call a dream investment. Every other 2-bed apartment in the hood has the same story. Ask over 600K and it sits and sits.

#124 eaglebay - Parksville on 11.25.11 at 2:44 pm

#112 Form Man on 11.25.11 at 1:05 pm

What’s with you with deportation?
A country cannot deport it’s citizens, unless you’re an immigrant. Get your facts straight.
The NEP of Trudeau sucked money from Alberta to Eastern Canada. Get your facts straight.
As for the “oil sands”, it was money well spent. Find out how much taxes and royalties are now paid by the oil sands companies.
Look at bankrupted Ontario, they subsidize renewable energy and in particular the solar energy sector to no end. The Ontario energy consumers and the taxpayers are footing the bill for this so called renewable energy.
Get your facts straight.
By the way, Canada needs more westernman than pretentious whiners like yourself. Duh…

#125 Brad in Calgary on 11.25.11 at 2:50 pm


Sovereign debt issues lead investors into the security of US dollars and treasuries. Commodity prices fall as a result, gold included. I totally disagree with this view, and also with the doomer sentiment this blog is oozing today. You people need more love. — Garth

Only a fool would bet against America. — Garth

God. Help. Us.
Blind and stubborn are such a dangerous mix.

Argue the point, not the person, or you have none. — Garth

#126 JohnnyBravo on 11.25.11 at 2:51 pm

“Sovereign debt issues lead investors into the security of US dollars and treasuries. Commodity prices fall as a result, gold included.”

It depends on the sovereign in question. During the US debt ceiling crisis gold shot up probably at it’s fastest pace in years. When other sovereigns have a crisis, that drives people to the dollar/Treasuries, but it’s becoming more and more of a temporary flight to safety. Everyone knows the US dollar is not strong, it’s just the default flight to liquidity because no one else is big enough to absorb it all, given that the US still has the deepest, most liquid capital markets and the world’s strongest military (something many people don’t factor in).

Af flight to the dollar also causes other currencies to decline vis-a-vis the dollar, at the very least mitigating the drop in gold prices as denominated in those currencies.

In any event, the era of the dollar/Treasury system seems to be waning. The US is no longer 50%+ of global GDP. It’s more like 18% now. Still proportionally huge, but less of a reason to rely solely on a dollar/Treasury system. Countries are diversifying their reserves. Gold is playing a larger role in that. Like I said, China is taking all it can get internally. If they actually went to market to get it, I wonder what the price would be right now.

Again, I go back to the fact that the Treasury/Fed complex––even while officially shunning a gold-backed dollar for promises-to-pay, backed by confidence––have never given up their gold. Go ask them why.

It’s not doomer sentiment; it’s reality. What else is reality is that gold has not had a single down year in at least the last ten.

Can all this change and gold drop back to the basement? Of course. But there is no reason to believe that yet.

#127 Canadian Watchdog on 11.25.11 at 2:52 pm

All that is left to happen is for media headlines turning bearish and a transpacific telegraph delivered from, and stating, ‘Canada too Peking.’

#128 RL on 11.25.11 at 3:00 pm

“This blog is in heat”. — Garth

It is Friday Garth, and a Pay Weekend to boot…

#129 Not 1st on 11.25.11 at 3:10 pm

Garth, you are dead wrong about commodities, the U.S and ECB will have to print more stimulus and that excess cash goes to speculations likely in commodities, and if and when the world comes out of the doldrums and rocks again, the need for real things will be very high thus still propelling commodities higher.

Jim Rogers has called it. He runs an actual commodities index. Are you saying you know more than him?

Wait and see. — Garth

#130 Peakoilist on 11.25.11 at 3:31 pm

that hurt my feelings Garth….. :(

#131 disciple on 11.25.11 at 3:36 pm

Iconoclast: One who engages in the destruction of conventional dogma. disciple loves that!

The photosphere of the sun is the bright shining ball that we see in the sky, that’s where the light comes from. It is the visible surface layer of the Sun. There’s the chromosphere, just above that. When you see a total eclipse, you see a red glow just above the photosphere – that’s called the chromosphere – “chroma” meaning color. And then above that is the corona, which you can see during a total eclipse, which is very faint, but it’s a kind of bluish white light which extends at some distance from the Sun.

The trouble that astronomers have had is that the surface of the Sun [the photosphere] is cooler than the corona – it’s actually a lot hotter outside the Sun than on it. What’s the temperature difference between the Sun’s surface and the area above it?

The temperature rises into the tens of thousands of degrees in the chromosphere [extending to about 2000 km above the surface], and then into millions of degrees in the corona [extending over a million km from the Sun]. So the difference between the photosphere [the surface], the center of the Sun, and the corona is in the order of millions of degrees.

That’s astounding – the conventional science is that this is a nuclear explosion, the hottest part is in the middle, the surface of the Sun is five or six thousand degrees, and as you get away from the Sun, it’s millions of degrees. Does standard astronomy have any explanation for this?

They’ve been struggling with it, because to have such a system, somehow energy has got to get from the center of the Sun to the exterior, and bypass the photosphere [the surface]. And so there have been all sorts of clever suggestions, like magnetic fields reconnecting, which is actually a non-physical thing anyway. It’s the kind of desperate idea that you cook up when you can’t think of anything else.

#132 Hammer1 on 11.25.11 at 3:37 pm

that hurt my feelings too :(

#133 TheBigLebowski on 11.25.11 at 3:43 pm

People shouldn’t forget that the U.S Debt to GDP will be a Greece level in the next 2 years at 120%. Portugal debt was just cut to junk, Belgium debt hits record yields and all of the EU is melting down. EVen Germany had a bond auction that flopped and wasn’t filled. But just like The Lord Of the Rings, soon The Eye of Sauron will turn its gaze to the U.S and its debt levels. This is where things will really begin to get interesting. At this point, the unnatural association which is the EU will have lost its 6 weaker nations and will begin to dissolve

#134 Form Man on 11.25.11 at 3:43 pm

#124 eaglebay

the comment regarding deporting westernman was obviously in jest. sorry for your missing sense of humour.
At the time the NEP was negotiated ( a time of fast rising oil prices ) Lougheed thought it was a good deal for Alberta. There were subsequent photo ops of Lougheed and Trudeau smiling and shaking hands at the conclusion of the deal. Then the oil price crashed and the world went into recession, with oil producing regions of north america particularly hard hit ( including Alberta and Texas ). Albertans immediately blamed the NEP, which many argue would still have been better for Canada and Alberta in the long run. So get your facts straight

If the true environmental cost of burning fossil fuels was reflected in the price, we would not have to subsidize renewables. The cost of non-renewables is pollution on a crippling scale. get your facts straight

#135 Robert Dudek on 11.25.11 at 4:13 pm

Now The Economist is making this same claim with respect to the Canadian market as a whole at around 25%

I remember, about 15 years ago, the Economist had a feature article which claimed that the price of oil would soon hit $5 a barrel.

Yes, housing is overpriced, but there is nothing that says it can’t stay overpriced for decades. As a wise man once said, the market can stay irrational a lot longer than you can stay solvent.

The Economist called for a plunge in oil prices. That’s what happened. — Garth

#136 Dr. Ruth on 11.25.11 at 4:22 pm

#117 Disciple

“This is why constant sperm loss causes backache.- Not many people know that! Backache in women is often caused by orgiastic congestion, through lack of lengthy bouts of deeply fulfilling penetrative sex.”

So let me get this straight disciple, sperm loss for men leads to backaches but their effort is heroic as their sperm loss in deeply fulfilling and penetrative sex relieves women of their backaches. “Calling all men to action!”

#137 Brad in Calgary on 11.25.11 at 4:26 pm

Place your bets people! Dyodd of course.

http://www.bloomberg.com/news/2011-10-19/america-s-bills-about-to-exceed-its-paycheck-chart-of-the-day.html

#138 westopia on 11.25.11 at 4:28 pm

“Sovereign debt issues lead investors into the security of US dollars and treasuries. Commodity prices fall as a result, gold included. I totally disagree with this view, and also with the doomer sentiment this blog is oozing today. You people need more love. — Garth”

You might be right if the prevailing influence on the price of gold was commodity prices, but it’s not. Gold’s price is influenced long term by paper currencies (this is the “gold-is-money” argument you refuse to acknowledge), and is also why countries stock pile and have been buying huge amounts of the this useless metal.

Don’t tease me with cheap gold prices – it’s black friday you know.

#139 Ben on 11.25.11 at 4:52 pm

BLACK FRIDAY

It’s quite the joke, people camp overnight(s) on the sidewalk to be first in the doors at midnight last night.

So here’s the deal, there’s 10 plasma 42″ for sale at Best Buy for $179, but you don’t get one unless your a camper and fight off the pepper spray from some other idiot.
You do go down at midnight though wanting a 42″ but after finding out there was only 10 and they were gone in the first 30 seconds, you buy something else.

#140 robert james on 11.25.11 at 4:53 pm

Poor Ozzie !! LOL http://www.theprovince.com/news/Court+approves+class+action+suit+against+Ozzie+Jurock/5765821/story.html

#141 Timing is Everything on 11.25.11 at 4:57 pm

#134 Form Man – “the comment regarding deporting westernman was obviously in jest.”

I thought he was deported…from Texas…?
——————————————————-
BTW, anybody from Moncton…

http://tinyurl.com/cehldwj

#142 888realtor on 11.25.11 at 5:02 pm

We don’t live in the world of economic cycles anymore. Financial crisis is structural this time. Structural crisis makes economic cycles impossible – so there won’t be interest rate increase. Interest rate will be pressed down until it reaches “0”. The existing monetarist model uses lowering interest rate for debt restructuring and making people to borrow more. Once interest rate reaches “0” such system comes to a halt (theoretically). Only after that it’ll get interesting and we will see significant price correction in RE. Before that trend in home prices will be inexpressive.

#143 VICTORIA TEA PARTY on 11.25.11 at 5:04 pm

#114 Mr. Lahey

This poster may be in heat, Garth, but there’s plenty of “ammo” out there today to keep all of us doomers jogging happily through the upcoming weekend, as we believe ourselves to be “on the right side of history!”

To wit:

–this week the Dow and S&P had the worst US Thanksgiving week since, the depths of the Dirty 30s, 1932;

–credit ratings of Belgium and Hungary were downgraded;

–Greece is trying some slidey deal with individual creditors to cut down on their principal debt amounts outstanding. This is called stiffing the lender, something Greece is very good at;

–Mr. Flaherty, on BNN, worried about European “contagion” throwing his budgeting plans off-kilter. If so, then will more stimulus (more debt) be in the works? He was coy, very obtuse;

–Canadian real estate is in the danger-zone, says an RBC report.

So, plenty to chew on as next Monday starts to heave into sight.

The West is suffering through a combination of a “geat reflation” and a “great credit contraction” all at the same time.

This seems contradictory and nonsensical.

But when you put the monetary and fiscal failures, who brought us the 2007-2009 debacle, in charge, what the Hell do you expect? Common sense? Right!

Doomers 1; Happy Financial Tinfoilers 0.

#144 JohnnyBravo on 11.25.11 at 5:08 pm

Housing affordability in Canada is improving, according to David Wright of RBC: “After two consecutive quarters of deterioration, the third quarter actually improved a bit.”

Two steps back, one step forward. But houses are getting more affordable. The spin cycle continues.

In Vancannibal it takes 90% of a PRE-tax median income to pay the mortgage, taxes, and utilities of the average house. What do Van residents eat? Their baseboards?

Soon, some of these poor, reckless souls may say, “I used to live in Van. Now I live IN a van.”

#145 Jimbo on 11.25.11 at 5:10 pm

#79 In Garth We Trust…

>Gold is not going anywhere anytime soon Brad.
>Al Friedberg ranks among the elite traders of the world.

Three thoughts:

1. As soon as you start believing that a specific forecaster has got to be right because he WAS right, you are dead meat when it comes to investing. NOBODY has a crystal ball. Another great investor, Richard Russell, once warned, “Watch the very intelligent analyst who has been correct for a long while. Watch him because he is on his way to being dead wrong. By the same token, watch the brilliant analyst who has been woefully wrong for a while. He’s now close to making a terrific call.”

2. Family, friends, and investment “experts” have strongly warned me against gold in 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, and 2011. For 11 years now those warning were wrong. In my opinion, the number of reasons for owning gold is only increasing.

3. I don’t disagree with the chances of a major gold correction. But let’s say gold falls to $1250 in the next few months. Ask yourself, “Why would it do that?” I believe the likeliest reason would be because we’ve entered another crisis era where everyone is deleveraging in an asset deflation spiral. In 2008, we saw what happens in that situation; everyone run to the US dollar. So gold might fall to $1250 but the US$ might rise again to $1.30 against the CAN$. The net result is that, for Canadians, gold would hold it’s value or fall a bit priced in Canadian dollars. That’s one reason why, for Canadians, gold bullion is a very good store of value in the current environment. Another good reason is that it is extremely liquid, and liquidity is key in this environment: http://absolute-investments.blogspot.com/2009/09/risk-pyramid-for-uncertain-times.html

#146 GTA Girl on 11.25.11 at 5:19 pm

That sex-Ed post by disciple was actually quite a good read…

#147 Race to the Bottom on 11.25.11 at 5:34 pm

Sovereign debt issues lead investors into the security of US dollars and treasuries. Commodity prices fall as a result, gold included. I totally disagree with this view, and also with the doomer sentiment this blog is oozing today. You people need more love. — Garth

Only a fool would bet against America. — Garth

God. Help. Us.
Blind and stubborn are such a dangerous mix.

Argue the point, not the person, or you have none. — Garth

If what Garth says is true (i.e., that America is “winning”) then the entire world is in for one heck of a race to the bottom.

Where did I say it was winning? I said don’t bet against it. You’ll lose. — Garth

#148 prairie gal on 11.25.11 at 6:22 pm

#76 jess:

I went boating with one of those ‘jumbo directors’ in Cayman a couple of weeks ago. We were discussing the Weavering ruling (he had been asked to appear as an expert witness but declined). Its a bit of an overstatement to say that these directors must oversee hundreds of funds – they mainly act as directors for the umbrella fund that many funds feed into. As long as the funds are meeting their investment objectives in their offering documents, and they are audited as per the rules, its not an overly onerous task to oversee so many funds.

#149 Al on 11.25.11 at 6:23 pm

The parking lot outside a large Homelife RE Office in Markham has been mostly empty this month – it used to be full of BMWs and other expensive cars with RE Agents smoking outside the office. Something’s changed.

#150 scared on 11.25.11 at 6:48 pm

#122 Bill Gable – I do enjoy reading your posts. You always give an honest insight to Vancouver property market. I’m sure your friend the realtor is an honest guy, but gee if he started in 1974 I think it is about time he retires regardless of the market conditions. As for all the mainland china owners of condos by English Bay, they must be very disappointed in their real estate investments in Canada. One thing about chinese people, they spread information to each other like wildfires – once the rumor mill starts back in china that real estate is a bad investment in Canada, everyone stops investing. I don’t doubt that real estate will tumble here as it has most corners of the world.

#151 Westernman on 11.25.11 at 6:49 pm

Form Man,
Poor old Form Man, I have completely destroyed your sense of self worth. Look at yourself – like a toddler having a temper tantrum in a Wal-Mart toy aisle.
You should try to man up and face the fact that I am spot on in my assesment of you and your beloved socialist nanny state.
You must be on some form of goverment assistance – I’d bet on it… maybe you are the parasite and should be deported…maybe to Cuba. Fidel is probably your hero anyway, isn’t he?

#152 Nostradamus Le Mad Vlad on 11.25.11 at 6:53 pm

For The Older Crowd

A distraught senior citizen phoned her doctor’s office.

“Is it true,” she wanted to know, “that the medication
you prescribed has to be taken for the rest of my life?”

“‘Yes, I’m afraid so,”‘ the doctor told her.

There was a moment of silence before the senior lady replied,

“I’m wondering, then, just how serious is my condition
because this prescription is marked ‘NO REFILLS’.”
*
#129 Not 1st — “. . . the U.S and ECB will have to print more stimulus . . .”
— and —
#133 TheBigLebowski — “. . . all of the EU is melting down.”

Now that the EU is melted cheese on toast, all that needs to added is the crispy fried bacon (the US) and a tomato or two (Kannaduhh). Then we can all splurge on a magnanimous feast!
*
Had a major overdose of Vitamin D today. The sun was shining brightly — almost like spring — and a neighbor and I were talking.

He said a friend, about 35 living just out of Calgary works eight weeks a year, and his total income tops 100K.

What does he do? He puts up (arranges) outdoor xmas lights, lets them sparkle then takes them down. He is so busy he has hired a few people to work for him.

That is known as using one’s creative imagination to the max. Has more orders than he knows what to do with. Once all his income taxes are done, he spends about 40 weeks a year traveling.

Nice job, if one is a creator and businessperson!

#153 Pathetic v. Degenerate Blog on 11.25.11 at 6:54 pm

Garth:

If your blog is “degenerating”, how can it be “evolving”?

hehe

#154 Hammer1 on 11.25.11 at 6:57 pm

is this blog on central time?if so, why? just curious

#155 palebird on 11.25.11 at 7:33 pm

Form man, you seem to forget the photo of Trudeau giving us the middle finger salute as his train pulled away. That said it all.

#156 Nostradamus Le Mad Vlad on 11.25.11 at 8:14 pm


Hungary Junk statuus, which leads to this; Italy; Kangaroo Bonds Same as Euro bonds; Dow, S&P; Belgium; Venezuela receives its first shipment of gold today; Congressional Insider Trading Endangered lawyers? Use them for shark bait! 3:24 clip US debt.

Eurozone “Olivier Sarkozy, brother of French President Nicholas Sarkozy, and head of the Carlyle Financial Group . . .” — Isn’t dubya and his thugs part of the Carlyle Group? US bonds at record low; Debtors Prisons “One has to wonder; is the imprisonment the debt collectors are so eager to have happen is to loot the homes of the debtors, and sell off everything they can find toward paying off the debt?” wrh.com; Oahu Black Friday today; Selling Taiwan? Apparently, we could be sold (for $1.49); Twelve Hours waiting on a plane? The world really has a screw loose; Gold Germany sold tons of the stuff yesterday, Russia bought tons in Oct.;
*
Soros (Obomba’s backer) celebrates the fall of Tunisia; Russia arms Syria. That’s why their ships are there; 12:11 clip War with Iran and the consequences; 3:24 clip Is it because France is broke that they are using Syria as a diversionary tactic? 3:37 clip Egypt. Mubarak never really went away; Society Still fighting over material junk; Surreal Programed or brainwashed? Survival The karmic speed of time must be moving a lot faster now; Demand They are right. Senators, politicos and lobbyists should be locked up, and the keys tossed.

5:21 clip US nuke carrier sails into Syria, where Russian warships are. Curious to see if China nukes the carrier, and the after-effects; GS and Climategate 2.0 “I told you this was all about doing to the Earth with Carbon Dioxide what ENRON did to California with electricity!” wrh.com, and Collusion Revealed; The Art of Fascism Don’t let the bastards win; Lieberman No doubt Google will accommodate him, but who is the biggest terrorist threat in the world? ‘Net interference EU court rejects one.

#157 jess on 11.25.11 at 8:24 pm

prairie gal this fund?

http://www.telegraph.co.uk/finance/financial-crime/8750929/Serious-Fraud-Office-criticised-for-closing-Weavering-Capital-investigation.html

The Stolen Money Trail
By ANTHEA LAWSON
Published: November 23, 2011

http://www.nytimes.com/2011/11/24/opinion/the-stolen-money-trail.html?_r=1

#158 bill on 11.25.11 at 8:26 pm

some parts of the blog are ‘degenerating’ and other parts of the blog are ‘evolving’…

#159 Tony on 11.25.11 at 8:31 pm

Re: #6 Danforth on 11.24.11 at 10:48 pm

The morons buying there today will be living in Allan Gardens after the bank takes over all of their houses.

#160 prairie gal on 11.25.11 at 8:32 pm

@ 153: its creative destruction!

#161 Daisy Mae on 11.25.11 at 8:37 pm

Walmart in West Kelowna has a blitz on right now — open a Mastercard with them, they’ll donate $5 to the local food bank…and apparently, they’re just approximately 150 apps short of their goal of $4000. That’d be 800 new applications for Christmas spending.

#162 Beach Girl on 11.25.11 at 8:40 pm

#173 Westernman on 11.24.11 at 5:12 pm

DondWest,
You have made it clear to all you are a loser … you may now retire to your parents basement and play your video games while planning your escape on your solar-powered boat.

____

Are you telling us you didn’t get your grade 12 in this environment. I think my Jack Russell is smarter.

#163 Bottoms_Up on 11.25.11 at 8:52 pm

#149 Al on 11.25.11 at 6:23 pm
—————————————–
A lot of expensive cars up on leasebusters right now, some from Maple and Markham areas. Many driven by realtors I assume?

#164 Westernman on 11.25.11 at 9:04 pm

Beach Girl,
I’ve read your posts…they appear to have been written by a gal who made several trips through the ninth grade and then finally gave up and settled. If there is ANYONE on this blog that shouldn’t be judging intelligence it’s you. There is a word for you – dingbat.

The hostility thing is cute. But stuff it. Any more personal attacks will be flamed. — Garth

#165 Daisy Mae on 11.25.11 at 9:05 pm

BEN: “You do go down at midnight though wanting a 42″ but after finding out there was only 10 and they were gone in the first 30 seconds, you buy something else.”

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

It’s called a ‘loss leader’.

#166 Daisy Mae on 11.25.11 at 9:11 pm

RACE TO THE BOTTOM: “If what Garth says is true (i.e., that America is “winning”) then the entire world is in “for one heck of a race to the bottom.”

Where did I say it was winning? I said don’t bet against it. You’ll lose. — Garth

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

No country is ‘winning’. Gawd!

#167 Daisy Mae on 11.25.11 at 9:14 pm

Pathetic v. Degenerate Blog on 11.25.11 at 6:54 pm
Garth:

If your blog is “degenerating”, how can it be “evolving”?

hehe

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

‘EVOLVE’ means ‘CHANGE’.

#168 neo on 11.25.11 at 9:26 pm

Actually, eurobonds would be a nice solution. — Garth

Nice to solution to what? A sovereign solvency issue treated like a liquidity one? That is no more a solution than paying your mortgage with your line of credit because you can no longer afford your house.

#169 Westernman on 11.25.11 at 9:29 pm

Garth,
But what about all my adoring fans? Form man, Marc L, DondWest and the rest…. they will miss my rapier like wit and insightful commentary.
This party is just getting going…

#170 Harlee on 11.25.11 at 9:30 pm

117 disciple
After reading this I really needed a cigarette…..and I don’t even smoke !
The post at 118 about houses was some-what anti-climactic.

#171 pathrik M on 11.25.11 at 9:31 pm

I notice the Brits are lowering mortgage lending standards to 5% down, in a desperate attempt to keep their bubble going in these trying times.

Would the government here be so cynical and try the same desperate ploy here?

Oh yeah I forgot we already have 5% down or zero percent (with cash back).

#172 Junius on 11.25.11 at 9:51 pm

#142 888realtor,

Your analysis makes no sense. First of all, we have learned that Minsky was correct and that our economy is inherently unstable. Our prevailing economic model is flawed in that it believes that we return to equilibrium. We now know that is incorrect. Rates will rise and will probably go beyond historical levels when they do to compensate. Soon zero percent interest will be a history.

#173 45north on 11.25.11 at 10:06 pm

Mr Lahey: I am not. Sunnyvale is my home, in the lovely province of Nova Scotia.

you are 1 minute, 19 seconds from 45 ° north (google maps)

we used to drive to Wolfville to see my son play with the Acadia Axmen, they lost to McMaster last week

Bill Gable: My best pal is one of Vancouver’s Top Agents. He has been selling in this part of Vancouver since 1974. He said, in no uncertain terms, the Lower Mainland is going to be a disaster zone.

reminds me of Shelley Levenne (Jack Lemon) in Glengarry GlenRoss:

http://mcaf.ee/nv9w6

The American: As an American who has lived through this for the past 5-6 years, its unbelievable that Canada of all places would not heed this warning, but instead would take it to an entirely new and never-before-seen level of greed, arrogance, insanity, and denial.

in fact Canada has not heeded this warning, thinking of my family, some still have a strong belief that housing always goes up. I don’t see how Canadian housing can gradually decline, once it’s clear that Vancouver and Toronto are in decline, the rest of Canada will follow.

#174 In Garth We Trust on 11.25.11 at 10:10 pm

#145 Jimbo

There is no blind following going on here Jimbo. You completely overlooked the fact that Friedberg is a master at understanding what is happening in the market, hence why he is one of the top traders in the world. He has temporarily pulled out of gold (as in later 3rd quarter)and will return to it when this correction is over in his seasoned estimation. He is of the Austrian school of economics so gold will always be part of his investment strategy. His words were prophetic as he said one of the reasons he was pulling out was due to unstable hedge funds. MF Global anyone?

#175 Jimbo on 11.26.11 at 2:26 am

#174 In Garth We Trust

“You completely overlooked the fact that Friedberg is a master at understanding what is happening in the market”

Whoa. This is where we differ. Your quote above runs against all the lessons I’ve learned in investing over decades of wins and losses. In my view there is no such thing as a “master of understanding what is happening”. I remember believing in the “masters” back in the late 80s when I was new to investing, but I now certainly appreciate that everyone is just making educated guess – Garth included.

You can find armies of very smart people who all support completely opposite views. And this is especially true when it comes to short-term timing. The world is WAY too complex for any one man or group to be able to anticipate with consistent precision what will happen tomorrow. How does anyone know that a black swan event won’t happen tomorrow that will cause gold prices to gap up – or down? They don’t.

The best we can do is take in various sources of info, make our predictions/bets, and ensure that we have a hedge or strategy in place in case we are wrong (which hopefully is less than 50% of the time).

If anyone truly WAS a “master at understanding” the markets. They would make a few hyper-leveraged perfectly-timed trades with their own money and retire a billionaire to their private Caribbean island.

#176 Daisy Mae on 11.26.11 at 11:45 am

Walmart is also having their very own version of BLACK FRIDAY this weekend…so people can take those brand new credit cards and chaaaarge! Electronics are flying off the shelves.