Over the last few posts I’ve brought you close to several people grappling with their financial lives. More in a moment. I do this for the satisfaction of trying to help them (and anyone reading this), and to make economics human. There are two lessons I cannot return to often enough. Real estate is now dangerous. And, your goal should be liquidity.

But humans, being what they are, usually screw it up. People with liquid wealth lust to buy houses. And people with illiquid houses are desperate to get out.

All this plays out against a tapestry of fear. It’s the overriding public emotion. A survey last week found that 75% of people think they’ll be in worse financial shape next year, and four in ten believe this is no time to buy much of anything. These thoughts are the precursor to deleveraging, of course. That’s when people spend more time trying to get out of debt than acquiring new stuff. It creates the death spiral for real estate.

Ironically, liquidity – having a portfolio of financial assets – is a far better defence against economic, social and political volatility than sticking your wealth in a house. You can adjust your assets to suit conditions, avoid danger quickly, or swoop to scoop opportunity.

Real estate, by comparison, is fully exposed to market, interest rate and emotional risk. It can take weeks or months to trade, with huge transactional costs. Is this the kind of asset you want in an unstable world? Would it not be better to have securities paying you to own them (or financing your rent) instead of snorfling your cash flow?

This is what I mean by grappling. Collectively we’ve come to see real estate as riskless, when it’s anything but. I’m amazed daily at what I hear.

So, here’s Sarah. I told her in an email yesterday she’s a textbook case in property-based delusion:

After seeing you in Kelowna and reading your latest book, we felt the need to sell our big, two story , 4 bed home !! We made a profit of only $30M after selling for $100,000 lower than its highest appraisal value just before the 2008 drop.  Unfortunately we refinanced and spent the equity on, you guessed it RE!!!

We moved closer to Vancouver not by choice, but for job transfer .  We are renting a house for $1900/mth. My husband hates it and feels we are throwing money away!!  If we were getting this place cheap, then perhaps it would be ok and we could sock away the savings!!!

We know there will be a market correction, but we are still looking to buy something in the $500,000 range-rancher or something that will be marketable in future! We only have 10% down, but payments will be less than $1900/mth.  (we have to borrow the 10% down from family (good rate/pymt plan) since we declared bankruptcy last year.  Long story but got caught in the real estate speculation hype and lost everything!  Well not everything, we have a condo in Kelowna we can’t sell, but at least it is rented!! Mtg is $312M, prop value $300M.  Cash flow is negative marginally.  We also lent money from our home equity during the boom, when we refinanced.  They have defaulted and have not paid us back.  We hold a 2nd mtg on their property in St Catharine’s which is not worth much now!!!

Does it make sense to buy?  We hope to be here 5 yrs.  We are in Langley where we feel any correction would be much lower than in the city.  We would be happy to break even and at least enjoy our own place for a bit.  We have kids that would like a place to call home!!

Pray for this woman. How much money does she and her husband have to lose before they learn the lesson? Apparently all of it.

While most people (like her) don’t realize it, the threats facing property owners are vastly higher than those with exposure to equities, bonds or a slew of other fixed-income or growth assets. Real estate’s been a drug. It makes people believe interest rates will stay low forever, prices can rise endlessly, occupancy costs are trivial or that everyone who drives by is horny to own their home.

It’ll take time for the new reality to sink in. But more people get it. Like Dylan:

My wife and I are selling our place and renting for a while.  We are amazed at what we are finding. This listing is $3100 per month all inclusive. Purchasing in this area a similar house would go for between 1.5 million and 3 million depending….

We are taking your advice of buying capital safe assets that pay us monthly to help facilitate the rent for this place. Who in their right mind would purchase at this pricing level vs. rent is beyond me!

Sarah would. Just lend her the deposit.

Have I ever mentioned this will not end well?


#1 604 on 12.11.11 at 6:37 pm

Great post Garth.
Although much of the same- but I guess people keep asking the same question that you have the same answer for but hoping for a different answer- “maybe my case is special and Garth will say yes in your special circumstnace in this economy YOU should buy”. Poopycock unless you have money you don’t care about losing- I guess then you can buy a house.
Its just too easy to own even after you file for bankruptcy-amazing.

#2 NFN_NLN on 12.11.11 at 6:46 pm

“We made a profit of only $30M after selling for $100,000 lower than its highest appraisal value just before the 2008 drop.”

I believe the xxM’s should be xxk’s, either that or she really is incredibly bad with numbers.

#3 Mr. Lahey on 12.11.11 at 6:53 pm

Blog Dogs we have an emergency situation on our hands. As you know Ricky was on his way back from western Canada with Westernman’s tractor. He had the stupid incident where Ricky was being Ricky and threw the coffee Westerman had generously supplied in the face of the ostrich being ridden by a blog dog enroute to the FASTPGFBDCParty. I scolded him for this potentially dangerous action and Ricky being Ricky didn’t take well to my criticism. To make a long story short, Ricky has gone missing and is no longer responding to any of our calls. His phone has gone dead and he has not touched base with Sunnyvale for over 24 hours. I implore any blog dog who may know the whereabouts of Ricky to please advise on this blog! He has Westernman’s tractor on board and we all know it is needed for the ploughing contest with Form Man, the one that now has a Rolex watch as a prize, all thanks to our very own Mark Carney. SOS blog dogs!

#4 Doom on 12.11.11 at 6:54 pm

Guess all the “FIRST” people are still at zombie church praying for “…brains…….

#5 Paully on 12.11.11 at 6:54 pm

How does somebody who went bankrupt only last year get approved for 90% mortgage financing this year? Is that really possible?

If Sarah went bankrupt last year, why on earth would anyone in her family lend her $50k for a down-payment on a half-million dollar property?

I can’t believe that a complete credit flake like Sarah can be contemplating buying a $500k property with absolutely none of her own money down. Any idiot that lends her money deserves to lose it.

Sarah’s story offends me.

#6 Ron Mendelson on 12.11.11 at 7:09 pm

Another great post Garth! I thank you for your devotion to the blog as it is enlightening, informative and entertaining.

1 Question, repeatedly you say we should be liquid (I basically am), and that we should hold capital safe assets/equities.

I am sitting on a healthy sum as I have sold almost all my properties which are/were mortgage free and am now in the process of selling my last property to sit out and wait for the correction prior to considering purchasing any real estate again.

Obviously holding such large sums in the Orange Guys Shorts doesn’t even come close to covering inflation.

Can you give a couple of examples as to what you believe capital safe assets/equities are in today’s market.



Why don’t you have an advisor? — Garth

#7 meslippery on 12.11.11 at 7:12 pm

profit of only $30M
Is that 30 million?

#8 borrowedcarbon on 12.11.11 at 7:18 pm

I hope she means 30k (and 312k/300k) not 30M.

People in Halifax are saying its different here, too – shipbuilding contract is supposed to continue inflating bubble until all first-time buyers have to look to the Annapolis Valley for a “starter home”.

#9 Onemorething on 12.11.11 at 7:20 pm

There’s human nature yes and dilusion and greed go hand in hand with it more than ever. Cheap money and 30 years of it has turned us into the biggest gamblers where the global financials backed by it’s governments and elite own the casino!

Those who say they “Dont Do Vegas” do it 24-7 everyday, not knowing the exposure and the little losses they dish out everyday to that Casino.

I think more than anything Garth is showing all of us these examples of good sound advice for what the majority deems safe – RE!

He is also exposing us for who we really are right now, lost! I think human nature especially when the humans have been manipulated like we have will only be faced with pain and yes potetially the hardest lesson!

For the few of us that get it! We have already won!

#10 JO on 12.11.11 at 7:22 pm

One of the few great economists worth listening to. He tells it as it is and has been quite accurate.




#11 Min in Mission on 12.11.11 at 7:23 pm

Wow, even after having had a bankruptcy due to RE, plus having been a lender and having that default, they still want to try again!!! Wow.

Mind you, I am one of the vast number of Canadians with the vast bulk of my “so called worth” tied up in my house. When we bought, we didn’t buy a house, make an investment, jump on the wagon, etc. We bought a house to turn it into a home. At least we got that part right.

I wouldn’t try it in this market though!!

#12 ss on 12.11.11 at 7:24 pm

oooh I know that house for rent by Cambie. Very nice hood. My friend lives 2 doors down and is thinking of selling for about 1.2 million.

#13 Mark on 12.11.11 at 7:49 pm

1MM-3MM for that little house? If there is any indication Vancouver is insane that is it. Everyone must be smoking too much weed over there.

#14 jess on 12.11.11 at 8:18 pm

How the EPA linked “fracking” to contaminated well water
By Scott K. Johnson | Published 2 days ago

Making the link
On Thursday, the EPA released a draft of its report on the investigation, which is available on the project website. The report’s conclusions are sure to stir up the debate, as it draws a pretty strong connection between fracking and groundwater contamination in Pavillion. The report will go through public comment and peer review by an independent panel of scientists before being finalized, but it seems unlikely the conclusions will change much given the multiple lines of evidence that support them…

#15 Devil's Advocate on 12.11.11 at 8:39 pm

“we are all wonder where DA is ( he made a brief appearance a couple of days ago, to admit he has fallen on hard times ). I think he is quite busy in Kelowna fending off angry buyers to whom he sold properties to in the last few years ( and have seen their equity vanish ) Things are definitely getting ugly in Kelowna”. – #73 Form Man on 12.10.11 at 12:39 pm

Thank you so much for your concern Form Man, but you (again) are mistaken. My abstinence from this blog is for many a good reason but those which you allude to are none of them.

A few facts that may be worthy of your consideration;

Volumes in Kelowna have been stable for four years now.

Prices in Kelowna have been stable for three years now.

Presently inventories are abating beyond seasonal norms pushing us closer to that elusive transitional
“balanced market” as we move from this “buyer’s market” closer to a “seller’s market”. Ever notice how buyers tend to buy in a “seller’s (market” and are affraid to in a “buyer’s market”).

Out of province buyers represent a greater portion of the market than they did last year.

First time buyers are not so prevalent in our market as they once were but clearly still are in those all-important feeder markets where they are buying the homes of those sellers who buy the homes of those sellers who buy the homes of those sellers who sell there and move here.

In a market where the average REALTOR enjoys but four meager sales in a year I am still getting more than my fair share. Competition though, to be true, is fiercer than ever as more are entering this business than leaving.

This is a good market. There are still some adjustments to be incurred but, all in all, this is a much, MUCH, better market than that of four and eight years ago.

Just passing through this pathetic blog, quickly to avoid it’s toxicity. and note there is nothin’ new here – surprise, surprise.

#16 ken s on 12.11.11 at 8:47 pm

Engaging in hyper-hypothecation have been Goldman Sachs ($28.17 billion re-hypothecated in 2011),…..

“…….Canadian Imperial Bank of Commerce (re-pledged $72 billion in client assets), Royal Bank of Canada (re-pledged $53.8 billion of $126.7 billion available for re-pledging)……..”

“…..Oppenheimer Holdings ($15.3 million), Credit Suisse (CHF 332 billion), Knight Capital Group ($1.17 billion),Interactive Brokers ($14.5 billion), Wells Fargo ($19.6 billion), JP Morgan($546.2 billion) and Morgan Stanley ($410 billion)……”

“……..And people were wondering why looking through the balance sheet of Canadian banks……..revealed no alert signals. It is because all the exposure was off the books! Hundreds of billions of dollars worth……….”

Financially this is the same as you or I “rehypotheticating” our
mortgage to scoop Another $ 700,000, equal to the Original
$700,000. This is fantasy money: The product of a completely
warped and unregulated financial system.
Update Sunday Dec 11 – http://www.zerohedge.com/news/denials-begin-interactive-brokers-first-claim-it-has-not-engaged-commingling-rehypothecation11
2 questions: 1) WHY did these banks do this?
—to shore up shaky balance sheets?
—to goose the profit line? (and therefore Bonus?)

Every legal entity on the planet has re-hypotheticised (and re- re-re-re—-n hypotheticized Everything that has not been nailed
down by Someone else (and guarded by 9 lawyers with shotguns)

But, you ask, how is this mathematically possible? –If
I borrowed $500 million from the “Shadow banking system”
(ie the US Fed originally, then channeled thru multiple enteties)
at .01% interest for 99years, I could lend you the rehypotheticised $700,000, for a fee of 2%/yr or so
then forget all else except perhaps where to live? Thailand?
Shanghai? (anyplace where Everything is for sale)

Question 2) To what extent is there physical or legal collatoral
to cover these loans? In Europe, about 25% is covered. — of
$ ‘x’ Trillions. Worst case otherwise is a dartboard guess: 1%? 10%?
2b) ——To what extent have the Other 8 CDN banks dipped
into the shadow pools? Or Canadian Consolidated Widget Corp?
or the city of Montreal? or CMHC??
—-(what did you Think collapse would look like?)
Ken S in La-La :-)

—the cats r kute

#17 Mister Obvious on 12.11.11 at 8:53 pm

M is an old fashioned symbol people once used to mean 1,000. Of course there is also the old fashioned ‘G’ for ‘Grand’ or 1,000. (or, as Garth sometimes calls it a “Large”)

Under the metric system M now indicates ‘Mega-‘ or 1,000,000.

Interestingly, a lower case ‘m’ stands for ‘mill-‘ meaning 1/1000 (not 1/1000000 as might seem more logical). That’s probably where some of the confusion comes from.

For example, some people believe millipedes are called so because they supposedly have a thousand legs when techically it should mean they have ‘one thousandth’ of a leg.

#18 Spiltbongwater on 12.11.11 at 8:54 pm

“Mtg is $312M, prop value $300M.”

Did Sarah move to Zimbabwae?

#19 S on 12.11.11 at 8:56 pm

Great post. To sell common stock/preferreds it usually takes a few minutes, you get the cash in 3 days. The transactional costs usually range from $100 (full-service) or $10 (discount broker). With most preferred shares from banks, utilities, and insurance companies the asset value fluctuates very little with the market, though it will be affected by interest rates. It is very easy to get a yield of 5% from these assets.

#20 The Original Dave on 12.11.11 at 8:58 pm

Mental instability – that’s this woman’s problem. She just wants to hear that she’s right. She needs validation. She’s going to purchase again. Her and hubby are nuts.

Just by her message you can tell she’s crazy. She’s hoping that Garth’s words will be: “yes honey, go and buy. You and dumb hubby are finally making a good decision.”

She’s going to buy regardless. I shouldn’t have wasted the 4 minutes it took me to type this. Delusional woman. I”m happy she’s gonna get it.

#21 kilby on 12.11.11 at 8:59 pm

In a sane world that house would rent for $1,500 a month and likely be shared by two parties. What does the average worker with a decent tech level job take home every two weeks? $1,600 to $1,800 after deductions.

#22 Hoof-Hearted on 12.11.11 at 9:09 pm

Tales from Lotusland..

In Vancouver Friday/Saturday..overnited .

New Condo Hi-Rise near Vancouver Trade and Exhibition Center built be ASPAC has intersting advertising. Very snobbish, non millionaires need not apply. Exterior is clad in 1 inch thick polished greenblack stone on 30 plus story building. It offers strata owners a shared Lamoborghini.
This is the same developer that OVERpaid for land adjacent to Richmond’s Olympic Oval(ie $100 million)

Down Granville, (West Side) south of 41st ave….there was a cluster of 7-8 homes in a row with For Sale signs by same realtor.

There is still lots of construction, but I agree with Garth, this will not end well, in fact it will only get worse the longer the overdue correction drags out.

#23 scib on 12.11.11 at 9:21 pm

Here in China they have a custom of paying all debts back by Chinese New Year. This year however the paying back is becoming more violent than usual according to a local who has had to hire expensive loan shark collectors.
Because of the banks tightening policy this year many people are seeking finance from friends, suppliers, and loan sharks.
My friend as we speak has one of his three main debtors imprisoned in a hotel room with 3 “heavies” while the debtor makes phone calls to get either money or collateral to “get out of jail”. I asked what happens if they aren’t successful at getting help? My friend replied “may god help them”.
He also told me that for a simple $3000.00 loan one of his creditors was thrown into the river in the middle of the night last week and paid in full the next day!
Interesting times ahead!
In Ordos, the ghost city of 300,000 with only 20,000 people. some men are driving drunk in front of police hoping to get arrested so they will be safely put in a real jail and protected from loan shark collectors.

#24 Nostradamus Le Mad Vlad on 12.11.11 at 9:26 pm

“Pray for this woman.” — Indeed. That is the only comment needed for both hubs and Sarah.

As for Dylan and better half, way to go, and it concludes my worthless (they’re free) diatribes for today.
Thought For The Day! — “Foreign aid might be defined as a transfer from poor people in rich countries to rich people in poor countries.” — Douglas Casey, Classmate of W.J. Clinton (wrh.com). It appears the transfer of wealth is well underway, such as here — Durban Quote of the week: “The UN plan will shift wealth from the first world’s poor to the third world’s rich without making any difference in climate control.”
6:08 clip Secrets of the wealthy; 8.4:1 ratio Hah! The banxters are milking us dry; 4:27 clip If silver goes down . . .; Wall St. Money Machine Pulling back the curtain; G. Edward Griffin A pessimistic post; US and IMF US worried? The only reason the US is worried is if the Euro banking system debacle gets bigger, it will drag the US down with it; Eurozone Patchwork, at best. They’re outta ideas, except for a global dictatorship and a one-world currency; Wall St. WH to cover US ties to Russian protestors; 0:55 clip The ‘konomy — man-made disaster; QE 30 It’s not out of the realm of fantasy; 4:40 clip Homeless family occupies empty house.
Pre-planning Kinda goes with Garth’s advice — pre-planning, having a positive cash flow is better than tying oneself to bricks and mortar. TPTB also know this; WW3 A natural resource war; 25:00 clip “Watch the argument 10 mins . in.”; Iran will take US to court, and make the lawyers enormously wealthy; 12:24 clip Iran, pre-invasion; Fourteen min. clip The chosen criminal elite; Pakistan gives fair warning; Gaza pix; Ron Paul See the headline; Facebook “In response to this, Syrians on Facebook started a new page dedicated to the Syrian TV.”

Bigotry Lowe’s hits the big time; Harry S. Truman “Contrary to Newt Gingrich’s deranged view of history, Palestine was already in existence when the United States supported carving off a chunk of it to create a nation called “Israel” for the descendants of central-Asian Khazars who felt they were in danger from a government that did not exist any longer to occupy, all justified by some ancient writings that says an invisible man in the clouds wants then to have first crack at all of life;s blessings, and by the way the Earth is flat, rests on pillars, and does not move.”; Downloading straight into the brain. No manuals, no nothing; dubya loved 9-11.

#25 Mr. Lee on 12.11.11 at 9:31 pm

Hey Mr. Turner, come to Calgary. According to our CRB, new home growth will increase bt 16% next year due to…….you guessed it……migration from the East because of economics. You can go crazy on jobs and homes here in good old Cow Town. The money flows as easily as the oil. Now for the bad news, that VP positiion in an energy company will probably not go to the guy who will end up pouring coffee at Tims of sweeping up the warehouse.

#26 poco on 12.11.11 at 9:32 pm

#17 DA
exactly the same bullsh*t you posted a year ago
exactly the same bullsh*t you posted 6 months ago
probably the same bullsh*t you’ll post 1 year from now

you don’t have a clue !!!!!

#27 T.O. Bubble Boy on 12.11.11 at 9:48 pm

“Sarah”, and the thousands out there like her, are the reasons that Carney is scared to raise rates and put the bubble to bed.

#28 Aussie Roy on 12.11.11 at 9:48 pm

This is the typical thinking of Aussies also.

A waste of money to rent RE but not a waste of money to rent the money to buy because RE only ever goes up.

Aussie Update

An early Christmas gift

SYDNEY’S auction clearance rate plunged at the weekend to the lowest level recorded for the year.


SYDNEY recorded its weakest auction day of the year, despite last week’s announcement of the second interest rate cut in a row.


Of course here in “it’s different here Australia” we are being assured that the bottom of the property cycle is in or close or something. So gather up your change leverage up and just buy RE, because house prices are going to moon in the BCOE, so the RE lobby tells us anyway.

#29 T.O. Bubble Boy on 12.11.11 at 9:51 pm

Hey Garth, did your postal code make the list of Canada’s Richest?


Kleinburg and King (both in Ontario’s Top 10) are more or less in your hood, so I guess the bunker is still surrounded by some serious money.

#30 Dan in Victoria on 12.11.11 at 9:56 pm

Soooo…. lets see here.

Lets say 3 years out. Rent paid out 68K.
Buy a 500K Rancher (Why?) correction of 13-15% maybe. 70K give or take.
Rancher now worth 430K debt still about 500K (Go look up how much you pay off on the mortgage, will be a homework question for you Sarah)
So you just threw away 68K on rent but no debt.

500K mortgage @4% 30 years is 2377 month plus property taxes Lets say 200 a month feel free to insert the proper number it ain’t Zero.
$2577 / month. 2577 x 36 months is $92772 paid out.


93K paid out, place worth 430K give or take, debt still @ 500K. (Homework for proper #)
Geez honey we should sell….
Whats that ? 16K for realtor…

Theres a time to rent and a time to own get it figured out.

Hey I’ll sell you the bridge to Port Angeles….

#31 Aussie Roy on 12.11.11 at 9:58 pm

Aussie Update

Max can be a nutter but the second half of the show he interviews Satyajit Das one of my favourite commentators.


#32 Homer on 12.11.11 at 10:09 pm

#26 Poco

Not sure you are adding to the usefulness or decorum of the debate on this blog.

Why don’t you do some work and show us where DA is wrong.

I tried here: http://www.omreb.com/files/11%20-%20CO%20Statistics%20Graphs%20November%202011.pdf

and was surprised to see on p 8 that prices are pretty stable, and inventories (p 15) aren’t out of line either.

#33 not 1st on 12.11.11 at 10:11 pm

At least Jon Corzine and the like can’t steal my house.

#34 Montrealer on 12.11.11 at 10:11 pm

went bankrupt and will still be able to get loans… even if she get’s the 10% cashdown from family, I cannot believe she could have someone lend money. that’s incredible.

#35 Samba on 12.11.11 at 10:20 pm

#17 Two questions. Did you check the “Helpful reminders” before you posted? Did you think about perhaps revealing more about your own knowledge base and skills than you might want to?

#36 SophieZombie on 12.11.11 at 10:21 pm

Garth, can someone who declared bankruptcy a year ago can really have a 500k mortgage with only 10% down ? (I bet over 35 years!)

#37 Mr Buyer on 12.11.11 at 10:21 pm

A former American co-worker has family that are professional financial types. He told me an interesting story. His brother related to my former co-worker that while standing in line at the bank one day in or around 2004 a dishevelled yet personable man struck up a conversation along the lines of “I am in today to get a third mortgage on my house to pick up another house, how about you.” It was at that moment that my former co-worker’s brother came to the realization that RE is overheated in his home town and America in general. My former co-worker’s brother immediately began the long process of divesting himself from his extensive RE holdings and escaped 2008 relatively unscathed while missing out on some heady price jumps prior to 2008. My former co-worker’s father was the head of a bank in America (after being a fighter pilot, landing on aircraft carriers and the works) and it was interesting to hear, prior to the bubble years, how much good teeth and reasonably well kept shoes figured into the approval process when seeking financing. Another interesting point was how crucial parking is when trying to get funding for a business project. It was nice to get a small peek behind the curtain. PS…this is one of those friend of a friend stories so I cannot personally vouch for its veracity but I can say my former co-worker did not utter a single obvious falsehood throughout the four or five years I worked with him.

#38 Scott Walker on 12.11.11 at 10:27 pm

Great Post Garth
I have a friend who is in a messy divorce settlement and I have to say this is great stuff for her! She is obsessed with own ing and i am telling her NO Now is the time to be liquid Cash is KING- She should rent and ure enter the market when and if we turn the corner. Any comments much appreciated!

#39 Tony on 12.11.11 at 10:33 pm

Re: #2 NFN_NLN on 12.11.11 at 6:46 pm

She must be referring to M as 1,000 in Roman numerals.

#40 poco on 12.11.11 at 10:42 pm

#32 Homer

do my work everyday–suggest you go back and read many of the archived posts showing what i’ve found with regards to the housing market–especially the tri cities area

aa for DA, he’s been shot down and proven to be wrong for many many months now…. always leaves in a huff–only to return to spew more crap –the same old crap

remember stats (especially CREA stats) are for losers

#41 Not Fooled By Property Spruikers Hype on 12.11.11 at 10:47 pm

Garth a site that might be of interest to your readers explains how housing will destroy their wealth.

http://www.khanacademy.org/video/wealth-destruction-1?playlist=Credit+Crisis & Then the second part….. http://www.khanacademy.org/video/wealth-destruction-2?playlist=Credit+Crisis

Great explanation that most peoples should be able to follow.

Then also watch this 4 part explanation on how the US subprime started…. http://www.khanacademy.org/video/the-housing-price-conundrum?playlist=Credit+Crisis

(Be sure to watch all 4 parts)

This has Great site to read all year Garth keep it up in 2012.

FYI Perth (Australia) land developers are now throwing in a $60,000 Range Rover Evoque with every block of land bought before Christmas!! ($550k Blocks) & still the alarm bells are not ringing.

Thanks to everyone from Canada who has popped on my Blog Site in 2011 see you next year


#42 Devil's Advocate on 12.11.11 at 11:01 pm

#26poco on 12.11.11 at 9:32 pm
#17 DA
exactly the same bullsh*t you posted a year ago
exactly the same bullsh*t you posted 6 months ago
probably the same bullsh*t you’ll post 1 year from now

you don’t have a clue !!!!!

EXACTLY Poco, exactly. What did I say?.. “Volumes in Kelowna have been stable for four years now. Prices in Kelowna have been stable for three years now”. Based on that, it would be incongruous for me to say anything but in that span of time, don’t you think?

As far as it “probably (being) the same bullsh*t (I’ll) post 1 year from now”. Let us hope so Poco, let us hope so. I, for one, anticipate I will be saying just that same bullsh*t but with more vigour and reason.

As for me not having a clue… you are quite right. No one really does have much of a clue poco. That is why I, like #32 Homer on 12.11.11 at 10:09 pm, am always looking for answers. Don’t you think you would be wise to do the same instead of prejudicially dismissing everything you disagree with?

#43 First Place on 12.11.11 at 11:02 pm

Praying for first.

#44 TaxHaven on 12.11.11 at 11:15 pm

Off topic, but the Vancouver SUN never fails to stoop lower and lower in shamelessly flogging real estate:


The next tsunami to save house prices!!!

According to the SUN, there’s always more housing demand where that came from. But how many seniors today can afford $600,000+ housing? Most of us will run OUT of money before retirement anyway…

#45 45north on 12.11.11 at 11:29 pm

Sarah: My husband hates it and feels we are throwing money away!!

in good times banks take personal bankruptcy in stride. In the US the good times are gone, people get seriously depressed, marriages fall apart. Figure out how you are going to survive.

The Buyer: new Japanese phrase: kee-oh-skit-ta-na
“take care”

#46 Jane24 on 12.11.11 at 11:56 pm


In business the letter M usually stands for thousands as per the Roman latin. In my advertising business the value of advertising is compared by the cost of reaching one thousand people with the ad, and this is always represented by the title of CPM not CPMM.

Except in the EU when it is called CPT!!

A million in the advertising world is MM or a 1000 x a 1000.

Hope this helps for those not in business.

By the way my daffodils are showing so it is now Spring in the South of England. Two weeks earlier than last year when they were up for Christmas Day.

#47 Rich in Calgary on 12.12.11 at 12:03 am


Bankrupt 1 year ago, negative equity on a current property, and looking to buy another $500,000 property with nothing down.

These people truly have manure for brains.

#48 Angela on 12.12.11 at 12:09 am

This lady is certifiable. To everyone asking how she got approved for 90%, she doesn’t say she did. Looks to me like she used the MLS calculator and calculated a $450K mortgage at 3%. She could rent this http://vancouver.en.craigslist.ca/rds/apa/2728928784.html, with utilities included and not have to pay property taxes and come out ahead. Granted, there is a basement suite and likely a coach house tenant to share the yard with. Her math sucks. There is no way in hell you can make a “$500K range rancher” work out to costing you less per month than $1,900. She needs to find a cheaper rental. Or a similar priced one that you would never be able to afford to buy, like this: http://vancouver.en.craigslist.ca/rds/apa/2741269282.html

Everyone that already said this is bang on, that she’s just someone that wants someone to tell her that she’s right. I’ve been watching prices in the valley stagnate and slowly erode over the last 16 months she’s deluded that the crash won’t be as bad here as in the city. There might not be a crash here, but prices are slowly ebbing downward with no up on the horizon, imo.

#49 Burnt Norton on 12.12.11 at 12:11 am

WTF? Declared bankruptcy but kept title on a mortgaged now underwater condo? Why would it not have been foreclosed on and sold to pay off creditors? Better yet, if there’s truly nothing else for the bank to go after, why haven’t they just sent the keys to the bank?

She writes about bankruptcy as if she’s just broken one of her French manicured fake nails. “Like OMG..it was just so…ya know…stressful and everything…”

#50 Steady Eddie on 12.12.11 at 12:15 am

Mom, Dad are we there yet!!????


The tin foilists have posted this numerous times. So, stop. The Zerohedge guy has already been discredited on this subject. No Canadian bank will fail, teeter, stumble, crumble or even list. — Garth

#51 jonny on 12.12.11 at 12:21 am

Hi Garth,

Does your newest book teach us how to invest in equities or etf and which ones?

#52 McLovin on 12.12.11 at 12:21 am

DA you said you would never post under the DA handle again. What happened?

A Realtard going back on his word? Please say it isn’t so?

My world is crumbling….

#53 Burnt Norton on 12.12.11 at 12:26 am

#5 Paully on 12.11.11 at 6:54 pm

It’s possible because it’s legal and nobody in Victoria or Ottawa is doing anything about it (therefore, in a way the government is actually sanctioning this kind of speculation).

Who can blame the speculators. Lots of potential upside. Downside? Just declare bankruptcy and start all over again. No biggie. Only moral hazard to consider and it has more than 2 syllables so must not matter.

Any bets for which Canadian politician will end up being our version of Hank Paulson? (perhaps already is?)

#54 Behavioral Finance on 12.12.11 at 12:29 am

Economist is in.


#55 Kathy on 12.12.11 at 12:40 am

I’ve learned my lesson 6 years ago in States.Now try talk to people around me (here-GTA),explain,give them advice.It doesn’t work.They do not want to learn on my mistakes-they need to go through this by themselves.They use same arguments I used to use couples years ago buying house,then another… Do you know what is the most funny?All my friends( current horny buyers)feel sorry for me and my husband (because we don’t build equity)while we feel really sorry for them. But Sarah, YOU…??????????

#56 scared on 12.12.11 at 1:02 am

#23 scib

Interesting turn of events in China. Is it true that because of the credit crunch, some are cashing in their real estate investments in Canada? I find that hard to believe since it was so difficult to get money out of China in the first place, who would take money back?

#57 Nostradamus Le Mad Vlad on 12.12.11 at 1:05 am

Is it time to clear the temple of the money changers for good? Hypothetical question only. 4:01 clip Anyone remember Sly and the Family Stone? The ’60’s Great decade. Was anyone there?
Corzine and MF Global Don’t know whether anyone has posted this, but here it is; Germany vs. US But it’s not soccer; China Never put all the eggs in one basket; UN wants authority to tax America, with CC taxes. No doubt Canada and Mexico will be included as well; 5:11 clip Nigel Farage; Ssssshh! It’s a secret; Learning from Failure; 14:59 clip East beating West Part One, and 49:20 clip East beating West, Part Two; 75:17 clip A little long. In brief, herd mentality. Keeping up with the Jones’s, when there is no need to; Complicit? and 8:32 clip Tchir on Europe’s plan.
3:35 clip Speed freaks only; Faked Fake snow, fake polar bears but CC is impossible to fake, as the climate will always change; David Cameron The UK is an isolated island now, except for the Chunnel and 62% agree with him, plus France and Germany Most citizens don’t want the EU either; Border Here we go again. Another illegal war being started, ‘tho US – Israel have attempted to put Russia under the microscope; 6:21 clip North Korea not so lonely.

Oops! Somebody goofed in 9-11; Mystery Babylon What else can be expected? Smelliest Frogs A bonanza of antibiotics; A New Way to Lose Weight Yes, it’s true. Chewing weight-loss gum; Rickets Lack of sun is bringing rickets back; Down the Hatch! Life is illusion, and that is real; Public Education Dismantle it?

#58 bcpaul on 12.12.11 at 1:15 am

#15 Devil’s Advocate on 12.11.11 at 8:39 pm

Prices in Kelowna have been stable for three years now.

Must be selling only mobile homes

#59 Pat on 12.12.11 at 1:15 am

Garth predicts the housing gloom, however the guys in realestate think differently. Government has been warning about higher interest rates for years, however now they are even thinking of dropping it below 1%. You can’t increase liquidity in a market and raise rates at the same time, it’s a catch 22. So you can’t stimulate economy by raising rates. The only reason why interest rates would have to go up if nobody bought Canadian bonds in the open market at current rates. Canada has weathered the recession a lot better than other countries and the perception is that it’s a relatively safer investment climate than others.
Real question is what would happen if there was a super inflation because of currency devaluation? Which assets would hold their value the best? Housing historically would. I live in Vancouver and the last time I really saw a housing gloom was when HK was handed over to China and at that time values have only fallen by maximum of 30%. You could have bought a nice condo for 100K close to downtown, now the same condo sells for close to 275K and up. Slow realestate market yes, but in my opinion I can’t see devaluations like Garth is forcasting.

#60 carp on 12.12.11 at 1:28 am

can you spell f’n losers! both sarah and family lending cssh! they deserve to lose more. hubby keep feeling bad .. not for renting but being a financial failure long before.

#61 J on 12.12.11 at 2:06 am

Use your common sense people. Don’t worry about “M” & “m” – Just numbers – Point of the story is something else…

#62 TheRealTruth on 12.12.11 at 2:16 am

Renters must read:


It basically says temporary Visas are akin to permanent visas as no one ever leaves. Immigration per year is 500,000 plus. That includes 280,000 Permanent residents plus 220,000+ temp workers/students/failed refugee claimants.

Population growth fuels housing as all basement suites/condos etc. are rented out. Land use restriction further pressures housing!

And on the immigration numbers, I challenge anyone anywhere (including immigration lawyer Junius or Garth himself) on the validity of the numbers. Statscan assumes temporary visa holders leave…they don’t! So save it for your own personal agendas.

In BC, you got multiple people using the same carecard (medicare) as there is no picture on it. Just go to a walkin clinic and pretend to be somebody else and after a month or two, get the procedure done! This sh&% has to stop! US residents come here to get minor surgery. Foreign students come here to get medical treatment. Its just crazy!

And premier clark wants to encourage more immigration. WTF?


#63 By any Means on 12.12.11 at 2:20 am

Another way governments might try to keep people in their houses longer.


#64 Kilt on 12.12.11 at 2:34 am

Garth, why would a bank lend these people money.


#65 Barry in Pickering on 12.12.11 at 2:40 am

[Garth} A balanced (40/60) portfolio lost 20% in 08 (when markets were down 60%), was flat in 09 and gained 15% in 10 – for a return of about 5% over the worst three-year period in a generation. Then average in the better returns of 06 and 07, and 6% is no stretch. — Garth

Huh? Here are the actual calculations, and you get, using your numbers, 1.6%, not 6%
Year Start $ % Gain End $
2006 $100.00 6% $106.00
2007 $106.00 6% $112.36
2008 $112.36 -20% $89.89
2009 $89.89 0% $89.89
2010 $89.89 15% $103.37
2011 $103.37 6% $109.57

Total Return for 6 years 9.57%
Average Return 1.6%

Even if you put in really big number, like 10% for every good year (I doubt you’re getting 10% this year for example)
You still only get 3.7%

Anyyway, the point is all the balanced stock/bond funds have averaged 0.5%, not 6%.

I said the average gain was 6%, not the annual, save for the two years mentioned. Some people sure have too much time on their hands. — Garth

#66 TheRealTruth on 12.12.11 at 2:48 am

And Jason kenney if you read this,

plz plz crack down on those receiving OAS/GIS plus Indian Government pensions (without ever declaring the latter here)! Sick and tired of hearing this in community circles. BTW, I’m of indian heritage – 3rd gen.

An aquaintance was bragging how his parents go to India every year and money is always waiting in their accounts. Was bragging that they only pay for their tickets and they take no other money. When they come back, I’m sure money is waiting on this end from OAS/GIS. What a swell life!

plz plz require citizenship to collect OAS/GIS.

#67 wtf????? on 12.12.11 at 4:32 am

Absolutley gorgeous day in Bangkok today…mid 80’s…a pool day….took a nice walk to McD’s for a .20 cent ice cream cone…saw a condo offering in a hot town an hour away Pattaya….waterfront highrise for $26,500 all in. Property taxes here are pretty much zero….utilities are 1/10 the the average Canadian costs….food costs ditto…..26 oz Vodka + $9 cdn. You get the drift. New cars are half what you pay in Canada.

So…has anyone stopped to wonder why these countries can have great hospitals, roads, schools etc all delivered at a tenth the cost of Canada? Thailand and Malaysia ( just had a short holiday in Penang) are growing a middle class faster than anything Canada has experianced since the second world war….whats the diff? Where is the 50% +++ income tax dollar collected in Canada going? The country is stifled…no economy….debt and stagnation…why? The malls are full here….really packed….people have money to spend.

The media keeps telling you that this is the third world….what BS !! This is free enterprise where people have opportunities not stifled by an unyielding bureacracy that see’s individual success as a thorn in the side to bureacratic design.

Success by individuals makes socialism look bad. People are doing well here…the economy is booming on every front…..Canada brags and lags………better get mad Canada….before you wake up with a red boot up your keister.

I’ll get some more sun now………how’s the weather where you are? Mine costs me next to nothing and you’re paying half your wages and income to a government that blows it on nepotism and pandering….be happy while you shiver in the dark and grandma eats cat food…..your civil service is doing a great job …………not !!

#68 househornyhousewife on 12.12.11 at 6:46 am

#5 Paully,

I’m definitely with you on this one ! 100%

Sarah !! What the heck are you doing for heaven’s sake?! Are you crazy ?! Sell everything you have, pay all of your debt and for heaven’s sake rent a place until your credit score comes back in line with reality. If your husband doesn’t like the rental, rent another place that he DOES like. You obviously cannot afford to buy right now.

Crunch some REAL numbers for a change and compare the REAL monthly cost of owning a home. In contrast, that $1,900.00 per month rental payment also includes property taxes and ALL repairs (if you don’t also have some utilities included in there as well). Show him (and yourself) what part of each mortgage payment is actually “rent” paid to the bank in the form of interest that you will never get back.

Anyone loaning you money these days (ie. a bank for a mortgage) would probably be charging you a small fortune in interest rates due to your bad credit. Why take on this added cost on top of what you have already ? Take the money you are loosing now and use it to feed and clothe your kids (or set it aside for their post secondary school education or something .. anything better than pissing it away in a bad investment).

You are obviously not meant for this business so get out of real estate investing and take care of your personal life. SIMPLIFY !! No one is good at everything and that’s OK. The business you’re in is loosing money anyway so how long are you going to keep bleeding money before you get it ? Those kids are going to become expensive soon so plan for that. As a responsible parent, you have no time to play the real estate crap shoot.

My gosh, this story made me shiver. Just the thought of someone in that financial situation even thinking of buying a house is incredible. Garth, the stories you bring to this blog are truly remarkable and Canada is definitely in trouble if people are thinking this way. They are exposing themselves to future misery and poverty. Even in boom time I would never have continued to buy real estate in this situation much less with our current economic mess.

Sarah, go see a debt counselor and get your life together .. then come back in a few years and tell us you have sold everything, you are free and clear of debt, you are renting a nice house in a neighbourhood you could not possibly afford if you purchased AND you are putting some money aside for your family’s future.

All the best.


#69 Barry in Pickering on 12.12.11 at 7:06 am

[Garth] A balanced (40/60) portfolio lost 20% in 08 (when markets were down 60%), was flat in 09 and gained 15% in 10 – for a return of about 5% over the worst three-year period in a generation.
Umm…no. Add ‘em up again Garth, and you’ll see your error. Start with 100, lose 20%, now you’ve got 80. Then add 15%, now you’ve got 92 – a total LOSS of 8%, not a gain of 5% as you’ve stated.

But that isn’t the worst error, this is; “in 08 when markets were down 60%” – ummm…no again… markets went down 35% in 08. (S&P went 1400 to 900, a 35% drop)

My portfolio lost 20% in 08. It regained that in 09 (back to flat). It gained a further 15% in 10. Three-year gain, about 5% annually. The 08-09 drop on NA markets was 55-60%. — Garth

#70 LAST on 12.12.11 at 7:56 am

Oh man I sure understand how Sarah feels, long story but we bought our first place (condo row house) just before the first crash (late 80’s) zero down in a bidding warand lost our shirt on it, eventually we sold it and made a small profit, fast forward 8 years and h,ousing lust hit again but we got smarter this time (or so we thoughtp) we bought another place, cheap, could afford the payments find but the cost of fixing it up nearly killed us, eventually a new job meant a new city so now our dream place is being rented at a slight loose. Fast forward to today RE is so removed from my system that I know view it as any investment eh.ich is why I happily rent today.

As for Sarah I think she’s going to have to through this once more before RE lists gets removed from her system

#71 Guan-Di on 12.12.11 at 8:33 am

For those wondering why Sarah is using “M” for “K”:

M is the Roman numeral for 1000.

#72 neo on 12.12.11 at 8:53 am

My portfolio lost 20% in 08. It regained that in 09 (back to flat). It gained a further 15% in 10. Three-year gain, about 5% annually. The 08-09 drop on NA markets was 55-60%. — Garth

Are those nominal gains brought about by the massive monetary expansion that produced inflation that ultimately tempered your real gains to 2-3%?

Beats me. I bought Harley gas and ebooks with it. — Garth

#73 TurnerNation on 12.12.11 at 8:59 am

Truly a shocking account. These parents should be given a choice, perhaps: seek help at Gamblers Anonymous or have their children taken away!

Kind of harsh but…to risk their own family’s food & shelter – and future – with real estate gambling, to the point of bankruptcy, is simply wrong.

#74 Marc L on 12.12.11 at 9:08 am

Sarah is an excellent example of someone who makes all of her financial decisions based on EMOTION.
She is knowingly buying a house and planning on a correction.
What an idiot.

1900 in rent is cheap compared to buying a home and planning for a loss.

Husband said they are throwing away money on rent.
A roof over your head is like underwear, gas, insurance, toilet paper, booze. They are consumables.

Home for the kids is mom and dad, dinner with the family, etc. Not SS or granite counter tops.

Example, “Mommy, don’t lease the Mazda, buy it, when you pick me up at school, I wanna feel like home”

#75 GTA Girl on 12.12.11 at 9:49 am

As mentioned by Toronto Bubble Boy,


Kleinburg is #6 in Ont., #10 in Canada. There is a growing push to have our town leave the corrupted city of Vaughan and secede to King Township.

Residents have grown weary of corruption and being ignored by Vaughan. We can’t even get a streetscape plan to highlight our McMichael Gallery with group of Seven art. Govt corruption at even a local level has become intolerable. If people even with money are being ignored when they question corrupt practice, then how do those without means ever have a voice?

It’s time Canadians wake up and question all levels of government. Municipal being the most rife with dubious practices. Hands in your pocket without any benefit to the community. Mass sprawl, traffic and corrupt planning. It’s why a 40ft lot home is selling for $500k.

Yes, taxes should be paid. But we expect a transparent and orderly use of our money.

Sorry, needed to vent. This country is going to sh*t.

#76 Alistair McLaughlin on 12.12.11 at 9:50 am

We only have 10% down, but payments will be less than $1900/mth. (we have to borrow the 10% down from family (good rate/pymt plan) since we declared bankruptcy last year.

How does one get a mortgage for 90% of the value of a home, or ANY mortgage, if they’ve just declared bankruptcy last year? How? Are the lenders now that stupid? Is CMHC that stupid? Do they consider RE so safe that even a couple who has defaulted on a previous mortgage and delcared bankruptcy can qualify for a mortgage with 10% down? Which is borrowed from family???

I’m flabbergasted by this. I really am. Are things really this insane that one can get a mortgage with 10% down within a year of declaring bankruptcy? Someone please come along and tell me this isn’t possible, and that this lady is delusional. (We already know she’s delusional, but I want someone to tell me she’s delusional about the part where she qualifies for a mortage!!!! Please, my peace of mind is at stake!!!!!)

#77 Very Full House – Recent Bankruptcy; Borrowed Down-Payments; HELOC Spent On More RE; Cash Flow Negative Rental; 2nd Mortgage On Friends’ Property; “Throwing Away Money” On Rent; “Would Like A Place To Call Home”. | Vanc on 12.12.11 at 10:00 am

[…] “We sold our big, two story, 4 bed Kelowna home. We made a profit of only $30M after selling for $100,000 lower than its highest appraisal value just before the 2008 drop. Unfortunately we [had] refinanced and spent the equity on, you guessed it RE!!! We moved closer to Vancouver not by choice, but for job transfer. We are renting a house for $1900/mth. My husband hates it and feels we are throwing money away!! If we were getting this place cheap, then perhaps it would be ok and we could sock away the savings!!! We know there will be a market correction, but we are still looking to buy something in the $500,000 range-rancher or something that will be marketable in future! We only have 10% down, but payments will be less than $1900/mth. We have to borrow the 10% down from family (good rate/pymt plan) since we declared bankruptcy last year. Long story but got caught in the real estate speculation hype and lost everything! Well not everything, we have a condo in Kelowna we can’t sell, but at least it is rented!! Mtg is $312M, prop value $300M. Cash flow is negative marginally. We also lent money from our home equity during the boom, when we refinanced. They have defaulted and have not paid us back. We hold a 2nd mtg on their property in St Catharine’s which is not worth much now!!! Does it make sense to buy? We hope to be here 5 yrs. We are in Langley where we feel any correction would be much lower than in the city. We would be happy to break even and at least enjoy our own place for a bit. We have kids that would like a place to call home!!” – Sarah’s story, as told by e-mail to Garth Turner and featured at greaterfool.ca 11 Dec 2011 […]

#78 neo on 12.12.11 at 10:01 am

Beats me. I bought Harley gas and ebooks with it. — Garth

Ok. So just to help you out. Real gains are all that matter in the real world in the end. How’s the Rehypothecation studying going by the way…

Tempus Fugit…

My money is intended to finance my life. It’s going well. — Garth

#79 george Klein on 12.12.11 at 10:07 am

When BOC speaks of a condo correction then Houston we have a problem. There is a deep concern condos especially in GTA were overbuilt. BOC has noticed a problem when people were walking in and purchasing condos for $5000 down. and most of these people dont even intend on living there. This has huge ramifications and has inflated sales numbers in past few years. Ireland had same situation and market crashed in all real estate sectors. Remax had big meeting this week in Toronto Board of Trade. Rumor has it that Remax is planning for some cuts.

#80 Aussie Roy on 12.12.11 at 10:09 am

TheRealTruth on 12.12.11 at 2:16 am

And on the immigration numbers, I challenge anyone anywhere (including immigration lawyer Junius or Garth himself) on the validity of the numbers. Statscan assumes temporary visa holders leave…they don’t! So save it for your own personal agendas.


Lets take a look at Canadian Census data

2006 31,612,897
2001 30,007,094
1996 28,846,761



We get it, these people all hide, the census data is rubbish, it’s different here, house prices only ever go up and all renters are fools. Where have I heard all that before?.

#81 AACI-Okanagan on 12.12.11 at 10:23 am

#15 Devil’s Advocate on 12.11.11 at 8:39 pm

Prices in Kelowna have been stable for three years now.

Presently inventories are abating beyond seasonal norms pushing us closer to that elusive transitional
“balanced market” as we move from this “buyer’s market” closer to a “seller’s market”. Ever notice how buyers tend to buy in a “seller’s (market” and are affraid to in a “buyer’s market”).

That post was funny, drop by my office DA and I will show you TRUE market evidence that shows values in most sub-markets coming down at a rate of 1% per month over the past year. 35% of our business right now are foreclosures, 35%!!! I have been doing this for 25 years and have never seen this amount. It is going to get worst before it gets better.

#82 Expat on 12.12.11 at 11:01 am

Thank god for Sarah! Garth has been warning for years to bail out of overleveraged real estate markets by selling to people just like Sarah. She’s just part of the circle of life, the foolish victim part, as her unwise real estate purchases have allowed smarter people to bail and take the (leveraged by Sarah and her hubby) money and invest wisely. Likewise her negative cash flow condo is allowing the renters to live in the condo for less than the cost of owning, freeing up their money for investment or spending elsewhere. You go, girl!

Happily, it seems just as Sarah and her husband were running out of leverage, pesky bankruptcy and all, a kind relative with similar saavy stepped in to allow them to further stimulate the economy in the lower mainland, since there is no evidence of a bubble there. Good times.

I suspect Sarah and her husband are the tip of the iceberg, maybe the more foolish end of the tip, but the tip nonetheless. How many more cases like theirs are waiting out there if real estate makes even a moderate correction like 15 or 20%?

#83 TurnerNation on 12.12.11 at 11:06 am

Luckily, this is not a gold blog! Looks like the bubble pop will take it down to 1500.

(Disclosure: no position.)

Gee. Who warned you about that? — Garth

#84 HolyCow on 12.12.11 at 11:42 am

Canada’s Housing Bubble has surpassed the US bubble.



#85 Trev16 on 12.12.11 at 11:56 am

The tin foilists have posted this numerous times. So, stop. The Zerohedge guy has already been discredited on this subject. No Canadian bank will fail, teeter, stumble, crumble or even list. — Garth


Wow…..very interesting your thoughts on Canadian Banks. You must have insider knowledge and know everything on their balance sheets to say something like that. With the US going into a financial meltdown in 2012…..this will not be a postive for our Canadian Banks…..wasn’t it just last week I heard in the media there could be problems for our banks with the Euro imploding? What about Sarah declaring bankruptcy and then being able to get a mortgage…….is this another example of Canadian banks showing best business practices?



Mortgages are insured by the feds. Why should the banks care? — Garth

#86 Form Man on 12.12.11 at 12:01 pm

#15 DA

that post has made my day. you are a very funny man.
( extremely deluded, but funny )
prices have been dropping in Kelowna for 3 years now
volumes are down
inventories are down slightly, but so are sales
MOI is still over 17 months ( 5 months is a balanced market )
all above facts are courtesy of OMREB site

#82 AACI
your post draws an accurate picture of the Kelowna housing market right now……DA’s…….not so much….

Mr. Lahey

if westernman’s tractor is fails to arrive, I have an old Fordson I can lend him………

#87 debtified on 12.12.11 at 12:01 pm

62 J on 12.12.11 at 2:06 am

Use your common sense people. Don’t worry about “M” & “m” – Just numbers – Point of the story is something else…


I agree – common sense.

Hey, blog dawgs, what’s you opinion on the PEI RE market? I found this online and I thought it was a great value (property has since been sold but other of similar value exist – and no, I am not the realtor):


I know it’s PEI and cannot be compared to BC or Ontario in terms of economy. I drove around the whole island on my motorcycle in 2007 for a couple of weeks and I thought the place was really beautiful.

#88 jess on 12.12.11 at 12:18 pm

wtf –
google Alstom
lese majeste convictions 15 year prison sentences are harsh

16 ken s


11 Although the term “non-accelerated filer” is not defined in Commission rules, we use it throughout this release to refer to a reporting company that does not meet the definition of either an “accelerated filer” or a “large accelerated filer” under Exchange Act Rule 12b-2. Under Exchange Act Rule 12b-2, an accelerated filer is an issuer that “had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $75 million or more, but less than $700 million, as of the last business day of the issuer’s most recently completed second fiscal quarter” and a large accelerated filer is an issuer that “had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $700 million or more, as of the last business day of the issuer’s most recently completed second fiscal quarter”. In addition, for both definitions, the issuer needs to have been subject to reporting requirements for at least twelve calendar months, have filed at least one annual report, and not be eligible to use the requirements for smaller reporting companies for its annual and quarterly reports.
On September 15, 2010 the SEC issued final rule 33-9142 the permanently exempts registrants that are neither accelerated nor large accelerated filers as defined by Rule 12b-2 of the Securities and Exchange Act of 1934 from Section 404(b) internal control audit requirement.[40]

#89 Ret on 12.12.11 at 12:42 pm

Immigration is the new economy!

Get a student visa and you’ll never have to leave. Fog a mirror and you can go to just about any college or university somewhere in Ontario. You may leave years later, but that would be your choice and not the governments. Basically, you’re in and you can bring over the rest of the family too.

Harper preaches from the right but governs from the left on just about every file. Our immigration policies are the most lenient in the world. The odd deportation that hits the newspaper is just laughable when you look at the total numbers of people who just show up every month.

We need millions of new entrants to keep our Ponzi based social welfare state going at least for a few more years and Harper knows it as does every provincial politician.

Our new economy has immigrants building more condos for more immigrants. Does this sound like 2002-2007 in the southern sand states in the US?

The global economy has gutted just about all of our manufacturing in southern Ontario. Immigration and related construction and RE spin-offs are our new economy until the bond markets shut us down.

#90 Trev16 on 12.12.11 at 1:05 pm

Luckily, this is not a gold blog! Looks like the bubble pop will take it down to 1500.(Disclosure: no position.)

Gee. Who warned you about that? — Garth

Newsflash!!!!!….Gold is not in a bubble……..it is no more complicated than …..US dollar up and gold/Canadian dollar down. If you think the US dollar is going to continue showing strength in 2012 with its 15+ trillion debt…..you are delusional.

There is a reason why the US Government is starting to hire contractors to work in the FEMA Camps. There is a reason why Congress is trying to pass a bill where they can imprison American Citizens without a trial because they are deemed a so called domestic terrorist. There is a reason why the National Guard in the US are being surveyed to see if they will fire on American Citizens.

What is happening in the states is very scary….and yet many Canadians and people on the blog are oblivious to it. Garth just rights it off as tin foil conspiracy stuff….but when you have insiders leaking the info and look at the big picture as to what is happening in the world…..it all goes together.

People better wake up and the correction in the real estate market is so minor as to what is coming in terms of who controls the US military and upcoming events in 2012.

It’s all good.




#91 Mr. Lahey on 12.12.11 at 1:06 pm

#87 Form Man

“Mr. Lahey, if westernman’s tractor is fails to arrive, I have an old Fordson I can lend him……”

Once again Form Man your magnanimous gesture is really appreciated. We are all in a panic with the disapperance of Ricky and no blog has been able to help with his whereabouts!

#92 disciple on 12.12.11 at 1:13 pm

Useful information:

There are a few factors to consider when buying a fund: Timing. If you’re investing outside of a tax-deferred account, timing may matter. Funds are required to distribute capital gains and dividends to shareholders. These distributions are taxable – so if you buy into a fund right before a distribution, you’re essentially paying taxes for some sort of gain that you didn’t even benefit from.

While most distributions are made in December, some are made earlier. If you’re looking to buy a fund anytime after Sept. 1, be sure to ask about the company’s distribution — if there is a taxable distribution, make your purchase after it passes.

But even if it is not a taxable distribution, the price may take some sort of hit as stock is sold.

#93 SaggyBottomBoomer on 12.12.11 at 1:35 pm

#15 Devil’s Advocate

Speaking of “nothing new”……

#94 Alistair McLaughlin on 12.12.11 at 1:42 pm

Sarah’s story is just too good to be true. Took out a HELOC…. and lent it out??????? Her character reads like a composite of everything that is wrong with today’s RE market. It’s just too perfect. I think someone is pulling Garth’s leg.

#95 thinktank on 12.12.11 at 1:46 pm

funny thing is – I agree (as I think most do now on this blog) that real estate is the LAST place you want to put your money right now (speaking to potential buyers … especially those with minimal downpayments)

Where I differ from Garth is his alternative approach … a balanced portfolio – I suppose for those who are not full time investors and traders – it is very sound advice although there are holes wide enough in his approach I could drive a truck through them but beyond the scope of this blog.

Simple options hedging (not that difficult folks if you take the time to learn) can out better Garths 5-7%/ annum twofold – and a lot more is you are really savvy. Admittedly that takes experience but the rewards are well worth it. (currently up 24.7% ABSOLUTE return YTD personally and clients portfolio) with MINIMAL HEDGED risk

To Barry in Pickering … I see your point .. but i will leave you with this …. Garth is 100% right on the drop of the over all markets – I selected the SP-500 as my overall index … from January 3, 2008 to the LOW of ’09 which was March 10 2009 (or close enough) .. the SP-500 lost exactly -50.28% – Garth is pretty damn close if he was quoting OTHER than just the US SP-500 … throw in the DJ-30 or the NASDAq and thats about right …

FInally – I dont have too much time on my hands … I just have some slick charting software – took me 10 seconds to calculate it – good luck all – one thing is a constant … real estate is NOT where you want to have the bulk of your net worth …. liquidity is king – PERIOD.

#96 bridgepigeon on 12.12.11 at 1:58 pm

I’ve spent a fair amount of time travelling throughout Asia. Have you watched the roads and infrastructure being built? These types of construction jobs pay about a dollar a day most places, with extreme heat and working conditions etc., a lot of the labour is done by women. Obviously zero benefits whatsoever, simply subsistance. ‘Survival sex’, for the tourists rampant in Pattaya, Germans in speedos with young boys.
I love many things about that area of the world, but don’t ask why things are so cheap, the human cost is everywhere.

#97 disciple on 12.12.11 at 2:01 pm

marcfromOttawa… many investors will be looking to slowly transfer from, for example, iShares to Vanguard due to the low MERs for their new ETF’s, but I am concerned about the lack of full transparency on the holdings. Based on MSCI and Barkleys but I’d like to know what I’m invested in…

#98 VICTORIA TEA PARTY on 12.12.11 at 2:03 pm


So listen up!

Any newbies out there in Canada’s besotted real estate so-called industry (sort of like Victoria’s newest foodie industry — sloppy, fatty (but green) hamburgers!) kindly check out what’s shakiun’ in downtown Europe.

I offer the following literary “props”:

First off, Karl Denninger of Market-Ticker blog fame:

“…Europe has done nothing to solve the essential problem — the political promise of services that cannot be funded with current tax revenues, and the inescapable reality that this must eventually end. When it does the multiplication effect that this overspending has had on prices and output in the Continent will reverse. That in turn will force GDP down to where it is supported by actual economic surplus. Margins, being levered against cash flow, will contract dramatically and as Larry Kudlow loves to say “profits are the mother’s milk of stocks.”

Well Larry, in this case mommy sucked down a drink full of arsenic, the milk is poisonous, and mommy is writhing on the floor in agony as she draws her last breath.”

And this second “prop” from JH Kunstler’s morning rant:

“…Anyway, Great Britain (a.k.a. Old Blighty) simply checked out. The sceptered isle is now Europe’s dog-house. They stayed out of the Euro currency for a reason: so that their equivalent of Wall Street, the City of London, could short the shit out of it when the time came, a strategy that begins to look absolutely brilliant – except considering what Old Blighty is otherwise left with as an economy: Scotch whiskey, mints, and a whole lot of Hallel grocery shops, with the Royals as window dressing. (I’d sooner invest in Argentina, with its amber waves of grain.)

The message is clear. IT’S OVER on and for the Continent that invented the loquacious (babbling) lattee lounge lizard on sidewalks everywhere, that so many denizens on this side of the pond love to emulate.

Also remember the wars. Ah yes, and the military cemeteries filled with the remains of Canadians and others who could have been doing soemthing productive but wound up entangled with idiots and their pompous ethnic problems. It is to weep that needless waste of humanity. Are we going there again? We wait.


Canadian real estate, as I opined in this space last week, has about as much remove from world economic conditions as does a pair of Siamese twins.

Garth has been warning the Greater Fools out there for years now, warning them of a crappy “property-owning” future.

Well, boys and girls. That future rolled up on the beaches of our East Coast at dawn today, and is steaming across this great land at blinding speed.

The economy of Europe is dying, and fast. The US economy, similarly; China is fast falling into an economic slump of its own devising. The beat goes on.

The stock markets in Europe and on this continent are today predicting a horror show, simply put, as stock markets are considered to be leading economic indicators. Even gold has tanked a sign that the only “safe” haven is the disreputable US bond market and, on “good” days the stock market. This is not good.

Holy smoke!

#99 Canadian Watchdog on 12.12.11 at 2:09 pm

Interesting change of tone from the BoC today.

Prolonged Period of Deleveraging Ahead, Says Bank of Canada Governor Mark Carney


#100 Dorothy on 12.12.11 at 2:16 pm

Real Estate markets have always been affected by a combination of factors, the greatest of which has traditionally been the LOCAL economy. In other words, areas where employment is high always see more active RE markets than areas where employment is low. That is why comparing the RE market in places like Windsor to places like Toronto is a useless exercise. It is also the reason why it is an equally useless exercise to compare prices in one country, to prices in another.
While it is true that the overall economic position of a country will influence the overall trend of RE to go either up, or down, there will still be vast differences in price depending on the state of the LOCAL economy the RE is situated in.
The same applies to the seasonal nature of the economic cycle as it relates to RE. The time of year will have, and always has had, an effect on the amount RE will sell for, and on the length of time it will take to sell. But what that amount will be, and the number of days on market, will still be influenced by the state of the LOCAL economy where that RE is located.
So those bloggers who are trying to over generalize statistical information, particularly those of you who are attempting to do so on an international basis, are just plain wrong.
While it is true that in Canada there is an overall trend to price stagnation in the RE market, with a definite drop in some markets, and continuing increases in others, one size does not fit all when it comes to deciding whether or not to buy. Anyone trying to decide whether they should rent or buy, needs to research conditions in their own local market first. If you live in a place like Vancouver, where prices really do appear to be in bubble territory, you’re probably wiser to rent. But if you live in a place where prices are more in line with wages, and employment is fairly stable, it may be a completely different story.
Relying on general information in a blog such as this, may turn out to be a very big mistake. Please, please, make sure you do your OWN research in your OWN neighbourhood before making your final decision.

#101 disciple on 12.12.11 at 2:16 pm

#96 thinktank… hedging with options? Thanks for doing the old jump on Oprah’s couch for us, and congratulations on winning at the casino, but you may end up on the end of your clients’ noose. Betting on declines has worked well thus far, but I think you better change your strategies pretty soon as the US and emerging markets start to roll again…

#102 Alistair McLaughlin on 12.12.11 at 2:21 pm

The only way I can explain Sarah’s belief that she’ll qualify for another 90% mortgage is as follows:

A) She’s delusional
B) The same family lending her the 10% is also crazy enough to co-sign the mortgage and put their own (presumably paid for) home up for collateral.

I hope it’s A. Cuz if it’s B, she’s gonna bring her whole family down with her. She’s already proved she’s capable.

#103 disciple on 12.12.11 at 2:21 pm

Jamie Dimon, King of the Scumbags Speaks:


#104 604 on 12.12.11 at 2:48 pm

Wanted to also comment on Sarah’s last statement about the kids wanting a place to call “home”.
I really doubt children really know whether you own or rent a home. In any case most people move on average every 7 years- whether you own it or rent it you have to uplift your family.
I moved several times as a kid- home is where your family is not whether you have a mortgage on the home- I doubt kids are at school talking about how their home is rented -Like little Jimmy is talking to all his 7 year old friends” geez I really wish my parents would just buy a house aleady- I really feel emotionally detached- feel its more of a house than a home”. Just saying- I have kids and I know that is the last thing on my son’s mind.

#105 Okanagan Renter on 12.12.11 at 2:49 pm

The real estate shills in the Globe & Mail deleted an entire thread responding negatively to an “article” on a condo in downtown Toronto. When Canada’s national newspaper is so flagrantly corrupt, what can we expect from the rest of the mainstream media? Here is the link to the piece (POS, that is): http://www.theglobeandmail.com/life/home-and-garden/real-estate/done-deals/toronto-condo-goes-down-smooth/article2263502/

More interestingly, 60 Minutes had a segment on the housing market collapse in Australia that I’d highly recommend to all blog dawgs, but above all to hapless Sarah. It’s a cautionary tale for Canadians. On the bright side, it validates renting in a way that made this smug renter feel just a tad smugger. I’ll save an extra smile for my underwater owner neighbours in my condo.

#106 disciple on 12.12.11 at 3:02 pm

Tokyo: 6753 (Sharp, iPad3 to use their tech)
NYSE: TGT (Target, Canadian expansion costs already built in to stock price since Q3)

Happy Holidays!

#107 Calgary Ripoff on 12.12.11 at 3:10 pm

Garth you provide a certain view as to why a person should rent and not buy a place. If a good downpayment is not saved up and the person cannot afford the payments if and when interest rates go up, then your argument makes sense. My mortgage is $90 more than I was paying for rent. So did it make sense to keep renting a place when I could buy a place that was immaculate and 5 houses down? I cannot see how continuing to rent would benefit me after securing a large down payment and having given $82K to the landlord. I just dont agree with your argument.

You mistake housing as just a form of investment. It may be that. However, it is also a place to live in. The counterargument could be made to continue renting and then when you are set to retire you have nothing. I assume that you are renting and not owning a place eh Garth? Somehow I doubt that. So tell everyone to keep renting. :)

The market in Calgary is tricky. Most of the places for sale are dumps and priced $200K over what they should be. That is the reality of overpriced crap. Calgary housing hasnt changed much since 2007.

My plan to ignore the market and let my wife do all the footwork paid off perfectly. I got a place that was immaculate, with all new appliances, good furnace, good roof, and 200 meters from my daughters school. The trick in all this was timing and patience. The Calgary market is a load of crap-specifically a rat race. So the trick is to know when to pounce, and then when you are, pounce hard, which is what I did. Think of it like shooting down a large bear with the biggest gun you can obtain. I got exactly what I wanted(the most important thing) and my wife feels adequately satisfied(the next most important thing).

I am posting this to help any renters in their coping with the bullshit calgary housing market. Keep saving your money to get a big down payment while keeping that landlord at bay. Most landlords are a holes who think of their tenants like holes in the wall-the trick is to deal with these slime as little as possible-treat them like the leeches they are.

The nice thing about now is that the landlord who never earned the right to obtain any of my money(other than residing in HIS place) can kiss my ass in terms of getting any more money.

Now its between me and the bank. The severity of not paying may be greater with the bank, but the illusion of renting as being nicer is a falsity.

The simple conclusion of this endless blog is: 1)Save up big downpayment, 2) make sure you can make payments with interest increases, 3) make sure you can maintain payments, 4) make sure you can pay for upkeep, 5) tell landlords and house flippers and all scum to F%$CK off.

#108 Victor on 12.12.11 at 3:13 pm

Canadians consuming beyond means: Mark Carney

OTTAWA— Globe and Mail Update
Published Monday, Dec. 12, 2011 1:08PM EST


“We might appear to prosper for a while by consuming beyond our means,” Mr. Carney said in the text of a speech he was delivering at a luncheon in Toronto. “Markets may let us do so for longer than we should. But if we yield to this temptation, eventually, we, too, will face painful adjustments.”


“We, too, will face painful adjustments.”


#109 pjwlk on 12.12.11 at 3:13 pm

#42 JohnnyBravo I like the way you think brother. I’m a very big believer of the everyday simple basics around us can speak volumes about what is to come.

Most things happen for simple reasons and not complex ones.

#110 Anotherlowlyrenter on 12.12.11 at 3:20 pm

Most detailed video I’ve seen describing China’s real estate situation:


#111 triplenet on 12.12.11 at 3:31 pm

Mr. Lahey:

I saw Ricky!!
Me and Lucy were cruising the 2nd hand stores in Duncan on VI and we saw Ricky pulled over by the cops on a logging road. I don’t think he recognized us in the old motor home but we knew it was him due to the cases of beer on the hood of his car (the one with no doors) and the nefarious looking people with him.
If Ricky is on probation you’ll most likely find him in jail again. So that’s a starting point.
PS – you didn’t hear anything from us.

#112 jess on 12.12.11 at 3:33 pm

RBS failure caused by ‘multiple poor decisions’The FSA criticised the ‘light touch’ regulation encouraged by the Labour government as it called for an overhaul of the rules

Does interest rate deductions /borrowing at low rates make a manager more reckless?

Capital Structure of REITs http://www.landecon.cam.ac.uk/research/…/Feng%20Ghosh%20Sirman.pdfYou +1’d this publicly. Undo
File Format: PDF/Adobe Acrobat – Quick View
by Z Feng – Cited by 28 – Related articles
As Ghosh and Sirmans (2001, 2003, 2004), and Han (2004) observe, however, REITs must abide by special regulations that can weaken or render ineffective

Testing Trade‐Off and Pecking Order Predictions About Dividends and Debt
Eugene F. Fama
University of Chicago
Kenneth R. French

#113 Eddy on 12.12.11 at 3:43 pm

Just as “Sarah” wrote to Garth seeking validation of her conviction to buy, many readers of this blog seek precisely the same type of validation only for an opposing conviction. So we can’t really fault her for that. I read this blog daily. I read much of the comments daily. I enjoy it, but some people are far too critical. The level of criticism to others/where they live/what they do I believe is inversely correlated to the happiness with oneself and their life. Watch for it. The most critical people you see, have something unsettling to them going on in their own life. I shred others apart when I’m pissed off about something completely unrelated to them. I’ve recently learned adjusting what I’m not happy with to be far more productive. In saying that, Sarah’s an idiot, she’s clueless, the concept of money is lost on her. But whatever, I don’t dwell on it. All we can do is try giving her some useful advice and opinions then carry on our way and hopefully it works out for her. Why wish for her failure? Her failing doesn’t enhance our lives. When it comes to investing I’m a moron. It’s an imaginary world to me whose concept I cannot grasp. And I’m a smart guy. Other than, sometimes some stuff goes up, and other times it goes down. The why, when, and how? Not a clue. And I’ve tried to understand it. It’s basically gambling to me. (As I believe it is to most) Whether investing in stocks or real estate, it’s all gambling for the average person. Most choose real estate because they receive something they can physically see and utilize, its value is physically apparent. Just like the casino, we’re all playing a game where the house always wins and where corruption breeds the most financially lucrative rewards.
My advice (of which I haven’t quite taken for myself just yet). Invest in myself. Invest in my family. Invest in memories. Invest in relationships. Invest in life. Do what makes me happy. Let others do what makes them happy. Watching my 400 shares of XEG and XGD slowly dwindle in my RRSP account has lost it’s appeal to me. Going to Home Sense on Saturday to find decorative trinkets for the bathrooms and living room that have absolutely zero merit toward the quality of my life has also lost its attraction. I feel that my coming 4 week trip to Thailand with 11 of my closest friends is by far the best investment decision I can make right now.

#114 disciple on 12.12.11 at 3:46 pm

#100 Canadian Watchdog… this is the more useful link:


A lot of veiled threats are made in this speech, as well as a lot of doublespeak, and of course, the BofC does not share culpability whatsoever…

“For years, central bankers have talked of surplus and deficit countries, of creditors and debtors. We were usually ignored.”

***disciple translation: “we warned ya, but nobody listened” – really? Because I don’t remember that…

“Central banks can only bridge real adjustments; they can’t make the adjustments themselves.”

***disciple translation: “we can only do so much, but it may not be enough” – so why are you still talking, dude? Find me someone who can do something, idiot…

Thanks for nothing. How stupid you must think we are.

#115 disciple on 12.12.11 at 3:56 pm

The criminal outfit at the BofC won’t help you. Save yourselves, save your parents, save your children from another generation of debt servitude. I give you a tool below, use it!


Your real rulers employ their puppets but they have to pay them. This is how they do it. Now you can derail the system and restore it anew. I’m sorry Garth, but the commercial banks MUST fail. The only other option is WAR, which was alluded to three times in his speech, in the same breath as the Cup and the Leafs. Mind control.

#116 thinktank on 12.12.11 at 4:07 pm

#102 Disciple …

Thanks for your concern – NEVER play direction … EVER

NEVER own the underlying instrument either … EVER …

look up Condors and Butterflys (or Iron Condors if you prefer) … they are RANGE BOUND options strategies … I collect theta (time decay) ..I can get more complex if you like … Calendars – diagonals – double Diagonals – reverse ratio back spreads – again – in my original post – those are more sophisticated for those who know what they are doing and you need sophisticated “what if” modelling software as well. Based on your the comment you made – I now see why Garth does not even bother trying to introduce those into the conversation. And for the record … if you are picking direction with options – then you are not a strategist – just a gambler looking to hit it big. Good luck with that however if you have a LONG ONLY portfolio – PUT option contracts are a GREAT form of insurance in the event of a market meltdown. Again – knowledge is required – (PS .. long stock + PUT contract = synthetic CALL – its a lot cheaper than owning the underlying)

one last thing – are these strategies right all the time???? – absolutely NOT – build a portfolio of them (hopefully non correlated) – be prepared to adjust (if you know how which I doubt you do based on your comment) and if youre any good (like I am) then youre winners will more than compensate for your losers – its all about risk management , position sizing and discipline – work yes – but the rewords more than pay for themselves – good luck and I suggest the CBOE website to further that wonderful knowledge base that you are commenting from

Oh ya .. clients love their returns :)

#117 disciple on 12.12.11 at 4:10 pm

Sorry folks, I’ve gone raving mad bonkers after reading this latest propaganda from the BofC… I don’t know how any sane Canadian can read this and not absolutely shudder in their wool socks…

Social unrest? Only now, you are worrying about that? Thanks for caring Mr. Puppet banker man. You must have had this in the back of your mind:


#118 Humpty Dumpty on 12.12.11 at 4:15 pm

make economics human

unstable world!


Pray for this woman

Have I ever mentioned this will not end well?

G… What’s up… Your sounding more like a prophet these days…


#119 Kevin on 12.12.11 at 4:31 pm

Canadians consuming beyond means: Mark Carney

No duh!
Mortgage debt has outpaced inflation growth, income growth, GDP growth, for over the last decade, and has help launch house prices to the sky.
And the crazy thing is that consumer debt has outgrown mortgage debt over the last decade.

Anybody who thinks that growing debt is justified because the economy is growing, take a look at this chart.
This is household debt to GDP. As of 2010, Canada was at 91% and by golly, 2011 is shaping up to be even higher.

Here is household debt to GDP for the US. They are deleveraging and below 89% as of first quarter of 2011.

And for those wondering Government of Canada debt to GDP is not so hot either.

#120 Junius on 12.12.11 at 4:41 pm

#63 TRT,

Perhaps you can ask Santa for a “new trick pony” this Christmas. These “immigration will push prices up” posts of yours are so tired and ridiculous.

BTW – I never practiced immigration law but know lots of people who have and do. They think you are wrong as well.

#121 Junius on 12.12.11 at 4:47 pm

#101 Dorothy,

Clearly your main point that RE prices are highly localized and subject to local economic conditions is historically correct.

I think the difference right now is that we have to factor in the enormous influence of the global credit bubble. If you look at Vancouver for example you see a local economy that is very weak but high prices as a result of the credit bubble and speculation. I think it is also prudent to examine at what stage a location is in their asset deleveraging cycle. In the case of Toronto and Vancouver that would be at the beginning.

#122 Tony on 12.12.11 at 4:47 pm

Re: #91 Trev16 on 12.12.11 at 1:05 pm

There may be a long trade the very first couple of trading days of 2012 for gold but it should continue to fall every year until it double bottoms at 200 U.S. an ounce. I have out of the money puts for most of the months of 2012.

#123 Mark "the Talk" Carney = Housing bubble on 12.12.11 at 5:10 pm

This clown loves to talk and then talk some more. CANADIANS ARE LAUGHING AT YOU CARNEY. They know you are a gutless man who understands the ponzi which you help create but only loves to warn and TALK but that is it. Inflation is well about the 2% propaganda government created standards and yet this CLOWN continues to hold rates. INCREASE RATES you stupid talking clown. People in Canada will CONTINUE TO SPEND UNTIL THEY ARE BANKRUPT. People will WALK you IDIOT. As a saver I feel stupid for working and being productive. Soon I will choose to spend spend spend ALL MY CREDIT WHILE i HIDE my money and then I will go bankrupt and leave Canada in economic ruin like tens of thousands of other Canadians will do. you talking clown fool RAISE INTEREST RATE 5% today!

#124 Very Full House – Recent Bankruptcy; Borrowed Down-Payments; HELOC Spent On More RE; Cash Flow Negative Rental; 2nd Mortgage On Friends’ Property; “Throwing Away Money” On Rent; “Would Like A Place To Call Home”. on 12.12.11 at 5:14 pm

[…] “We sold our big, two story, 4 bed Kelowna home. We made a profit of only $30M after selling for $100,000 lower than its highest appraisal value just before the 2008 drop. Unfortunately we [had] refinanced and spent the equity on, you guessed it RE!!! We moved closer to Vancouver not by choice, but for job transfer. We are renting a house for $1900/mth. My husband hates it and feels we are throwing money away!! If we were getting this place cheap, then perhaps it would be ok and we could sock away the savings!!! We know there will be a market correction, but we are still looking to buy something in the $500,000 range-rancher or something that will be marketable in future! We only have 10% down, but payments will be less than $1900/mth. We have to borrow the 10% down from family (good rate/pymt plan) since we declared bankruptcy last year. Long story but got caught in the real estate speculation hype and lost everything! Well not everything, we have a condo in Kelowna we can’t sell, but at least it is rented!! Mtg is $312M, prop value $300M. Cash flow is negative marginally. We also lent money from our home equity during the boom, when we refinanced. They have defaulted and have not paid us back. We hold a 2nd mtg on their property in St Catharine’s which is not worth much now!!! Does it make sense to buy? We hope to be here 5 yrs. We are in Langley where we feel any correction would be much lower than in the city. We would be happy to break even and at least enjoy our own place for a bit. We have kids that would like a place to call home!!” – Sarah’s story, as told by e-mail to Garth Turner and featured at greaterfool.ca 11 Dec 2011 […]

#125 Standard Deviation on 12.12.11 at 5:33 pm

So with European Bonds heading for higher interest rates and investors looking for risk premiums. What does this mean for Canadian interest rates? I am guessing they will increase not simply because of inflation but because of the risk premium being offered everywhere else. House prices do not seem to be going anywhere up in a hurry on that assumption, yet the parochial attitude of these house purchasers will sure result in pain and hurt. “Its different here on this intergalactic plane”.

#126 neo on 12.12.11 at 5:55 pm

My money is intended to finance my life. It’s going well. — Garth

Yes, life is good for the 1% isn’t Garth. As long as your as not as leverage as a French bank (-; Then your wealth can be “transitory” as the Fed has popularily coined.

But you already knew that based on your housing market thesis.

Go occupy something. I hear it’s fun. — Garth

#127 Mr. Lahey on 12.12.11 at 6:31 pm

#111 Triple Net

“Mr. Lahey:I saw Ricky!!”
“Me and Lucy were cruising the 2nd hand stores in Duncan on VI and we saw Ricky pulled over by the cops on a logging road. I don’t think he recognized us in the old motor home but we knew it was him due to the cases of beer on the hood of his car.”

Triplenet are you sure? Ricky was driving a big truck with Westernman’s tractor for the ploughing match this Saturday at the FASTPGFBDCParty. You have to make sure Triplenet and further find out what happened to the rig and tractor. Westernman is going to be really pissed off. I promised him his tractor will get here safe and sound. I don’t care if Ricky ends up in the slammer for violating probation but the rig and tractor! Triplenet it is in your hands now. Find the rig and tractor and please drive it to Sunnyvale. Westernman will be pleased and hopefully he is unaware of the fact his tractor is temporarily MIA! Get back to me Triplenet and please get your hands on the rig and tractor! This is critical! Many thanks in advance.

#128 Kevin on 12.12.11 at 6:35 pm

You know consumer debt is bad when Mark Carney cites Leafs

“An analysis by Canada Mortgage and Housing Corp. last month showed consumer are, indeed, pulling back as growth in mortgage debt slows. That’s at least in part due to a softening real estate market. Growth in personal loans and credit card debt has also eased.”

Do these reporters even check the numbers?
Here are the numbers from the Bank of Canada website for mortgage credit growth year over year for 2010 and 2011.

1/1/2010 6.6% 1/1/2011 7.5%
2/1/2010 6.8% 2/1/2011 7.3%
3/1/2010 7.1% 3/1/2011 7.9%
4/1/2010 6.7% 4/1/2011 8%
5/1/2010 7.3% 5/1/2011 7.6%
6/1/2010 7.3% 6/1/2011 7.3%
7/1/2010 7.1% 7/1/2011 7.2%
8/1/2010 7.3% 8/1/2011 7.3%
9/1/2010 7.2% 9/1/2011 7.2%
10/1/2010 6.9% 10/1/2011 7.5%
11/1/2010 7.2%
12/1/2010 7.1%

Mortgage debt growth is marginally “down” from the spring, but each month this year is the same or higher than 2010.

At least they got the part of consumer credit growth slowing. It had to, as consumer credit growth has outpaced mortgage credit growth over the last decade, growing by 146%, while mortgage credit growth “only” grew by 131%. Consumers are tapping out.

Here is a graph of year over year consumer and mortgage debt since 1990.

#129 Devore on 12.12.11 at 6:35 pm

#63 TheRealTruth

In BC, you got multiple people using the same carecard (medicare) as there is no picture on it. Just go to a walkin clinic and pretend to be somebody else and after a month or two, get the procedure done!

You immigration nuts need to get your story straight. I’ve heard that there are WAY (WAAAAY) more care cards issued than people residing, now you tell me there are multiple people using the same card. According to this, even simple math shows there should be 2-3 times the people living in BC than are officially counted, which is obviously bogus.

#130 Cato on 12.12.11 at 6:37 pm

Sarah is poster child in making the case not everyone is suited for home ownership. She wants to take on a 500K debt, yet can’t manage to save 10K as a down payment. Not sure why they didn’t throw the Kelowna condo onto the bankruptcy heap. Hate to break the news but the condo isn’t worth 300K. I recently helped a nice little old lady make a bid on a condo originally purchased for 330K, assessed @ 310K , asking 280K sold for 240K. Owners were young specuvestors from Vancouver running scared, had the feeling overseas parents were bringing down the hammer after losing patience waiting a year for a sale. People like Sarah holding appraisals on properties that don’t resemble market reality are likely already insolvent and should just get bankruptcy over with.

Sarah and others need to clue into the fact Canada is not the US. Just because rates won’t rise in the US for the foreseeable future doesn’t mean they won’t rise in Canada. The US has the privilege of controlling the world’s reserve currency. Canada is at the mercy of the bond markets. In case you haven’t noticed our economic prospects aren’t exactly robust. That means a higher risk for anyone holding Canadian consumer debt, which means higher interest rates all around. Carney can’t dictate terms to the bond markets as Bernanke can. I’d bet he’s running numbers as we speak to see just how many families will be forced under water with rate hikes the bank is going to have to make. Its a no win scenario, question is whether we’ll see a wave of defaults or will Canadians suffer in silence under debts they can’t afford.

#131 Devore on 12.12.11 at 6:47 pm

#72 Guan-Di

For those wondering why Sarah is using “M” for “K”:

M is the Roman numeral for 1000.

Is she Italian? That explains it!

#132 Form Man on 12.12.11 at 7:02 pm

#130 Cato

interesting comments. The word I am hearing from Mortgage brokers in Kelowna lately is that they are busy………trying to refinance regular folks who are in trouble. We already know the condo developers are in trouble, they are going broke left and right.
I wonder how DA will spin this one ?

#133 Dorothy on 12.12.11 at 7:06 pm

#121 – Junius
I agree that the combination of low interest rates and speckers (one having led to an increase in the other) has contributed to certain RE markets (noticeably the ones with the highest increases such as Vancouver). However, not all RE markets are subject to the same kind of rampant speculation.
For example, northern communities never experienced the same RE boom because of that very fact. Consequently Canadians who live in the north are playing by a totally different set of rules than their southern cousins. Even in the south, there are areas that were unattractive to speckers which never experienced huge booms like the one witnessed in places such as Vancouver or Toronto. So I stand by my original comment, that people need to research the state of RE in their LOCAL market prior to making the decision as to whether it is best to buy or rent.

#134 VICTORIA TEA PARTY on 12.12.11 at 7:13 pm

#125 Standard Deviation


Standard Deviation is a good handle indeed as that calculation also represents the ability of investors to determine exactly how out of whack our markets and economies are these days. Deviations indeed.

With that in mind, on Monday, it was a heckuva long time since I’d seen CNBC’s financial-advice drones looking so downbeat.

Behind the Wall Street “curtain,” kindly check out a key reason (the blog “oftwominds” has the wretched details) why so many thousands of Wall Street employees are about to be laid off.

Not only that but some brokerage companies are demanding repayment of employee bonuses, going back for a full year! If that doesn’t spell involvency, in the name of credit default swaps, then what does?

Your point about higher yielding European sovereign bonds is a good one. But Canada’s bond yields are more closely aligned with the “safe” US bond market and will likely continue to have more subdued rates, for the next while.

But Europe, as the world’s largest single trading bloc, has barely begun to deal with its seemingly insurmountable problems. So higher Candian bond yields (surely to follow the US lead) is a definite idea to keep in mind. Never thought of it!.

Nevertheless, every economic indicator of importance is either down or soon to head that way. Those that are still “up,” are surely being propped in some flim-flammery way. “Zero Hedge” has been doing yeoman service in calling out various market and govenment miscreants’ activities and is worth the look.

I fear deflation before inflation.

#135 45north on 12.12.11 at 7:20 pm

Alistair McLaughlin: talking about Sarah:

she’s gonna bring her whole family down with her.

yeah and when she does, the whole family is go’na talk about the “greedy banks”.

#136 Westernman on 12.12.11 at 7:27 pm

Calgary Ripoff,
The reason most landlords think of renters the way you describe is because most renters act like orangutans… no, scratch that – orangutans are more civilized and a damn sight quieter and cleaner…

#137 Devore on 12.12.11 at 7:55 pm

#93 disciple

Huh? There are 3 dates to worry about:

1. Date of announcement.
2. Date of record.
3. Date of distribution.

If you buy the fund/stock/whatever after the date of record, you do not get the distribution. Investors know this. They also know payouts happen on regular dates, so there’s no surprise when #1 happens. There’s no surprise when #2 happens either, it’s also a regular date, as is #3. While there is usually a small runup a little before #2, especially on quarterly or annual distributions, it should not be a huge factor.

In any case, if you are buying a fund or equity, you are already doing due diligence, right, so basics like distributions don’t come out of nowhere, yes?

#138 Devore on 12.12.11 at 8:09 pm

#130 Cato

All this talk about the BoC rate is really moot. The rate hasn’t moved for months, and banks are raising theirs anyways. In fact, banks don’t care what the BoC rate is. They base their variable rates on their prime rate, which is set by individual banks, and has nothing to do with the BoC rate. The bank prime rate is the rate they will give their best customers. It doesn’t even have to be the same at every bank, although due to competitive pressures it usually is. Banks will raise their prime rate and premium as liquidity decreases and risks increase.

The fixed rates are set by the bond market, which the BoC is powerless to do anything about.

#139 Nostradamus Le Mad Vlad on 12.12.11 at 8:13 pm

Ahh jes’ feel so rambunctiously sek-c today. Last week, I correctly answered a question on the radio. The prize consisted of lunch for two at Boston Pizza, plus tickets to an Xmas do at a local theatre.

As the better half drives now, I took the opportunity to invite her out (I was planning on ordering two meals, one there and one at home, but both were for me.

Unfortunately, she accepted so I ended up with one meal, but it was free. Taxes and tips were extra, of course.
Benefit of the Doubt “Hence the attempt by the US Banking system to have the CIA overthrow Putin.” wrh.com; 0:35 clip Today in Latvia there is a bank run, and Mother of all bank runs; Anti-Gold Propaganda From a Cdn. perspective; Gold Central banks, etc.; Collapse Take two Euros and call me in the morning; US Fed A trillion is chump change; Stupid Gimmicks Payroll taxes.
9-11 “This was the group that made it possible to have NORAD stand down and be so confused on 9-11 that we put up no defense. On page 43 it lists the members of the Defense Policy Board on September 11, 2001.

“They were: Henry Kissinger, James Schlessinger, Eliot Cohen, Paul Wolfowitz, Douglas Feith. Kenneth Adelman, James Woolsey ANNNNNNDDDDD NEWT GINGRICH!” wrh.com; Iran and Syria sign defense agreement, and Frame Up to justify Syria’s invasion; Palestinian Flag to fly at UNESCO; Clone Drone Good for Iran; Straits of Hormuz Practice runs; Suspend “In effect the legislation is a declaration of martial law throughout the country.” wrh.com; Obumbler strips Americans’ rights; Pope St. Gal of the Ores Snowing somewhere; NAU – SPP won’t go away.

#140 new_era on 12.12.11 at 8:17 pm

For those wondering why Sarah is using “M” for “K”:

M is the Roman numeral for 1000.

No I feel Sarah did not pass grade 2 math and doesn’t have a freakin clue how to manage her money!!

#141 johnny5z on 12.12.11 at 8:18 pm

You sound similar to the saying about boats:
The happiest day is when you buy a house,
The next happiest day is when you sell a house.

Old Sal once said, “When it comes to boats, airplanes, and women – rent don’t buy.” Maybe we should extend this to houses, especially the speculum (intended) type.

#142 45north on 12.12.11 at 8:20 pm

Dorothy: here’s David Lereah, Chief Economist(2006) for the National Association of Realtors:

“‘If you have a healthy local economy, it’s almost impossible to have a bubble burst,’ he said.” We needed to catch our breath.’”


you see Dorothy, it’s like watching the movie again, you can lip-sync it


#143 disciple on 12.12.11 at 8:22 pm

#116 thinktank…. thanks for the advice, I may look into it if I’ve got some time. I must ask, do you spend time with children? If not, do you spend any amount of time with senior citizens? Since you eschew the balanced portfolio, do you also eschew the balanced life? I would say we would all be delighted if you taught us a tiny morsel of what you know so that all may benefit… or do you not see the profit in it unless we are your clients?
Two things… if you have to hide your deeds, then they are ultimately unworthy, clients or no clients. And thanks for YOUR concern…

#144 Devore on 12.12.11 at 8:36 pm

And people say Canadian banks are so prudent. There are plenty of ways to get a mortgage shortly after bankruptcy, in fact it is possible for anyone, regardless of their financial situation to get a mortgage, you just have to look around and get a little creative. Bankrupt, no savings, with an underwater cashflow-negative investment property? No problem!

#145 George on 12.12.11 at 9:12 pm

Mark you should change your last name to clown. The BoC Mark Clown tells Canadians what every Canadian already knows. Canadians are spending and living beyond their means until they go bankrupt or the credit taps get shut off. Mark the clown either do something or shut your useless mouth. Garth can you tell your buddy mark clown that we canadians are getting sick of his empty words.

#146 NFN_NLN on 12.12.11 at 9:24 pm

#39 Tony on 12.11.11 at 10:33 pm

She must be referring to M as 1,000 in Roman numerals.

I checked and you may be correct. Although I don’t know why mixing number systems is a good idea, maybe that’s why she can’t do math…

She should say: “XXXM” or “30k”; not “30M”

#147 jess on 12.12.11 at 9:58 pm


How about employing those poor kiddies as soldiers Newt?

#148 Steady Eddie on 12.12.11 at 11:41 pm

Well if one bank is going to screw up, I bet it will be CIBC… remember this beauties:



#149 Steady Eddie on 12.13.11 at 12:07 am

Garth, the re-hypothecation argument was originally a Reuters article (Thomson Reuters’ Business Law Currents to be precise). I can’t find a rebuttal to this. Do u have a link?


Read it. Yawn. — Garth

#150 Pr on 12.13.11 at 12:37 pm

WOW! Canada pulls out of Kyoto protocol
The Canadian environment minister, Peter Kent, said Canada was invoking its legal right to withdraw. Kyoto did not represent the way forward for Canada or the world, he said. -To many people now its a fraud! Good for us and for you M Kent! No more non sense carbon taxes in the horizon. M Carney and M flaherty its you turn now.

#151 Joe on 12.13.11 at 12:59 pm

Dear Garth,

First, I would like to thank you for this blog. It has opened the eyes of many people and helped the inevitable to happen sooner. However, I have to admit that it is becoming quite boring to read the same thing with minor twists over and over. If I may suggest an idea, why don’t you broaden the scope of your blog to include contrarian views on issues other than real estate? One example could be the theory of human generated CO2 driving a global warming. As a contrarian, I can’t accept the fact that an unproven theory has become so prominent that most people accept it as a fact. It would be interesting to read what a thinker of your caliber can say about it. Here is a good documentary presenting the opposing view: http://www.youtube.com/watch?v=YaTJJCPYhlk