I smiled a little as I trundled up a spectacular rock walkway, looked above at the towering slopes, picked my way through a litter of Mercedes, then stepped into the glittering foyer of the Four Seasons Whistler. How ironic that a big real estate company would have its annual convention here. And how ridiculous I should give the keynote address. Can’t these people Google? Or maybe both Bill Clinton and Lady Gaga were booked.
Whistler gives real estate deniers a nice lesson in fads. Just a couple of years ago it, amidst the Vancouver Olympics, it was pure hot. Media crews poured in, and so did the money. For example, one of the ‘private residences’ in this hotel (a suite) sold for $1.1 million. Recently it sold again – this time for $520,000. Says a local agent, in a duh moment, “We’ve seen the prices come down significantly.”
Three years ago it was different in Whistler. A year ago it was different in Vancouver, too. A well-connected realtor just sent me this note:
“Went down to coffee with one of my clients this afternoon. He is a really smart and successful businessman (and an accountant). He made likely $3+ million on his West Side house that he sold last November. He was saying that he is hearing from his friends that have condos and townhouses how for the past 5 years, the value has not gone up for them. This is now becoming general chatter on the street. You can quote me. “Their condos have not gone up in value and they feel it is like a ball and chain. The building is mismanaged and the condo fees are way too high. At $5,000 per year just on the strata fees and to feel you are getting nothing for it is pretty difficult to swallow when there has been no capital appreciation”.
Now it’s different in Calgary. Sales there last month jumped and prices are back to 2011 levels. But, of course, not back to where they were in 2007-8. A gobsmacked Calgary Herald reported: “Calgary seems to present the land of opportunity right now and people need homes. Renting does not seem like a reasonable option with the low interest rates. They also feel that the property values will be increasing so they want to secure an investment here.” And I wonder who told them that?
And it’s different in Toronto, of course. Bidding wars have dominated local media coverage of the housing market, as the average SFH in 416 tops $840,000. But at the same time, sales of new condos have taken a tumble and increasing numbers of potential buyers are walking away in disgust at the kind of greedy realtor and vendor tactics I bleated about yesterday. Listings of resales are skimpy while a tidal wave of new-build condos is set to swamp the market.
It’s a world out of balance, wherein dozens of people compete for rare homes in nice hoods while others go ignored. I spent an hour Monday with a young couple whose family endured an entire year of trying to sell a beautiful penthouse unit. This is what happens when 23,000 shiny new ones are in the pipeline.
The lesson should have been learned by now. It’s not different anywhere. Markets always revert to their mean. Booms always end. Bubbles always burst. And there’s a formidable list of reasons why those who forgot their history will soon find it chewing on their behind.
We’ve covered this ground in recent days, but in case your father missed those blogs, remind him of a few things. Like CMHC’s plan to drastically reduce the mortgage insurance it offers. This 80% drop is already sending a chill through the industry, which is exactly what F wants.
I told you in excruciating detail about new rules the banks will have to follow by year’s end. That’s when OFSI (the bank regulator) will mandate an end to cash-back mortgages, insist banks scrutinize borrowers and properties more closely, and force them to stick to LTV values upon renewal. That means if house prices drop, borrowers might only be able to renew their mortgage by making up the difference in cash. Given that, would you buy real estate with 5% down?
Then there’s the budget last week which promised more oversight of CMHC, leading most people to believe it will stop being a political baby and fall under evil, tough OFSI – the bank cop. This is like having your mom plan your conjugal sked.
And, of course, interest rates will be higher long before you expect. I mean, just look at the stock market – now back to 2007 pre-GFC levels. Hell, we’ve just seen the S&P’s performance eclipse that of gold for the first time in a decade. This is happening because (a) companies are making boodles of money, (b) America is absolutely, irrefutably, unmistakeably strengthening, (c) Europe is a mess, but nobody cares anymore and (d) China is soft-landing. In fact, as much as stocks have increased since last autumn’s correction (up 30%), they’re still running about 11% behind long-term multiples of corporate earnings.
Whether you agree with this or not (and most retail investors don’t, which is why they’re being creamed), the big guys do. So equities will continue to sawtooth higher, bond prices flip lower and yields swell. The fact so many DIYers are now buying bond funds should tell you everything.
In other words, nothing’s different. Financial assets will ascend. Real estate won’t. What everybody thought was the new normal is the same old. For a few years balanced, diversified portfolios will make money and real estate newbies will lose it. People who bought with nothing down at inflated prices with mortgages guaranteed to pop will wonder what they were smoking. Nobody will sympathize. Nor should they.
By the way, I told the realtors all this. Then narrowly escaped, in a stolen Benz.
190 comments ↓
First?
Is it a good time to buy bond funds now?
I just failed. — Garth
“Like CMHC’s plan to drastically reduce the mortgage insurance it offers. This 80% drop is already sending a chill through the industry, which is exactly what F wants.”
Maybe that’s not what he wants.
Maybe he sees the bottomless pit CMHC would be – as Fannie & Freddie were – and recoils from the thought of having to fund that if the mania continues…
Lol… On the key note speaker assignment :) I tell everyone about your blog. Keep up the good work. I enjoy my nightly reading.
he RoboCon situation will unfold over the next few months and years. The allegations are quite serious but the Conservative Party, the only Federal party that has been convicted of electoral fraud, the only party that has paid to call Canadians with false information, the only party that is being investigated for election fraud and the only Prime Minister in Canada’s history to be found in contempt of parliament, refuses to take it seriously.
http://uranowski.wordpress.com/2012/03/08/why-nobody-believes-the-conservative-talking-points-on-the-robocon-scandal/
Wrong blog, dude. Anarchy.ca is two doors down. — Garth
Was that stolen Benz the one in the picture of yesterday’s post?
Hi Garth
Can one borrow from US banks to buy Canadian real estate if the rate down south persists for the entire amortization of the loan?
No. — Garth
Quatro?
FURST GARTH?
Was DA in attendence? In his girlish 3-series bimmer?
The epitome of house hornyness http://www.topca.net/documents/90_Cumberland_Drive_PHOTO_ALBUM_March_2012.pdf
Check out 90 Cumberland in Port Credit. McMansion indeed and an uproar as is dwarfs the homes around it. Emergency meeting tomorrow… How could this happen… The craziness that’s everywhere.
http://www.topca.net/
Scroll down to how could this happen…
Garth, unfortunately, The G&M disagrees with your thesis.
http://www.theglobeandmail.com/globe-investor/markets/markets-blog/market-view-video/video-corporate-earnings-outlook-points-to-us-recession/article2389312/
That’s a joke, right? One journalist’s opinion on corporate guidance? The ad which came first was more accurate. — Garth
When will the mainstream tv media, especially Global, begin addressing the myths of “superior Canadian mortgaging standards” and “sub-prime doesn’t exist here”? After the initial wave down?
There it is again. Soft Landing. A highly unlikely scenario. Irrefutably strengthening America. Nice assertions. I will assert that there are no such things as soft landings when bubbles are concerned. A soft landing asks that an asset be invested in knowing that it will decline in value. Would you invest in an asset that you know will decline in value…I am not saying that I am too smart to be convinced to do so but that is going to be some magical convincing. When the last foreclosure has occurred in America and they have achieved even a single penny higher real GDP and one extra job than there was before the bubble beset them then I will surrender. Strengthening in that a cancer patient made it to the toilet on his own post chemo, but nowhere near the stamina displayed the years before while running marathons. As for corporations with boodles of money well that is another ball of wax. I get the message, this is a soft sell bubble blog but they are playing with fire.
#2 Makavelli on 04.02.12 at 9:07 pm
Is it a good time to buy bond funds now?
I just failed. — Garth
Outstanding!
Sure things are bad in America, but I have to agree that the situation is improving.
Here are a few charts that provide some evidence of America’s improving situation:
http://seekingalpha.com/article/445711-why-i-m-bullish-on-america-5-charts
Garth, what do you think of investing in second mortgages as part of a balanced portfolio?
Compared to food poisoning? — Garth
The S&P 500 index regularly removes under-performing stocks and replaces them with performing stocks. So if you track indicies vs gold you need to remember the stocks indexed yesteday are different than the stocks indexed today, how can you compare the two?
This is also valid for the entire market, badly performing stocks are removed regularly. Gold is still gold.
And metalheads still blind. — Garth
How ironic that a big real estate company would have its annual convention here. And how ridiculous I should give the keynote address.
– — –
Parallel universe divergence maybe…
Garth – The shoring up of equity upon renewal will never happen….I’m the 2nd most bearish person on the face of the earth (next to you) when it comes to residential Canadian real estate but the government will never, ever, make a homeowner to come up with the lost equity subsequent to the original mortgage being inked. This doesn’t exist anywhere in the world and it surely will not be implemented by Canada….the loosest of loose mortgage regulators!
It has already been put forward by the bank regulator. Explain that. — Garth
Interesting how you are optimistic about U.S…..
Who cares about Europe? Truly, you are very short sighted. Retail investors are in the ‘don’t know any better camp’and people like you are in the ‘ know everything camp’. Hmm!
Not much has been accomplished in this phony economy except adding more debt. If this is economy that you think will grow over long term, well, I am not in that camp.
Next year, this phony world economy will fall once again!
Enjoy the funk! — Garth
@#11/#12 Can It Be
All I can say is Holy [email protected]! That is ridiculous.
The posts get more pithy and funnier at the same time.
No mean feat.
Bravo Zulu, Big G.
Garth,
Since I was here on time to read shortly after you posted, I just wanted to say how much I like your blog. I hold my husband down regularly to prevent our family from getting over leveraged on our first house. I must say I was smart enough on my own (:D) to know it would be stupid to buy now, but your blog gives me credible ammo.
Thanks!
Garth,
Those who do have money to put away on a regular basis have seen two large hits to their financial wealth in the past 15 years. It has given the idea that the markets are a game, not an investment, rightly or wrongly.
The “big boys” as you put it might perhaps going longer equity at this point in time, encouraged by good markets. However, many a pension fund these days are over-weighting debt. Although they believe in the equity risk premium (which is almost nil, if you read last week’s economist), the risk of having boomers retire when markets are bad puts them in a big bind as they are forced to sell.
#21… You can’t make this stuff up, it’s more amazing in real life
CANADIAN BANKS UNDER FIRE
And now the irony: the U.S. and the international banking community, which could learn a few lessons from us, are developing stringent new banking regulations to which our banks have to adhere, and that will make it much harder for them to remain as profitable.
The main culprit is the so-called Volcker rule. This American legislation, which takes effect in July, is supposed to prevent insured deposit-taking institutions in the U.S. from engaging in certain risky activities. But as written, the rule could have severe implications for Canadian banks, forcing them to make radical modifications to some of their business activities, or implement costly new compliance regimes. Changes are happening at the international level, too. Next year, significant components of a set of global regulations known as Basel III take effect. While not nearly as sweeping as the Volcker rule, the regulations nevertheless force Canadian banks to make changes that could impact their performance.
http://ca.finance.yahoo.com/news/canadian-banks-under-fire.html
Garth’s comment on post #2 is worthy of LOL
Regarding 90 Cumberland in Port Credit – Mississauga
In a few years the developer of this site will be receiving a major award for redesigning the part of this community that backs on the lake.
Anyone that owns these type of property has to rethink why you would want the house set almost at the high water mark and all the yard at the front of the house.
The design of this redevelopment moves the house closer to the street – the part closest to the street is the garage – while the back of the house will enjoy magnificant views of the lake with lots of backyard and additional privacy.
When I first saw it on an early morning run I was taken back but the more I thing about it and as it comes to completion I have to admit that there are merits with this approach.
Anyone wanting to guess what the selling price will be? – I have not seen a for sale sign on the property – but I am guessing it will be north of 3 million.
Ohhhh I forget this blog is for those negative on RE.
Actually you fit in perfectly. — Garth
The fact so many DIYers are now buying bond funds should tell you everything.
– — –
Only the ones that don’t read enough.
I profited before, during, and after the GFC.
Not all DIY’ers are created equal. ;)
No buns this year?
Wimps.
The OSFI guidelines are just that, guidelines. They are neither rules nor regulations, nor binding at this point.
The CMHC has seen its lending decrease steadily over the past 3 years. They should be able to handle their insurance on force limitations with ease.
Finally, no Garth, interest rates are not guaranteed to go up. Nor can you say with any certainty that any of this is what ‘F’ wants. He proved you wrong last week when none of what you expected him to do materialized. Stop trying to crystal ball the future, and you might actually get some of it right.
You mean it’s different? — Garth
Phone conversation from me to Mr Turner,
“Uncle Garth ! You were in town and you didnt call ?
Have I told you, your my favourite Uncle and I love you??????? …….Good.
Now,……. It’s about the remortgage of the Whistler condo……….Hello? Hello?”
Uncle Garth, yer a ruthless bastard …….and I STILL love ya.
I was advised last week to buy CLF & CBO. I’m a newbie and still learning. Not sure what I should do.
Then don’t. — Garth
Garth, can we see your keynote on youtube or get a transcript of the speech?
Nope. Adult content. — Garth
US recovery?
Is it the record number of people on food stamps, the sagging tax revenues, or the mounting US Federal debt that leads you to this conclusion?
How well would the “recovery” hold up with higher interest rates, hmmm?
Its called bottom bouncing.
And yeah, I am enjoying the ride up on equities, but I doubt burrito fast-food chains are trading at 63x PE ratios on fundamentals.
Been trading markets for quite some time now, and its become a total joke. But the music keeps playing for now… Just make sure you have a chair when it stops.
Today i just heard the most unbelievable thing, no really.
A local retailer and I were talking after he came up to me to say he’ll miss me after i move next month to my rental. We were chatting for a bit about his house, etc., then he said something so absolutely crazy… He knows a friend that paid $10K to a guy who generated 3 years of T4 slips and government forms from a fake company for a person who works in a gas station to show income of $100k per year so the person could go to the bank to get a mortgage. The person, in fact, makes less than $30k per year, but can afford rent of $1000 per month, and with the right mortgage, can buy a house and carry the costs with both spouses working.
Think about it for a second, the person producing the fake T4s obviously is doing this over and over again.
The free market has lost control.
The banks must protect themselves and us (CMHC) from a disastrous ending to this bubble.
http://pls.ca/
Here is a website largely for rich Chinese investors that do not want to lower themselves to the common herd when buying up Vancouver.
There is MLS – Multiple Listing Service for the general public and then there is …
PLS – Private Listing Service.
In other words people who pay with cold hard cash!
The site is the creation of a Van marketer, and repackages some MLS listings. — Garth
I just bought TD Canadian Bond Fund from a Td sales rep!!!
I love it!
Garth…
So that was you that almost ran me over in the Benz
As I was stumbling out of The Keg after one too many ceasars!!!
I manage property in the big W !! Yikes what a job!
No, I don’t mean it’s different. I actually mean nothing has changed (not with the OSFI guidelines, the CMHC insurance limitations, F’s budget, or BMO’s interest rate increases). It’s the same as it has been. The sky hasn’t fallen, and nor is it any more likely to, just because you think that it should Garth…
Realtor talk. Always uplifting. — Garth
BTW
One of my clients here is a waitress who needs to work
12 hours a day to pay for her mortgage …yikes!!
To say that the contrary must be true, now that’s denial.
Scary thing is even at $5000 the condo fees are probably too low to cover all the necessary maintenance and work, and there will be special assessments coming down in the future.
Looks like the evil of the collateral mortgage is spreading: http://www.moneyville.ca/article/1153051–collateral-mortgages-why-banks-like-them . Fortunately, Garth already warned us months ago. Once again, THANK YOU.
I heard Ozzie jurock on the radio this weekend. I had to chuckle when I heard him suggest that it might be a good time to buy now in Calgary, after all he said, at an average price of 450,000 for a house, Calgary is quite “affordable” compared to some of the other big cities in Canada.
Yes, we truly have lost our marbles but than most people on this Blog figured that one out quite awhile ago.
#27 Skyce
They already delayed the Volcker Rule and may fall short of Basil III capital requirements for 2013. If banks can’t be ‘market makers’ (profiting and betting with customers deposits), then they won’t make money.
Wait, until recently gold’s been outperforming S&P for the LAST DECADE!? How come my Investment Advisor/Bookie hasn’t “advised” me to put a small portion of my money in gold ten years ago? Oh yeah, it’s because he doesn’t make a cent from it. He’s busy selling other paper products. Thank goodness the internet saved me from missing out.
Let’s see how S&P does after the US election is over. Wanna bet it’ll go down, but I’m only taking bets in gold or silver. Maybe then I’ll give my Bookie a call and move more of my cash and gold into my paper investments when it’s cheap.
Oh yeah and I’m not selling all of my mortgage free properties and handing it over to my Bookie so he can lose it all once it’s in the crapper again.
American is strenghting … -however Fed rates are still 0.25%,
IF American was well back on the road to recovery interest rates should have been pushing up by now. The Fed would have given a SOLID signal by increasing rates.
Dream on.
Billionaires with Richmond ties busted
http://www.richmond-news.com/Billionaires+with+Richmond+ties+busted/6398136/story.html
A pair of billionaire brothers who have changed the skyline of Metro Vancouver with their mega-property projects, including a new urban low-rise community in Richmond, have been arrested on suspicion of corruption.
Hong Kong’s Independent Commission Against Corruption arrested the joint-chairmen of Sun Hung Kai Properties, brothers Raymond and Thomas Kwok, on suspicion of corruption, the company said Friday.
“They were primarily involved around the purchase of the land about four years ago,” said city spokesperson Ted Townsend. “And all the money was paid up front, so as far as the city is concerned, we’re free and clear. We have no reason to believe it won’t be business as usual.”
The Kwoks are involved in the low-rise waterfront community called River Green, which is being developed on the banks of the Fraser River near Vancouver International Airport.
The brothers are worth $18.3 billion, the second-biggest family fortune in Hong Kong after that of Asia’s richest man, Li Ka-shing, founder of rival developer Cheung Kong (Holdings), according to Forbes magazine.
etc etc.
#31Chris on 04.02.12 at 10:33 pm
Spoken like a true ‘Echo’.
The numbers are in….its been a good run but, the game is up. We are simply running out of Greater Fools (unless we can sign You up with a second or third mortgage).
Do your research…start with Statistics Canada and read Boom Bust and Echo by David Foot and Daniel Stoffman. Good luck.
Canada’s Population 1971 – 2056
http://www.statcan.gc.ca/ads-annonces/91-520-x/pyra-eng.htm
Keep up the good work GT!
Off to a record SLOW year in Victoria :
Early MLS data – credit to Marko (Victoria Realtor)
March March
2012 2011
Net Unconditional Sales:
570 622
New Listings:
1,385 1,501
Active Listings:
4,274 4,100
Please Note
•Left Column: stats for the entire month from this year
•Right Column: stats for the entire month from last year
February VREB news release :
“”REALTORS® are reporting increased showings, especially since the Provincial budget announcements,” says Carol Crabb, President of the Victoria Real Estate Board. “Our Members tell me the HST transition rules, increased HST rebates and New Home First-time Buyers Bonus are stimulating traffic for both new houses and condos.”
That didn’t pan out; might be a rough month for some realtors.
VREB sales from their PDF’s :
March 2006 : 843
March 2007 : 833
March 2008 : 707
March 2009 : 602
March 2010 : 789
March 2011 : 622
March 2012 : 570
You know that the only reason stocks are doing good is because of the Feds ZIRP policy. Any increase in interest rates or implied reversal in it’s policy of QE to infinity will send the markets tumbling like a Cirque performer. So let’s see how great the US’s recovery is, pull the liquidity and let’s see if it can stand on it’s own two feet.
#19 Duncan
Of course they’re removed. Why would you hold on to loser stocks?
#12 – Can It Be – unbelievable. What on earth is it?
More evidence of melt in Vancity:
http://www.yattermatters.com/2012/04/mail-delivery-surprises-vancouver-average-prices/
The best way to invest is to forget about trying to predict the future and balance your money across asset CLASSES. Doesn’t matter which stocks you pick, when there is a panic all stocks fall in sympathy. Better to own uncorrelated asset classes. Buy 25% stocks, 25% long term treasuries, 25% gold and 25% cash. Rebalance yearly and live long and prosper.
It’s really easy to do with ETFs. Just buy each of the following in four equal parts: VTI, TLT, GLD, SHY.
This is all you need to know about investing in “the markets”
#39 JSS on 04.02.12 at 10:49 pm
I just bought TD Canadian Bond Fund from a Td sales rep!!!
I love it!
••••••••••••••••••••••••••••••••
I guess I’m not the only newbie here eh?
I’m with Garth… don’t bet against the USA.
The future US population will increase … double in the next 40 years! With the one child policy and aborting female fetuses in China, I’m not counting a future population boom there and expect lots of civil disorder. India has limited land. Russia’s demographics seem bleak but it’s awesome in Palestine if you aren’t Jewish! Japan doesn’t expect a boom but has robots and that’s pretty cool! If you are an entrepreneur … where would you live?
I think Canada will also be awesome in terms of population increase. However, before this happens. Boomers and their kids will keep enslaving themselves to the banks. This will leave Gen-xers and immigrants to teach them a lesson on being true progressive & conservative folks. The way the “silent” generation thought us to be.
#27 Skyce on 04.02.12 at 10:20 pm
I would not worry about banks, they are in a bussiness of making money.
They could sell a tower and few more assets, and problem solved. Profits could go down, but having all that capital is not bad thing, pile of cash will will bring stability to bank and the market. Investors love companies with lots of cash… Think of apple…
I’m not always right… But I’m never wrong!
NoName
Garth you are saying that America is definitely recovering.
I see that consumption of oil in USA is way off what it was
prior to crisis and still they report 3% growth. What do they grow? I mean common ? Something doesn’t add up,
don’t you find? If you have explanation on how to grow economy while consuming less oil I am all ears.
… the government will never, ever, make a homeowner to come up with the lost equity subsequent to the original mortgage being inked
Could be. I think the main intent of the OSFI reg was to force banks to periodically reevaluate their portfolio collateral, to prevent them saying “Yup, good portfolio with good collateral” right up until the wheels come off.
The collateral damage is, having done the appraisal, they’ll KNOW you can’t move to another bank, so at renewal you’ll end up paying that quaint rate that few people actually pay. I think they call it “Posted.”
“This is like having your mom plan your conjugal sked.” – Garth
My mom told me that I would go to hell if I ever “conjugated” with someone I was not married to. Also hell was the destination if you ended up divorced. I am not saying that I know she was wrong, and I guess I’ll find out one day, but it seemed a little harsh, especially given the girls I grew up with.
Parents are like Comedy Channel (CNN) talking heads. Be a little suspicious of their motives, and understand they are not looking out for you in many cases. Like everyone one else, they are looking after themselves. Even if that means justifying their decisions by making you make the same decision even though now it might be a mistake. They don’t care that times have changed, they only care to justify the fact that they put it all in a house and are planning a reverse mortgage to get them through retirement (which it won’t).
Here is a tip to the wise: You get what you pay for. In the case of your parents, you almost never have to pay up front for the service. And the advice is almost always disastrous. To you, not to them. They have something they want from you. Always go with someone who bills by the hour. Percent of assets under management is ok too, as long as you trust that hours spent is proportional to assets under management.
It’s the same as it has been. The sky hasn’t fallen
Maybe go over to the mortgage broker blogs and reassure them. Because from what I see, if I may paraphrase, they’re saying “AAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHH!!!!!! THE SKYYYYYYY IS FALLING!!!!!”
#54Devore
#19 Duncan
This is also valid for the entire market, badly performing stocks are removed regularly. Gold is still gold.
Of course they’re removed. Why would you hold on to loser stocks?
___________________________
Devore,
Do you know that after removing the bad performing stocks (some went on to bankrupt), they insert new, outperforming (fashionable) stocks, thus misleading an investor like you? Are you aware that they are thinking to include AAPL to Dow Industrial 30, thus immediately push it to 20,000 (not exact number)?
#55… An unregulated McMansion in port credit Mississauga on the lake. Clearly some
Poor architecture and design taking place, pity the person who will be stuck between two McMansions, can’t wait to see the next one gO up. This is what happens when people sell to the highest bidders. We’ve been looking there for years, and likely would have done a small Reno and stuck with the theme of the neiborhood, but they sell to developers and start all the McMansions and then everyone gets excited… Can’t stop the change now… Changes the neighborhood forever… It really is a monstrosity, If it was mine I would have put a stop to it.
I am looking for a job by the way…here is my resume:
Position Sought: Bubble Soft Landing Facilitator
Qualifications: Numerous mindless posts in various social media to the effect that bubbles end in disaster and Canada is beset by a bubble.
Cover Letter: Dear Bubble Profiteer (Political or Financial). I have been watching this epic bubble begin to crash and it has come to me that there may be profit to be gained on my part at the expense of those destroyed by the eventual fallout of the bubble and the once in a lifetime opportunity it presents. While I have spent time warning buyers to beware for some time now I would be more than willing to ply my terrible wordsmithing abilities to help prolong the bubble’s demise as much as possible. There are many ways to do this in addition to the obvious minimization of the ending of the bubble. As for remuneration I feel if I were to cause even an mere fraction of a day to be added to the crashing of the bubble that this would mean a huge amount of income for the bubble profiteers such as yourselves and say 100k after tax would thus be a nice price at which I could sell out. This causes me no moral quandary whatsoever as I feel I would be working to achieve the best possible ending to this disaster and I always though the great unwashed were rather smelly anyways.
Economic warfare…If there is such a thing and who are we and who are they in such a war? Is it by country or by economic status? Who does the military and legal system serve in all out economic warfare? Is it their respective citizenry or is it prevailing economic entities? I am sure these questions have been pondered by better men than myself so I will get myself back to work.
http://www.youtube.com/watch?v=pvqMGIn8ozo
So what would you do if you won 168 million in the lottery. Is that you Beach Girl?
http://www.weissmoneynetwork.com/learning-to-avoid-broken-investments-2-46101?mam
#21 John
That’s why this blog is entertainment….of course NO gov would ever implement that LTV suggestion by OFSI. It’s lip service directed at some in society…
Re: #34 Makavelli on 04.02.12 at 10:38 pm
Buy TLT American interest rates will plunge whereas Canadian interest rates don’t have as much room to fall. The Canadian dollar should also fall.
It hasn’t been a good time to buy bonds for quite sometime now…
All liquid. So I win at winning…
http://winjunkie.com/c/10/u/gLT6kJA
2012 has already delivered 7 times what the 2011 Indexes in equities delivered. Time for the pause that refreshes, it’s due.
WHY would anybody buy bonds now? They had a GREAT run in 2011 with falling interest rates. Now the pressure is on rising rates -poison- for bonds! (OK, you need some short, or intermediate term bonds for balance especially when you’re a retired guy like me).
50% Stocks, 42% bonds 8% cash. Thus far it’s been good for me. Would I like to see uncle Ben begin raising rates?
YES, I believe he is behind the curve a little now, a .25 % increase would be a start, then a similar increase for a while to reach a 2.5 -3% rate would appear warranted.
Just a thought. Might even help cool off horny buyers all over who think “cheap money” is forever!
I read the GEEZER blog with a touch of amusement the other day. The US raised our social security age to 67 in a phase in a number of years back. Both the government (FED) and most industry have done away with defined benefit pension plans, or scaled them back as to be practically meaningless. Yes, my full SS retirement age is 66 and 4 months. You can take it early ay 62 with about a 30% permanent loss of what you have earned at normal age, or defer to 70 with about a 7.3% pop for each year you wait. Yes, we split the Boomer generation into two pieces the early 45-54 birth years do better, 55-64 less so.
Similar to what Canadians now have to deal with.
The BIG question, GEEZER, is how long are you gonna live?
Since only the man who controls his own termination date can answer that honestly, unless he is terminated by the creator before that date….most of the US takes their benefits -at reduced rates- early.
I have not yet decided when to start those benefits. The longer I wait, the higher the monthly.
Feeding your tax-free retirement account will be the best thing one can do. One thing that comes in VERY handy in retirement is MONEY, much more so than owning a home.
It gives one the freedom to make choices. When you are broke, or nearly broke you do not have many choices.
Start early, stay on track, save something each pay day.
Oh, and drive FAST, I need the money!!
What’s wrong with holding a bond fund so long as the yield’s are high, it pays me monthly, and all of them together are like a third of my portfolio? So long as they keep spitting out money monthly I don’t really mind if the value goes up and down.
#21 John
John, G keeps pushing this mid-mortgage LTV fodder. It makes for a good blog.
It don’t matter what the OSFI has ‘put forward’; the OFSI is empowered to regulate and supervise, not legislate. Dickenson reports to Flaherty. If you argue that F don’t care about the perils of the Canadain RE market then why would he enact legislation based on a suggestion from a politically obscure body such as the OFSI?
Furthermore, even if you believe F will move mountains to have draconian legislation such as this enacted and in the process making the OFSI take the bullet, do you really believe that, right here in Canada, will be the first place on the planet where home owners are wrtiting 76,000$ cheques to cover depreciation in thier home? ….pfft….
Don’t kid yourself. G knows this won’t happen, also, and he is smarter than both you and I combined.
There is MLS – Multiple Listing Service for the general public and then there is …
PLS – Private Listing Service.
In other words people who pay with cold hard cash!
The site is the creation of a Van marketer, and repackages some MLS listings. — Garth
—
I’m going to start PNS.ca, the Private No-Limit Service for the ultra, ultra rich.
My motto is going to be: “Live it, breath it, work it… PNS”.
I can’t see a soft landing in Canadian RE myself. Home valuations and household debt are too extreme, overdevelopment in some cities too high and if Canada compares its housing bubble to the U.S., we’ve got them beat in every department (housing valuations, household debt, debt per capita, employment from housing, you name it).
The only differences between Canada and the U.S. are that we never introduced Adjustable Rate Mortgages and CMHC backstops the works… a 1.2 trillion dollar mortgage pie. Nearly half of this pie is 100% insured with the rest, privately held debt 90% backstopped through CMHC (I know, 80% LTV’s or less, but if payments get missed, the house goes up for sale contributing to oversupply which if it happens en’ masse, creates a crash just the same). The numbers are too exaggerated, too high… not to mention employment/GDP numbers too reliant on construction to land softly.
I had a cup of coffee with an MLA a couple days ago and he listened to what I had to say about the risk of household debt to Canada and then he quoted media mantra that “new homebuyers must be able to afford interest rates going up 2% before they buy. If they can’t afford a 2% hike, they shouldn’t buy a house.” 2%. A mere 2%. He was former cabinet minister. It shocks me how people can’t see whats coming for Canada over the next 5 years. His view is widely shared, by the way with other MLA’s and MP’s across the nation and that, dear readers, is scary.
Here’s why. At some point rates will go up in Canada and it’s very likely to happen between the spring/summer of 2013. I’ve gone through the reasons why (the last of the ARM’s resetting to much higher rates causing so much grief to U.S. housing are poised to reset in October of this year and I’ll gladly explain it if readers want to hear it again, the hard work’s done, its a cut n’ paste).
Bernanke knows he can’t keep rates near zero like this forever (but he’s not getting much help). The U.S. simply has too much foreign owned public debt to continue with QE’s for years on end like Japan did (and look where it got Japan). If they don’t allow bond markets to self regulate U.S. central banking becomes a hopeless ticking timb bomb ponzi scheme. Inflation will spiral out of control at some point as the world loses faith in the dollar so QE has to end but it can’t be done without a U.S. recovery and once it does, interest rates are poised to go higher not just in the U.S. but everywhere world wide. Every central banker in the world will be competing for borrowed money including us and as we go into 2014, 2015, 2016 and that competition could get fierce, especially for Canada.
Canadians simply cannot be naive about this. Nor can americans be naive about continuing to run near trillion dollar trade deficits and federal budgetary shortfalls north of 35%. Their nation is chronically undertaxed and the feds there hopelessly overspend. Defence spending to GDP U.S. numbers are beaten by only one nation and that nation is North Korea (should tell you something).
Should gold buggers (small attempt at humor there) drool at what I’m saying? Balanced budgets are still possible in the U.S. but not without major cuts to defence and social spending combined with dramatic increases in taxes. What are the chances of this happening? The world can’t blame Bernanke over budget policy, they really can’t. Government policy there, much of it still engineered by a previous government, has given him a very narrow path to follow.
Canadians think our government has its fiscal house in order in comparison but it doesn’t really, not when one compares and contrasts its intergovernmental debt to GDP to the rest of the world:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html
Three things should come to mind when one looks at the list of where we rank. Firstly, bond investors don’t look at federal debt alone, they look at intergovernmental debt, the sum total of all public debt to GDP because this number more accurately reflects the risks of currency devaluations should a bond investor buy a treasury bond or bond of any kind really, in a foreign currency. Secondly, we are 20th at 82% est. in 2011 and the economies that beat us are on their way to insolvency. Zimbabwe, Ireland, Portugal, Italy, Iceland, Lebanon, Jamaica, the nations that have more debt than Canada are nations that are at or near a currency crisis. 100% intergovernmental debt to GDP is considered to be the threshold depending on who you owe and how much of the world market share your currency has.
Thirdly, the U.S. distorted their debt to GDP numbers by including federal debt only with the CIA factbook link I’ve provided. Of all the nations on the list, the U.S. was the only nation not to include intergovernmental debt (thats CIA for ya). Click onto “economy in this link and readers will see it in the fine print:
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
Add state and municipal debt to federal debt and intergovernmental U.S. debt to GDP is creeping well above the 100% intergovernmental debt to GDP threshold and look where Japan is in this link. We ask why these two nations aren’t experiencing a currency crisis and the answers are the over 90% of Japan’s debt is domestically owned so they’ve managed to keep their debt in house. Japan has also ran surplus’s for decades now (until last year) so corporately and trade wise, Japan is quite strong but I think they are nearing the wall.
The U.S. however, is another story. Their percentage of foreign owned public debt has dipped to 47% (federally) but only through QE campaigns (the U.S. borrowed plenty from themselves since 08′) from Bush era foreign owned debt levels past 50%. (note: this link below only counts federal debt, not intergovernmental)
http://www.csmonitor.com/USA/Politics/DC-Decoder/2011/0204/National-debt-Whom-does-the-US-owe
So one might ask, whats keeping the U.S. currency afloat? 1 of every 4 nominal dollars world wide is in U.S. currency. It is, quite simply, too big to fail and Asia/Saudi’s own a big chunk so the party keeps a rollin’.
Lets look at the list again:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html
We added 2% debt to GDP federally last year but provincially and municipally we’ve add another 3% or collectively 5% intergovernmental debt to GDP in 2011. If we do this for 3 more years, Canada’s intergovernmental debt to GDP soars to 97%. Add a deflating RE bubble to the equation bringing the spectre of negative GDP growth and it could hit 100% in just 3 years. Folks, thats where Canada was at the height zenith peak of our currency crisis back in 95′.
Alarm bells should be ringing here and yet, our governments and media is silent. This nation’s governments either collectively start balancing budgets from here on in or 3 years from now we dance with accelerating interest rates. Thats our choice going forward and honestly, with the household debt levels we have now… (95′ was nowhere near these levels), our nation would be a dead duck with higher rates and with the governments we’ve got now, there is simply no political to face this.
The only solution I can see going forward is much higher taxation, dramatic cuts to spending and a major dose of QE to restructure our household debt to 30 year terms. Thats right, 30 year terms that the banks would never go for in this nation because of the dramatic bite into profits, unless they got into trouble. In late 08′, early 09′, Mark Carney suggested the possibility of using QE, anyone remember this talk about QE in Canada? Mark used a 7 to 8 year timeline when he mentioned this roughly 3.5 years ago, this is how far ahead our central banker is with this issue.
Sorry about the length of this post, but I can’t keep stuff like this a secret. Canadians should not feel economically safe thinking interest rates will stay low indefinitely in Canada. There’s no justifiable reason to believe this is the case. I hope I’ve helped explain why.
(e) general confidence
— what happened to the opportunity that you were forecasting dude ?!?!
I thought DIY are doing puts on VXX?
No? Optimistic?
“No Bust In Canada”
http://seekingalpha.com/article/459941-canada-vs-australia-no-bust-in-canada-but-a-recession-is-probable
HAM flying in helicopters around White Rock was a sales scam
http://whispersfromtheedgeoftherainforest.blogspot.ca/2012/04/mon-post-2-more-on-latest-cam.html
Waiting for history to repeat or just rhyme. Working in Montreal in 1973 -1974, we automatically got a 10% raise at the end of the year as inflation was so high. You could fill your gas tank for $5 and never thought about gas prices or eating out. A big mac cost 35 cents and we made $5 an hour.
Today just a Sandwich anywhere cost $5 so the equivalent pay should be $100 an hour which only realor can dream of making. A Toyota Corolla tin box cost $1800 but would need an engine rebuild at 35,000 miles.
In 1981 I bought a 1400 sq ft 3 bdrm apartment at 627 The West Mall in Etobicoke next to Mississauga for $60,000 directly from CHMC. Morgage interest rate was 17%. Todays price is $184,000 with a Maintenance fee of $800 per month, includes heating, air conditioning and Hydro, indoor pool etc. The Realtor had an office in the building and had many units for sale in the area. Apparently people paid $90,000 and walked losing their downpayment.
Businesses and traffic were very quiet driving down Dundas St. in Missisauga compared to the Zoo today.
If cycles do repeat are we overdue after 40 years or do we have Maestros like Bernanke and F able to orchestrate things and destroy our savings and reward the speckers? We are seeing the greatest transfer of wealth in history.
Aussie Update
Rates will go lower, we keep getting told. Just one question when?.
RBA, Aussie Central bank leaves rates on hold at 4.25 per cent
http://www.news.com.au/money/interest-rates/reserve-bank-of-australia-leaves-interest-rates-on-hold/story-e6frfmn0-1226317619635
More jobs go, retail, building, finance and manufacturing taking a bath.
Metcash, the country’s biggest grocery wholesaler, will shed nearly 10 per cent of its workforce and take a multi-million dollar hit as it restructures its business in response to difficult trading conditions.
The company behind brands such as Franklins, IGA and Mitre 10 said it would close 15 regional Campbells Cash and Carry branches, with 315 jobs to go.
http://www.theage.com.au/business/metcash-cuts-478-jobs-20120403-1w9im.html
Macquarie bank, Australias Goldman Sachs, you muppet.
Now they’re best known for greed, buying government support, profiteering at the expense of clients (or muppets in the Goldman Sachs vernacular), truly massive staff bonuses, insider trading and taxpayer-funded bailouts.
To its many critics, this is the wrinkled, ugly face of crony capitalism.
Nevertheless, the behaviours for which it is so vocally criticised have helped US-listed Goldman Sachs and to a lesser extent, Macquarie Group, to survive the GFC largely intact.
http://www.smh.com.au/business/intelligent-investor/macquarie-vs-goldman-sachs-20120402-1w8ef.html#ixzz1qvEIRsfi
“(d) China is soft-landing” ? I guess so, if you believe the propaganda of the cleptocratic communist cadres in the People’s Daily.
http://english.peopledaily.com.cn/102774/7747364.html
Green shoots in America? Soft landing for China? Nobody cares about the financial crisis in Europe?
Now sing with me:
So long sad times
Go long bad times
We are rid of you at last
Howdy gay times
Cloudy gray times
You are now a thing of the past
Happy days are here again
The skies above are clear again
So let’s sing a song of cheer again
Happy days are here again
Altogether shout it now
There’s no one
Who can doubt it now
So let’s tell the world about it now
Happy days are here again
Your cares and troubles are gone
There’ll be no more from now on
From now on …
Happy days are here again
The skies above are clear again
So, Let’s sing a song of cheer again
Happy times
Happy nights
Happy days
Are here again!
John #21 – I posted a few days ago about a renewal on a commercial mortgage I had. The commercial mortgage was “securitized” as are almost all home mortgages now. That is, the mortgage was taken out at the TD bank. But they bundled it with a bunch of other mortgages, and it was sold to the public as a CMBS – commercial mortgage backed security. The exact same process happens with residential mortgages.
This mortgage then became managed by First National.
Six months before renewal they sent me a letter stating that the mortgage had to be paid in full upon expiry – no renewal. Period.
So if you think that there is anything, or any reason that a mortgage lender is required or forced to renew, think again.
Two points I’d like to make today.
1. We are all getting poorer. Here is how
Let’s assume a wage increase of 3% per year. Inflation sits at 3% so it should be balanced but it’s not because of taxes. At a 40% tax rate you become that much poorer. Multiply this for the last decade and you see why Canadian household debt sits at 150%.
2. No one should hold bonds. I know Garth likes balanced portfolios but why lend out your money for a loss? The interest will not cover inflation and the taxes are killer. 100% equities might result in losses but bonds will guarantee losses.
Sophisticated investors hold bonds for stability in balanced portfolios. They are also as capable of producing capital gains as equities. — Garth
Sometimes you wonder are people caught up in the frenzy and can’t see the path ahead? Or…can the development community just be as stupidly blinded by the shine from their Bentley’s??
GTA municipalities have been flooded with proposals for large condo units in the last two months. 20-30 story units pushed into lots bordering older subdivisions. Some even proposed in former farming fields.
Vaughan, Ontario has been awash with proposals, almost all being passed with the excuse the city doesn’t want to face the OMB…*Cough..corruption..cough*
One smaller proposal is a 7 story condo across from the beloved Kortright Centre (large protected forestry centre). Two 30 story condos at Jane/7, (in addition to huge Expo condo development)..2 more 20 story condos at Weston/MjrMac. A cluster of condo towers is being proposed in former car dealership area of hwy 7/near Martingrove….the list grows weekly.
Has no one bothered to read the papers? I can’t see how these units would sell for $350k+ now. Who the hell wants to live in a condo this far north, when you could at least buy/rent one closer to Toronto with all the amenities that come with it.
I’m already seeing that swaths of cheaply built town homes, sold as glamorous living, are now looking like slum areas. Since many hare being used as rentals/rooming homes..
There will be entire throw away areas of these units and condos. This makes no sense. Where are the jobs?
I have a very bad feeling.
@ #79 daystar:
Interesting that you note Canada has all of the signs/aspects of U.S. housing bubble, except that we don’t have ARMs.
However, given that a decent chunk of the market have variable rate mortgages (I don’t know the percentage, but it’s obviously not zero), and nearly the entire market is on a 5-year term or less, you have almost every mortgage in Canada resetting withing 5 years.
So, no – we don’t have the crazy mortgages that reset at a rate 5% or 10% higher within just 1-2 years, but we have the GIANT reset of $1T+ in mortgages all within 5 years.
This says it all:
ECONOMICS – 2011/ 2012 and into the near future.
Mary is the proprietor of a bar in Dublin. She realises that virtually all of her customers
are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she
will go broke.
To solve this problem, she comes up with new marketing plan that allows her customers
to drink now, but pay later.
She keeps track of the drinks consumed on a ledger (thereby granting the customers
loans).
Word gets around about Mary’s “drink now, pay later” marketing strategy and, as a
result, increasing numbers of customers flood into Mary’s bar.
Soon she has the largest sales volume for any bar in Dublin. – All is starting to look rosy.
By providing her customers’ freedom from immediate payment demands, Mary gets no
resistance when, at regular intervals, she substantially increases her prices for wine and
beer, the most consumed beverages.
Consequently, Mary’s gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognises that these customer
debts constitute valuable future assets and increases Mary’s borrowing limit.
He sees no reason for any undue concern, since he has the debts of the unemployed
alcoholics as collateral.
At the bank’s corporate headquarters, expert traders figure a way to make huge
commissions, and transform these customer loans into Drinkbonds and Alkibonds. These
securities are then bundled and traded on international security markets.
The new investors don’t really understand that the securities being sold to them as ‘AAA’
secured bonds are really the debts of unemployed alcoholics. They have had a “rating
house” certify they are of good quality.
Nevertheless, the bond prices continuously climb, and the securities soon become the
hottest-selling items for some of the nation’s leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original
local bank decides that the time has come to demand payment on the debts incurred by
the drinkers at Mary’s bar. He so informs Mary.
Mary then demands payment from her alcoholic patrons, but being unemployed
alcoholics they cannot pay back their drinking debts.
Since Mary cannot fulfil her loan obligations she is forced into bankruptcy. So she now is
broke.
The bar closes and the eleven employees lose their jobs.
Overnight, Drinkbonds and Alkibonds drop in price by 90%.
The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing
new loans, thus freezing credit and economic activity in the community. The suppliers of
Mary’s bar had granted her generous payment extensions and had invested their firms’
pension funds in the various Bond securities.
They find they are now faced with having to write-off her bad debt and with losing over
90% of the presumed value of the bonds.
Her wine supplier also claims bankruptcy, closing the doors on a family business that had
endured for three generations, her beer supplier is taken over by a competitor, who
immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are
saved and bailed out by a multi-billion Euro no-strings-attached cash infusion from their
cronies in government.
The funds required for this bailout are obtained by new taxes levied on employed, middle-
class, non-drinkers who have never been in Mary’s bar.
Now, do you understand our current economic situation!
You were noticably absent from the real estate roundtable this time Garth in the post. Scared? (kidding) Your question to Sherry Cooper, well, lets just say a broken clock is right twice.
Anyway, it looks like Harry Stinson picked up the ball this time ,where you left off.
As for Brad Lamb, selling his condo for 1.7 all the while pumping the immigrant and “manhattenization” of T.O story never gets old to the RE humping crowd. Looks like he led the cheering section for the rest of the “real estate is god” crowd on that panel.
I was not present, as I had to travel to Atlantic Canada that day. — Garth
1. Olympics were a special case they will not go back to Whistler. 2. You may know what will happen, but your timing is poor. 3. We are now in a managed economy like China and USSR(used to be and want to go back to) and it has nothing to do with Keynes and more like Marx.
“I just failed. — Garth”
Can’t them all can we? :-)
Lovely writting as usual Garth.
Very much agree on financial assets, too bad most wil have missed he boat.
Meant “win them all…”
Penthouses used to be premium units. But today? Who wants to sleep directly under 20 cell phone antenna towers?
Duct tape would have been a much better match for that car’s paint job than box tape. Some people just have no sense of style.
The sky isn’t falling, and the future is looking pretty good. Why? A paradigm shift is here now. One which obligates people to choose community principles. Self-responsibility. Real health care ( self-care). Family. Mentorship. Real wealth defined in visible producivity and competition. A dramatic reduction in the use of “technology” as a “pain-management” strategy. Connection among people, not between faces or twits. This evolution has to happen, as the escaped Canadian real estate story shows.
You can see the old paradigm jumping around: “Real Estate out, financial ponzi in.”
Why? It’s the trend set by “the big boys”. Those biggies are not and cannot take the world into it’s human reality, because they are literally junkies. And life is about value. Productivity. Give and take.
Forget about “utopia”. Dog eat dog, and political duck and dive will always exist. Perfection is not the goal…it’s inhuman and an evil in itself.
But the “real estate-finance-big boy” isn’t leadership. Can you tell the difference between a man and a woman in Canada? No you can’t. Men have character, and this “big boy” god is one completely devoid of that.
Look at family dynamics….that’ll show you where it’s at right now. Keep it simple, and the real picture appears top to bottom.
Hard to believe the rally in equities will persist. Seasonals were positive and the institutional investors were all in and now getting out. Market breadth, the number of stocks driving the rally, is getting smaller. ECRI, who has a good track record of forecasting recessions, is calling for a slow down in summer/fall. Gasoline prices peaking. Seems like we are waiting for a catalyst for a sell off. Next quarter earnings as a trigger?
Seems like we are in for rolling periods of recessions and growth. That is, the economic cycle is getting shorter. Gotta be a trader.
#244 Ronaldo yesterday
I do not know how things are going with the project you refer to, but I expect prices are suffering like most Okanagan waterfront.
10 years ago the Canadian dollar was worth considerably less than its U.S. counterpart, and U.S. average housing prices were higher than Canada’s. This provided the Okanagan with a steady influx of retirees ( especially from Alberta ). Now that the currencies are at par, and Okanagan prices are 3 times those of Arizona, the Albertan retirees are buying in Phoenix instead of Kelowna.
Some Kelowna developers appear unaware of this and are betting the oil boom will soon spawn a new wave of Albertan investors.
We shall see…………
still pissed about the gov reneging on my OAS.
slippery slope and my butt’s all greased up.
Are Student Loans A Ticking Time Bomb For The Economy?
Four years later, we’re still standing on the rim of a smoldering crater where the housing market used to be, pledging we’ll never let another financial disaster like that happen again. But some prognosticators worry we could soon be bracing for another blast, judging by the growing number of people who can’t pay back their student loans.
More than 80% percent of bankruptcy lawyers have seen an increase in clients looking to get out from under their student loans, according to the National Association of Consumer Bankruptcy Attorneys.
Read more : http://consumerist.com/2012/03/are-student-loans-a-ticking-time-bomb-for-the-economy.html
So much for economic recovery.
How is next generation going to be able to afford that new house in the States ?? They’ll never be able to buy a house with the student loan debt this big.
‘By the way, I told the realtors all this. Then narrowly escaped, in a stolen Benz.’ – Garth
LOL, however, you should have finished with, “in a stolen BMW (see photo above)”.
Is downtown Toronto out of land for houses – NOT condos???
OK I got into a heated debate with my family this weekend. Everyone thinks pricing will never be coming down in Toronto because we are running out of space for houses. They say the same thing happened in London or NY. The core of houses isn’t going to go down in price. Blame foreign money and blame running out of land?
I don’t buy it.
One thing they kept saying was you can barely find available homes in the area. I have a few friends that are looking and a friend who finally had to up his bid to win a tiny shack which requires a lot of work and sold for over 500k.
So where is the supply??? If you can get amazing value for your home right now, why is nobody selling?
Rates are low, but so is supply. Fear of never being able to afford in the city is high. Never got that heated before at the dinner table.
Who’s right???????
#21 JOHN: “…the government will never, ever, make a homeowner come up with the lost equity subsequent to the original mortgage being inked…”
******************
Do you think the banks will absorb the loss?
Sell Canada. Buy USA.
#29 NAGA on 04.02.12 at 10:27 pm
“…..that there are merits with this approach.”
What, that the city is rubbing it’s hands in anticipation of the additional tax revenue….that it now blocks a whack of light and view from it’s immediate neighbours, is a blight to others in the community and the fact that it’s bloody ugly? The goal of taking full advantage of the view could be achieved without being anywhere near as architecturally aggressive. Talk about not being clear on the concept of integrating with community. Shame on the city for allowing this sheer ugliness on so many levels.
http://www.zerohedge.com/news/when-will-retail-start-buying-stocks
The ever higher market is just a confidence building exercise by the central banks. Everyone should be knowing this by now.
#89 I’m stupid… Good post. Now plug in a more reasonable number for inflation that is not spewed by the gov’t, and also realize that for most working people real wages have decreased. The situation then becomes even worse.
Bonds are not significantly correlated with equities and because of herd behaviour, have historically demonstrated negative correlation, so you would need to have bonds in your portfolio for those times when there is a panic or downturn in the markets. Otherwise, you’re correct that holding bonds that pay less than inflation is pretty stupid, but then so is our beloved central-bank manipulated economic system, so the stupidity balances out nicely.
And what you get is what you see. A population that is dumbed-down, drugged-up and ready to enact violence. Or in other words, mind-controlled. If I say it enough, will it sink in I wonder?
Eh hem… This just in and is front page news. I’m curious to know what page in the Canadian publications this is found today. This is going to get interesting. The ole’ Canadian-tax-payer-backed CMHC cannot support this. Sometimes it isn’t only housing that can damage or take down a bank’s reputation and finances. The U.S. is suing Royal Bank of Canada for “washing” hundreds of millions of dollars in fraudulent trading. Again, not so *conservative* after all.
http://money.cnn.com/2012/04/02/markets/royal-bank-canada-sued/index.htm
http://news.yahoo.com/us-sues-royal-bank-canada-massive-fraud-010221584.html
http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_784788.html
http://news.xin.msn.com/en/business/storyviewer.aspx?cp-documentid=6066623
http://www.channelnewsasia.com/stories/afp_world_business/view/1192838/1/.html
http://www.google.com/hostednews/afp/article/ALeqM5jyTJ1aFjw4R6kiKdOx9fSr6NXJ3g?
docId=CNG.d3426359c7bf8d0824de3e71ac0df446.3f1
http://www.wisn.com/r/30820472/detail.html
RBC sounds a little like, or I should say a lotta like Goldman Sachs.
Oh, and I might add the charges aren’t “meritless.” That type of attitude won’t fare well for RBC in the end. We’re talking nearly a billion dollars, and the investigation went on for nearly two years to determine the validity of complaints both internal and external. These charges for such a massive case are not brought about by “meritless” accusations. Someone has been naughty and is gonna get a spanking.
#92 simkev… nice, you do illustrate how the banksters have used waning employment and domestic North American economic output to create a housing bubble…,
but you are making a rather large assumption, that Mary needs to borrow from the local bank in the first place. The whole scenario rests on this premise. But you don’t show why. Can you kindly revise?
@LuckyRenter, post #104;
If what you say is true for the United States, where property values have corrected back to sensible values, it gives you a sense of where property values are going in Canada, especially in over valued markets like Toronto area.
#41 Chris,
There’s already been significant changes (ie. tightening up) in the lender world Chris. Check the mortgage broker blogs for the details.
The real question is whether these changes are the tip of the iceberg or not; and how small capital base lenders, like mono-lines and credit unions, react going forward.
Do you mean that there hasn’t been any changes for conventional LTV mortgages? If so, that is absolutely correct as of today.
simkev: Mary is the proprietor of a bar in Dublin.
good story simkev
simkev sounds slavic, but you’re not
Re 90 cumberland-
We should be vigilant about the preservation of property rights, they are eroded everyday.
The complaint here is with existing zoning- and zoning is not for the logical, rational mind.
I got a letter from my councillor in TO saying Toronto wants to eliminate appeals to the Ontario Municipal Board, and set up an appeals dept at City Hall, she said Mississagua wants to do the same. So if you lose at their committee of adjustment (your judges are councillors) you can appeal to different councillors. There is no educational requirement to be a councillor. At the OMB youwould go with your lawyer and planner in front of judges who specialize in land use and argue for the property rights that were denied you by city councillors. Judges are not beholden to voters.
The city wants to eliminate appeals to the OMB because so many of their decisions are overturned.
At #106: Sean, stick to your gut intuition. First, Toronto is anything but running out of land. Google Earth it and you’ll see the copious amounts of untouched land that surrounds the city North, East, and West. And, all the land is basically flat as a pancake, which makes for easier development. Think Miami, Florida circa 2002, only much colder and no beach or palm trees.
#88 (You need to know the whole picture on this)
“That is, the mortgage was taken out at the TD bank. But they bundled it with a bunch of other mortgages, and it was sold to the public as a CMBS – commercial mortgage backed security. The exact same process happens with residential mortgages.
This mortgage then became managed by First National.”
The Td Mortgages in this portfolio were “TD Financial Services” mortgages, not standard TD Mortgages.
This was a “C” lender equivilant to xceed in the past who was providing high ratio mortgages to low credit credit applicants, deals that the 5 Bank’s and CMHC could not touch with a 10 foot pole.
When CMHC modified the Refi ceiling to 85% this in fact Nuked this style of lending. There is no take out opportunity for these applicants using this style of lending.
It was self insured by a division of TD. Charging similar premiums as CMHC, rates in the 7 -8% range, and were still going initially to 95% ltv.
But clients who have such poor credit or non confirmable income, this lender would go to 75% TDS, is the ultimate of giving people who should never buy a house the means. But just like when Xceed closed shop, when that self insured mortgage matures, regardless of your pristene repayment history, if that lender is gone, you don’t have anywhere else to go.
It was a rent to own program with no possibility to actually own at the end of the term.
Cheaper to rent.
#11 Can it be? on 04.02.12 at 9:29 pm
The epitome of house hornyness http://www.topca.net/documents/90_Cumberland_Drive_PHOTO_ALBUM_March_2012.pdf
Check out 90 Cumberland in Port Credit. McMansion indeed and an uproar as is dwarfs the homes around it. Emergency meeting tomorrow… How could this happen… The craziness that’s everywhere.
————————–
As Solomon said, “There is no new thing under the sun.” I remember way back in early 1980s I think, when visiting relatives in NE end of Toronto. They were complaining about Chinese buying up houses, tearing them down, then building a huge box to within feet of the property line. We jumped in a car and went looking. I think it was either Scarborough or North York. We drove down this street and noted the typical houses then came to this one newly-built eyesore that dwarfed its neighbours. I couldn’t believe the city would allow this idiocy. Not long after that the RE market took a dive. Human nature never changes!
For beat up homeowners with inflated mortgages, the road to recovery looks ominous. Economist Robert Shiller, co-creator of the Case-Shiller housing price index, said last Tuesday that house prices may not recover within this generation’s lifetime.
https://www.thetrumpet.com/9263.8110.0.0/economy/your-house-will-never-recover-its-value
Definitiely invest in banks; they’ve got it made:
http://seekingalpha.com/article/472171-oh-canada-imposing-austerity-on-the-world-s-most-resource-rich-country?source=email_macro_view&ifp=1
How is the sale of Sherry Cooper’s home coming? Price reductions? Sold?
#88 Terces on 04.03.12 at 5:48 am John #21 – I posted a few days ago about a renewal on a commercial mortgage I had. The commercial mortgage was “securitized” as are almost all home mortgages now. That is, the mortgage was taken out at the TD bank. But they bundled it with a bunch of other mortgages, and it was sold to the public as a CMBS – commercial mortgage backed security. The exact same process happens with residential mortgages.
This mortgage then became managed by First National.
Six months before renewal they sent me a letter stating that the mortgage had to be paid in full upon expiry – no renewal. Period.
So if you think that there is anything, or any reason that a mortgage lender is required or forced to renew, think again.
——————————————————-
I think Commerical Mortgages are different the mortgages for residential homes? Commercial mortgages i think, usually have different terms which can allow the bank to call in the loan???
#91 T.O. Bubble Boy on 04.03.12 at 6:48 am
Exactly. I explained the U.S. housing bubble bust the best I could in the link below and I urge readers to check it out. I should point out that ARM’s are nothing new historically in the U.S. but they were historically new to a market bouncing off near zero central bank rates for 3 years running and that’s been the historical difference in the U.S. . ARM’s reset to higher unaffordable interest rates fuelling bankrupcy rates and housing devaluations in combination with a serious housing oversupply which is still keeping U.S. housing from recovery:
http://www.greaterfool.ca/2012/03/27/written-in-the-wind/
#99 daystar on 03.28.12 at 2:27 am
… and the thing is, like you alude to, if rates stay cheap here til’ 2014, it will be a full 5 year cycle of 5 year term holders (roughly 60% of all mortgage holders) renewing into a higher interest rate environment, some of them much higher. Those who bought homes over the last 2 to 3 years including this year and likely most of next year are the most likely to get burned and/or go broke from capital losses.
In answer to your question, VRM’s make up 29% of the mortgage pie (2 year old stat I think). Cheers.
Soft landings, pixie dust and the tooth fairy.
Yeah, right. Well, maybe the tooth fairy.
So far, doomers have been 100% wrong. — Garth
@daystar #79
You are right to point out that Canadian public debt to GDP ratio is about 85% (does this number include (local ) municipal, I’m not sure?)
But in the US the same calculation (fed+state+local) gives 85% if GDP if you exclude the debt held by the Social Security Trust Fund. Social security debt is not served and can be affected by (inevitable) reforms ans legislation (just as our imploding health care will…)
http://www.washingtonpost.com/wp-dyn/content/article/2011/02/20/AR2011022003201.html
(I believe the right way to calculate debt is to factor in all the borrowing you actually have to server, that’s what the above numbers are, although Canadian numbers are likely worse since many public institutions have debt as well, ex: hospitals…)
As you mention the US are “undertaxed”, at least compared to us, that gives them fiscal margin we surely dont have. Also economic growth perspectives are IMHO much better in the US. Not only that but the US is recovering, we yet to have to solve our houshold debt and RE unbalances…
In short the US situation is better than it looks, better than ours and most certainely better than Japan, and ours is already very bad and about to get worse.
#72 Tony on 04.03.12 at 12:55 am
So you’re saying US interest rates will fall to zero? And Canada will creep lower as well? I call BS on that
so far the doomers have been 100% wrong-Garth
Tell that to people living under bridges my fine man.
That was inane. — Garth
#92 Simkev.
That just about nailed it.
Gartho, sorry I haven’t posted lately. (burp) Vegas was bananas. I went to the roulette table straight away. Considering the current climate in the Sates of lately, I was hesitant to, um, bet on black. But what the heck, I, er, gave a shot and you know what? I won! I took half abd let it ride and I won again. I made more money than a year’s salary of 11 of those Foxxcon factory workers over in China. However, I puked on myself but unlike Rama, I didn’t get kicked out. I just asked the waitress to bring a side car of soda along with my triple whiskey and gave a quick rinse. Then I went over to a brothel. Hey, did you know they have guys working there now? Anyway, I spent all of my winnings paying the brothel workers to act out my Greater Fool sexual fantasy, I mean, screenplay. Anyway, Garth, we’re screwed if we buy a house and we’re screwed if we don’t. Enjoy life while you can, don’t let anyone judge you and when you die, you won’t get charge a fee for carry-on luggage.
@Ben, post #123:
That may be true, but in reading the article I flash back to another nostalgia trip to 1994. It’s complete with memories of Kurt Cobain’s death in this month of 1994, the annular solar eclipse in May of that year, music like Superunknown by Soundgarden or Connection by Elastica. It also brings back memories of the early days of the show X Files. Another nostalgic memory is that year was when the “expert” analysts said the housing market in both Canada and the U.S. would flatline forever because all the Baby boomers have already bought houses.
Fast forward to the present, it’s all the talk of doom and gloom that most likely signals a market bottom, and a good time to buy in most if not all American towns and cities. My suggestion is, if you are looking to buy a house in any American city is to look for a place with good access to public transit. If peak oil is for real and is in the present or past, high petrol and diesel fuel prices are here to stay.
ALBERTAGUY, post #108 is right, sell Canada and buy USA.
gas priced up to $1.40 tomorrow… that will hurt those mortgage payments more too when there is less money to go around.
I was in NS on the weekend. Mid-grade $1.50, super $2.01. — Garth
#89 – I’m Stupid –
“2. No one should hold bonds. I know Garth likes balanced portfolios but why lend out your money for a loss? The interest will not cover inflation and the taxes are killer. 100% equities might result in losses but bonds will guarantee losses.”
PH&N Bond Fund – O
9.26 2012 to March 31st
5.54 2011
10.46 2010
2.99 2009
4.59 2008
5.80 2007
5.44 2006
5.38 2005
10.83 2004
10.05 2003
PH&N High Yield Bond Fund – O
6.54 to Mar. 31 2012
9.56 2011
24.17 2010
1.18 2009
1.11 2008
10.93 2007
6.86 2006
7.45 2005
19.45 2004
7.94 2003
So you see, had you held bonds even from 2000, you would not have had a losing year. It is not stupid to hold bonds in your portfolio. In fact, had you just held these two funds over the last 12 years you would have more than doubled your money and slept well and not have had to be concerned about the stock markets crashing. Glad I made my move into bonds in January of 2008 even after my so-called financial advisor said it was against conventional wisdom. Yea right?
THIS “RECOVERY” IS JUST ANOTHER $4 BILL…
Your own personal research assignment starts with reading the following post:
#92 simkev “…Now, do you understand our current economic situation!”
Of course I do! Utterly brilliant! Send this post to the ECB HQ in Frankfurt!?
AND NOW THIS:
Garth: “…And, of course, interest rates will be higher long before you expect. I mean, just look at the stock market…Hell, we’ve just seen the S&P’s performance eclipse that of gold…This is happening because (a) companies are making boodles of money, (b) America is absolutely, irrefutably, unmistakeably strengthening, (c) Europe is a mess, but nobody cares anymore and (d) China is soft-landing…”
THERE IS A PROBLEM WITH THIS, THE UNKNOWN OUTCOME(S)…
This so-called US recovery can’t be made whole while the other two legs of this world economic ahem “stool” of East Asia and the EU are, respectively, getting weaker or is effectively done like dinner under current economic constructs.
The Yanks pulled off economic miracles in the good old days of the 60s-through-90s when the Mighty Eagle spread its military/industrial goodness and light as the Soviet nightmare eventually imploded and the “end of history” emerged.
But, dammit, history started back up again! The nerve! From 2001 onwards is been a crap show.
With US debt levels continuing to soar like an eagle to ever new highs, making any economic “sunshine” nothing more than a mirage, we don’t know what will be the outcome because nothing like this has occurred in economic history before to such a degree.
Garth’s portent of higher interest does not include the most serious of potential unintended outcomes: ramping up the still-simmering currency war by sovereigns using their own monetary policies to further degrade their currencies for whatever minute trading advantage they can figure out.
Higher interest rates would most likely end any US recovery, do who knows how much more damage to Europe, never mind the impact on China’s higher internal economic costs brought about by increasing labour costs and ever more restrictive bank lending policies for smaller businesses there.
We are nowhere near out of these woods. A US recovery based on cash-for-clunkers, more food stamp issuings, and lipstick-on-pigs “official statisics” on joblessness and foreclosures is just gunking up the wheels of everything.
Also, don’t count on the “world’s biggest company”, Apple, to bail out the Dow and the rest of the know world. It will not happen.
But the one thing I do know, because I can sense it, for us the Canadian real estate is now the riskiest investment “opportunity” extant at this time.
Here in Victoria, real estate stas indicate a miasma is settling in, as we wait for public sector cutbacks, and their effects on the private sector.
Saw this in the 80s and 90s, BTW. Same story, same outcome…it makes Victoria, one of Canada’s prettiest backwater enclaves, even more backwaterish!
That’s good.
http://www.canequity.com/rates/prime_rate.stm
An interesting chart on the prime rates in Canada over the years. Kinda tells you where interest rates are headed next along with house prices……
#104 LuckyRenter –
”How is next generation going to be able to afford that new house in the States ?? They’ll never be able to buy a house with the student loan debt this big.”
http://www.cnbc.com/id/46930173
I suspect that these guys are banking on them renting.
#106 – Sean
”So where is the supply??? If you can get amazing value for your home right now, why is nobody selling?
Rates are low, but so is supply. Fear of never being able to afford in the city is high. Never got that heated before at the dinner table.”
Same story in Vancouver. Talked to daughter of a friend. They bought in 07 for around 750m…old 1920’s place and needs complete redo…still same old single pane windows, sloping floors, old wiring and plumbing. Suggested that they look at selling if they think its worth the 1.4 million they say it is and cash in on their lottery ticket, rent and wait for prices to come down then rebuy. The answer I get is, ” if we sell we may not be able to afford to buy again and the house down the street is listed at 1.8 million right now. Prices will never go down in Vancouver cause its different here and has a lot to do with lack of land and the Chinese buying up everything.”
I shake my head in amzement. I tried.
I recommend everyone concerned enough to file a complaint through the CBSC within the week regarding global news.
http://www.cbsc.ca/english/complaint/index.php
“Clause 5 – News
It shall be the responsibility of broadcasters to ensure that news shall be represented with accuracy and without bias. Broadcasters shall satisfy themselves that the arrangements made for obtaining news ensure this result. They shall also ensure that news broadcasts are not editorial.
News shall not be selected for the purpose of furthering or hindering either side of any controversial public issue, nor shall it be formulated on the basis of the beliefs, opinions or desires of management, the editor or others engaged in its preparation or delivery. The fundamental purpose of news dissemination in a democracy is to enable people to know what is happening, and to understand events so that they may form their own conclusions.
Nothing in the foregoing shall be understood as preventing broadcasters from analyzing and elucidating news so long as such analysis or comment is clearly labeled as such and kept distinct from regular news presentations. Broadcasters are also entitled to provide editorial opinion, which shall be clearly labeled as such and kept entirely distinct from regular broadcasts of news or analysis.
Broadcasters shall refer to the Code of Ethics of the Radio and Television News Directors of Canada (“RTNDA”) for more detailed provisions regarding broadcast journalism in general and to the CAB Violence Code for guidance with respect to the depiction of violence, graphic reporting of delicate subject matter or the use of explicit language in news and public affairs programming on television.”
For those of you in other parts of the country, this just in from Richmond:
$1.63 regular Shell 22940 Westminster Hwy & Gilley Rd
Might be time for me to trade in the V-12.
#120 – The American – Your right, I don’t think Toronto is running out of land either. Neither is the world according to this study. See link below.
http://www.economist.com/blogs/dailychart/2011/10/world-population-1
NS was tired of multiple cent increases/decreases at the pumps so now price changes happen only once a week and they usually pad the price a bit. At least you can still get a decent donair. Here in TO you can get two mini donairs for 12 bucks plus tax and tip. Each one is done in two bites. Garth when is the donair bubble gonna pop? Screw it 12 dollar donairs for dinner…
#129 pbrasseur on 04.03.12 at 11:51 am
Canada’s intergovernmental debt to GDP is 83.5% CIA 2011 est. so I see where you could extrapolate a current 85% est. number (although I’d say its at 83, 84% factoring in GDP growth) and in answer to your question, intergovernmental does include municipal debt.
U.S. intergovernmental debt to GDP is accurately reflected here:
http://www.usdebtclock.org/
However… state and local (municipal) debt only factors in 2 types of bonds so I wouldn’t trust these numbers without further research into the other types of bonds state and local governments issue meaning total state/local and therefore intergovernmental debt should be higher but how much higher, accurately its hard to say ’til one looks into it but another 2 trillion wouldn’t surprise me.
According to the numbers on this link, 15.6 trillion federal and 2.8 trillion state/local add up to 18.4 trillion worth of intergovernmental debt divided by a 15.1 trillion GDP for a rough 121.5% intergovernmental debt to GDP ratio which compares to Greece but I should also point out in the same breath that last year the U.S. treasury had 3.4 trillon worth of cash that could be applied against this debt. As well, there was a major MBS bailout in the bond markets to a rough guessed tune of 2.3 trillion? (where the true value of this bailout is now however, would be far less but on CIA balance sheets writedowns would has of yet not occured)
Nevertheless, take those numbers into account and the federal balance sheet is looking much better (18.4 – 5.7 = 12.3 divided by 15.1 = an 81.5% intergovernmental debt to GDP ratio. Add this year’s deficit of 1.3 billion and a conservative 30% writedown of MBS’s and total intergovernmental debt grows to 14.2 trillion divided by 15.1 or for a revised 94% intergovernmental debt to GDP ratio and as alluded to, local/state debt could be higher when factoring in other types of bonds and right now I haven’t got the answer for you. I ran these numbers a couple years ago and state/local debt was much higher than 2.8 trillion, its worth a look)
If it wasn’t for QE and the sheer size of the U.S. economy and its holders of debt wanting business to continue on as usual, the U.S. would be well on its way to following the same path as Greece but confidence is also optical?
Most of the general public isn’t aware of the information discussed here today including its impacts and as such, media hype about percieved U.S. economic recoveries however based on reality cover the sheer fact that the U.S. is running 35%+ budgetary shortfalls with a fast growing public debtload that at is approaching the critical 100% intergovernmental public debt to GDP threshold which is not the place to be when the percentage of U.S. foreign owned debt is so high (yeah, I know, it still matters who you owe). Again, its optical but for how much longer optics alone can keep things in order (they are still the largest economy and military power in the world) is anyone’s guess but I can’t see this same course lasting a decade. At some point lion share of this debt will come to maturity and when it does, just like Greece, the empire falls. Since the lionshare of federal U.S. public debt occurred from 2007 on, my guess is that a U.S. currency crisis is still 5 years away. Sorry goldbugs, all you have to look forward to between now and then is the media portrayed “dramatic” U.S. recovery… til’ then.
@daystar:
“The only differences between Canada and the U.S. are that we never introduced Adjustable Rate Mortgages”
As T.O. Bubble Boy noted, in fact virtually every mortgage in Canada is an Adjustable Rate Mortgage.
In the US, you can get a 30-year mortgage that will be 4.00% for the entire life of the mortgage. Or you can get a 30-year mortgage at a rate that “resets” after a set period.
In Canada, that period is called the mortgage “term.” Thus, you can get a mortgage with a 30-year amortization, but your rate is only guaranteed for 5 years (or the length of your “term”). After that, your rate resets to whatever the prevailing rates are at the time, making EVERY mortgage in Canada an ARM.
Don’t kid yourself into believing Canada doesn’t have risky ARMs. The opposite is in fact true.
#21 JOHN: “…the government will never, ever, make a homeowner come up with the lost equity subsequent to the original mortgage being inked…”
#107 DAISY MAY: “Do you think the banks will absorb the loss?”
No, I think they’ll keep doing what they’ve always done and just renew the mortgage at current interest rates.
As long as the homeowner can keep making the payments, who cares what their LTV is?
The regulator does. For good reason. — Garth
Re #128 Ret
“Soft landings, pixie dust and the tooth fairy.
Yeah, right. Well, maybe the tooth fairy.”
“So far, doomers have been 100% wrong.” — Garth
Just curious – Garth, have you been right ???
Not sure if this going to make it anyway.
Alarmingly so. — Garth
I think that if real estate was treated by banks and short sellers like it was gold or silver ,guys like me would have bought a home long ago and paid cash instead of being priced out of the country. Then again the topic of this blog site would be completely different.
Garth, you said :
– “I told you in excruciating detail about new rules the banks will have to follow by year’s end. That’s when OFSI (the bank regulator) will mandate an end to cash-back mortgages, insist banks scrutinize borrowers and properties more closely, and force them to stick to LTV values upon renewal.”
But Garth, you told us that F and H would bring back 25 year amortization, increase mandatory downpayments to 7%, and a whole host of other things that never happened, so what if you are WRONG about these things TOO ?
Actually I told you that once OFSI published its guidelines that F would not make his moves. That is just what happened. Try to keep up. — Garth
daystar 145#
You have missed my point totally it seems
about 1/3 on the US federal debt (the 15 trillions) is made up of INTRA governement deb, namely IOUs to social security. That anount coudl change via reforms, for example by pushing back retirement age.
Only the rest is actual loans that the US gov. and states must serve. And that figure corresponds roughly to 85% of GDP, same as Canada.
#21 John
Where were you in ’82 ?
#21John on 04.02.12 at 10:08 pm
Garth – The shoring up of equity upon renewal will never happen….I’m the 2nd most bearish person on the face of the earth (next to you) when it comes to residential Canadian real estate but the government will never, ever, make a homeowner to come up with the lost equity subsequent to the original mortgage being inked. This doesn’t exist anywhere in the world and it surely will not be implemented by Canada….the loosest of loose mortgage regulators!
It has already been put forward by the bank regulator. Explain that. — Garth
—————————–
Put forward, not implemented….still plenty of time for pushback from the banks and for the regulator to cave just as F did.
Clearly you do not understand the nature of the relationship between the banks and the regulator. — Garth
#140 Ronaldo
Wow. That is almost exactly what I was being told over here in Toronto. People aren’t selling because they want to live in the city and if they sell their home in the city the rich immigrants are buying them up and they will never be able to afford in that area again. There are no more new homes being built in the downtown core.
They are 100% convinced there has been a huge shift in Toronto and house prices will never go down like in London and New York. Not to mention all the immigrants we have apparently let in recently that are snapping up huge amounts of prime Toronto real estate. This is it, if you don’t buy now you will continue to be priced out. Thing is 3 years ago people kept saying it would crash and it never did — those people got priced out badly. Now everyone is convinced it really is never going to go down. The bidding wars scare people more.
I’m still lost on why there is such a huge lack of supply.
We will we hear soon “But he isn’t wearing anything at all!” – this tale fits real estate perfectly. Once “proud owners”, “speculators”, and other stakeholders realize that the real estate is “naked” we will witness panic and carnage.
“The Emperor’s New Clothes” is a short tale by Hans Christian Andersen about two weavers who promise an Emperor a new suit of clothes that is invisible to those unfit for their positions, stupid, or incompetent. When the Emperor parades before his subjects in his new clothes, a child cries out, “But he isn’t wearing anything at all!”
146 Kevin on 04.03.12 at 2:11 pm
Your right. Thing is, I made the exact same point a few days ago and alluded to my entry then it on this thread. You will find it on the greaterfool.ca link and entry # I provided to see it.
#151 pbrasseur on 04.03.12 at 3:08 pm
Yeah… I did miss it, I thought you were talking about Canadian intergovernmental debt to GDP ratios. Point taken this time (and pension debt is definitely worth the mention). I think we are both right with our numbers since your link is a year old and my math includes a fresh year of public debt plus a 30% writedown of MBS bailouts.
I got distracted with my own look into U.S. intergovernmental debt and I’m still distracted by the maturity dates of when QE and credit easing bonds that have been issued (its a whopping number) are actually set to mature since I caught myself carelessly rattling off a conclusion based on QE bonds with 10 year maturities (my bad) to assess when a the U.S. faces a possible future currency crisis but some bond maturites are obviously much longer than 10 years (such as MBS’s). Its a complex subject obviously, lots of information and intel to wade through and I’m emersed in it now and bingo! Found the answer I’m looking for in page 2 of this link and now see between a 5 to 8 year horizon leaning more towards 7 years away from a U.S. currency crisis event developing but we shall see! Lots can happen between now and then and they could get away with kicking the can in 2019 but we shall see!
http://www.bis.org/publ/qtrpdf/r_qt1203e.pdf
Supplemental:
http://en.wikipedia.org/wiki/Quantitative_easing
#65 50% correction predictor
It is not misleading me, it’s telling me I forgot to keep tabs on my portfolio, if it catches me by surprise. By the time something is unlisted it’s long gone from my portfolio, and by the time it’s added to the index I’ve hopefully owned it for months already.
Unlisting bankrupt companies inflates stock prices about as much as rising standard of living denamds (ensuite bathroom, walkin closet, entertainment basement, granite, hardwood, etc) are increasing house prices and misleading house buyers like you.
#76 ronthecivil
This is indeed how a bond works, but not a bond FUND, which is buying and selling bonds all the time, at prevailing market prices. This changes the equation, even if you personally don’t buy or sell any new units. You also don’t get your money back at par, because you’re not holding individual bonds to maturity.
#157 Devore
I don’t mean “you” specifically by this, just making a point. Which is that no one paying attention to their money is being misled.
One thing I’m continually amazed by is Garth’s technical writing ability. Series commas, proper capitalization patterns, correctly offsetting non-restrictive clauses. You either have a great editor or are an oddity!
You would not believe how odd. — Garth
KELOWNA CAPITAL NEWS, April 3, 2012
SOUND OFF
Thursdays question:
“Do you think Premier Christy Clark has been an effective premier since winning the Liberal Party leadership race to succeed Gordon Campbell?
NO – 91.7%
Isn’t the U.S. “recovering” because it is simply buying up its own debt, and creating false demand for bonds etc..?
Didn’t the U.S. government buy up 60+% of its own debt last year?
No, because 200,000 jobs are being added each month. — Garth
Sophisticated investors hold bonds for stability in balanced portfolios. They are also as capable of producing capital gains as equities. — Garth
I understand your point and it all depends what stage of life you are in. If I were in my late 50s and retiring within a decade bonds would be part of my portfolio. At 32 with interest rates at historic lows the downside risk far outweighs the potential gains. Even if 2008 happens again and I lose 30% in equities as long as the dividends don’t get cut and i keep investing for 33 more years,my portfolio will outperform one with bonds in it. Time is on my side.
Did you miss the word ‘balance’? Anyone all in equities deserves what they shall get. — Garth
Daystar, nearly ALL mortgages in Canada are the equivilent of adjustable rate mortgages – they reset every three to five years. It is the EXACT same thing as what an ARM is in the U.S. Also, in the U.S., you can take out 10-year, 15-year, 20-year, 25-year, and 30-year FIXED money, unlike is available in Canada. The difference between Canada and the U.S. is that in the U.S. under 30% of all mortgages were taken out as ARMs at the PEAK of market. In Canada, over 90% of all mortgages have been issued as the same thing as ARMs. My point is, its FAR FAR worse in Canada than ever was experienced in the U.S.
#128 Ret on 04.03.12 at 11:48 am
Soft landings, pixie dust and the tooth fairy.
Yeah, right. Well, maybe the tooth fairy.
So far, doomers have been 100% wrong. — Garth
………………………………………………………………………
So there has never been a soft landing of any asset caught up in a bubble in the past but you feel asserting that fact makes a person like myself a doomer. I have to respectfully disagree because after all this is your blog. I would ask you to stand back a moment and really contemplate the numbers we are dealing with here and try to link those numbers back to the lives they are and will be destroying. This soft landing, even if partially realized promises hugely over inflated housing prices being accepted as the norm (but hey how about those juicy bank preferreds that a small fraction of the entire population can ever hope to own in any sort of volume to have any kind of impact upon their quality of life). This soft landing baloney will serve to rope more people into this disaster with the consequences being further minimized based upon no proof whatsoever that soft landings have ever existed. I am coming to the point where I am wondering about your vested interests. I could easily be labelled a doomer but not because of any sort of future financial calamity. As things stand there is a bottle neck approaching a few decades (about 3.8 decades) out that we will never again see with the convergence of exponentially growing influences of primarily population growth and climate change as well as resource exhaustion. But that is another blog. Good luck with the whole soft landing thing. Who knows, you might make history but I strongly disagree. It is all well and fine to make pronouncements regarding optimal financial health but take a good look at the reality of our situation and what it means for all of us. Maybe I should not be rocking the boat as the situation is so far gone that a deep commitment to unicorns and fairies is our only best hope and calling those that say otherwise blue meanies or doomers or whatever will maximize that only best hope. No, on second thought, you are playing with fire and I think you are functioning as a propagandist (knowingly I might add as your capacity to reason is clearly of a level to fully appreciate our situation far better than I).
No, because 200,000 jobs are being added each month. — Garth
Didn’t I read somewhere that much more monthly is needed just to keep up with population growth? 150k to keep up with population and 300k to put a dent into unemployment rate? How is 200k making a difference lately?
How is it bad? — Garth
No, because 200,000 jobs are being added each month. — Garth
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Are those seasonally adjusted job numbers (that is to ask are they new permanent jobs)? I hate to ask the questions but I can not stand by cheering us into a wall at 200kph. I am sorry, I like what you have been doing and your message is needed but I can not suspend disbelief because of past efforts. I want things to improve, I desperately want things to improve but it is that desperation that is often preyed upon by opportunists. I am glad there is some reason for hope and I know in my heart America will ascend again but truthfully I am simply committed to that belief as there are no substantial changes in the situation and no reason for an improving America to be linked to an attenuated outcome to this housing bubble and I think you know that.
#125 kilby
It’s not on the market, so I don’t know, the listing was C2223430, it’s not on the market any more. Someone with realtor access to MLS could tell you what happened to it. But the guy next door is selling:
http://www.realtor.ca/PropertyDetails.aspx?&PropertyId=11434529&PidKey=1270474592
Are we still bearish on REIT’s?
Why? — Garth
I CAN STATE CLEARLY THAT HOUSE SALES ARE FALLING ACROSS CANADA. What usually follows is drops in house prices. BUYER BEWARE. NOW IS NOT THE TIME TO BUY A HOUSE. As for stocks and bonds, they hold risk and have been the focus of a horrendous bubble in the past and a horrific ending to that bubble (THE DEPRESSION). There are no sure ways to get rich and risk abounds. Risk can not be avoided and facing it and taking risk is a requirement of life but there are good risks and bad risks. Financial instruments have been the preferred objects of manipulation in the past with housing thought to be too expensive and far to meaningful to the great unwashed to manipulate and get away with it without causing rebellion. Hard work is for fools and savers are losers has become reality and likely has been for some time. Our elites have lived the same sheltered lives we have and they do not fully comprehend the consequences of their brazen acts as most of their lives have been lived without consequences. So it is to be Russian Roulette to have any kind of future for your children. If most of you feel that is okay then it will and probably has come to pass. My favorite word in the English language is prevail as it brings to my mind a victory that was by no means assured and obtained after many failed attempts. This sentiment is also echoed in the words of Theodore Roosevelt that go something like this…
Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure… than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.
Sadly though the reality of our present situation is better encapsulated in another of Teddy’s quotes…
A man who has never gone to school may steal from a freight car; but if he has a university education, he may steal the whole railroad.
#121 refinow – I was not a high risk client of TD – in fact my accounts are with Private Client Services and you probably know what that means. Regardless of which arm of the TD acted As the Originator of the mortgage, it became a CMBS. Securitizing mortgages is how the game has been played, and most residential mortgages have been bundled and sold.
If what you are trying to say is that the holders of these mortgages and the government are going to play nice and force the automatic renewal of underwater mortgages, you are dreaming.
“No, because 200,000 jobs are being added each month.” — Garth
Garth! We’re talking about 10 MILLION jobs lost since 2008–give or take a million.
200,000 (low paying jobs?) per MONTH is a drop in the bucket
Hopefully, the progress continues…but I find it hard to believe that this positive trend will continue in the U.S. EVERY month for HALF A DECADE in order to undo incurred economic damage.
It’s called recovery. The opposite of recession. — Garth
How did my handle turn up as Reces instead of Terces. Fat fingers?
Spoken like a man who knows exactly which side his bread is buttered on. Business as usual, party on!
http://money.ca.msn.com/investing/news/breaking-news/scotiabank-ceo-cautious-on-housing-no-plans-to-leave
#170 Mr Buyer on 04.03.12 at 7:28 pm
I CAN STATE CLEARLY THAT HOUSE SALES ARE FALLING ACROSS CANADA.
How do you know this living in Japan or China, wherever?
Closer than your planet. — Garth
147Kevin on 04.03.12 at 2:31 pm
#21 JOHN: “…the government will never, ever, make a homeowner come up with the lost equity subsequent to the original mortgage being inked…”
#107 DAISY MAY: “Do you think the banks will absorb the loss?”
No, I think they’ll keep doing what they’ve always done and just renew the mortgage at current interest rates.
As long as the homeowner can keep making the payments, who cares what their LTV is?
The regulator does. For good reason. — Garth
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I was being facetious….
Daisy Mae @161
Yeah, the pyjama party is not going too well. Construction is in free fall in Victoria.
My buddy owns a little mom and pop resturant in Victoria (its good) hes just hanging on….
Other buddy has a guide service bookings waaaay down.
Another one has a plumbing company used to be 4 guys, just him part time now.
Was actually talking to a long time competitor this morning, the die off has started in the trades (Guys going broke or shutting down)
Check this out.
http://alexgtsakumis.com/
Line ups at the pumps… What happens when it hits $1.50 or more… At some point
People will get squeezed.
#133 TaDa! It’s me, Smoking Man on 04.03.12 at 12:26 pm
You suck at being me.
Only I can be the village idiot and get away with it.
Screwing up the English language constantly and maintaining the same errors over and over requires shear brain power.
Example :
didn’t
we’re
never use these.
Did you know algo’s are being worked on to look for patterns in writing to ID people, it’s coming.
Not going to push my softwere Garth does not like that, but as always The Real Smoking Man way ahead of the herd.
All for today back to the book
We had a test of the market last summer, it didn’t fail then, US housing #’s are finding a bottom, the price of lost jobs, and forclosures, is fully priced into the market.
Look at the last 6 months for all these equity companies, I like the Canadian ones, but US is probably a better value (given our dollar) Your portfolio should be fully balanced at this point, if you don’t know what that means, buy a book.
…”indebtedness is being fuelled by cheap foreign capital, Mark Carney, Bank of Canada governor, said on Monday…the limits to this growth model are becoming clear.”
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Money Matters: An IMF Exhibit — The Importance of Global Cooperation
Reinventing the System (1972-1981)
http://www.imf.org/external/np/exr/center/mm/eng/rs_sub_3.htm
#160 Flint… you missed a comma. That’s your homework for tonight to determine where.
Here is something I’ve been struggling with for a while: There have been assertions that Obama is actually Osama (one actor two roles) and I did not want to believe it because it seems so preposterous.
But, I regret to inform you all that after reviewing what little evidence we have, it would appear to be undeniably true. I will not post any links so as to make you think I’m crazy; instead, I will leave it with you to pursue this matter on your own… if you dare…
#178 – can it be? –
This is circulating on the internet right now. Maybe give it a try. I am. Gassed up at Super Store in Vernon today 125.9 and got a 3.5 cent rebate so effectively 122.4. 134.9 at most places when came thru the Fraser Valley a week ago. Same on the island. Don’t know what it’s at now.
http://london.kijiji.ca/c-cars-vehicles-cars-trucks-GAS-WAR-STARTS-MAY-01-2012-READ-ON-FOR-LOWER-GAS-PRICES-W0QQAdIdZ367426083
Compound predicates don’t take a comma, if that’s what you’re implying. I might use it stylistically in a long sentence or for emphasis on a contrast, though.
Here’s your homework: you capitalized something incorrectly, and I just gave you a hint.
Did you see any repo men around the Mercedes in the parking lot?
#184… Flint – I was just testing you. Yes I’m aware of the capitalization issue. I do it out of disdain for the English language and for conventions. It’s nice to meet you.
ebill or pay 2 bucks to get your bill in the mail.
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…malicious infrastructure has been used for over 3 years to steal personal information from millions of people around the world. Cyber criminals managed to infect these users’computers with malicious code that changes the users’ DNS configurations to forward all their web content requests to a rogue DNS rather than a legitimate one. ”
http://www.dns-ok.ca/
You make no sense and don’t always look on the negative Side pls:(
Well I understand you put a lot of time and effort into this but pls stop I don’t like it neither does my family:(
God Bless you,
Alyson Torelli
[…] land and the Chinese buying up everything.” I shake my head in amazement. I tried.” – Ronaldo at greaterfool.ca 3 Apr 2012 1:08pm Share:TwitterFacebookRedditStumbleUponDigg This entry was posted in 02. Profiting from the Boom, […]