Careful

If Kias, anything from a Tim’s crock pot or Pilates doesn’t kill you, then lousy information might finish you off. On Friday, for example, with stocks plopping, gold puffing, oil draining and bonds spiking, the end-of-days guys were back. Of course every time markets lose 2% or Europeans do something else beyond dumb, we’re told this is 2008 all over again, but worse. And with each decline, scared people sell, turning paper losses into real ones.

Ironically, when equities fall, risk is diminished and investors should buy. Just like houses. The only reason not to chase assets when they stumble is if you believe life as we know it will soon end. Fortunately, lots think that way. They sell at the bottom (to smart people) after buying at the top (also from smart people). Without these greater fools, there would be far fewer rich people.

It’s human nature. When markets rise 250 points, the headline is on page 43, and the story doesn’t even make TV. When stocks shed 250 points, reporters stand in front of sat trucks on Bay Street, while angels weep. Bad info. It’s toxic.

Kat sends me an example. She lost it after reading this media gem (in the T.O. Star):

“Since the average Canadian household has a net worth of $400,000 and home equity accounts for just $150,000 of that, house prices could fall by up to 40 per cent and households would still be solvent – assuming no other assets declined.”

“The AVERAGE household has a 400K net worth…meaning profits – debts (mortgage etc)…really? really?” she asks. “If that’s accurate, then my husband and I – who see between 170-200K/yr annual income – are going to be living in a trailer park and dining on cat food once the kids have left home and we’ve retired….granted we’ve still a small bit left in our “hey-let’s-move-to-Edmonton-for-your-job-honey” fiasco that, 3 years later, I’m still bitter about/paying for…but still…really? average Cdn household net worth is 400K? NET worth is 400K?”

I think Kat has issues. But then, somebody took her to Alberta, which could explain a lot.

“Can you confirm either that (a) I’m destined to live in a trailer park in my golden years or (b) this dude is on glue. Or should be?”

This urban myth that Canadian families are actually rolling in liquid wealth is just that. Myth. It’s been perpetrated by people and companies anxious to make you feel behind the curve, so you’ll buy a house or a mutual fund. Or both. The Royal Bank, for example, runs an online calculator called ‘How do you stack up’ which states clearly the average Canadian family has a net worth of $382,759.

We all know this doesn’t pass the smell test. Net worth is the difference between the stuff you own (like house, RSP, orange guy’s shorts) and what you owe (mortgage, line, credit cards, car loan, Nicky the Hammer). For this to equal $382,759 for the average household is absurd. And wrong.

Because 80% of the wealth is concentrated in the hands of 2% of the population, this is one time when averages are useless. A truer indication is median net worth, or the point at which half if us have more and half less. That number was $120,451 in 2005, according to Stats Canada. But apparently by 2011 – thanks to a debt binge of historic proportions – media net worth has plunged by a third. A Credit Suisse report now pegs it at $89,014.

The answer, Kat, is glue.

You think real estate has made us all richer? Hardly. But it sure has messed with our heads. Like moving to Edmonton.

Speaking of which, a new condo, adolescently called The Ultima, goes on sale there Saturday at noon at prices ranging up to $1.55 million. “Standing 32-storeys tall in the heart of the financial core and future arena district, the Ultima will feature 199 exclusive luxury residences,” says the developer in its come-hither email campaign. “Only 199 lucky individuals will get to experience the Ultima urban lifestyle and we want to ensure that you have your chance at our pre-sale launch.”

OK, kids, here are the rules:

What you need to bring: Photo ID, a cheque for $1,000 Presale launch Rules: To ensure you get the Ultima suite you want:

  • PLEASE CHOOSE A MINIMUM OF YOUR TOP 3 SUITES PRIOR TO PROCEEDING TO THE PURCHASING LINE UP.
  • PURCHASES ARE ON A FIRST COME FIRST SERVE BASIS BUT WE HOPE TO PROVIDE ALL ATTENDEES THE OPPORTUNITY TO SECURE AN ULTIMA SUITE THAT WORKS FOR THEM AT A GREAT PRICE.
  • PLEASE NOTE: DUE TO HIGH DEMAND, THERE WILL ONLY BE ONE RESERVATION ALLOWED PER PERSON TO ENSURE SUITES ARE NOT TIED UP BY PEOPLE WHO CANNOT MAKE A DECISION. WE THANK YOU FOR YOUR COOPERATION IN THIS MATTER.

Does Edmonton even have a ‘financial core’? Is there anyone alive who would pay $1.159 million for a two-bedroom condo overlooking a ‘future arena’? Are there enough delusional Edmontonians, on a weekend after oil prices have plunged, to line up with cheque and photo ID? Do they know the local housing market has come to a virtual halt, and 54% of the condos on the market can’t find buyers?

Of course not. Bad information.

Fools food.

275 comments ↓

#1 Hoof-Hearted on 06.01.12 at 9:34 pm

DELETED (you know why)

#2 Duke on 06.01.12 at 9:36 pm

Firstly I’d like to say it’s a great post as usual. Second I’d like to say Garth I don’t see interest rates rising anytime soon if Europe brings down the global economy. Sorry.

Europe won’t. — Garth

#3 Poorboy on 06.01.12 at 9:40 pm

Median at 100k? That’s damn sad.

#4 Chaddywack on 06.01.12 at 9:43 pm

Any thoughts Garth on why more young people don’t invest? Out of all my friends I’m the only one who has money in stocks…..this is a time in your life when you can absorb more risk.

Especially if you’re single, no dependents, and rent :)

#5 Dave on 06.01.12 at 9:44 pm

Unfortunately some fools will fall for this, just like they did with the condos in downtown Calgary a couple of months ago.

#6 Johnny D on 06.01.12 at 9:45 pm

@#2… China will

#7 Mark W on 06.01.12 at 9:45 pm

http://www.realtor.ca/propertyDetails.aspx?propertyId=10665629&PidKey=-1165631746

Condo illusion … you want condo delusion.

This place was built ten years ago in Winnipeg and was never developed.

Original price (if my memory is correct) was $350k.

Now it sits like this, for years in fact, and you can have it for ONLY $1,207,500.00

The condo fees are about a grand a month too, plus taxes.

#8 T.O. Bubble Boy on 06.01.12 at 9:48 pm

3 signs that things need to change:

1) the only 5-star financial situation that I’ve ever seen in one of the MSM personal finance columns is for a government worker who will retire in his early 50’s with a guaranteed $80k/year pension paid by us suckers.
http://business.financialpost.com/2012/06/01/canadian-diplomat-can-afford-early-retirement-but-what-then/

2) Jim Flaherty expects that GM will “maintain a strong presence” in Canada, despite laying off 2000 in Oshawa. Will they be opening up a McDonald’s to hire these workers as a part of the new EI program or something?
http://www.foxbusiness.com/news/2012/06/01/canada-fin-min-expects-gm-will-maintain-strong-presence-in-canada/

3) The Real Housewives of Vancouver is renewed for a second season. So, the CBC is being killed off, but this high-quality programming gets re-upped?
http://blogs.theprovince.com/2012/05/30/the-real-housewives-get-renewed/

#9 Aunt Fritzi on 06.01.12 at 9:55 pm

Are they starting to worry in Vancouver?
http://citycaucus.com/2012/05/the-persian-rugs-going-out-of-business-sale/

#10 T.O. Bubble Boy on 06.01.12 at 9:56 pm

Be cautious with Canadian bank stocks — they will look highly over-valued if growth in personal lending slows:
http://beta.fool.com/beat8/2012/05/31/time-be-cautious-about-canadian-bank-stocks/5176/

The writer said: “I am not currently a shareholder of any Canadian banks and would like nothing more than to see them come under a period of duress.” So much for objectivity. — Garth

#11 Mikey the Realtor on 06.01.12 at 9:57 pm

you still flogging the markets eh gartho? you have been wrong on RE going on 5 years now..geez, for how long can someone be wrong about something before they just shut their god damn trap.

the stock market is going into the 4 digits, like it or not, admit it or not…oh yes, if you admitted it you would lose the lemmings that handed you their money. I’m sure this wont be printed as too many eyes would open and we wouldn’t want that now eh, gartho.

I could not have made that up. Thank you. — Garth

#12 Duke on 06.01.12 at 9:58 pm

Garth the problem with Europe is energy depletion and the cost of importing all of their fuel. Germany is ok because of the production of value added goods such as cars, manufacturing equipment and agricultural machinery.

Unfortunately most of Europe will have exhausted their entire oil, gas and coal reserves and will need to import all their energy. As energy and capital become scarcer European governments will no longer be able to service their debt and go into default while paying higher energy costs. THAT will bring down the markets and commodities as we have seen oil fall 20% recently.

I share many of your beliefs Garth, property will face a deflationary decline and Canadian Government bonds will do well for a while. But I don’t see how we can keep growing the global economy in the longterm without growing energy? No growth means collapse of the debt based money system. Having 10-20% in gold is not a bad idea either. I know you will back me on the low end of that figure.

Anyways, thank you for introducing me to preferred bank shares a few years ago. I got a friend of mine into the RRSP mortgage and they were thankful and bought a few of your books. So keep it up!

#13 Steve Thompson on 06.01.12 at 10:10 pm

This week, for the first time in history, Germany’s two year federal bonds traded at a negative yield as shown here:

http://viableopposition.blogspot.ca/2012/06/negative-medium-term-bond-yields.html

This should give all of us some idea how the world’s economic house of cards is on the edge of the precipice. The volatility in the world’s markets will eventually impact Canada and our over-heated housing market since Europe is Canada’s second largest trading partner and what happens there, washes ashore here.

#14 JSS on 06.01.12 at 10:10 pm

“Does Edmonton even have a ‘financial core’?”

Edmonton has a small but growing financial core – ATB Financial, Servus Credit Union, AIMCO, and Canadian Western Bank.

Good for a mid-sized city.

Just nothing close to Toronto.

#15 Dan from Richmond Hill on 06.01.12 at 10:14 pm

Garth, Kia is just fine, GM does not feel so good…

#16 BeachBoy on 06.01.12 at 10:17 pm

ahaha you should hire her as a shadow amazonian writer when you’re away. I like her style!

#17 ANONYMOUS on 06.01.12 at 10:20 pm

Hey Garth: Thank you SO MUCH for deleting that guy ‘Hoof Hearted’, you know, the one who brainlessly said ‘F!RST’ , and then you deleted him like you promised.

THANKS !!!

#18 Island renters on 06.01.12 at 10:25 pm

#10 mikey, so if you don’t believe anything Garth writes why are you here?

#19 young & foolish on 06.01.12 at 10:25 pm

Hmmmm ….. deflation anyone? And what will the authorities do? Print more money to prop up the stock market?

Young and foolish, aren’t you? — Garth

#20 furst on 06.01.12 at 10:30 pm

How can I post without getting deleted? Am I allowed to write a poem Garth or will that get removed too.

Depends. — Garth

#21 Devore on 06.01.12 at 10:31 pm

#9 Aunt Fritzi

I don’t know what it is about the persian rug places, but the one on Kingsway near Boundary has been going out of business for nearly 2 years now. It’s like a permanent 70 off sale.

#22 VIVA Fort McMurray on 06.01.12 at 10:32 pm

What’s with the hate on EDMONTON?

Join my girlfriend as she hates the fact I moved from Vancouver to Edmonton last year. But let’s be honest, Alberta actually has a REAL Industry and Jobs.

Not to mention far more affordable rent and cost of living… on second thought I can’t actually comment on Edmonton because I don’t really work there as I’m an Electrical Engineer flying in and out of Fort McMurray every week. Collecting an ACTUAL Pay Cheque.

Can believe people actually still work and live in places like Vancouver and Toronto – the working serf… might as well just volunteer your time and contribute to some charity. Wouldn’t make any difference while living in those cities.

Anyways, I’ve been reading your blog for years Garth. Keep up the good work.

With regards to investments, I hold a bunch of REITs and preferred shares collecting dividends every month. I sold my resources equities months and ago and looking to get back in soon. (made a nice profit). In the meantime have done quite well with riding the volatility index such as HVU and VXX. Any thoughts to boost the portfolio. Would like to hear more posts on investments as the Housing thing is like beating a Dead horse. Its going to happen soon… just be pateint. SMILE.

#23 Ex-Cowtown on 06.01.12 at 10:36 pm

I grew up in Edmonton. I like it better than Calgary, but as a friend of mine said “The Congo is better than Nigeria… but that doesn’t mean it’s good.”

I doubt that Edmontonians will be lining up for condos. It’s not that they’re smarter than Torontionians, it’s just that with a much smaller population base there are that many fewer greater fools.

#24 Market Bull on 06.01.12 at 10:37 pm

The stock market just frightened another million Canadians into buying real estate.

Get used to it bubbleheads.
_____________________________________________

Isn’t that what I just wrote about? — Garth

#25 abraxas on 06.01.12 at 10:39 pm

Even though I agree that Atlantic Canada has mostly avoided the property bubble prices for some properties there can and do get absurd e.g.

http://www.realtor.ca/propertyDetails.aspx?propertyId=11618509&PidKey=1959104010

http://www.realtor.ca/propertyDetails.aspx?propertyId=10516793&PidKey=-1783995535

No part of the country has been completely immune.

#26 Peter Goesinya on 06.01.12 at 10:43 pm

I love the first couple paragraphs Garth.

You are such a hypocrite!

I hope your will is up to date. Cause I smell $1900 coming!

Is that a threat? — Garth

#27 VIVA Fort McMurray on 06.01.12 at 10:43 pm

I agree with EX-Cowtown. Edmontonians won’t buy these condos… Where would you park your new quad, dirt bike and wakesetter.
The only ones able to afford these condos would be oil sands workers and I’m pretty sure they aren’t going to be living in a concrete shoe box. Afterall, they already live in a camp prison the half of their live. Pretty certain they would much rather have their fancy toys with some kind of acreage.

#28 Observor on 06.01.12 at 10:43 pm

SPEAKING OF DEBT AND BANKS

I’m sure we can all agree that traditional banks that take in savings accounts and lend out money are paragons of virture.

They provide an intermediation service of allowing savers to lend money to people who need it. This mostly frees us up from relatives asking us for loans. That alone is a wonderful thing.

Let’s all be thankful for banks.

(Except for Junius who would apparently like us all to live debt-free in mud hovels and caves and such like we did for “millions of years”. Back in the good old days when it was common to die before your first birthday and rare to see your 40th. Note that fractional reserve banking was in operation in Florence Italy around the year 1100 with the Medici family and others).

And remember, one man’s debt is another man’s savings.

#29 timbo on 06.01.12 at 10:48 pm

http://theautomaticearth.org/Finance/the-truth-about-europe-there-is-no-solution-part-1.html

What we can learn from all this is that our money is used to prop banks, and the banking system, while at the same time our debt to those same banks, and that same system, rises. The ECB and the Fed lend money to banks, money “underwritten” by our present and future earning power, at something like 0.05%, money the banks use to either buy sovereign bonds which pay interest rates that are 5 or 10 or 20 times higher (depending on the country we live in), or to prop up their accounts at the central banks, which also earn them higher rates. Both options, again, are underwritten by our earning power.

http://theautomaticearth.org/Finance/the-truth-about-europe-there-is-no-solution-part-2-growth-doesnt-rhyme-with-crunch.html

“National deposit-insurance programs, strengthened by the European Union in 2009 to guarantee at least 100,000 euros ($125,000), leave savers at risk of losses if a country leaves the euro and its currency is redenominated. The funds in some nations also have been depleted after they were used to help bail out struggling lenders, leading policy makers to consider implementing an EU-wide protection plan.

“These schemes were not designed to deal with a complete meltdown of a banking system,” said Andrew Campbell, professor of international banking and finance law at the University of Leeds in the U.K. and an adviser to the International Association of Deposit Insurers. “If there’s a systemic failure, there needs to be some form of intervention.”

fascinating two-part on what hopefully will not happen..

TAE: a blog to suicide by. — Garth

#30 Fred on 06.01.12 at 10:49 pm

@19 young & foolish

Garth, you don’t believe that on or around June 19 another QE will be issued to do just that?

#31 Observor on 06.01.12 at 10:50 pm

SPEAKING OF BABIES

I am sure most of us will agree that the best time to be born in the history of the world was today and that tomorrow will be even better.

Anyone born in the last 100 years seriously wish they were born 200 years ago? Really?

Anyone have kids that are really living in a lower standard of living than when you were their age? Really? If so, why?, ’cause on average the little beggars are living very high in my experience.

Kids may inherit a certain amount of government debt but they also inherit a pretty fine world. You really think someone born 100 years ago would not see today’s kids as having a much better deal by a factor of 100% or so?

Life damn is good, rock on!

#32 the word of reason on 06.01.12 at 11:11 pm

Can someone explain why oil 8s at 83 bux a abrrel and gas is still a 1.27 and also why no of you sheep seem to mind ?

#33 bobbyToms on 06.01.12 at 11:20 pm

A local realtor in London. He uses a unique approach on MLS

“Not sure if real estate prices are dropping? Now is the time to rent.”

http://www.realtor.ca/PropertyDetails.aspx?&PropertyId=11296138&PidKey=-671250880

#34 Just Say No on 06.01.12 at 11:25 pm

http://www.youtube.com/watch?v=s5fORJvWYME this was when buying homes you could see the financial state of the sellers……..I miss those days. Block Brothers….until I get this kind of info I will not be buying. One of many many reasons to stay away from real estate today.

#35 Sold in Edmonton (Renting in Sherwood Park) on 06.01.12 at 11:30 pm

Anyone buying these condos will join the sheep that bought the Century Park condos in Edmonton and will lose money as well.

Century Park was a much touted condo project that is now half built overlooking a graveled transit parking lot. It is now being redeveloped to a less aesthetic look and feel and the sheep that bought are fuming. I have a friend renting there and all he talks about is how hollow the walls are, how the kitchen is falling apart and how many drug deals go on through the multitude of renters in the complex. This friend enquired about purchasing a condo from the developer and basically was told that there is an automatic $40,000 discount but it is not advertised to keep the property values artificially high.

Like i mentioned this will be Century Park #2.

#36 Not 1st on 06.01.12 at 11:45 pm

#31 Observor on 06.01.12 at 10:50 pm

You do know that 9 million babies and kids die every year due to disease, famine, malnutrition, war, abuse, etc. Try reading a paper or something one day before you go spouting on who life is good for.

#37 Hoof-Hearted on 06.01.12 at 11:48 pm

#17 ANONYMOUS on 06.01.12 at 10:20 pm

Hey Garth: Thank you SO MUCH for deleting that guy ‘Hoof Hearted’, you know, the one who brainlessly said ‘F!RST’ , and then you deleted him like you promised.

THANKS !!!
===============================

No, how would you know what was deleted…???

I gave Garth tomorrows winning 6/49 numbers..and he benevolently passed them onto Smoking Man (We split the fee).

Now, go back to yo Momma’s basement suite

#38 martin on 06.01.12 at 11:53 pm

Europe won’t. — Garth

Whithout a QE3 in the view, stock markets will crash easy another 5-10% in the next few weeks.

#39 OwlEyes on 06.01.12 at 11:53 pm

Ouch
http://www.theglobeandmail.com/news/national/british-columbia/land-rich-boomers-buying-nests-for-their-young/article2449988/

#40 Arshes on 06.01.12 at 11:54 pm

Wow an Edmonton bubble post!!!!!

#41 Bryce from Edmonton on 06.01.12 at 11:56 pm

Hello!
Garth are you a Christian? I think that you should be born again and start a Christian blog, and I’m serious. I think you can help people more than just financially with your persistence. Seems like what you have been saying about housing is starting to be seen more in media, keep up the good work my friend.

http://www.moneysense.ca/2012/03/20/canadas-best-places-to-live-2012/

Edmonton’s #8 Bazinga!

#42 $$$BPOE#1 on 06.01.12 at 11:57 pm

Folks this week was another week of SUCCESS. Sold signs popping up everywhere. Check out Williams Road in Richmond where huge swaths are being bulldozed with townhouses being built. Lovin It. Oh yeah, those preferred shares you hear being touted. Well folks BPOE is here to break the news that there are new changes brewing on the horizon by Uncle Stephen and you DO NOT want to own preferred shares especially in banks. You will see these news stories coming up in the near future. Meanwhile back in hotel land Vancouver as always SOLID
********************************
B.C. hotels remain sought-after investments this year and it’s a trend that’s expected to continue, according to the CBRE Group, a commercial real estate services firm based in Los Angeles.

“We’re going to see the continuation of a number of assets coming on the market [in Metro Vancouver],” said Bill Stone, executive vice-president, CBRE Hotels. “We expect most to be sold this year.”

CBRE said Friday that Canadian hotels are seeing solid growth in operating results and strong activity in the investment sector.

#43 Rainbow Island on 06.01.12 at 11:57 pm

It’s a raining day in toronto and it’s also a good day buying stocks when market shaking…

#44 Dude on 06.01.12 at 11:59 pm

China will become less competitive over the next few years, will turn to internal consumption more than ever, let in more immigrants to make up for aging population, spend on social programs to maintain social cohesion, etc.

This should make the weaker links of Europe that will exit the Euro more competitive.

No interest rate hike in the future for Canada though, not for any longer than a blip. China and Europe will continue to ask for resources, but the Canadian economy will be too fragile to play with rates.

Retirement and aging population and jobless rates will hurt the RE market though. Deflation ahead.

#45 Victoria on 06.02.12 at 12:04 am

I have 4 kids in 4 different schools. One is a private school, apparently 50% of parents have asked for a bursery because they can’t pay schools fees and 30% of the school population is covered by grandparents and the other 20% seem to be able to afford it. Maybe they re the ones with one kid in the school.

Another kid goes to school in a very expensive neighborhood – everyone says they are so strapped for money. My other kid goes to school in a middle income neighborhood – people are strapped and the 4th kid well same thing. All I hear is that people are in trouble.

People don’t have any money.

#46 Davey Boy on 06.02.12 at 12:05 am

#33. That’s a great deal for gas! In delusional Vancouver it’s $1.50 a litre.
The sheep mind but that’s about the extent of it, after all we are Canadian, we are for the most part accepting of things even though we don’t agree with them.(unless of course it has to do with losing at hockey then will take to the streets and cause mayhem) Hmm maybe we should get our priorities right.

#47 S on 06.02.12 at 12:20 am

#33 the word of reason on 06.01.12 at 11:11 pm

Once the industry learned that the market can sustain north of $1.20/L gasoline the prices were not likely to ever fall much from that level. Also, average vehicle fuel economy improved dramatically in the last few years. Buy less, pay more. Profit margins must be maintained.

#48 Ronaldo on 06.02.12 at 12:21 am

#12 Duke – I am inclined to agree with post whereby holding 10 to 20% in gold is not a bad idea at this time. Not sure if you’re familiar with the Royal Canadian Mints recently launched ETRs which trade on the TSX under the symbol MNT. The fund consists of 30 million units with a total of 327.010 oz’s. The unit value closed today at 17.47. Generally these fund units trade at a premium to NAV but right now it is trading at close to par. The thing I like about it is the ease of purchase and sale plus you can redeem the value of your units for the real stuff as well. A good way to own pm’s in your RSP or TFSA or regular investment. Thought I would pass this on for anyone else looking at a simple way to invest in gold with added security. Check out their web site.

http://www.newswire.ca/en/story/886507/royal-canadian-mint-etr-begins-trading-on-tsx

#49 S on 06.02.12 at 12:21 am

on another note, here’s a curious read:

http://www.businessinsider.com/raoul-pal-the-end-game-2012-6

#50 Fort Mac Flatlander on 06.02.12 at 12:21 am

Hey Garth,

love the blog, been reading for years. I’ve been approached by my current landlord in Ft. Mac, who is interested in selling. I had to turn him down (for obvious reasons), but wholeheartedly agreed with his decision to sell as he now has a house in Ft. Mac (likely underwater) a young wife in Edmonton in a condo and looking to combine residences in a house in Edmonton.

My question is do you believe the property bubble is now expanding to commercial property and farm land?

Thanks

#51 MissPriss on 06.02.12 at 12:24 am

Same in Calgary…walked into sf show home there in Auburn Bay and the seller rushed over to let me know the advertised price of 343k … I could take 20k off that. I hadn’t even said I was interested yet. LOL.

#52 Peter Goesinya on 06.02.12 at 12:25 am

“Is that a threat? — Garth”

Not from me. As I recall you said the next time gold hits $1900 you’d be dead.

Just Sayin!!!

#53 KWKid on 06.02.12 at 12:26 am

Garth, Europe is a vegetable on the verge of losing life support. China is headed for a hard landing. Commodities are taking it on the chin. US is trying to print its way out. Our housing ponzi scheme is going to fold like the house of cards it is.

The fall of the american empire and next great depression are upon us.

#54 Carpe Diem on 06.02.12 at 12:30 am

Hey Chaddywack,

> Any thoughts Garth on why more young people don’t invest?

I assume less than 30 here …. it’s simple. They have school debt, don’t have good paying jobs and look at their boomer parents as examples.

> Out of all my friends I’m the only one who has money in stocks…..this is a time in your life when you can absorb more risk.

Your friends see less risk in some townhome with granite counter top than stocks. They understand granite counter tops but have new clue what a stock is!Otherwise they are consumerist with credit card debt and have a monthly cycle of debt repayment.

> Especially if you’re single, no dependents, and rent :)

Stay that way .. life is very easy when single…. but those kids are awesome if or when you have them ….

#55 Ronaldo on 06.02.12 at 12:31 am

#12 – Duke – correction to my previous post re: MNT…units closed at 19.31 today not 17.47 which actually represents a premium to NAV. My error.

#56 Harlee on 06.02.12 at 12:34 am

# 20 furst
Yeah furst, write some poems. I like poetry,although I don’t read as much as I used to (I don’t read as much newer fiction as I used to either). I tried to write some poetry as a young man but it all stank. But I bet you could put it over.
Maybe do a pastiche of Robert W. Service about leaky condos. Or a knock-off of Walt Whitman about stocks and bonds… Maybe you have an original style in mind. Whatever.I’ll be curious to see what you come up – Good luck !

#57 Smoking Man on 06.02.12 at 12:37 am

DELETED

#58 Nostradamus Le Mad Vlad on 06.02.12 at 12:37 am


Good post. The two parts I found interesting were: “The only reason not to chase assets when they stumble is if you believe life as we know it will soon end.” — Such as Galaxy Wars Andromeda vs. Milky Way, and sniffing glue. Mebbe another hobby is called for?
*
#11 Mikey the Realtor — Mikey! Great to see you back! What have you done with BPOE? Bring him back, Mikey!

#33 the word of reason — “. . . also why no of you sheep seem to mind ?” — I don’t drive, and even if I could, I wouldn’t. Taxis are way cheaper.
*
Revolution The global anti-elite one; Greed is addictive, like crack; UK helping Spain? They can’t even help themselves! FB stock plunge; SArabia Gonna make oil so cheap it kills Iran’s economy? Cdn. Friday links; Stock Markets to EZone but not many calls on the bond market; Greece Prisons run outta food, now the electricity may be turned off; Zoellick How many more emergency plans are there? Clip with Anderson Cooper Fast food rage (wierd); Personal Savings Rate (US); The Joker Chart; Splendid Idea QE direct to the public. US$1 quadrillion should cover NAmerica.

Cdn. Inventions Some of us are lightbulbs; Horrible but Great; Yadda Yadda Yadda; The End Game; Apple TV; Historical Misconceptions; SmartASS or how to kick FB’s butt; The Uncertainty Principle Similar to The Peter Principle? Declining Competitiveness in the emerging world.
*
UN — Total Control of the ‘net, possibly under Agenda 21 and this; English Perspective on Luka Magnotta; Pic of BdB;s, and Felony? Big Fish meets little girl; China In-house security breach; Houla, Syria Proven to be a load of old cobblers; Lake Vostok “Deep beneath the great Antarctic ice sheet, there is a fascinating but unknown treasure of this planet – Lake Vostok.”

#59 Rich Renter on 06.02.12 at 12:39 am

I wouldn’t even buy a $159 condo in Edmonton.

#60 maven19 on 06.02.12 at 12:49 am

http://www.bloomberg.com/video/93836131-how-much-lower-can-the-market-go.html

long term, the markets will go back up

#61 Phil Indablanque on 06.02.12 at 12:58 am

Mr Turner. You must just LOVE the friday night blogging. Brought to you by SM conciousness conecction netwerk .

I work with the salt of the earth. We fix the Navy`s broken shite. Ever hear of those effed up subs? Well me and the boyz are the ones who make it so the sailors can fire a weapon and come home to tell the story about it. We get paid every couple of weeks like all the other lemmings. Some of the boyz have been here since high skool. Took the bait, got a job for ‘life’ and have a 1.5 million dollar bung that they bought in 1986. I don’t think that is real wealth.

I rent, owe 20gs and went bankrupt 5 years ago. In 5 more years I wonder who will have ALL the necessary skills to survive. The white picket fence crowd does not understand risk. I realize that I took a chance and it went sideways and I will need to work my way out. It will take some TIME. Much like this RE correction. The nay sayers who come here and say GT got it wrong have NO idea on timing. This is a S L O W process … compared to a 13 week TV season …

The money is a diversion peeps. The more you have, the more you pay attention to it. Look in the sky and enjoy the sunset… or sunrise … or whatever the latest fade is. I am getting a refill

#62 Popeye the sailor man on 06.02.12 at 1:03 am

#28 Observor on 06.01.12 at 10:43 pm ;

“And remember, one man’s debt is another man’s savings.”

Well your wrong! With fractional banking systems, it is “ one man’s savings is another TEN men debt”

#63 tundra pete on 06.02.12 at 1:15 am

Souled out food may better describe this fiasco,

Good one Garth,

The fools never cease to amaze. I’m familiar with the north from Edmonchuck to Y-knife, White-outHorse and all areas between 49 and way past 60, into many areas of Nun-of-it.

Worked and lived in the great white north for years. But I must say the other day I heard two stories, from another trusted northern source, CBC, who I actually do trust to report stories diligently as my life depends frequently on them as I travel.

They were obviously filling air space as the days or nights, depending on the time of year, can be long in the north. One came out of Whitehorse, the other from Yellowknife. They were both stories of “it’s different here” and how owning is so much more glamorous than renting in the north.

It’s was obvious they came from Brad Lamb wannabee condo developers. They both carried the same message of act now before it’s to late and you’re priced out forever. They both specifically stated “no downpayment required”. W.T.F.!!!

I was blown away. When I bought my first home I worked side jobs after changing diapers and working full time for years to come up with an actual cash downpayment to buy that place. I didn’t just stroll into some swanky showroom and sign papers. I had to suck-hole to [email protected] to convince her I was a worthy risk!!! Those were certainly the days.

Sad to see. Can’t blame this new gen. for being sucked in. It’s all laid out there for them being set up for failure by the 1%. W.T.F.!!!

#64 groovin_123 on 06.02.12 at 1:15 am

” Hmmmm ….. deflation anyone? And what will the authorities do? Print more money to prop up the stock market? ”

Not exactly – they will print more money to keep the bond markets from collapsing, soaring commodity prices/stock markets are just a side effect. Oh, and $2/litre gasoline.

#65 Soylent Green is People on 06.02.12 at 1:16 am

Good blog good blog I enjoyed

Ps Tom Sat everyone is protesting at CON MP offices at nooon

B
B
B
T
H
E
R
E

#66 An Cat Dubh on 06.02.12 at 1:18 am

My dad (87) keeps re-investing in low interest GICs. I suggested he buy bank preffered shares which pay 5% dividend and at a lower rate of taxation. Hopefully he will when the year is up.
Interesting about Edmonton having a financial district.
Kelowna claims to have a cultural district. Pull the other one KLO.

#67 dd on 06.02.12 at 1:32 am

Yuan and Yen trade directly …

Yuan fetches 12.33 yen at start of Japan, China currency trading
TOKYO, June 1, Kyodo

Direct trading in the Japanese and Chinese currencies started Friday with the Yuan fetching 12.33 yen at the outset, bypassing the U.S. dollar in a development expected to boost trade and investment between Asia’s two biggest economies.

Yen-Yuan trading was previously conducted by referring to their respective exchange rates against the dollar and so was subject to risks associated with fluctuations in the U.S. currency and increased costs to settle trade and investment transactions.

The first direct exchange rate was marked early morning in Tokyo, according to the Bank of Tokyo-Mitsubishi UFJ. It compared with 12.39 yen, the rate calculated via the dollar at Thursday’s close in Shanghai.

#68 SydCixel on 06.02.12 at 1:36 am

Congratulations on being reprinted on http://www.321gold.com/ . Bob Moriarty certainly has enough articles available, from writers around the world, from which to chose for his daily selection. He chose well in finally (I can’t recall a previous posting) in listing one of your blogs.

A few months ago, you wrote a blog that was not exactly enthusiastic about owning gold. The next day the price dropped 3%. You then wrote, “The world reacts in shock to Greater Fool.” Because gold increased by 4% today ( http://www.kitco.com/ ) are you prepared to lay claim to that markewt change also? It would be great fun if you did.

#69 Kits on 06.02.12 at 1:38 am

Hi Garth,

Time to have some fun. Love your blog but here goes …

– I could have sworn you said Europe had stabilized – when I questioned your assertion I think you called me a doomer

– I think I said the risk environment called for a reasonable allocation in cash (not always, just now because there was a reasonable likelihood China nd Europe were heading for a wall) – I think you called me a doomer and then said buy ETFs and preferred shares

Have you ever said it is time to sell securities once on this blog? It is always buy and hold … It is hard to average down or buy low if you are fully invested in liquid stocks … That have had the snot kicked out of them.

Anyway, I know you can’t predict the future. The point is you definitely should not panic and sell at the bottom but it is equally valid to take profits when there is a material risk of loss (or build in stops).

Like I said, love your blog, but avoiding losses and crystallizing gains at certain times are valid investing approaches and simply part of the tool kit

Suggest you read more carefully. I have never advocated buy-and-hold, both rather careful asset allocation and rebalancing to maintain weightings, which absolutely involves harvesting cap gains. Had the gold bugs followed this last year at my urging they would have reaped rewards all the way up and increased their holdings on the way down – all at constant dollars. Try to pay attention. — Garth

#70 John Ratadlin on 06.02.12 at 1:57 am

Garth, the 31 year B.C. bond is yielding 3.15% today June-1-2012. It was yielding 3.38% just May-14-2012 about 3 weeks ago a 6.80% cut in interest income. interest rates were already rock bottom and now this. We are in a depression like economy because interest rates would not be this low. A $500,000 invested today is about $1,150 per year cut or about $96.00 per month less. What a shame for our young generation that this gives the message saving for your future is not a benefit anymore.

#71 Derky on 06.02.12 at 2:05 am

Garth I love your website, I have tried to steer my idiotic co-workers to your site without success. My workplace is full of of people who all live larger than me even though they all have multiple kids (I have none) and drive newer vehicles than me. I must have the smallest and/or cheapest house at work now of all of them, my house cost me $137,500 about 8 yrs ago and I’m on my last 5 yr amort now. All these people do is talk about vacations and granite countertops I kid you not. Honestly I have been to houses with granite and I find them too cold just like ceramic flooring. Anyway I’d like to thank you for bringing up the HELOC fiasco, I honesly had no idea about these things until a few years ago, this explains why my co-workers are so much “richer” than I am. The fact that people can borrow on this perceived ‘value’ at such cheap rates scares the [email protected] out of me. Just to make sure this wasn’t a repeat of a dream or something I thought I’d heard in la-la land I checked on Youtube and there it was. Just check on ‘Peter Schiff was right 2006-2007 (2nd edition) and listen in on the part at approx 1:04 in when he says “the disease is all this debt financed consumption” Bingo. Good thing it’s different here in Canada or I would be worried.

#72 John on 06.02.12 at 2:22 am

The health of an economy is largely perception. If people start panicking, the power of self-fulfilling prophecy lurches into the picture.

You could say the same about real estate, the most emotional of assets ( only surpassed by a luxury boat purchase).

That’s all true, but this blog continually focuses on facts and market fundamentals. Except with the big picture. The “fact and fundamental meter” drops a hefty 90% when leaving the real estate dock. And that’s moving into territory that is supposedly less sexy ( thus having less emotion).

The market is vastly underreacting to what is actually going on right now, and that is not going to last. The same perception and judgment profile that is so accurately spelled out regarding the real estate dynamic, exists systemically. You don’t slide out of one financial disaster, adjust wisely…and all is cool.

Weighing risk correctly is a big part of diversifying. People who are even reasonably informed don’t spout off over gold and silver anymore. A manipulated market doesn’t “favor” anything. Speculation as a driver means speculation is the vibe…in everything.

Dodging bullets is wise, but why are bullets flying in the first place. The time is approaching for a consideration of this question. If not, there’s talk of “tops and bottoms”. Not too relevant right now.

Unless you think we’re in a cycle? We’re not. A paradigm shift is an exit from an existing cycle. That’s why it’s a paradigm shift.

#73 DeadmontonDwellwr on 06.02.12 at 2:23 am

I rent in one of those wonderful type of condo’s built during the last boom in 07 in NE Edmonton.

Two Words. Hell Hole.

The building is 4 stories, has an elevator only because of code. The inside of the elevator doors is covered in what can only be called “Cock ‘n Balls” type graffiti, which maintenance stopped painting over after a few months.

The whole thing is wooden framed, clad in tar paper & vinyl siding with asphalt shingles and a good deal of glue that passes for strand board. Basically the joint’s made of rocket fuel. I fully expect this place will go up in flames fairly soon, since the sprinklers aren’t actually hooked up to running water.

The parking lot never gets cleared during winter and there are no sidewalks. You walk where the cars drive. Not cool, unless you are an ambulance chaser.

Just had the balcony & front door removed and re-installed today (at the owners expense) because the building is stood up on pilings. No foundation here, folks! The whole thing has shifted so much the door frames warped to the point the doors wouldn’t/couldn’t close anymore.

Did I mention I found a meth pipe outside my door last week, and almost every week I have to have someone towed out of my assigned parking spot, otherwise I get to have my car towed for parking in visitor parking while waiting to have my spot cleared out.

One of these 950 sq ft crack shacks went on the block for $215 000. Its unfathomable that there is anyone who would buy in this city, but there are always greater fools where people think they have money just because they have a job and think the good times will never end.

Idiots.

Sad thing is, this is fairly normal in Edmonton these last several years. Seen the same in every other building I’ve lived in.

#74 Skip Breakfast on 06.02.12 at 2:40 am

Garth calls The Automatic Earth a blog to suicide by. Rather catchy, but also really not entirely fair. Not unless you want to regard The Greater Fool blog the same way. I don’t. I think they’re both eye-opening sources of information.

In fact, I discovered Automatic Earth a couple of years before discovering Greater Fool, and I’m so glad I did. Because the TAE blog steered us far clear of getting into a real estate fiasco. Like Greater Fool, TAE also sees a (much more) significant housing correction. Honestly, I was rather blind before discovering TAE, and was really just relying on the mainstream media to inform my decisions–which would have taken us straight to the bank with our “lucky equity” (from the sale of our home) and into another gargantuan mortgage. So I am very thankful to TAE. They helped me avert falling into that trap, just as Greater Fool has done the same for many of Garth’s readers.

Now, I know what Garth is referring to by his suicide reference. TAE predicts a very calamitous collapse in the price of all things. Not just real estate. And one might see TAE as exceptionally doomerish in predictions of the implosion of the current financial system. But there are two valuable takeaways from their point of view. One is that this is a bad time to buy non-productive real estate. And the other is that, as they themselves admit, “if they’re wrong” and the financial system doesn’t collapse, well what is so terrible about shoring up one’s financial defences just in case. Because it is pretty inarguable that the system is “fragile”–more fragile than ever in most of our lives. Even if you ascribe only a 1% chance of such a collapse, being rather cautious until the storm blows over isn’t such a crazy idea. Because we haven’t had to face a 1% chance of collapse since the Great Depression of the 30s. I see it as sensible to consider some “insurance” in the circumstances. Yes, you might miss out on some yield/returns. But I for one am sleeping really well at night right now.

Getting out of real estate when we did was one of the smartest/luckiest things we have done financially. I just see a lot of instability everywhere, and TAE takes an ultra-extreme approach to the worst-case-scenario. You don’t have to do what they say. But it’s valuable food for thought. I don’t believe everything I read anywhere. Not even here on Greater Fool. But I value the perspective, and use it all to inform my investment decisions.

And finally, it’s not really about “doom”. TAE is very much about the upside of a return to community values and self-sufficiency. There are tremendous positives that come with becoming more self-sufficient and unplugging from the financialized treadmill. I feel less suicidal than ever.

#75 Debtfree on 06.02.12 at 3:03 am

@viva fort Mac . What are you going to do in twenty maybe twenty five years when the oil is gone ? And who are these part time inmates going to sell their acreages to in twenty years when you have to follow the money again . It’s a really sad thing to see a mining town when the party is over . I suggest you visit some of them on your vacations before 2032 ,37 . You’d be surprised how fast time flys when your having fun with your toys.

#76 P & T S on 06.02.12 at 3:23 am

Garth – you really DO need to hire a Kia Carnival / Sedona: We thought just the same, and as we’ve been posting of late, weren’t we very wrong. The Carnival is the ONLY 8 seater MPV to gain a 5-star safety rating in the US, and they are really great to drive – especially the new diesel version.

Look, we were getting around 6.5 litres per 100km average, and these (new) are coming with a 8 year 175,000km warranty.

The Koreans are now where the Japanese were say 15 years ago. Build quality beats anything US or European, and there’s a lot of thought put into the “little things” that make these vans outstanding – TWO sliding side doors, full electric windows all round, multizone climate control, electric side doors and tailgate (?? No Idea why they need this but there you go!) and all the usuals – leather seats, steering wheel, 6-speed auto, discs all round, and that jaw dropping economy on an eight seater MPV.

Do GM even build Hummers for civilian “consumption” these days? I thought they tried to flog the design to the Chinese, and even they weren’t interested.

(Your Harley probably does less to the litre than the Kia we borrowed did!!)

Otherwise all useful stuff in today’s article, but Nostradamus’s links yesterday do seem to paint a significantly less rosy picture for the future – one where reliance on “paper assets” might not be that great an investment strategy . . . . . . . .

A case of “choose your poison” we think.

#77 P & T S on 06.02.12 at 3:39 am

TAE: a blog to suicide by. — Garth

Think that’s bad, just spend time trawling through Zerohedge – Tyler Durden is such a cheerful chappie!!

Definitely up there with the rest of the “time to slash your wrists” doom and gloom stuff, and is it us, or does there seem to be a LOT more negativity, well, just about everywhere??

Seems “Guns, Gold ‘n’ Ammo” is the current thing to be following . . . . . . . ! !

#78 VIVA Fort McMurray on 06.02.12 at 3:48 am

#33 ‘The word of reason’, reasons why “sheep” don’t care about Gas prices being $1.27/litre.
a) don’t pay for gas (Company pays for it etc)
b) Make too much money
c) So infactuated with rising housing value that you preceive to have so much wealth.
d) You’re already in so much debt that what’s a little more debt added by the high pump prices.

#79 a prairie dawg on 06.02.12 at 5:05 am

#33 the word of reason

Can someone explain why oil 8s at 83 bux a abrrel and gas is still a 1.27

– — –

For the same reasons a loaf of bread doesn’t drop 10% if the price of wheat goes down a buck a bushel.

One is a raw product. One is a finished product. Many factors can affect the price between the two of them.

Input costs
Demand
Supply constraints
Refining or processing capacity
Labour costs
Shipping constraints

The prices for a raw product and a finished product, are not directly correlated to the point where a given percentage drop or rise in one automatically means it will happen in the other.

#80 Superman on 06.02.12 at 5:20 am

New numbers out of Vancouver updated as of May 31, 2012. Is everyone ready?

– Prices are down 12% YOY (May 2012 vs May 2011)
– Prices are down 13.1% from peak in Feb 2012

So there you have it folks. People who purchased in Vancouver 1 year ago are now down 12%, plus realtor fees, plus inflation, plus PPT. If you bought a million dollar home in Vancouver last year, you just lost about $150,000. And we aren’t even at the best part yet. By the end of the year we will be down over 25% from peak.

#81 Canuck Abroad on 06.02.12 at 5:22 am

Observor – your posts are snark right? You can’t be serious. Debt is good? Let’s be thankful for banks? People have a better standard of living?

Debt is not good. It enslaves you. The only entities that benefit from debt are the institutions that collect interest from you.

Let’s be thankful for banks? Seriously? You do realise that it was American banks that created the mortgage crisis in the USA as well as the current sovereign debt crisis? Yes, both. Hundreds or thousands of bankers ought to be in prison right now. They will never be prosecuted. Both major US parties are owned by the bankers. The best we can hope for is that they devour each other in an orgy of failures and their stock prices collapse to zero, since that is all they care about.

Life is better, really? You must be very young. Because all I see is a world that has been completely decimated by a bogus “War on Terror”. The American constitution is being ripped gradually to shreds and the US populace is too busy watching Dancing with Stars to notice or care. Leaders have become a bunch of whiny girly men who cower in fear at phantom ghosts and the citizenry begs to be protected by any means possible even if it means being stripped of all the rights and freedoms they fought for decades to enjoy.

This is better? You fight for slavery, Observor. Wage slavery. Debt slavery. A life of fear and cowardice. Shame on you.

#82 a prairie dawg on 06.02.12 at 5:43 am

@#11 Mikey the Realtor

If real estate was doing that well, none of you a**holes would hang around here bitching and moaning so much.

The majority of realtors I’ve met are vacuous self-absorbed people more concerned about their own lifestyle, and their next big commish, than they are the general public or any individual customer. And you’ve done nothing to improve that perception.

You know what they say about people who live in glass houses…

They probably got talked into them by listening to a realtor.

#83 Canuck Abroad on 06.02.12 at 5:59 am

Another silly article from Mark Weisleder.

http://www.moneyville.ca/article/1203420–why-the-bidding-war-frenzy-may-be-ending

All four of his arguments why prices will remain stable can be instantly dismissed. (1) Interest rates will not remain low forever. (2) The old Toronto = NYC canard. It just doesn’t. Not in your wildest dreams Torontonians. (3) The sky is falling in Europe. Actually, this is the time to start looking for a perfect little pied a terre in central Barcelona or Rome, no? (4) Prices in Toronto haven’t fallen in the last 12 years so they aren’t going to. Ever. So buy now or be priced out forever.

Does this guy collect a salary for this “work”?

#84 TimV on 06.02.12 at 6:10 am

The only stock price argument that has any basis in rationality is that the stock prices are irrelevant to someone with my level of knowledge – efficient markets. To blindly argue that stocks become less risky just because they are cheaper makes no more sense than to argue that you should buy stocks because they have gone up in the last year.

Of course, it may be asked if efficient market theorems have any empirical data support, but that is a separate question.

Interesting comment from a realtor last night. She mentioned that she had had to amend three agreements recently to (based on the context of the conversation) put two buyers on the agreement, rather than just one. Quote: the banks are getting so strict that it’s ridiculous. Presumably banks now want a clear paper trail showing that two people own the property if two incomes were used to qualify for the mortgage. Anyhow, thought it was an interesting insight.

It’s been a long year, but I am for a brief moment the GTA’s greatest fool. I just hope my wife’s maternity leave doesn’t affect our cash flow. Hehe…

Our city needs to start building family-friendly (and speculator unfriendly) condominiums. But that’s a screed of its own.

#85 Deb on 06.02.12 at 6:22 am

The Ultima? Does the person who chose this name know that ultima has an Italian root which used as a noun means: the last woman, the last female.

#86 fu_ming_xia on 06.02.12 at 7:19 am

#10 mikey

Sucka , has too much time on his hands …. can’t sell ish , and is frustrated he can make the payments to keep up with the Realtor(R) joneses! hahah. Make em squirm Garth!

#87 fu_ming_xia on 06.02.12 at 7:19 am

^^^^ that’s “can’t” make payments…

#88 Market Bull on 06.02.12 at 7:33 am

BMO, NBC, RBC & TD all drop 5yr posted mortgage rates.

OIS market now prices in a BoC RATE CUT by December.

There is no connection between bond-based long mortgage rates and the BoC’s monetary policy. — Garth

#89 timbo on 06.02.12 at 7:37 am

http://www.washingtonpost.com/business/economy/us-job-growth-remains-weak-may-data-show/2012/05/31/gJQAUHge4U_story.html

“Though consumer confidence has dipped, the U.S. economy remains a bright spot compared with struggling countries such as Spain and Greece. The euro zone has fallen back into recession. Meanwhile, growth in once-booming emerging markets such as China and India has slowed down.”

If oil prices remain in the 80’s it will help to end the recession……

http://theeconomiccollapseblog.com/archives/the-bad-jobs-report-is-just-a-very-small-taste-of-the-economic-nightmare-that-is-coming

“Many Americans will look back on 2010, 2011 and 2012 as “the good old days”.

Right now, there are only small pockets of the country that are total economic hellholes.
For example, Yuma, Arizona has an unemployment rate of 26 percent, and El Centro, California has an unemployment rate of 26.2 percent.
“In the future, those kinds of numbers are going to become the norm all over the nation.
Sadly, most Americans have no idea what is coming.”

Damn doomers. Think happy thoughts………

#90 John on 06.02.12 at 7:58 am

Ronaldo wrote:

“you’re familiar with the Royal Canadian Mints recently launched ETRs which trade on the TSX under the symbol MNT. The fund consists of 30 million units with a total of 327.010 oz’s. The unit value closed today at 17.47. Generally these fund units trade at a premium to NAV but right now it is trading at close to par. The thing I like about it is the ease of purchase and sale plus you can redeem the value of your units for the real stuff as well”
—————-

There’s of course always going to be a lot of debate about precious medals in times like these. A subjective opinon would be that it’s not relevant, because “wealth preservation” would first require a “paradigm preservation”. It’s hard to follow how a person could believe there could be some similiarity in the system when comparing the next ( unknown) 20 years with the last ( known) 20 years.

I mean…how could “top-bottom, boom-bust, cycle” labels apply? Even with 99% uncertainty, you can at least consider all the facts and see that that paradigm is gone.

The following link is from a sharp, pretty mainstream guy. He kind of has a “Ned Flanders” streak to him, but he’d at least educate you on your “paper=the real thing” fantasy.

You’re still hawking casino chips in a sucker’s rigged game. A better question might be…”so what’s my best strategy in the current situation?”

You can’t expect a relevant answer if you’re asking the wrong questions, and looking to others for answers. The net has a lot of good information. The ponzi scheme has not unravelled quite enough for a ban on social media
( local or complete). So it’s not a major problem to get info. So go and get it.

Your “advice” is nothing more than a soon-to-be painful delusion. Here’s a link to get going. You can see how Canada’s housing bubble is plugged into it all.

http://www.chrismartenson.com/blog/harvey-organ-get-physical-gold-silver/73933?page=5

#91 Alister on 06.02.12 at 8:04 am

#83 Tim

If a stock is $70/share, your risk is $70 if it went o $0.

If it drops to $45, your risk is now $45 if it went to $0.

So garth is right, your risk drops as the price moves lower.

Also – people only have so much $ to invest. So as prices move lower, their capital can be diversified across more sectors/companies due to the lower entry cost.

#92 Q on 06.02.12 at 8:07 am

If you’ve ever visited Edmonchuck…especially the dead downtown core…you’d realise that there is barely a market for latte…let alone a shiny new condominimum tower…

#93 Herb on 06.02.12 at 8:18 am

#78 a prairie dawg,

I’ll gladly grant you the various price factors you list. In return, would you explain how the various independent oil companies do their individual calculations and arrive at the same selling price to the 10th of a cent in the same markets, or how small changes in barrel spot prices and futures contracts lead to almost instantaneous changes in retail litre prices, and ususally to the up side?

#94 Canuck Abroad on 06.02.12 at 8:33 am

Garth, this article will make your head explode. Ditzy divorcee runs up vast debts in only five years and is told by an advisor that she absolutely must sell her house. Then he recommends she takes the tiny bit left over from proceeds of sale and pile it into another (cheaper) house. Ummm, because it worked out so well the first time I guess.

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-facelift/divorce-must-kick-her-debt-habit-to-the-curb/article2449655/

#95 Kaganovich on 06.02.12 at 8:39 am

timbo

Thanks for posting. While garth’s quip “TAE: a blog to suicide by.” made me chuckle, it should be rephrased: Deregulated financialized capitalism: a system to suicide by.” Greaterfool is to the Canadian Housing market as TAE is to the global economy. Both occupy helpful contrarian views not too mention interesting pictures! Besides, what are the odds of the majority of the greaterfool readership joining the ranks of the 2% (who own 80% of the wealth)? Slim enough to require not just investing but hoping and praying too.

#96 Kaganovich on 06.02.12 at 8:41 am

Observor

Either you are Shawn Allen or you have spent too much time listening/reading his ‘work’.

#97 Rob now in Nova Scotia on 06.02.12 at 9:00 am

Is it true? Average Canadian net worth is $400,000 but median net worth is only $90,000? Good to know that I am not even close to average and that my net worth is pulling down the average. Soon silver will explode and I will pull the average up. How’s that for being patriotic?

#98 Aussie Roy on 06.02.12 at 9:08 am

Aussie Headlines

Fickle buyers stay away in May, leaving top-end prices stuck in the doldrums

The drop of 2 per cent was the biggest of any capital except Melbourne, which recorded a 2.8 per cent fall, RP Data-Rismark’s May home value index found. This contrasted with unit prices in Sydney, which rose 2.2 per cent in the same period.

The senior research analyst at RP Data, Cameron Kusher, said the biggest house price falls in Sydney last month were at the prestige end (down 6.4 per cent), which dragged the rest of the market lower. The most affordable 20 per cent of houses actually rose slightly, while the middle 60 per cent fell by 0.4 per cent.

So still some Greaterfools buying the lower end, suckers.

http://smh.domain.com.au/real-estate-news/fickle-buyers-stay-away-in-may-leaving-topend-prices-stuck-in-the-doldrums-20120601-1zn1x.html

#99 Mr. Lahey, Sunnyvale Trailer Park Supervisor on 06.02.12 at 9:08 am

“Can you confirm either that (a) I’m destined to live in a trailer park in my golden years or (b) this dude is on glue. Or should be?”

And what would be wrong with living in a trailer park Kat? Bubbles, Ricky, Julian, Randy Barb and I just love it. In Sunnyvale, for $25k you get yourself a wonderful place with no traffic jams, pollution and loads of debt. You combine the best of Garth’s world. Liquid investments (Ricky is up 15% this year as manager of the Sunnyvale Hedge Fund – he is shorting European bonds) and you are NOT A RENTER. Nope, no landlord to contend with and yearly rent increases. $25k is what some pay in a year of rent. So Kat, rethink your view of trailer parks and head on down to the SASTGFBDCParty and see for yourself how wonderful they are. Bubbles and the rest of the gang would love to meet you!

#100 DonDWest on 06.02.12 at 9:13 am

“What you need to bring: Photo ID, a cheque for $1,000 Presale launch Rules. . .”

If I could get away with asking for $1000 dollars just to attend a presale, I wouldn’t have to sell anything! I would make all my money just offering presales. If anyone shows up at all to buy these condos, they’re without a doubt the greatest of the greater fools!

Imagine if a retail outlet charged customers money just to have a look at their merchandise. This is essentially the same thing. Why, oh why, is real estate “special” in the world of capitalism and doesn’t have to follow rules like everyone else?

#101 Toronto_CA on 06.02.12 at 9:25 am

WOW. Just wow. I wonder how many people are like this:

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-facelift/divorce-must-kick-her-debt-habit-to-the-curb/article2449655/

No assets. Just a big, mortgaged $600k house. Advice? Sell the house! But the expert says she must buy another one of course. Couldn’t rent and build up some savings and retirement funds…no that would be sensible. Need to buy another illiquid, mortgaged declining asset with the small equity she would get from selling the one she has now. *sigh*…Garth is there any hope for Canada?

#102 CrowdedElevatorfartz on 06.02.12 at 9:51 am

@#42BPOE$$$

BeePee, BeePee, BeePee, you smelly little cherub!

How do you keep escaping from your locked cage? I guess your fingernails are for more than just picking you nose eh wot?
The only reason there may be “Sold” signs in Richman may be due to the fact that the “owners” have seen the approaching meltdown and have dumped those cardboard and glue boxes before they lose all their investment.
OR
They saw video of the Japanese Tsunami and realized that the only reason Richmond exists is due to dykes and pumping stations. That fact plus the knowledge that Greater Vancouver Regional District (GVRD) is way way way overdue for a massive earthquake.

If you survive the tsunami you can stay at my house. I’ve hosed your cage out and put fresh straw down on the floor. But you know the rules. No dung flinging in the house…….

#103 Flash on 06.02.12 at 10:09 am

Garth, You provided information on 3 different categories in this blog. I find it very unusual that there are no comments from your readers regarding their proposed net worth of approximately $90k for the majority of Canadians. I believe that your readers missed this very important data. I wish you would reiterate on this issue without adding any other new information.

#104 Herb on 06.02.12 at 10:23 am

#91 Alister,

I must join TimV in questioning the utility of the “declining price = declining risk” argument. By that flawless logic, Nortel would have been too risky at #120, but would have been a compelling buy at #12 (or at $1.20).

Surely the criterion in any investment is the probability of profit, not the risk of total loss. The latter is a secondary consideration adjusting the realistic expectation of profit. It’s the “REOP” that counts even in tax law, not the risk of total loss.

No. Nortel was less a risk at $12 than $120. How is that not obvious? — Garth

#105 Market Bull on 06.02.12 at 10:37 am

There is no connection between bond-based long mortgage rates and the BoC’s monetary policy. — Garth
_____________________________________________

Those who deal in Overnight Index Swaps obviously beg to differ.

So I take it that you are still sticking with your earlier prediction of a BoC rate hike this year?

#106 Doug in London on 06.02.12 at 10:38 am

As I said about a year ago, buying equities or other assets should work like governor. When values drop as they have done recently, like the speed of the engine dropping below the set point, there should be a massive frenzy of buying, just like how the governor gives the engine more fuel/air mixture in response to the drop in speed. Why is that so hard to understand?

#107 Lorne on 06.02.12 at 10:41 am

#100 DonDWest on 06.02.12 at 9:13 am
“What you need to bring: Photo ID, a cheque for $1,000 Presale launch Rules. . .”

If I could get away with asking for $1000 dollars just to attend a presale, I wouldn’t have to sell anything! I would make all my money just offering presales. If anyone shows up at all to buy these condos, they’re without a doubt the greatest of the greater fools!

IMAGINE IF A RETAIL OUTLET CHARGED SUSTOMRERS MONEY JUST TO HAVE A LOOK AT THEIR MERCHANDISE. This is essentially the same thing. Why, oh why, is real estate “special” in the world of capitalism and doesn’t have to follow rules like everyone else?
………
Isn’t this what Costco does???

#108 avenirv on 06.02.12 at 10:44 am

@Duke,
i thought russia is in europe. so do you think russia will have its oil, gas, mineral resources soon ? russia is a “little” bigger and richer than canada in such areas…

#109 avenirv on 06.02.12 at 10:45 am

correction:

russia will have its oil, gas, mineral resources gone soon ?

#110 Inglorious Investor on 06.02.12 at 10:51 am

#91 Alister on 06.02.12 at 8:04 am

“If a stock is $70/share, your risk is $70 if it went o $0.”

When buying a stock, you should set your own risk amount. Just because you invested $70/share does not mean your risk should be $70/share. You should set your risk at a percentage of your invested capital, which would be determined by a number of factors, such as your risk tolerance, the stock’s volatility, your own analysis of the stock’s potential, market sentiment, whether you have a full or partial position, etc. Risking the whole nut is foolish and a sure way to generate a loss.

#111 Bigrider on 06.02.12 at 11:02 am

I was at a stag party yesterday night full of builders, real estate agents, mortgage brokers and construction guys of various types.

Can’t tell you enough how different there perception of the world is from this blogs.

Tons of beautiful cars in the parking lot and much discussion about RE and the amount of money everyone has made off it.

Lots of very deep pockets getting much deeper from investing in first and second mortgages.upto 12% on second M with non of the stupid volatility and poor performance of stock markets.

Hard to be a financial asset advocate in a room full of those people let me tell you

#112 Realtors in a Panic! Now they attack Garth on 06.02.12 at 11:03 am

You can see the fear and now anger from realtors and even mortgage brokers who hate the fact garth is pointing to the truth. These criminal scum realtors/mortgage brokers have been profiting off a ponzi scheme and don’t want the scam to end but alas it is ending and they all know it. Dont get suckered into the top of the ponzi scheme. Many sellers have now maxed out their HELOC and need to sell before they go bankrupt. Sales have now almost stopped and many financing deal have fallen through as very few can even qualify in this housing bubble ponzi. You all seen mortgage brokers kick and scream over new rules which should have always been in place. It’s now going to be a nasty crash.

#113 T.O. Bubble Boy on 06.02.12 at 11:24 am

Garth – just read your most recent Post City magazine article on the “Vancouverization of GTA” and just saying no to bidding wars… will Post City (essentially a magazine of RE ads) ever let you write again?

#114 Intuitive Missus on 06.02.12 at 11:31 am

Me and the hubby found ourselves at a new home sales site (just looking, I swear) a few days ago having received an invitation to a VIP pre-sales event. If you wrote an offer at the event, you would receive a $10,000 discount and some $$$ to spend on upgrades. Problem was no one could give you any prices on the upgrades so there was no way to asses the value of the upgrades. The houses were quite basic and the starting price was just under $400K for just over 1200 sq ft for a drive of nearly an hour outside Toronto.
We did some quick calculations on the drive home and figured by the time we put some “upgrades” in (wood floors and stairs because they will last longer than builder’s carpet, taller kitchen cabinets because regular sized cabinets look ridiculous when the ceilings are 9 ft high and a couple of other little luxuries) fencing, landscaping and a paved driveway we would be hitting close to the $475K mark. Property taxes also high in the area. By that standard the house we sold a year ago was a real bargain.

We shook our heads and drove on. The madness continues. We just refuse to add fuel to that fire. We’ll continue to rent.

#115 Canadian Watchdog on 06.02.12 at 11:32 am

#88 Market Bull

Unfortunately for you, cutting rates has lost its ability to boost confidence in current market conditions. It is useless. Australia’s cash rate has been cut 75bps since November with no luck to stabilize falling home prices. http://i48.tinypic.com/nb7juo.png

You can lead a horse to liquidity, but you can’t make him borrow.

#116 Not 1st on 06.02.12 at 11:39 am

The TAE site is a little doomy, but they use a logical approach and simply see that we cannot keep doing what we are doing….printing money to keep the market afloat. Every time we get out a recession, our debt skyrockets to do so and they are coming more often now. What cannot be sustained will not be sustained, except when it comes to the world of finance. Central Banks have so much power to paper over and extend and pretend and their actions are barely noticeable in the market. A tiny day by day erosion in purchasing power is barely noticed by the public at large. In the 60s your could buy a new car for under $3000. Now what are they worth. Thats inflation at work for 40 years now.

#117 Gun Boat denier on 06.02.12 at 11:50 am

81 Canuck abroad – If I sell my house, the other persons debt becomes my savings. This is good for me, right? If a
company borrows to invest in a product made by the company I work for, this is good for me, right? Think about it. Where does your “money” come from? It will trace back to debt somewhere down the line.

96 Kag – I too caught the resemblance.

106 Doug – because it’s a positive feedback loop! The
output is added to the input.

#118 EdmontonGuy on 06.02.12 at 11:53 am

#73 DeadmontonDwellwr on 06.02.12 at 2:23 am

I rent in one of those wonderful type of condo’s built during the last boom in 07 in NE Edmonton.

Two Words. Hell Hole.

You had me at “NE Edmonton”. The only reason to live in NE Edmonton is to have quicker access to drugs and drug addicted hookers.

#119 xyz on 06.02.12 at 11:59 am

Vancouver’s detached average home prices continued a slow retreat from February’s high of $1,235,244 receding to a current average price of $1,073,331 down 12% YOY.

http://www.yattermatters.com/2012/06/vancouver-average-price-for-may-2012/

The new mantra will soon be “Sell now or be priced IN forever!”

I smell Bull trap :)

#120 Herb on 06.02.12 at 12:00 pm

“Nortel was less a risk at $12 than $120. How is that not obvious? — Garth”

That much is obvious, Garth. What is not obvious is the role of this specific element of risk in the investment decision.

I question its relevance, since it can be managed by refusal (i.e., not buying at all), by limiting the amount exposed to that risk, by stop-loss orders, hedging or whatever. If the risk of complete loss were that important, we’d be in penny stocks only.

That was not the context. — Garth

#121 Duke on 06.02.12 at 12:02 pm

#55 Ronaldo: Buy Physical and bury it somewhere secluded and safe! I don’t trust gold funds and stocks. They can be expropriated by the government while physical can still be used as part of a black market economy of needbe. Besides I don’t really trust the Royal Canadian Mint or Government. Canada sold all of its gold so if they ever need it to get gold based money system going again they will keep mine and give me fiat in return. Sure I’ll make a profit but I want the asset of the Pharaohs in my hand. The only physical paper I want to own is CASH in case the Canadian banks become insolvent. Then I will still get ahead.

Try buying something with a gold wafer. — Garth

#122 Jesse Livermore on 06.02.12 at 12:12 pm

“No. Nortel was less a risk at $12 than $120. How is that not obvious? — Garth”

Those who bought at $12 watched Nortel go to 0 or any other price on the way to 0 , incurred a great deal of risk. Amateurs (not you Garth) watch their losses run while pros watch their profits run and cut their losses quick. The wins have to be of such a magnitude to pay for all the small losses that are incurred. Grabbing at small profits will not pay for the even small losses. Everyone go out and buy Market Wizards and The New Market Wizards by Jack Schwager in which he interviews the world`s greatest traders. All the amateurs on this site offering their opinions would do well to see how billionaire traders do. Once again, I do not include you Captain Garth.

The point is mathematical and irrefutable. There is less risk buying assets at lower valuations. — Garth

#123 Century Park Renter on 06.02.12 at 12:16 pm

#36 Sold in Edmonton (Renting in Sherwood Park)

I rent in Century Park. Penthouse, SW facing! The owner said he bought for $600k and I neglected to ask the condo fees but I would assume it’s approx. $450/month. He fully furnished the place and I would say I pay just over 50% in rent of what his monthly payments are (not to mention the cost of purchase (i.e. downpayment, cost of financing, etc.), and the cost of the furnishings ($2000 on patio furniture alone, I know because I picked it up for him at Costco and my friends and I assembled it).

I have my friends over and they are simply amazed by the view (minus the LRT parking lot), the size of the deck, the luxury, the 20 foot ceilings. But it’s just stuff! Life is better when you have less holding you back. Freedom was fought for, but yet we neglect to transpose that same mindset into our own everyday lives…

I work as an oil & gas consultant at the ripe age of 28 (LOVE Alberta), and I need to be flexible. If I need to leave country for a job I have no trouble paying out the rent, taking my coffee maker and bed sheets and leaving.

All I have to say is Garth you saved me! Life is great! Thank you!

#124 Observor on 06.02.12 at 12:19 pm

Number 37 Not 1st responded to my post at 31, where I said today is the best time in the history of the world to be born, and he said:

“You do know that 9 million babies and kids die every year due to disease, famine, malnutrition, war, abuse, etc. Try reading a paper or something one day before you go spouting on who life is good for.”

Well, of course it is very sad that millions of babies are dieing. I suspect this is mostly in certain Africa counties.

A big part of the reason for it is those African countries have lille or no banking systems and other needed economic features like the rule of law. They badly need banks to save the babies!

In North America it is of course a wonderful gift to be born today.

It’s Saturday. Why not give the real gift of life and go forth and procreate this very night?

Not only will you create the gift of life but your offspring will contribute to fixing our demographic imbalance.

You can also give an immediate boost to the economy by going out and buying some booze to help the process along.

#125 NAM not HAM on 06.02.12 at 12:27 pm

#80 Superman on 06.02.12 at 5:20 am

You only lose is you bought in van west and sold this year. If you bought van east last year and sold this year, you’ll still see gains. It’s really not as bad as most people think. It sounds bad. Van west home are extremely over inflated and now the multi million dollar homes aren’t selling. So lower volume and a few less 10 mil homes being sold, will bring that avg number tumbling down. East van is hot and moving fast. No sign of crash or even a correction yet. Richmond has been flooded since last summer, but prices sticky as listings rise. Total listings in the rebgv has actually declined in the following week.(maybe due to expiried listings). It’s tough to say where we are exactly heading. Maybe a bump in rates this summer could do some damage, but as of now, it’s not as bad as it looks and sounds. The doomers here think its bad, I want it to be bad!!! But I’m a believer of something when it actually happens.

#126 In GARTH ALMIGHTY not God we Trust on 06.02.12 at 12:32 pm

#104 Herb

“I must join TimV in questioning the utility of the “declining price = declining risk” argument. By that flawless logic, Nortel would have been too risky at #120, but would have been a compelling buy at #12 (or at $1.20).”

A stock that is a so called bargain and is perceived to be an even great bargain is no friggin bargain at all. Anyone heard of catching falling knives? Great circus stunt for a pro but amateurs attempting it usually get sliced up pretty badly. Billionaire investor Stephen Jarislowsky in his book The Investment Zoo, outlines that the time to buy into declining stocks is approximately 6 months after a major collapse in stock markets. Even then, he advises choosing non cyclical blue chip stocks (no technology stocks). He wrote the book in 2005 and had anyone followed his advice, about 6 months after the 2008 financial fallout, the bottom was reached (spring 2009). As many of you know, the bearded mystic oracle, all knowing, all wise, all seeing financial prognosticator without equal, former minister of national revenues, denouncer and opponent of all parliamentarian peckerheads and peckerettes, lone voice of reason crying out in the financial heloc infested wasteland of Canada did EXACTLY THAT!

#127 NAM not HAM on 06.02.12 at 12:36 pm

All this talk about a balanced portfolio netting 6.88% after fees is pretty shitty actually. I have relatives in Ho Chi Minh City and they get fixed income from the bank @14%. This is paid by the banks there. 14% is considered low. They were paying 17% several years ago. HCM city had a massive run up in prices for RE in the last decade. Some properties saw 600% increase. Mostly due to HTM(hot Taiwanese money lol). The government stopped foreign investment, and prices reverted. It’s still not cheap though. So all you fools with a balanced portfolio, you are all suckers. You’re a bunch of tax slaves and remember, you work for the Feds. Over 60% of a home owning Canadian is getting their asses taxed from income, shopping, property tax, and etc.

#128 TimV on 06.02.12 at 12:41 pm

#91 Allister: Nobody buys 1 share at $45 or 1 share at $75. They buy $10000 of shares. $10000 of stock market equity has the same risk regardless of how you subdivide that into shares. It’s like saying that Berkshire class A (trading around $100000/share) has more risk than Berkshire class B (trading around $70/share).

Same for Nortel. Nortel could be trading at $12. But if they did as 10:1 share consolidation, they trade at $120. Oh wait. They did do as 10:1 share consolidation, after which they traded at around $10 or $20 (if memory serves). I guess they should have done a share split instead to reduce the risk — maybe then they would still be around.

A given share price change may either over-estimate or under-estimate the corresponding change in fundamentals. I don’t see how you can argue that there is a systematic bias to underestimate negative changes in fundamentals. Each situation needs to be analysed for its own merits.

#129 TimV on 06.02.12 at 12:43 pm

Sorry – that should read “overestimate negative changes in fundamentals”. Got my ups and downs reversed.

#130 broadway skytrain on 06.02.12 at 12:53 pm

No. Nortel was less a risk at $12 than $120. How is that not obvious? — Garth

yeah right, of course, when any stock splits it becomes 50% less risky, unless of course it’s a 3 for 1 ;)

No, because then you have the same dollar exposure. You have no point. — Garth

#131 Junius on 06.02.12 at 1:09 pm

#28 Observer,

You said, “And remember, one man’s debt is another man’s savings.”

This statement demonstrates your deep ignorance over the issues of debt and a fundamental misunderstanding of the causes of the 2008 financial crisis and the world’s current financial woes. You also misrepresent my opinions.

The simple statement you make only applies on a micro level between two independent actors. It does not apply at a macro economic level where fiat currencies, central banks and derivatives create a world where debt obligations can grow exponentially without corresponding rises in real assets. This is the problem faced by Europe with Greece and Spain now causing such extreme problems.

You should also note that these problems have only been solved in the past in cases such as Sweden in the 90s and most Iceland when debt was written down.

You also clearly do not understand the role of excessive debt in causing the current imbalance in our current economy at the household level. The debt fuelled consumption levels of the past three decades were unsustainable and caused a massive misallocation of resources. It has masked a falling level of productivity and a growing inequality of wealth.

The growth of this extraction economy is not a debt versus non debt choice as you suggest I advocate. I understand the beneficial role of debt but also it’s historical role of being used as a means to create control and servience as it did during feudal times. Even in the bible Jesus took issue with the loan sharks of his day.

Until we understand the negative impacts of excessive debt in our economy and society we will not break this cycle and be able to move forward. The current extend and pretend cycle is going to come to an end. It is just a matter of when.

#132 truth hammer on 06.02.12 at 1:24 pm

The soft brained BS that gets pumped out by Canada’s limited media is exactly why I promote that we should have more media, not less.

Thank you for finally pointing out the fact that ‘averages’ are spurious, meaningless and incindiary nonsense when apllied to political science, real estate and Net Worth stats for the general population……one we stop the BS of using ‘annualized returns’ we’ll be getting somewhere.

Recssesions do end….although this one is particularily onerous due to the interferance of government with ZIRP and QE. Soverign debt has reached epic proportions and may take a few years yet, making this the worst resesssion since 1930-39. Tell you potliticians to stop spending, rationalize repayment and get out of the debt market….the sooner they do the better we will be….and the faster the economy will recover.

Historically equities are on sale……its just hard to look right when everything looks wrong. I stepped in yesterday and bought a tiny smidg of RY, BNS and RSI.UN.

here’s the strategy……DRIP across the trough ( it may be years of pain ahead so be strong. you’ll never pick the bottom) and buy small increments ( brokerage is measured in pennies when you use a discount site) when the market seems at it’s worst. Time and dollar cost averageing MAY win in the end.

You have to have two things going for you…time and the sense to have never fully invested while the market was at it’s peak……you hold cash and squire it.

Some things have in fact done quite well…..GIB.A for ex…….$15 to $24 over 18 mos. This is the type of thing that you can seel small bits of to pick up bargains that are down…like RY ( mind you the lows of RY are $43 so don’t freak if that level is tested or even broken as in early 09).

The strategy here is that growth stocks will outperform and that if you hide away in nothing but ETF’s and Preferred’s for the percieved safety. of small returns..then over time you will lose big to hyperinflated food and energy costs as well as the increases in taxation and fee’s from untilities and services which are far outstripping ‘official inflation’ reports.

And BTW…can anyone not read Conrad Black in Canada? Is he the only articulate commentator left? If for nothing but his command of English.

http://fullcomment.nationalpost.com/2012/06/02/questions-and-answers-with-conrad-black/

#133 Stoopid on 06.02.12 at 1:25 pm

Consider this:

Next time you want to plagiarize some extremist like Raoul Pal, do it on your own site. — Garth

#134 Bigrider on 06.02.12 at 1:32 pm

To all you fools talking about mortgage brokers and RE agents being in a panic please stop making fools of yourselves.

RE agents and mortgage brokers have thrived past 13 years here in the GTA and continue to do so until otherwise when and if RE declines in both volume of sales and price.

No I am not a realtor or mortgage salesperson and yes I am bearish on the RE market. Just more objective than most here

#135 bill on 06.02.12 at 1:35 pm

Hey do the realtors in ditchmond mention these little guys ?
” The muskrat is considered a pest because its burrowing causes damage to the dikes and levees that these low-lying countries [holland and belgium] depend on for protection from flooding. ”

At the western end of blundell road in richmond bc is a great place to watch these rodents ,which are native to the area.
I reckon there is quite a ‘swiss cheese’ effect on the dyke there from their burrowing.
kinda makes you wonder what a strong westerly at high tide with a bit of an earthquake would do to the aforementioned dyke.

#136 Junius on 06.02.12 at 1:42 pm

#96 Kaganovich,

I noted the similarities between Shaun Allen and Observer are pretty striking. Thanks for pointing them out.

#137 Oldmac on 06.02.12 at 1:44 pm

Well well well…. the dog and pony show forges on. Since first visiting this blog years ago I’ve seen no change to the status quo. The debt binge continues. In my line of work I’ve got a lot of exposure to the middle through upper middle class and if there’s one thing that bridges the societal gap – it’s debt. All of them have lots of it; and zero liquidity.

The detractors would have you believe that we can continue ad nauseum until we’re all buying 1 bdr. condos for a million a pop – and we still haven’t experienced much fallout from the boomer property purge. I don’t believe that the majority of boomers have invested soundly in any other area than their house(s) or investment properties, at least from what I’ve seen.

The youngins’ who can’t even qualify for a $20K line of credit can still step up to a $500K mortgage with little issue. I was so naive to think that it may be hard to get said $500K mortgage with less than %5 down… I was wrong.

There is no future other than a correction; that much is certain – but will we postpone the inevitable until its’ consequences are the worst they possibly can be? It’s starting to seem that way.

From my anecdotal experience – the outlook is actually a lot worse than anyone has made it out to be. A few years ago I thought I may have a bit rosier outlook than Garth does, but now it’s markedly worse.

The lowest common denominator in terms of investment savvy has been allowed to accumulate the most amount of debt; in one asset class no less. In my experience this group of folks is also the least diversified in terms of skill set and flexibility (i.e. I need to have THIS job at THIS wage at THIS location otherwise I’m in a lot of trouble).

There’s no doubt a good many people them will be able to pull themselves up by their bootstraps and find a way to rally through hard times, however we know that’s going to have a tremendously negative impact on our consumer heavy economy.

Let’s all just hope this starts to sort itself out shortly before to long. To continue to delay is to amplify the pain in the end.

#138 Not 1st on 06.02.12 at 1:47 pm

The point is mathematical and irrefutable. There is less risk buying assets at lower valuations. — Garth

I will challenge that math. I think that the facebook debacle proved beyond a shadow of a doubt that valuation is totally subjective and not standardized in its determination. Therefore, if valuation is not a constant across the industry or viewed as steady for a reasonable period of time, then it cannot be said assumed that a lower price is a bargain or sale. You then have a statistically significant chance you are buying something that is as likely to fall as it is to rise.

Where did I say, ‘bargain or sale’? I indicated there is less risk acquiring the same asset at a reduced price than buying at an inflated value. That stands, no matter how much you subjectify and obfuscate it. — Garth

#139 Junius on 06.02.12 at 1:48 pm

#124 Observer,

You said, “In North America it is of course a wonderful gift to be born today.”

As a parent I hope you are right. I hope we leave a better world for our children than the one we inherited. However I find your confidence in the inevitability of human progress both naive and worrisome.

At the same time that humankind is making progress in areas of science and technology we are also exhausting the planets resources on many levels. Our species has seen periods of regress before in history and in order to avoid one this time we will need better leadership than we have now.

#140 jess on 06.02.12 at 1:55 pm

#8 T.O. Bubble Boy
This was in the guardian uk

Christine Lagarde, scourge of tax evaders, pays no tax
IMF boss who caused international outrage when she suggested that Greeks should pay their taxes earns a tax-free salary
The same applies to nearly all United Nations employees – article 34 of the Vienna convention on diplomatic relations of 1961, which has been signed by 187 states, declares: “A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal.”

According to Lagarde’s contract she is also entitled to a pay rise on 1 July every year during her five-year contract.

…Base salaries range from $46,000 to $80,521. Senior salaries range between $95,394 and $123,033 but these are topped up with adjustments for the cost of living in different countries. A UN worker based in Geneva, for example, will see their base salary increased by 106%, in Bonn by 50.6%, Paris 62% and Peshawar 38.6%. Even in Juba, the capital of South Sudan, one of the poorest areas of the world, a UN employee’s salary will be increased by 53.2%.

Other benefits include rent subsidies, dependency allowances for spouses and children, education grants for school-age children and travel and shipping expenses, as well as subsidised medical insurance

https://careers.un.org/lbw/home.aspx?viewtype=SAL

#141 Expat on 06.02.12 at 1:56 pm

$1M condos in Edmonton, near the Coliseum? Wow.

I was in town for a conference last month, hadn’t been there for 6 years or so, weird prairie melancholy grips you looking out at the open fields on the trip from Nisku to the city – for those who haven’t been there, the Edmonton airport isn’t really in Edmonton. Looked around the downtown, some nice stuff on the west, some stuff on the east that could easily pass for the crappier areas of Detroit (hello Hollywood location scouts).

As many here point out, Edmonton does actually have an economy that makes sense and probably won’t get sucked into the wake of a decelerating Chinese economy.

But a million bucks for a condo there? Really?

#142 Junius on 06.02.12 at 2:28 pm

#132 Truth Hammer,

You said, “Tell you potliticians to stop spending, rationalize repayment and get out of the debt market….the sooner they do the better we will be….and the faster the economy will recover.”

Yet austerity is clearly not working in Europe and many other places. Clearly many costs need to be cut but there also must be spending – and not on banks or other bad debts.

#143 Observor on 06.02.12 at 2:30 pm

BASIC MATH…

Shall we agree then that for every debt (a liability of yours), there is a receivable (an asset of say a bank)?

All debt is owed to someone. This is why one man’s debt is another man’s savings.

Bank balance sheets do indeed balance.

Banks lend out deposits, deposits are savings that banks owe to depositors.

As Gun Boat Denier at 117 explained, the loan gets recycled. You get a loan and buy a car, the seller of the car deposits that money back into a bank and the bank has the money back and can loan it out again. Nothing nefarious about it.

Banks don’t force people to take on too much debt. Many people do dumb things and then they blame the banks.

Without banks there would be very few homes to buy at any price and few or none to rent. Bank bashers, be careful what you wish for.

Life is glorious, rock on!

#144 TimV on 06.02.12 at 2:58 pm

Buying stocks when a greater portion of the valuation reflects current earnings and cash holdings is less risk than buying stocks when a greater portion reflects the assumption of future growth – I agree. But that is not what you wrote, Garth. You said that it is less risk simply because share prices have decreased. This is just technical analysis cloaked in the language of value investing. The price history is irrelevant (ignoring a short term momentum effect that many papers/studies claim to find).

Return to the context of the remark. This is one stupid thread. — Garth

#145 EdmontonJim on 06.02.12 at 3:05 pm

Exclusive is funny. According to the downtown development plan, the City will be allowing thousands of new units in the area. Add to this that this brave vanguard is in a location currently occupied by the homeless increases the chances of arson related losses to 100%.

The downtown core will probably be a fine place to live in a decade or so. But the risks associated with buying there are just too high.

Bear also in mind that the singular goal of the City is to increase affordability and quality of life and population density (not prices).

The City of Edmonton – genius
Downtown developers – shrewd
Downtown Renters – sensible
Downtown specers and condo-owners – fools.

#146 Tony on 06.02.12 at 3:12 pm

I doubt they could even get an offer if they offered the entire building of 199 suites for 1.559 million.

#147 a prairie dawg on 06.02.12 at 3:32 pm

#93 Herb

Granted, there’s got to be some collusion going on at that level. Proving it is a whole different matter.

Much less price difference (if any) between independent suppliers here, than those in the US.

Maybe they have a secret blog or website they all visit. lol

#148 Canadian Watchdog on 06.02.12 at 3:37 pm

Video: Niall Ferguson presents The Ascent of Money – Part 5 – Safe As Houses http://www.youtube.com/watch?v=os8gRhd4Ba0

#149 maxx on 06.02.12 at 4:03 pm

#119 xyz on 06.02.12 at 11:59 am

The new mantra will soon be “Sell now or be priced IN forever!”

Love it! Very well put.

#150 salonist on 06.02.12 at 4:18 pm

shed living coming to a neighborhood near you.

the u.s.
http://www.apartmenttherapy.com/tiny-living-highstyle-sheds-th-62601

england
http://www.dwelle.co.uk/

australia
http://forum.homeone.com.au/viewtopic.php?f=31&t=15275

canada
http://www.cbc.ca/news/canada/manitoba/story/2012/01/20/mb-shed-homeless-fined-winnipeg.html

does chmc still provide some funding for granny flats in the kid’s back yard?
chmc insured?

#151 wxman on 06.02.12 at 4:23 pm

I think a lot of people including yourself Garth are underestimating how bad things will get in the economy over the next few years.
There is just way too much debt in the system..its staggering how much debt most developed countries have. We have reached debt saturation..the entire boom economy over the past 30 years has been based on increasing debt. This is by far the biggest credit bubble in history.
A giant reset is coming. This is not just another normal recession..this upcoming collapse is based on decades of governments and people spending beyond their means.
Look at how many advertisements for cars and houses dont even mention the price but only the monthly payments.
Hence the stock market is going to get pretty nasty..I see easily another 10 percent down and 20-30 more is not out of the question. Notice how gold and gold stocks jumped on Friday..that is the only sector I see doing well. Its because countries around the world are going to be printing money like crazy which will once again devalue currencies and sending people into real assets such as gold and silver. 1900 gold will seem cheap within a year..

‘Reset’ is a meaningless piece of mantra. Regardless, the focus of this blog is not wailing about the macro but taking action to protect the micro. There is no one simple path (like loading up on gold) to achieving that. — Garth

#152 Junius on 06.02.12 at 4:26 pm

#143 Observer,

You asked, “Shall we agree then that for every debt (a liability of yours), there is a receivable (an asset of say a bank)?”

This is only in the land of simpletons where people like you live. It does not take into account the fractional lending of banks nor the international financial system. You missed the memo on the 2008 financial crisis.

If the banks were returned to their more traditional role of basic lending then your example would be relevant. However that world has been gone for decades.

#153 Harlee on 06.02.12 at 4:32 pm

#141 Expat
“…the Edmonton airport isn’t really in Edmonton.”
Edmonton actually has two airports. The ‘International’,the one Expat refers to, is indeed outside the city limits,near Leduc.
The one that I use when I change planes on my way to Vancouver is the smaller and older domestic flight ‘ City Centre’ airport ,in the northern part of the city.
So what if the international airport is outside the city? Vancouver’s is actually on Sea Island in Richmond. Of course , Pearson isn’t in Toronto at all but way out in Mississauga.
If Edmonton keeps growing then one day the big airport near Leduc will be surronded by city, the way that ‘City Centre’ is now.

#154 TakingResponsibility on 06.02.12 at 4:41 pm

A forum where the locals (no HAM here) are talking themselves into buying Ultima:

http://www.connect2edmonton.ca/forum/showthread.php?p=445034

Apparently, the Ultima screams a great buy because there is Glass – Granite – Downtown – Elite Heating – and Boosterism added to the mix of comments as the Ultima Building is going to put Edmonton in the same league as…..oh, you name some “other” city!!

Who needs marketing when boosterism thrives!!

#155 jess on 06.02.12 at 4:41 pm

February 2009 private equity

The Ultimate Bubble?
http://www.vanityfair.com/politics/features/2009/02/wolff200902

—————————-
http://www.guardian.co.uk/business/2012/jun/01/xstrata-glencore-merger-payouts

#156 Inglorious Investor on 06.02.12 at 4:53 pm

#122 Jesse Livermore on 06.02.12 at 12:12 pm

It’s very interesting: you call others on this site amateurs, yet your handle is the name of a trader who lost all his money and then killed himself.

#157 Van grl on 06.02.12 at 5:02 pm

#31 Observer:

“Kids may inherit a certain amount of government debt but they also inherit a pretty fine world.”

What??? I’m with Not 1st on this one, I know I lean toward being cynical and all but I look at children these days (even teenagers) and feel sort of bad for them. If they’re lucky enough to tear themselves away from an ipod or video game long enough to go outside and climb a tree, good on them- but their future?? Bleak. And that’s kids in the west.

#158 Inglorious Investor on 06.02.12 at 5:21 pm

#143 Observor on 06.02.12 at 2:30 pm
BASIC MATH…

“Shall we agree then that for every debt (a liability of yours), there is a receivable (an asset of say a bank)?”
– Yes, assuming the liability it to a bank.

“All debt is owed to someone.”
– Sure.

“This is why one man’s debt is another man’s savings.”
– Not necessarily.

“Bank balance sheets do indeed balance.”
-That’s why they are called ‘balance sheets’.

“Banks lend out deposits, deposits are savings that banks owe to depositors.”
– Collectively, banks lend out much more than their deposits.

“As Gun Boat Denier at 117 explained, the loan gets recycled. You get a loan and buy a car, the seller of the car deposits that money back into a bank and the bank has the money back and can loan it out again. Nothing nefarious about it.”
– Collectively, banks pyramid deposits/reserves. They lend out far more than the deposits. With a 10% reserve ratio (just for example), they can collectively lend out ten times their aggregate deposits/reserves.

“Banks don’t force people to take on too much debt. Many people do dumb things and then they blame the banks.”
-True, but banks do take advantage of individuals’ ignorance of finance, the way car dealers take advantage of people who don’t know about cars. Car dealers sell cars. Banks sell money.

“Without banks there would be very few homes to buy at any price and few or none to rent. Bank bashers, be careful what you wish for.”
– Banks are important. But they need reforming.

“Life is glorious, rock on!”
-Yes.

#159 Alister on 06.02.12 at 5:33 pm

The point is mathematical and irrefutable. There is less risk buying assets at lower valuations. — Garth

How many times do you have to tell them Garth, that buying into real estate with a PE of 9 is more RISKY then buying when the PE was 3 ?

#160 Casual Observer on 06.02.12 at 5:57 pm

We sold our home and rented it back from the new owner while we looked for a new place. When we changed our contents insurance policy from homeowner to renter, the premium DOUBLED.

We were the same people living at the same location with the same stuff to insure, but were told that since we’re now renters, we are deemed a higher risk.

There is a stigma surrounding people who rent their accomodation which is creating a dual class of citizenship. I can’t even shop at a certain hardware store anymore because their motto is “Homeowners Helping Homeowners”.

Renters are looked at as if there was something wrong with them. They are typically thought of as financially illiterate and less stable.

This may have been true in the past, but I’d say many people who choose to rent because of the current conditions are actually more financially stable and less “risky” than many “homeowners” buried in debt.

Your story is not credible. Tenant packages cost far less than house insurance. — Garth

#161 AgAu on 06.02.12 at 6:31 pm

The comments such as “Try buying something with a gold wafer” and similar are not helpful.
One could easily say,
“try buying something with an Apple share” or
“try buying something with a preferred share” or
“try buying something with a provincial bond”.
All of these are assets have value which is only accessible when they are exchanged for cash/currency. No single asset is always better than others. The key points are liquidity, value and price. Gold is not always better than common stocks or bonds or preferred shares.
For everything there is a season, and a time for every matter under heaven.

That’s right. They are all financial assets, convertible into money. I am pleased you accept that gold is not currency. This is progress. — Garth

#162 Inglorious Investor on 06.02.12 at 6:34 pm

#148 Canadian Watchdog on 06.02.12 at 3:37 pm

IMO, Niall Ferguson is a tool of the elite (whether that’s good or bad). But a very intelligent one. I’ve read a few of his books, including The Ascent of Money. As I remember (it was while ago) it’s a good gloss, but does not delve deep enough to be truly instructive on the perils of our current banking and monetary systems. If anything, he defends it, making Ascent a masterwork of obfuscation. There are better books on the subject, such as The Mystery of Banking by Rothbard.

#163 Observor on 06.02.12 at 6:35 pm

FRACTIONAL RESERVE BANKING
Inglorious Investor, we agree on quite a bit here.

But you said:

“Collectively, banks pyramid deposits/reserves. They lend out far more than the deposits. With a 10% reserve ratio (just for example), they can collectively lend out ten times their aggregate deposits/reserves.”

Actually, it is true banks can lend out at least ten times their equity level or capital.

And they can lend out at least 10 times their cash reserves.

But they cannot and do not lend out 10 times their deposits. Not as individual banks and not collectively.

Here is a simple bank balance sheet

Assets

Cash reserve $10 million
Loans receivable $90 million

Total assets $100 million

Liabilities and Equity

Deposits $90 million
Equity Capital $10 million

Total Liabilities and Equity $100 million

The reason that a new deposit of $1 cash can be turned into $10 in loans is because every time a dollar is loaned out it tends to come back to some bak or other as a deposit.

Fractional reserve alarmists raise this as some kind of scam. It is nothing of the sort. Fractional reserve banking has been around for hundreds of years and even applied when money was backed by gold.

You’re welcome,and no charge for today’s lesson.

#164 furst on 06.02.12 at 7:13 pm

#56 Harlee on 06.02.12 at 12:34 am

I wrote a poem but Garth deleted it. It was much more PG than his blog and had no mention of horniness, amazons or the like. I’ll try again but he’ll likely delete

Tulips are red
Violets are not
Toronto’s condo market is crazy
The bubble went pop

#165 Ralph Cramdown on 06.02.12 at 7:15 pm

this was when buying homes you could see the financial state of the sellers……..I miss those days.

Here in Ontario you can go to the land office and get a copy of the mortgage terms registered against title. Seeing who holds the mortgage and what the terms are can give you a good guess as to the financial state when they bought.

#166 Nostradamus Le Mad Vlad on 06.02.12 at 7:19 pm


#81 Canuck Abroad — “Debt is not good. It enslaves you. The only entities that benefit from debt are the institutions that collect interest from you.”

That’s why TPTB set up this ‘system’ a long time ago, knowing full well that sheeple would be too stupid to even question what was going on. Consequently,they set themselves up to be plundered, pillaged fiscally.

But sheeple don’t listen, learn, question or think critically for themselves. Until they do, the ‘system’ continues uninterrupted. What govts. do is window dressing, nothing else.

#85 Deb — “The Ultima? the last woman, the last female.” — Does this mean the age of the Male Chauvinist HotPigDog is coming to an end?!

#116 Not 1st — “A tiny day by day erosion in purchasing power is barely noticed by the public at large.”
— and —
#112 Realtors in a Panic! Now they attack Garth — “It’s now going to be a nasty crash.” — Both excellent sentences, meaning that most sheeple will have nothing to show for their life’s efforts at the conclusion of life, except a huge mess of debt passed on to their children.
*
#11 Mikey the Realtor — Mikey! Thanks a bunch for bringing #42 $$$BPOE#1 back from the dead! It’s really great to see both of you back, esp. BPOE.

Reminds me an awful lot of Comic Ali, who kept us in fits of laughter during his time. Great stress reliever!
*
John Mauldin Deflation, inflation and the possible timing when they may appear; 10:20 clip Election first, recession next; North Lost Wages “Once again local government chickens out and punishes workers for the crimes of the money-junkies.” wrh.com; Report about JPM Until substantiated, it remains a rumor; R&R Secrets between couples; Mark Zuckerberg — Dumb f(8ks Another cocky banxter in the making; Unemployment Propaganda (or PR) machine needed to spin the other way, and Bad Jobs Report is one aspect; Rejects The politicos are passing the buck to one another, blaming others without taking responsibility themselves.
*
Springtime with Hitler or US warships headed toward Asia – Pacific, and Risking Global War Out of chaos, order — the NWO mantra; Swell — Thanks, Obomba “White House leaks reveal Obama created the STUXNET nuclear plant attack virus used to attack Iran which is now in the hands of the Hacker Group Anonymous.” With Flame in tandem, it now creates a new ball of wax, and ORomneyama “Hundreds of PROTESTERS, to judge by the pictures! Looks like the GOP just handed Obama his second term.” wrh.com; Bloodbath for Syria Esp. if Russia and China choose to protect it; Ron Paul and BdB’s Evidently, Paul is a threat; Microsux Bring back XP and modify it! Death Life continues, where here or on the inner planes. The only death is our bodies or uniforms — we put them on in the morning (birth), take them off at night (death); 6:34 clip he Electric Universe; Synchronized Cannibals to keep us distracted from everything else; Spontaneous Eruptions Super volcanoes.

#167 Kaganovich on 06.02.12 at 7:27 pm

Observor

If we are heading into the conjuncture I think we are heading into, loans will be about as appealing as AIDS for the majority of the population. In a stagnant economic situation, nobody in their right mind will be pushing to take on more leverage. Depending on the estimates there is a 700 trillion to 1.5 quadrillion derivatives elephant balancing on the back of a 40 trillion turtle (global GDP in a good year, counting all the misallocated capital like say, for instance, thousands of vacant suburban wet dreams in North America along with the odd vacant spec city in China for starters). ‘Unwind’ does not do the rapidly approaching scenario justice. There is probably an uprising an hour in China right now, and there are most likely double Canada’s population on foodstamps in the US. And you’re still trying to convince us, the jaded of the bunch, that one someone’s debt equals someone else’s savings. Bruno Iksil would piss himself if he read your posts.

#168 MarcFromOttawa on 06.02.12 at 7:34 pm

The odds of a rate cut in the overnight lending rate at the BoC before a rate hike is between 5-10% by my very scientific calculations.

#169 Daisy Mae on 06.02.12 at 7:41 pm

#107 LORNE: “IMAGINE IF A RETAIL OUTLET CHARGED SUSTOMRERS MONEY JUST TO HAVE A LOOK AT THEIR MERCHANDISE….”

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

That’s probably coming. LOL As it is now, there are entry fees to attend trade shows, bazaars, and so on. Guess the public is expected to pay their associated costs for renting the facilities…

#170 Gun Boat denier on 06.02.12 at 7:44 pm

158 II

“Collectively, banks pyramid deposits/reserves. They
lend out far more than the deposits. With a 10% reserve
ratio (just for example), they can collectively lend out ten
times their aggregate deposits/reserves.”

You are making the classic mistake of confusing deposits and reserves. Two competely different things. Currently
most FIs run with about 3% reserves. Just google “(name of bank) financial statements” and check
the balance sheet.

#171 Daisy Mae on 06.02.12 at 8:12 pm

130 broadway skytrain on 06.02.12 at 12:53 pm
No. Nortel was less a risk at $12 than $120. How is that not obvious? — Garth

yeah right, of course, when any stock splits it becomes 50% less risky, unless of course it’s a 3 for 1 ;)

No, because then you have the same dollar exposure. You have no point. — Garth

***********

This is getting too ridiculous.

I figure if something is worth less, the risk and loss is less. (??)

#172 mel in victoria on 06.02.12 at 8:13 pm

#121 DUKE:….

…CASH in case the Canadian banks become insolvent. Then I will still get ahead.

Try buying something with a gold wafer. — Garth…

I recently purchased a painting valued at $1,600.00 for 400 Canadian pre-66 quarters……..does that count?\

It’s called barter. — Garth

#173 DM in C on 06.02.12 at 8:30 pm

# 160 Casual Observer

We sold our home and rented it back from the new owner while we looked for a new place. When we changed our contents insurance policy from homeowner to renter, the premium DOUBLED.

Baloney. That’s is a bald-faced lie.

#174 Matthew on 06.02.12 at 8:30 pm

@ # 63 tundra Pete: it must be that shortage of land in the north! :)

#175 mel in victoria on 06.02.12 at 8:52 pm

#121 DUKE:….

…CASH in case the Canadian banks become insolvent. Then I will still get ahead.

Try buying something with a gold wafer. — Garth…

I recently purchased a painting valued at $1,600.00 for 400 Canadian pre-66 quarters……..does that count?\

It’s called barter. — Garth

Semantics…Call it what you want…I call it a very nice nice profit for myself…

#176 Junius on 06.02.12 at 8:57 pm

#169 Kaganovich,

It is shocking that someone could even attempt to defend the current banking system after what the world has been through the past few years. From the collapse in 2008 through the bailouts to the unrelenting corruption of the system. The fact that there has been no meaningful reform and the gambling continues in the derivative markets is shocking enoough. However to defend the in defendable is just asinine.

#177 mel in victoria on 06.02.12 at 9:12 pm

By the way Garth, notice I never gloated the past 12hrs that the PMs did what I said they would in my message 10 days ago which you deleted…

And there’s much more to come the next few weeks and months but only the truly brave investors/speculators will be able to handle the incredible volatility…most will crap out with a loss..just like RE..when it crashes…..but some of us will make a piss pot full of $$$

This is not a gold blog. I will continue to delete posts which do nothing but pump an asset most people don’t own or care about. — Garth

#178 Kaganovich on 06.02.12 at 9:20 pm

176 Junius

No doubt. I would love to see plain vanilla banking with prop trading outlawed. Stiglitz is getting better at conveying the message:

http://www.vanityfair.com/politics/2012/05/joseph-stiglitz-the-price-on-inequality

You have ost likely read it but perhaps others would like to, if it hasn’t been posted yet that is.

#179 Can it be? on 06.02.12 at 9:43 pm

Open house report… Light day, looks like open houses are mostly on Sunday’s. Heard a friend who’s a very part time realtor complaining about the bidding wars in etobicoke and how her clients should wait. Small places going $150k over asking. Realtor felt her clients should continue renting and wait it out… Lol… This is rare. Another realtor is on holidays… I guess they don’t need to work during the “busy” time. I noticed pretty quiet open houses today. Oakville is quiet… Mississauga is quiet. We will see how tomorrow goes. It seems to me that there may be hot pockets of homes that sell… But it is getting quiet in suburbia.

#180 Inglorious Investor on 06.02.12 at 9:51 pm

#163 Observor on 06.02.12 at 6:35 pm

Aside from the fact that your balance sheet example is fictional, an individual bank’s balance sheet is not material to this discussion.

Capital ratios are loosely related to, but not the same as, reserve ratios. But again, immaterial to this discussion.

You said, “The reason that a new deposit of $1 cash can be turned into $10 in loans is because every time a dollar is loaned out it tends to come back to some bak or other as a deposit.”

Yes, that’s right. But what you seem to forget is that a deposit can become a loan, then a deposit, and then another loan, and so on, while the original loan is still outstanding. For each individual bank, the source of the deposit is immaterial. If all the loaned money stays within the banking system, the banks can collectively turn that original $1 of savings into $10 of interest-bearing loans before any of the loans are paid back (assuming a 10% reserve ratio).

Under this system, the banks can literally turn $1 of savings into $10 of money/debt. Sorry, but this is a scam, even if it is a legal one that is permitted by governments and enabled by central banks. It’s a scam because banks (collectively) create money as debt literally out of thin air, which then forces the economy to “catch up” with more production. But under this system, the economy can never catch up because the money/debt supply keeps growing at a faster rate.

This is the dirty secret of banking. They get to generate their own profits via monetary inflation, which they cause. And you’re right, it’s been going on in the modern world for hundreds of years. That doesn’t make it right.

When production can’t keep up with money creation (productivity gap), debt is issued increasingly for consumption instead. This non-self liquidating debt simply puts a greater burden on incomes, and inflates nominal asset prices.

Money should come from new wealth/production. But under the current system, wealth must be created at an ever increasing rate to collateralize an ever faster growing money supply. This continues until the economy can no longer grow fast enough to service the outstanding debt. Boom then becomes bust and the money supply must decrease to come back into balance with production. Either that or existing wealth will be forced to collateralize a much larger money supply, which just severely debases the value of current money at a rate even faster than that which the central banks try to regulate.

Institutions that are not permitted to pyramid deposits/reserves can lend money in a non-inflationary way because in creating loans they are not creating new money but simply deploying savings.

And yes, fractional reserve banking has been used even under a gold standard. In fact, the first fractional reserve “bankers” were goldsmiths. But again, immaterial.

#181 Expat on 06.02.12 at 9:58 pm

#153Harlee

I think it was the kilometers of wheat fields, cows and prairie between the airport and Edmonton that was the odd part.

#182 Casual Observer on 06.02.12 at 10:02 pm

#160 When we changed our contents insurance policy from homeowner to renter, the premium DOUBLED.

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

Your story is not credible. Tenant packages cost far less than house insurance. — Garth

#173 Baloney. That’s is a bald-faced lie.

I assure you it is the truth. As I said, the insurance was strictly for CONTENTS, not structure. It was not a house insurance package, which includes structure.

The premium went from approx. $250/yr. to $480/yr. (OK, I guess it wasn’t exactly double).

It was a condo, which has the structure insured by the Strata.

We are wasting time on $8 a week? — Garth

#183 patsan on 06.02.12 at 10:06 pm

#173 DM in C
Unfortunately, it’s true. Content insurance comes with a premium if you rent. I used to own and then rent the same townhouse and premium was about 60% higher for renters. Believe it or not.

Unless you own a Renoir this is a moot issue. — Garth

#184 mel in victoria on 06.02.12 at 10:18 pm

177 mel in victoria on 06.02.12 at 9:12 pm By the way Garth, notice I never gloated the past 12hrs that the PMs did what I said they would in my message 10 days ago which you deleted…

And there’s much more to come the next few weeks and months but only the truly brave investors/speculators will be able to handle the incredible volatility…most will crap out with a loss..just like RE..when it crashes…..but some of us will make a piss pot full of $$$

This is not a gold blog. I will continue to delete posts which do nothing but pump an asset most people don’t own or care about. — Garth

Thanks Garth……..understood and appreciated…and I would never want to give your readers the impression that my very specialized sector is for everyone……it is probably one of the most volatile and dangerous of all and I know of traders who’ve lost everything they owned through reckless speculation.

I’ve been in the PMs for over 50 Years and during those many years have learned a few things, done very well and from time to time during the past year or so when I’ve felt the risk of loss was relatively low would make comments on your blog suggesting I felt the PM market was over bought or over sold and what the liklihood of a change in direction was , usually throught charts, so that your readers who were so inclined might also do some of their own investigation and decide whether or not they wanted to take a calculated risk and try to make a couple of bucks in this sector….Thanks again….Mel

#185 Canadian Watchdog on 06.02.12 at 10:27 pm

#162 Inglorious Investor

I wouldn’t go as far to say he defends the banking system, since he’s been warning about Europe’s disintegration and US debt for more then a decade. He often admits the status quo is in uncharted territory and as an economic historian, his views are often scene through the rear view mirror rather then looking ahead. But yes, he’s quiet intelligent and perhaps one of the best.

If there’s any man with a global monetary solution, it would be Robert Mundell.

#186 Monster Cookie on 06.02.12 at 10:41 pm

Another good book on banking and money is Mises’s ‘The theory of money and credit’. I just ordered it along with all the market wizard books, reminiscence of a stock operator and some others.

The Mises book can be download for free in pdf from the mises.org website or purchased for a low price. Mises sells top quality books at bargain pricing.

http://library.mises.org/books/Ludwig%20von%20Mises/The%20Theory%20of%20Money%20and%20Credit.pdf

or bought from Amazon
http://www.amazon.com/Theory-Money-Credit-Ludwig-Mises/dp/1451578172/ref=tmm_pap_title_1

#187 Inglorious Investor on 06.02.12 at 10:46 pm

#170 Gun Boat denier on 06.02.12 at 7:44 pm

Deposits are one source of bank reserves.

#188 PoorgEoisie on 06.02.12 at 10:55 pm

I would like our realtor friends who follow this site to consider the intent of low rates. Of course it was to stimulate demand and now consider what that increase in demand does. Yes, construction jobs are created and some investors/specs make money and for a time all is well. But on a fundamental level they entice tomorrow’s buyers to buy today and sooner or later tomorrow arrives and there are no buyers to be found. You need only do some rudimentary research to find Canada’s population cannot even support CPP let alone million plus bungs. Bottom line is: when the choo choo drivers figure out that it’s not going to end well… It’s going to be pretty friggin’ bad.

#189 Mark on 06.02.12 at 10:58 pm

Try buying something with a gold wafer. — Garth

Try buying it with a Zimbabwe trillion dollar note, or a Continental. Fiat currencies always wind up at their true value, zero. ALWAYS.

The economy isn’t set up for us to use gold and silver in trade, but that doesn’t mean it isn’t the ultimate store of value in this environment.

The wheels will fall off of this phoney debt based economy soon enough. There is no real growth stateside, just more borrowing masquerading as such. Europe is first, North America is on deck.

This is not a gold blog. Last post. — Garth

#190 Monster Cookie on 06.02.12 at 11:04 pm

Reading the preface you’d think it was written this year. Here’s the first two paragraphs.

“FORTY years have passed since the first German-language edition of this volume was published. In the course of these four decades the world has gone through many disasters and catastrophes. The policies that brought about these unfortunate events have also
affected the nations’ currency systems. Sound money gave way to progressively depreciating fiat money. All countries are to-day vexed by inflation and threatened by the gloomy prospect of a complete break-down of their currencies.
There is need to realize the fact that the present state of the world and especially the present state of monetary affairs are the necessary consequences of the application of the doctrines that have got hold of
the minds of our contemporaries. The great inflations of our age are not acts of God. They are man-made or, to say it bluntly, government-made. They are the off-shoots of doctrines that ascribe to governments the magic power of creating wealth out of nothing and
of making people happy by raising the ‘national income’.”

#191 Gun Boat denier on 06.02.12 at 11:05 pm

158 II – here is a fairly straightforward balance sheet for
coast capital CU (Some of the banks can be very
confusing)

https://www.coastcapitalsavings.com/Resources/Documents/2011_Annual_Report/Consolidated_Financial_Statements_and_Notes.pdf

You will note the $375M in cash/cash-like but about $10B in BOTH loans and deposits. FRB at work in your community! Get some!

Loans are assets. Deposits are debits. Learn something. — Garth

#192 PoorgEoisie on 06.02.12 at 11:07 pm

On a side note, the sidings are starting to fill up with empty rail cars like ’07-08 (not just CP) but maybe you still like the lipstick indicator…

#193 timbo on 06.02.12 at 11:30 pm

http://www.cnbc.com/id/47661486

“Phil Flynn, an analyst for The Price Futures Group, believes falling gas prices could give consumers a psychological boost. But that could evaporate if hiring doesn’t pick up and stock markets keep swooning.

If prices remain in the 80 range for 2012 there will be a recovery and companies will hire……..

#194 Onemorething on 06.02.12 at 11:35 pm

Only buy RE with 40% down. If you cant afford it, then wait until prices come in line when you can.

This mean waiting 5-7 years and renting, socking everything away in liquidity, reducing costs and keeping as much after tax-pre tax assets on hand.

RE has to come in line with wages which have dropped big time for the masses in the real unemployment scene.

This reset is been happening since 2008. It’s a decade process.

RE will be a steal, banks no matter what the rates are will be looking for solid loans and clients. You will be able to negotiate on both.

But you have to be part of the few who gets there. Start now, nothing to loose.

#195 Canadian Watchdog on 06.02.12 at 11:48 pm

CMHC NHA Mortgage Backed Securities By Issuer http://i48.tinypic.com/2ik8wts.png

The extermination of brokers has commenced. I have to admit this was well played by the banks who are winning more market share.

Keep your friends close, and your banker friends even closer.

#196 $$$BPOE#1 on 06.02.12 at 11:59 pm

Operation Twist. Don’t know what it is? Get hip as rates poised to go down.
******************************************
Federal Reserve policy makers this month will consider joining Boston Fed President Eric Rosengren’s call for renewed stimulus after a report today showed unemployment rose to 8.2 percent in May, economists said.
Rosengren said the Fed should further its full-employment mandate and extend beyond June a program known as Operation Twist, which lengthens the average duration of bonds on its balance sheet. He spoke before the Labor Department today said the U.S. added 69,000 jobs in May, the fewest in a year, pushing the yield on 10-year Treasury notes to a record low.
“The May report does significantly raise the odds of further easing from the Fed,” said Dean Maki, chief U.S. economist at Barclays Plc in New York and a former Fed economist. “There will be a case made at the June meeting for easing.”
By calling for new stimulus, Rosengren aligned with the view of Chicago Fed President Charles Evans. Any setback in the job market is also a chief concern of Chairman Ben S. Bernanke, who said in April the Fed may provide more accommodation should unemployment fail to make “sufficient progress towards its longer-run normal level.” Fed policy makers plan to meet June 19-20.

#197 Min in Mission on 06.03.12 at 12:04 am

I only come here for the pictures.

#198 mortgage brokers in a PANIC! on 06.03.12 at 12:05 am

Look at the angry posts from realtors and mortgage brokers who hate Garth and his factual blog. They have reaped a lot of ill gotten money from CHMC ponzi scheme which is now ending. RE will now cash back down to historical values and thus should see a 50% crash in prices. This would make Canadians and Canada more competitive with the US . GM is leaving high wages Canada for the US all thanks to realtors and mortgage brokers. They can try to delude themselves but they are financial criminals. If forensic accountants look into RE deals crimes would be uncovered.

#199 Mark on 06.03.12 at 12:14 am

This is not a gold blog. Last post. — Garth

Come on Garth, that’s harsh. I respect your advice, and your comments on real estate are spot on. But often in your articles, you ridicule those who hold a significant portion of their holdings in precious metals. It’s only natural that those people would want to challenge you in the comments section.

Isn’t that what the comments section is about, addressing the articles? Otherwise a Facebook “like” button is all you need, and boredom quickly ensues.

Thanks for the forum but please rethink the banning of “gold” related comments.

#200 Nostradamus Le Mad Vlad on 06.03.12 at 12:20 am


#164 furst on 06.02.12 at 7:13 pm — C’est magnifique, furst! Thou hast learnt the art of mystical poetry well!
*
UK Govt. Spend like there’s no tomorrow! Welfare Recipients Nice benefits;
Soros – Merkel Guess who is the master of having opponents fight among themselves? QE3 Not dissimilar to WW3; Even dOg is in the midst of a heavenly recession; Euro Charts Galore; Renting good for landlords; Getting Started The global credit crunch, that is; India’s economy A used barf bag is in better shape; Countries with deep pockets; Biggest Mistakes; Billary has foot in mouth disease; Black Monday #2? Short version — “. . . in the event of a 3900-point decline in the DJIA, you better be locked and loaded.” JPM Sharing its wealth; NannySpain; The Fourth Reich and Doublespeak; Morgan Stanley Junk; 1:56 clip BdB News drivel.
*
US Election The Rethuglokrats continue to self-destruct, Obomba’s chart here says he won’t get in — Can anyone say Jeb Bush? Economic and Social Change “June we will have a full moon lunar eclipse on the 4th followed by a Venus transit. We do live in an electric universe, the Moon and Venus will bridge other cosmic and solar energies to Earth.”; 8:33 clip Vet. forcefully vaccinated by cops at BdB; Classic Ferrari Not cheap, but Good Bargains abound; TV-less Garbage programs, about as stimulating as watching dead ants fart; Putin Not afraid of mincing his words; Human Barcode Chip implants are coming.

#201 Devore on 06.03.12 at 12:52 am

#73 DeadmontonDwellwr

Never ever buy (or rent) a woodframe condo. Just don’t do it. I don’t care what the experts say, those things are deathtraps. Sound insulation is difficult, so they don’t usually even bother. And water damage to the envelope and interior frame is only a matter of time. Then the special assessments come.

#202 Arshes on 06.03.12 at 1:04 am

#73 DeadmontonDwellwr on 06.02.12 at 2:23 am I rent in one of those wonderful type of condo’s built during the last boom in 07 in NE Edmonton.

Two Words. Hell Hole.

—————————————————

You may want to reconsider living in a shifting condo, there was some condos in Ft Mac that had to be evacuated immediately becasue the engineer say there was a potential for the building to shift, which might cause the gas pipes to burst and cause a gas fire.

People werent allowed back in to grab thier things till things had been cleared because if a fire took place they may not be able to get out or rescued in time.

#203 Devore on 06.03.12 at 1:12 am

#74 Skip Breakfast

And finally, it’s not really about “doom”. TAE is very much about the upside of a return to community values and self-sufficiency. There are tremendous positives that come with becoming more self-sufficient and unplugging from the financialized treadmill. I feel less suicidal than ever.

I find all credible sources of information, even ones not consistent with my outlooks, to be valuable. Surely, if all you ever read is TAE, and take everything literally and to heart and believe the world will end tomorrow, then you’re screwed.

It’s not just self-sufficiency, but preparedness. There is great psychological benefit to becoming prepared. It doesn’t mean you’re a doomer. Just means you’re like a boy scout.

For example, I always make sure I have a small and rotating stash of consumables. Toilet paper, toothpaste, soap, cleaners, water filters, shampoo, salt, pepper, spices, flour, sugar, coffee, pasta, rice, beans, etc. It’s stuff I use regularly, which means I never run out. And because I have this buffer, I can patiently wait for things I need to go on sale, and not have to rush to the store and buy it at whatever price is there today. I also have candles, batteries, matches, a portable gas stove, sleeping bag (sub-zero even), tent, maps, etc, which come in handy when I go camping, or when the power goes out.

Being prepared doesn’t just put you in a better position in case you actually need all the stuff, but also makes your every day life easier and cheaper. And, again, the beneficial psychological effect of this is also well documented. Something to do with sleeping soundly.

Just because you prepare for something, does not mean you expect it will happen (you prepare precisely because you’re NOT expecting it), or welcome it, or look forward to it, or wish for it to happen. And if the preparations also make your life better, that’s just a bonus, or even reason enough on its own to do it.

#204 Hoof-Hearted on 06.03.12 at 1:12 am

PPhhyyyrrrruuuusssstt!

BTW….FYI submitted retroactively for the next posting by Sir Garth.

My prediction is he will hi-lite why he wants to become a Tory M.P. ….again…..and sublet this blog to H…..F..and C.

#205 Peter on 06.03.12 at 1:43 am

Hi Garth!
Love the blog! The looney toons are right about one thing: you don’t have a crystal ball. But I can’t fault you for that. Thanks for your wisdom and advice. It really helps. Keep up the good fight!

#206 daystar on 06.03.12 at 2:43 am

#171 Daisy Mae on 06.02.12 at 8:12 pm

Splits don’t effect the market cap or combined split value so the shares technically don’t get cheaper except by volume. What changes with splits devaluing shares potentially is commission, the possibility of shorts (I say potential and possible because they don’t always, stocks need to meet regulatory approvals of the exchange they trade in, generally with share value above $2.00 and some daily volume, cap and sector requirements) and smaller trade values.

I’m not a fan of shorts in the market (although I should be for more uncertain times like this. RIM and more recently Facebook would have made good candidates to short this year) and I guess I find myself talking about shorts because Nortel has floated around today’s blog and I believe when Nortel hit .25 cents and pulled off a 10 or 12 to 1 share consolidation it put them back into short territory and as share values tumbled for the last time it tore their balance sheet apart as corporations have to cover shorts (one reason why I didn’t short RIM, I want them to succeed so I don’t bet against them). Nortel was mismanaged and this is an excellent example of poor management decisions. It could have had something to do with mutual fund requirements but the risk wasn’t worth it and I think it was their final nail in the coffin.

Looking back on history, Nortel sold down to .50 cents in the dot.com crater of late 02′ and I believe they bounced back to 12 bucks within 18 months before they free fell to .25 cents and tried a 10:1 or 12:1 consolidation was it? Anyhow, Garth is right, is my point. What carries more risk, Nortel shares at .50 cents in late 02′, or Nortel shares at $12 bucks in the winter of 03’/04′? More to the point, what carries more risk with RE? The neighborhood doesn’t change. The home is generally the same sticks, paint, glass and cement. What changes? The fiscal environment. What carries more risk, a house worth $200,000 or the same house worth $500,000?

Obviously alot can effect share value, the biggest outside of profit/loss or good/bad news being dilution so history is highly relevant but all risks get priced into stock over its timeline and if the balance sheet can handle some hard times and the risk of dilution isn’t immediate and the asset if anything improves, what changes? The environment. If the market is selling off to the point of oversold because growth shrinks or even goes negative, is this an environment that is static? Of course not. At some point growth will become more positive and demand exceed supply and when it does, undersold heads toward overbought. Buy low, sell high right?

Catch a falling knife, yeah, its like that but greed can also keep you on the sidelines waiting for something to hit the ground and generally if it really does hit the ground, we tell ourselves we don’t want it which should tell us something about ourselves.

When logic leaves an oversold market, logical buyers step in. When logic leaves and overbought market, logical sellers sell and of course, we will all buy in too soon and sell too early or late over time but as long as we are patient and we are making profit on the sale and pick the stocks that make sense within their peer groups, in terms of assets, cap, management, supply/demand, balance sheets and dilution then the play becomes an environmental one and if you don’t know their peer group or have some outlook of the sector in the short/medium/long, you shouldn’t play with stocks until you do.

We’ll look back on stocks and some 52 week lows happened in May. June offers more of the same especially in commodities, good buying opportunities but really, it comes down to good old fashioned research, numbers and in some cases, luck and I do wish investors all the best. We need them and we need some luck too.

One last word, its not an 08′ meltdown. That’s not going to happen. There are going to be some rough days ahead, especially this first week in June but 08′ isn’t going to happen. Growth is slowing world wide but not by 10% folks. Its more like 2 and this includes consumption. Europe… Greece is a tick on a bears butt. Spanish woes are meaningful (and we should keep in mind what is happening there because its primarily the result of a RE bubble gone bust and they have recourse loans there so it is the true stress test of what recourse loans will do here) but they have room to absorb losses through public debt. I still think they will be in major trouble a couple years from now but thats not today. Italy? Timebomb but thats right, not today, its not their time. (I think, next summer/fall, thats a lot of time between now and then) U.K.? Recession but its not off the charts. The rest of Europe is flat but its not… imploding. When one looks at commodities we have to look at global demand, global GDP and its just not 08′. I’m not saying we won’t double dip, I think we could but it’s not an 08′ event so… buy and don’t go all in… just in case I’m wrong? (if it turns into 08′, then go all in) Not a psychic here readers, just trying to help.

Oh, and Garth is on cue with media hype here. Its overblown. Look at the U.S. jobs report for example. 69,000 jobs were created for the 27th month in a row. It didn’t beat expectations so blowhards were getting media soundbites spewing off how it “couldn’t be any worse”. Well, it can. In 08′, we lost over a half a mil in a month and a million as I recall, in two. Unemployment rises? Yeah, by a tenth of a point because a quarter million more than last month decided to look. Its hype and I’m betting my money on it. We have elections coming, look for this sucker to turn around.

#207 Harlee on 06.03.12 at 3:23 am

#164 furst
Just remember there were some great poets who have been censored. Whitman’s ‘Leaves of Grass’ was declared obscene in it’s time. Those Victorian’s were an uptight bunch.You do know that you have to avoid any rhyme that starts with “There was a man from Nantucket” don’t you ? Garth would surely hit the DELETE button on anything that raunchy.

#181 Expat
And as you travelled from the airport to the city did you get a good whiff of those wheatfields,cows and prairie ? Smells good doesn’t it ? Better than any city can,especially Edmonton.Those folks in T.O. or Van just Don’t.Know.What.They’re.Missing. They really don’t.

#208 Harlee on 06.03.12 at 3:37 am

Do I dare it ?

There once was a man from Nantucket
Who bought a big condo with ducats.

Nope, I better not. This isn’t a ‘gold blog’ is it ?

#209 The Real Jimbo on 06.03.12 at 5:04 am

“This is not a gold blog. I will continue to delete posts which do nothing but pump an asset most people don’t own or care about. — Garth”

Hmm… That comment it probably quite reasonable and accurate, as I know very few people who own, trust, or follow gold and gold stocks.

But if you apply the lessons repeatedly discussed here that an asset class should be bought when it is unloved, under-owned, and viewed with fear on indifference, it is very telling.

#210 John on 06.03.12 at 6:27 am

As far as this blog and the area of “play” ( discussion), it’s not an easy thing to manage.

For example, I agree that this isn’t a “gold blog”, and if it was, I wouldn’t read it. I feel I’ve understood that dynamic a few years back, and now want to keep understanding the bigger picture. The real prize is education, understanding honest limits on what I can and can’t control…and self-responsibilty. A contoversial “discussion group” like this does move forward by testing the edges of the debate, and saying yes and no.

Maybe a “gold bug” benefits from being told no, and finally decides to lift up their head and see the actual context. Along the way ( as with everyone and their belief system), it can get confusing. People thinking of “speculating” or “hanging on” with a commodity is confusing and invites a lot of fear and narrow-mindedness. Confusion precedes clarity in ALL learning.

On the road to clarity ( or more questions), indicators do help. Real estate does exist in context. This “context” includes the lowest EVER US 10 year treasury, 1.46%. A speedier flight to “safety”. The dollar. That’s what’s safe in the world of my Toronto single family “home”.

What’s most important to me to observe? Values. Some crazy complained about the “T&A” picture of yesterday. And this woman isn’t kidding. She’s just reflecting the values of Canadian society. She doesn’t know…and it’s that myopic repression that allowed the anti-value of “wealth is the value of my house” insanity. That insanity has lead to a lot of bad behaviour.

Was this woman challenged or deleted? Nope. Just the word “sigh”. What about NO, or maybe even a boundary. That’s the real wealth. That’s the real power. And it’s pure gold if you can find it…and use it.

#211 I'm stupid on 06.03.12 at 6:48 am

I would like to take this opportunity to congratulate the coward or cowards responsible for opening fire at the Eaton centre. I hope you are proud of yourself for killing innocent people, children and women.

I would also like to congratulate the crowd, who trampled a pregnant woman while running away. Your lack of courage is a real inspiration to all of us.

#212 ANONYMOUS on 06.03.12 at 7:28 am

“the S&P 500 is overvalued by roughly 20 per cent”

(read all about it here):

http://www.theglobeandmail.com/globe-investor/investment-ideas/yes-virginia-the-sp-500-really-is-overvalued/article4226068/

#213 blase on 06.03.12 at 8:19 am

I’m now betting that the Euro will be toast. The only way for the Euro to survive is for the participating nations to give up their sovereignty by forging a democratic partnership of governance, and well, good luck with that happening. Best to go back to the old ways, and let each country be responsible for their own people.

Talk about a Black Swan in 2013, but I’d say the people in power know the jig is up, let the bank runs begin and the stock market will suffer the consequences. Going to be a rocky 1-5 years getting this whole mess unraveled.

#214 Herb on 06.03.12 at 8:23 am

Property Insurance, Owner v. Renter – Fact:

1. for owned house and contents: $1,074.60 a year

2. for same contents in rented house: $486.00 a year

– Source: my property insurance policies with the Personal.

#215 T.O. Bubble Boy on 06.03.12 at 9:00 am

On gold – anytime an investment/product hitsnthe infomercial circuit, you know that the insiders have probably moved their money elsewhere.

For anyone who accidentally hits AM640 in Toronto on the weekend, you get the pleasure of a fake news broadcast, which is actually an informercial for investing in gold:
http://www.640toronto.com/HostsandShows/ExpertHours/Guildhall.aspx

These guys even encourage using leverage (loans that they offer) to increase your returns… No mention of downside risk, of course. It all comes across as very “Brad J Lamb-y” – i.e. Presented as absolute fact that you will get X% return.

Anyway – if this type of informercial seems a bit sketchy to you, imagine if 13% of households were taking out loans buy gold… That is exactly what is happening in India (the world’s largest consumer gold market):
http://www.businessinsider.com/india-gold-demand-2012-5

Sounds sustainable!

#216 mortgage brokers in a PANIC! on 06.03.12 at 9:51 am

#211 I’m stupid

Wait til the housing crash in Toronto takes total control….you will see people step on their pregnant family members , kids , friends and even the elderly. The house of HELOC cards is a massive ponzi.

#217 T.O. Bubble Boy on 06.03.12 at 9:54 am

Some interesting stats from CAAMP’s mortgage report:
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/06/caamps-spring-mortgage-report-2012.html

The “Equity Take Out” section is a bit scary: 18% of mortgage holders “took out equity” (i.e. took on more debt) in the last year, with an average of $43,500 (total of $45B from 2nd mortgages and HELOCs)

And, the top uses of this debt include:
Renovation: $17.25 billion
Investments: $10 billion
Debt consolidation: $9.25 billion
Purchases, including education: $7.5 billion
“Other” purposes: $2 billion

So, over $10B of consumer debt (debt consolidation + “other) was financed with home equity in the last year, and over $17B in home renos.

The construction and retail industries should be worried… any industry fueled by 2nd mortgages is treading on thin ice.

#218 DM in C on 06.03.12 at 10:08 am

Unfortunately, it’s true. Content insurance comes with a premium if you rent. I used to own and then rent the same townhouse and premium was about 60% higher for renters. Believe it or not.

I have been both, and now am currently a renter of a 2500 sq ft house. I assure you, content insurance is less than half of what it was when we owned.
You’re getting slightly hosed by your broker or your insurer.

Believe it or not.

#219 T.O. Bubble Boy on 06.03.12 at 10:28 am

Wow – also in that CAAMP report: 40% of new mortgages are for amortizations over 25 years!

Who likes paying maximum interest over the life of a loan? Apparently everybody.

#220 Daisy Mae on 06.03.12 at 10:34 am

#205 DEVORE: “For example, I always make sure I have a small and rotating stash of consumables. Toilet paper, toothpaste, soap, cleaners, water filters, shampoo, salt, pepper, spices, flour, sugar, coffee, pasta, rice, beans, etc. It’s stuff I use regularly, which means I never run out. And because I have this buffer, I can patiently wait for things I need to go on sale, and not have to rush to the store and buy it at whatever price is there today. I also have candles, batteries, matches, a portable gas stove, sleeping bag (sub-zero even), tent, maps, etc, which come in handy when I go camping, or when the power goes out.”

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

The BC government encourages all of us to have ’72-hour preparedness kits’ which includes the above-mentioned and more. I keep my kit in the trunk ’cause I figure my car is wherever I am and we could be subjected to forest fires as in 2003, chemical spills…whatever. Hwy. 97 was closed a couple of years ago due to a local forest fire jumping the highway. My son couldn’t get from West Kelowna to his family in Peachland and had to detour around the lake….people scoff, but it can happen.

#221 For lease signs Everywhere on 06.03.12 at 10:52 am

The housing bubble is an economic drag on the Canadian economy as businesses either can not compete with US workers/wages and people don’t have money to spend. Now that HELOC have been shut down you will see the slow down in the Canadian economy take hold. Driving around Toronto and GTA you see for lease signs everywhere as businesses CAN NOT survive since people spend over 60% for housing expenses. Realtors and mortgage brokers have ruined Canada. Wait til the masses figure it out. A linch mob will be after them.

http://www.theglobeandmail.com/report-on-business/economy/canada-competes/vanishing-act-where-did-canadas-mid-sized-companies-go/article4226069/

#222 kilby on 06.03.12 at 11:00 am

#33 the word of reason on 06.01.12 at 11:11 pm
Can someone explain why oil 8s at 83 bux a abrrel and gas is still a 1.27 and also why no of you sheep seem to mind ?

$147.2 in Vancouver, priced like houses……

#223 Derek R on 06.03.12 at 11:15 am

#187 Inglorious Investor on 06.02.12 at 10:46 pm wrote:

Deposits are one source of bank reserves.

This is the heart of the problem and is what allows a bank to create endless amounts of money even without fractional reserve banking.

Take a 100% reserve bank with $1000 in deposits. It can make $1000 in loans. if all its borrowers spend the money with people who deposit the money back in the bank, it now has $2000 in deposits. As a result it can now lend another $1000 dollars. And again if all those borrowers spend the money with people who deposit the money back in the bank, it now has $3000 in deposits. And so ad infinitum.

You might say “well, what if one of the depositors makes a withdrawal ?” This is no big deal. The bank can handle up to $1000 of withdrawals without running out of cash (although this will slow down the rate at which it can create new money via the loan/deposit cycle). Once it has given back $1000 it runs out of cash but there is still no big deal. All it needs to do is borrow the money to pay the depositors from somewhere, most likely the central bank, using its loans to the borrowers as collateral. As long as it can borrow at a lower rate than it is charging borrowers, it will remain profitable.

It is only if the bank is unable to borrow money itself that the whole pile of cards comes crashing down. That’s why everyone was scared silly by the post-Lehman credit freeze in 2008

So Fractional Reserve Banking makes the problem worse, but the problem is not just Fractional Reserve Banking. If you tried to solve it using FRB principles, you would have to insist that banks maintained reserves of 101% of loans or greater.

The real problem is allowing deposits to be counted as reserves.

#224 Canadian Watchdog on 06.03.12 at 11:17 am

#215 T.O. Bubble Boy

A bubble is better defined by its participation rate, rather price. http://i45.tinypic.com/30trs6t.png

#161 AgAu

“All of these are assets have value which is only accessible when they are exchanged for cash/currency.”

All of those have counter-party risk and debts on their balance sheets. Not something you want to fully own with global markets in uncharted territory. Think exponentially, not linear.

#225 Teresa on 06.03.12 at 11:24 am

Garth

How can you say the end is coming, just read this insightful intelligent piece:

http://www.moneyville.ca/article/1203420–why-the-bidding-war-frenzy-may-be-ending

To summarize, a real estate lawyer says prices will stay pat for 4 reasons:
1: Interest rates are low (never mind the fact that affordability is still at crazy levels)
2: Compared to New York Toronto prices are cheap. (Yeah, I love the commute to my job in Toronto from New York!)
Also, he also says: “In New York, people will pay more for a parking space than the average American pays for a home.” So why don’t I compare the prices in Toronto to the prices elsewhere in US?
3:Immigration remains strong (so apparently supply has nothing to do with the balance between supply and demand, and immigration has been going strong in this country since before it was formed if I’m not mistaken!)
4:”Economists have been predicting doom and gloom in the GTA for the past twelve years. It still hasn’t happened.” (They have been saying the same in Vancouver, and look at the price surges there!)

If this is the intelligence level of our lawyers, and the editorial team at the Toronto Star, our country is in good hands.

Teresa

#226 Gun Boat denier on 06.03.12 at 11:51 am

180 II – a very well written response, filled with many
accurate statements, BUT not addressing one very
important (perhaps the most important) issue.

Do you have “money” in the bank? I bet you do. At least I bet you think you do. If you are like most of us, you
accept cheques from various sources (work, govt
etc), “deposit” them in the bank or CU, then write
cheques or do transfers to pay for a whole whack of
things. Your deposit must be real as others accept your payment.

But you cant tell the origin of the “money” in your account. You are a willing participant in what you call
a scam.

“Loans are assets. Deposits are debits. Learn
something. —Garth”

I understand and never said otherwise. Do you have a question?

#227 HAM to leave Canada on 06.03.12 at 12:43 pm

reports coming from China have indicated that HAM will leave Canada by the thousands and RE will be effected greatly. Not only will sales be effected but rentals will take a HUGE hit along with the Canadian economy as less will travel to Canada.

http://www.theglobeandmail.com/news/national/china-warns-travellers-to-canada-after-killing-of-student/article4227228/

#228 Expat on 06.03.12 at 12:52 pm

#207Harlee

I think I hit a nerve and our comment exchange isn’t really about rural international airports. Good for you being a home town champ, everyone should be. Like I said, some nice stuff on the west, some new office construction downtown driven by the Alberta economy. The river area and Old Strathcona are very nice. All fine and well.

My point was, the east side of downtown – location of the future Maxima or whatever it’s called – is currently empty lots, boarded-up 80-year-old buildings, housing in poor condition, and lots of social problems. Its also a retail desert which is not a vote of confidence in an area and a major detriment to the middle class, much less high the rich, re-establishing there. No national retailers are visible, even the traditional risk-taking “pioneer” chains like 7-11 who will open up in dodgy areas in exchange for ridiculous markups. The only retail I did see was in the China town district. The Chinese, as is their character, will take risks and work hard to establish businesses where others fear to tread.

So a cool mil for a condo in this area? Naw!!!!

#229 s on 06.03.12 at 1:03 pm

@For lease signs Everywhere

Although not mentioned in the article, in Van here fewer and fewer people are visiting the best buys and future shops. The insane housing prices must be affecting people’s spending.

Also companies would be less willing to open here, high housing prices detract people from wanting to move here, if there’s not enough talent companies will move to where the talent base is.

Another note with higher housing prices, companies have to pay more to keep employees happy. Cuz ultimately there are people who would like to own a home, and with high housing prices, businesses have to pay more so eventually they can afford that.

#230 DonDWest on 06.03.12 at 1:18 pm

#227 Teresa

It’s called university degrees, we live in a society where it’s a university degree arms race and the people with the most degrees get the best jobs/most money. Very little consideration is taken how exactly they got the degrees and almost no consideration is taken into the arguments these “intellectuals” make. We’re told that because they have degrees and a fancy title, their arguments must be true. Reminds me of the Spanish inquisition. . .

#231 Don on 06.03.12 at 1:33 pm

http://www.cbc.ca/news/canada/british-columbia/story/2012/06/01/bc-real-estate-wobbly.html

Well…Garth is looking more and more vindicated these days – this article tells says it all:

Price gains for the last two years in Vancouver have been wiped out in what is supposed to be the busy time of the year.
Listings are up and sales are down.

But the economists from the UBC real estate department are still holding out – and these professors teach our children. Purely bullSh&T.

#232 daystar on 06.03.12 at 1:51 pm

The easiest way to win any debate (if it really is up to debate, especially when its not), is through facts and reason. I think gold talk has its place. Gold was in a bubble last year and is coming off it. Gold is hinged to the U.S. dollar/economy. One of the predictions Garth made at the beginning of the year is that we shouldn’t bet against america. Whether gold buggers realize it or not, they bet against the U.S. dollar (and america) with a bet on gold and thats not what I see happening this year, not with U.S. bond maturities in mind (its an 8+ year rollover, lion’s share in the latter half), not with the U.S. treasury balance sheet in mind, not with housing near the end of their bottom and not with the Euro down as the PIGG’s dominate the news pushing the reserve currency (the U.S. dollar) higher. Really, if someone wants to debate gold, its over before it began.

As with all cults, gold investors have been misled unless they DIY and thats not so easy for some with time constraints and doomer site synagogues at every search engine corner. Tough lessons for those who ride a bubble on its way down, one off days happen like they did with the dot.com bubble, “its going to turn around” and they rarely do. (the same pattern will repeat with RE) I feel for those who haven’t learned to diversify but such is the lesson of this kind of loss all preventable of course, through education.

Gold is still a part of the economy, still a strong part of equities in Canada and there should be some room for discussion on gold, but with gold rising nearly $60 an ounce in a day, as Garth has mentioned, the end of days guys are back so it could be like this until gold goes down and it will (I think next week, we shouldn’t have long to wait unless media pushes doom and gloom hype to the max but even then, its hype and hype never lasts).

Gold bugs represent a certain mindset if you will that is quite like those with RE in a way. They are cult members of another cult! (like the dot.com cult and RE cults) Thus, they shouldn’t be shunned persay but observed (and deprogrammed, if we really care :). They are here to teach us stuff through example, like how easily persuaded we can be… like how financially illiterate we are and how this can lead to big mistakes in investing (like loading up on one commodity) and it imitates the buying (and selling) patterns of how we think in correlation with the mother of all investments that will be for most of us… RE and finally, how frustrating it can be for us to de-program and re-teach but thats all a part of it, challenges are everywhere and need not be done alone.

#233 ANONYMOUS on 06.03.12 at 1:52 pm

Wow, I just read this article here and it pretty well sums up everything about what’s going wrong with the financial situation in Europe right now:

http://www.marketwatch.com/story/europe-has-3-months-to-address-crisis-soros-2012-06-03?link=MW_latest_news

Quote: ( ” Soros is gravely underestimating the Greek resolve to abandon austerity.

Similarly, I think he WAY underestimates the growing anger in unwillingness to foot the bill for any other deadbeats by the Germans. Where he gets his 3 more month thinking is unknown. Spain and Italy do not HAVE 3 more months…they must be able to fund their debt NOW and cannot at 6.6% borrowning costs and rising daily (Spain..Italy is a bit less)

The technicals in the markets are TERRIBLE with the Spy closing below the 200 day on Friday. CHINA should have everyone running for the HILLS since their real estate market has utterly caved in, and Friday’s report on their ISM shows just a fraction above absolute CONTRACTION. They are … absolutely collapsing before our eyes.

We are in the most perilous times we’ve seen since 2008 but the Fed does not have any bullets like 2008…the QE is done, the rate cuts have us at ZERO and STILL we fall. ” )

#234 truth hammer on 06.03.12 at 2:04 pm

Junius, austerity diesn’t work when it’s not auster. The current regimes want thier cake and eat it too. It’s just not going to work . We’ve seen a hyperinflation in the cost burden of supporting government programs. These costs are treated as the new normal….for austerity to work, we must roll back the expenditures and give the money back to the taxpayer…not continue to support parasitic ‘programs’.

The current malaise has been caused by the government being over generous to an elite and this has caused the majority to suffer. Cut the head off the snake so that the body may live. I’m positive that civil servants could be housed in dormitories and rented out to dockworkers on the weekends without the national economy crashing.

#235 TakingResponsibility on 06.03.12 at 2:35 pm

The ULTIMA UPDATE:

As reported on CTV on June 2/12, the Ultima DID have line-ups and Developer Ricki Lam is so pleased with demand that he hinted at Ultima 2 in Edmonton! See “Line Ups for Condo a Sign of Downtown Revitalization.”

http://edmonton.ctv.ca/

Amazingly, buyers are verrrry excited and eager to become neighbours to their hockey heroes (never mind a financial district! What do you think hockey is!!) and will gladly pay to do so!

On a side note, the reporter states that the proposed arena is still short a hundred million….but buyers are willing to “bet” on a “can’t lose deal.”

Bwahaha!!

#236 Junius on 06.03.12 at 2:48 pm

#233 Don,

All the UBC economists are on the Re: Industry payroll. They are all hacks. Tsur Sommerville is the worst.

#237 Inglorious Investor on 06.03.12 at 3:31 pm

#225 Derek R on 06.03.12 at 11:15 am

Yes. I think you explained that well.

The real genius of the current fractional reserve system (from the banks’ point of view, anyway) is that while no individual bank can actually lend out more than its deposits (at least officially, and only assuming there actually are reserve requirements), the recycling of outstanding loans through the system allows the banks, in aggregate, to inflate the money supply.

This monetary/debt expansion gives banks an ever growing claim on future wealth, which the borrowers need to monetize at some point and hand over to the banks. Because as I said, the money comes first, the wealth come later (hopefully).

The system is set up so that banks, in effect, work together to goose each other’s earnings. And it’s all facilitated by the central bank, whose two main goals are monetary inflation and protecting the system.

That’s why some people advocate what can be called a “one dollar of capital” model, in which banks should only be able to lend out a total amount that does not exceed their actual capital. That would certainly be quite a change.

#228 Gun Boat denier on 06.03.12 at 11:51 am

We the people are part of the “scam” essentially because we have no choice but to participate in a system which was set up primarily to benefit governments and banks. All in all, I’d say we are victims of the system. However, there are ways to use the system to your own advantage (If you can’t beat ’em, join ’em).

#238 DondWest on 06.03.12 at 3:38 pm

Oh no:

http://ca.finance.yahoo.com/blogs/insight/canadians-accelerating-mortgage-repayment-efforts-survey-finds-153558174.html

Apparently, the mainstream media is now “informing” people that Canadians are paying off their mortgages in record numbers. The hysteria is becoming unbearable. What’s interesting though are the replies to the article, seems the sheep are slowly but surely turning into wolves. . . Though, not quite at my level yet, there’s much more to the story than just the cost of living going up and Stephen Harper.

#239 truth hammer on 06.03.12 at 4:04 pm

How about this. We’re always been told that we have to pay the civil service more than the private sector if we are to attract the best and brightest. Lets examine this argument. It has become impossible to support the greed of the civil service ( $200,000 skytrain ticket maidens..six figure gardeners…$28 buck an hour Tims clerks c’mon people) so …what we do is send the civil servants genius level quality into the open market place to employ themselves and create employment for others. After all…aren’t they the smartest poeple in the land? Why do any of these people need subsidies?

Leaving their great intellects to marinate in the juice of the public trough is an absurd waste of their talents. Not only are these geniuses underutilzed in the through…they would be of great service nationally in turning back the austerity programs that have had to be implemented because of the taxpayers ability to support the legacy of largesse created for the lifestyles of this genius level elite.

Lets try a bold experiment Canada…….cut the civil service and all programs by 99% by next Friday. Allow people to concern themselves with how they’re going to support themselves as opposed to marching in the streets for more handouts and a continuation of the staus quo.

#240 Westernman on 06.03.12 at 4:13 pm

Harlee @ # 207
Cowshit and barren stubblefields… yeah, real wonderful,schmuck.
Your posts are getting way out there lately, even for you and thats really saying something…
Why don’t you get out of your little nothing province once in a while and have a look around at the real world, Mr. Kool-Aid drinke
I suppose you go to Roughrider games with a hollowed out watermellon on your head too, don’t you…

#241 Canadian Watchdog on 06.03.12 at 4:16 pm

#240 DondWest

It’s ok. Let CAAMP kick and scream all they want because that’s exactly what the banks wanted after cutting off broker lines back in early Feb. If you noticed, banks didn’t complain about the new HELOC rules proposed by OSFI, while McLister and the gang are going completely apeshit. All that matters is who can weather the storm and who will be blamed when the subprimes implode. Banks winning $$$

The big five are building an army to exterminate brokers. Nicely planned. http://www.workopolis.com/EN/job-search/mortgage-jobs?ak=mortgage&lg=en

#242 Harlee on 06.03.12 at 4:28 pm

#230 Expat
I guess I got the impression that you were “putting down” the fact that an international airport could be out in the “empty prairie”(and still be considered “international”) ,but that probably wasn’t your point at all,so sorry for that and forget it.
Actually I live in Saskatoon. I haven’t been in Edmonton (except to change planes) in years so I wouldn’t know exactly what the downtown is like now. A lot of the cities “out west” have their rough neighborhoods. Saskatoon has Riversdale AND Pleasant Hill. City Hall,the police,community groups keep trying to improve them with mixed results. Now City Hall here is proposing a”red light district”. Hell,that’s what the city had 100 years ago ! When the moralists of that time closed down the “houses of ill repute” it just spread to the streets and cheap hotels. We just don’t seem to learn from the past,do we…?
About transportation, I’m old enough to remember when the last steam locomotive crossed Canada. That was in 1960 and my dad and me stood at the railway tracks in our small town to see it go by. For him it was a real “passing of an era”.Diesel engines had been running since the early 50s (if not earlier) and air travel became cheaper and more common. I took my first plane ride at age 5 in 1961 on a TCA propeller plane. Fifty years later we have commercial space travel for private citizens. Some of the babies born today will take space travelling for granted when their 50 just like we do taking a trip to Europe.
There is a lot of trouble all over,but I still think we live in a pretty amazing world.

#243 furst on 06.03.12 at 4:33 pm

#207 Harlee and #200 Nostradamus Le Mad Vlad

Thanks for the support of my poetry ambitions. I shall continue to post and hopefully with each subsequent one the depth and hidden meaning of each will become more apparent.

#244 Harlee on 06.03.12 at 4:38 pm

#242 WesternMouth
Okay !
I must be saying something meaningful to get a reaction like that from this blog sites resident troll.
It really made my day ! Now,I can venture forth knowing that the power is with me. Yah me !!

#245 daystar on 06.03.12 at 4:51 pm

#241 truth hammer on 06.03.12 at 4:04 pm

Lets try a bold experiment Canada…….cut the civil service and all programs by 99% by next Friday – truth hammer

That would mean all schools and hospitals shut down, all government cheques would stop being issued, the mail would stop, police, penal, court, immigration, customs and government would cease to function normally unless people wanted to do their jobs to try to prevent anarchy but it would be anarchy and certainly cause it within weeks.

Our economy as a whole would spin into depression quite quickly and people would die. Its hard for anyone to take you seriously at all when you stay stuff like this? Perhaps you should try more reasoned arguments with links of some kind, even propaganda to support your views. Otherwise, its kind of a waste of time to respond to as it is by anyone, not just me? Don’t mean to sting you but thats how it is. Lets get real.

#246 Westernman on 06.03.12 at 5:03 pm

Harlee @ # 246

DELETED

#247 Canadian Watchdog on 06.03.12 at 5:19 pm

Here’s the video of the fire at Burano Condos I posted a few weeks back. http://www.youtube.com/watch?v=Qo3l3afB_vg

Of course, it was all Joe the electricians fault for chucking his cigarette on to some unknown combustible material on the rooftop. What a shame. Now the project is postponed so assignment holders will have to wait while the developers sales office is still open. Pitty.

#248 Westernman on 06.03.12 at 5:28 pm

Daystar @ # 247,
Well, there you go ladies and gentlemen, without our overpaid parasitic civil ” servants ” the entire edifice of civilization would come crumbling down and we would all perish…
Well, I guess all we can do is keep paying taxes out the ass to keep our noveau – royalty rolling in benefits, fat pensions and ridiculously inflated salarys …
Makes one wonder how mankind has survived to this point, dosn’t it?
You Canadians are just amazing in your absolute helplessness…

#249 Lorne on 06.03.12 at 5:40 pm

#241 truth hammer on 06.03.12 at 4:04 pm
How about this. We’re always been told that we have to pay the civil service more than the private sector if we are to attract the best and brightest.
…….

I thought that is what we are being told about private corporation CEO’s who are paid an ungodly amount of $$ for what they actually do. I am pretty confident all of them could be cut by next Friday, and we could find many intelligent humans who could just as easily handle their responsibilities for a low 6 figure salary….as opposed to the ridiculous 7 – 8 figure salaries these CEO’s feel they “deserve”. Just think how many more people we could employ if the $ were spread around a bit!

#250 DavyBoy on 06.03.12 at 5:43 pm

http://www.realtor.ca/propertyDetails.aspx?propertyId=11995065&PidKey=-2036867863

$670 a square foot !!! 410 Sq ft junior 1 bedroom!! hahahahaha!!

But you get real concrete walls… — Garth

#251 truth hammer on 06.03.12 at 6:13 pm

#251 Lorne…..heres the differance…The CEO’s who get the big bucks are granted those salaries by the shareholdrs out of profits that are made in the private sector without ever forcing themselves on the poor taxpayers.

Civil service salaries are taken from the taxpayers without ever having turned a profit for the ‘shareholder’ ie the taxpayer. You can’t compare a private sector compensation package with one ‘annointed’ by the elite socialists who produce nothing of value.

Stop watching the whining CBC ‘ class warriors’ and take a look at the real world. If CEO’s didn’t make money ‘out of thin air’ they would take home a dime. The civil service burns through tax dollars like toilet paper and get ‘performance bonuses’ for overspending.

C’mon man….get serious. The private sector and the public are entirely differant entities…only the unions want you to think they deserve ‘professional wages’ for never having had to excel.

#252 I'm stupid on 06.03.12 at 6:24 pm

#216 mortgage brokers in a PANIC! on 06.03.12 at 9:51 am

That’s not true. It will most likely be a self-inflicted gun shot would to the head. The ones that don’t take that route will be Walmart greeters until they die.

#253 Frank the skank on 06.03.12 at 6:29 pm

I don’t think my fat ass could fit in that condo….!!

#254 Debtfree on 06.03.12 at 6:49 pm

And davyboy real concrete ceiling . What else would you expect in the fashion district. Love the address says it all ” Sheppard east eeeeeeee ” home of the Sheeple . I wonder if the windows open .

#255 Stoopid on 06.03.12 at 7:06 pm

Sorry Garth… next time will include hyper link

#256 Stoopid on 06.03.12 at 7:17 pm

It’s almost Over:

Dr. El-Erian Synchronized Global Slowdown

http://www.youtube.com/watch?feature=player_embedded&v=xURH4e55co0

http://en.wikipedia.org/wiki/Mohamed_A._El-Erian

#257 Derek R on 06.03.12 at 7:20 pm

#239 Inglorious Investor on 06.03.12 at 3:31 pm wrote
Yes. I think you explained that well

Thanks, Inglorious Investor. It’s rare for anyone to give a compliment on this blog; brickbats are far more common. So I appreciate your kind words.

That’s why some people advocate what can be called a “one dollar of capital” model, in which banks should only be able to lend out a total amount that does not exceed their actual capital. That would certainly be quite a change.

Radical, no doubt. But it would solve the problem. Even if the banks were allowed to lend out a fixed multiple of their capital, that should work.

#258 Nostradamus Le Mad Vlad on 06.03.12 at 7:23 pm


Beer! Strong enough for a man, made for a woman! Now to further computer glitches . . .
*
#204 Hoof-Hearted — “. . . and sublet this blog to H…..F..and C.” — If they are all in jail by then (25 to life), their / this blog may be worth reading!

#250 Westernman — “You Canadians are just amazing in your absolute helplessness…” — To a large extent, you are correct.

It’s called self-responsibility and self-discipline, and only a few are unable to care for themselves, either through terminal illness or being born with some kind of disability.

For those who can look after themselves, don’t take more than what’s coming. The system suffers because of the greed of a few; e..g., see John Stossel. “John Stossel has become the lead spokesperson for the corporate elite and their propaganda program, designed to portray the American poor as “well off”.
*
Transition From full-time to part-time work; McHappy BdB’s Responsible for a lot of things; Germany “I am gravely alarmed when American billionaires out of “tradition” blame Germany for the crisis created by Wall Street’s mortgage-backed securities fraud.” wrh.com; Golden Turkey “Turkey is now offering incentives for people to store their gold in the bank instead. (*You’ll Be Sorry !!!)” wrh.com; 2:28 clip Smoking Man is correct. We are raising a bunch of illiterates; Silence of the Slumbering Credit Markets Chianti? SEC Changing Rules whenever they want to; More Stimulus? Cialis, Viagra and a few nukes may work.
*
The God Particle has been found, muttering quietly to itself “What did I create?”; Assad is right The CIA and Mossad (US and Israel) are responsible for the mayhem in the MEast, and Annexation of Bahrain to SArabia. That’s why they’re supporting the west; Serving Tuna with a geiger counter; Cuddles and Hugs Pakistan; Billary and CC “On Saturday, temperatures in Stockholm never inched past the plus 6 degrees Celcius mark.”; 3:08 clip Now there are GMO apples. Guess that means that eventually, the orchardists will be extinct; Stuxnet vs. the US “The same New York Times article confirms that after wrecking the Siemens’ controllers at Natanz, STUXNET “inadvertently” escaped into the wild.” wrh.com; Magnesium A weight loss cure?

#259 Stoopid on 06.03.12 at 7:42 pm

When you connect the dots you begin to realize it’s all been a set up from the very beginning. I would go as far as suggest…. Buy design

http://www.youtube.com/watch?v=f-N7RvsOMx8

#260 The American on 06.03.12 at 8:06 pm

Where’s my favorite shithead, BPOE?!? Prices in Vancouver crumbling like wildfire… Prices down over 12% already. Things are only warming up. Dang. Vancouver is nearly already half way to the price collapse that was seen in Seattle. Hell, it took nearly 4 YEARS for prices to erode 27% across the Seattle market. Vancouver’s prices are falling significantly faster than what was seen here. Perhaps I should update my prediction. I’ve been stating prices are guaranteed to collapse at least 40%. That’s a minimum. At this rate, expect it to be much greater.

#261 Freedom First on 06.03.12 at 8:10 pm

#234 daystar

Well said! ……I totally agree, and this is a major point of what Garth is trying to teach people, in my opinion only of course as I would not presume to try to speak for Garth…….but yes, loading up on any one asset, and not being diversified is extremely dangerous. One has only to simply look around the world, right now, and throughout history, to see how true this is. Yet [email protected], the mother-in-law, and numerous others continue to successfully brain wash the unaware. Very sad.

#262 Snowboid on 06.03.12 at 8:25 pm

#253 truth hammer on 06.03.12 at 6:13 pm…

All you are doing is repeating the common ‘right-wing’ rhetoric – boosted by the majority of MSM outlets, instead of doing just a bit of research into what has actually happened over the last decade.

If it wasn’t that our future is at risk, it may be funny – but the Cons (e.g. Feds, BC and other provinces and cities) have managed to implement the biggest move towards corporate socialism (often hidden in the guise of privatization or outsourcing) in our history.

Blaming average public servants for the nations’ woes is nothing more than a diversion.

Maybe you should change your name to ‘Lord of the Lies’?

#263 Daisy Mae on 06.03.12 at 8:26 pm

228Gun Boat denier on 06.03.12 at 11:51 am

Do you have “money” in the bank? I bet you do. At least I bet you think you do. If you are like most of us, you accept cheques from various sources (work, govt
etc), “deposit” them in the bank or CU, then write
cheques or do transfers to pay for a whole whack of
things. Your deposit must be real as others accept your payment.

“Loans are assets. Deposits are debits. Learn
something. —Garth”

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

I’m afraid I don’t understand this….why are loans ‘assets’ and deposits ‘debits’?

A loan to a bank is a stream of income generated by the asset. A deposit costs money and is a debt owed to another. — Garth

#264 Daisy Mae on 06.03.12 at 8:53 pm

#259 DEREK R: “Thanks, Inglorious Investor. It’s rare for anyone to give a compliment on this blog; brickbats are far more common. So I appreciate your kind words.”

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

That’s nice…

We all have opinions and should be able to express them without being unnecessarily attacked. Open discussion is “a good thing” as Martha would say. LOL

#265 Canadian Watchdog on 06.03.12 at 8:57 pm

#259 Derek R #239 Inglorious Investor

Pfffft. We’re way beyond fractional banking at this point. It’s all about rehypothecation now baby, and best of all, it’s your money earning 0% being pledged over and over again.

http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/

“Canadian Imperial Bank of Commercere-pledged $72 billion in client assets”

“Royal Bank of Canada re-pledged $53.8 billion of $126.7 billion available for re-pledging”

Banks make Vegas stakes look like child’s play.

#266 Daisy Mae on 06.03.12 at 9:00 pm

“A loan to a bank is a stream of income generated by the asset. A deposit costs money and is a debt owed to another. — Garth”

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

Okaaay….I THINK

#267 Daisy Mae on 06.03.12 at 9:02 pm

“A loan to a bank is a stream of income generated by the asset. A deposit costs money and is a debt owed to another. — Garth”

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

I’ll try again…

I THINK I get it, but for the lay person it can be pretty heavy duty stuff! LOL

#268 Daisy Mae on 06.03.12 at 9:04 pm

Anyone out there without a financial advisor is a fool. Good grief, this can be complicated. The more I ‘understand’ the more I realize I DON’T understand!

#269 Lorne on 06.03.12 at 10:52 pm

#253 Truth Hammer

” If CEO’s didn’t make money ‘out of thin air’ they would take home a dime. The civil service burns through tax dollars like toilet paper and get ‘performance bonuses’ for overspending.”

Sorta like James Gorman, CEO of Morgan Stanley:

“Morgan Stanley said Chairman and Chief Executive James Gorman was awarded total compensation for 2011 valued at $10.5 million, down 25% from a year earlier, according to a securities filing.

In the firm’s proxy statement filed with the Securities and Exchange Commission on Thursday, Morgan Stanley said the 53-year-old Mr. Gorman’s compensation included an $800,000 salary and long-term incentive awards of $9.7 million.

Most of the long-term awards were in the form of stock-based compensation, though Mr. Gorman also was awarded $2.7 million in deferred cash that he will get in two chunks, starting in November.

The total reflects “the fact that the company did not fully meet certain 2011 performance priorities,” the New York company said in the filing. For 2010, Mr. Gorman got $14 million.

…..
Seems pretty fair…for not meeting expectations (sarcasm intended!)

#270 Balmuto on 06.03.12 at 11:13 pm

#128 TimV:

“A given share price change may either over-estimate or under-estimate the corresponding change in fundamentals.”

100%. Therefore you cannot assume that a reduced stock price means reduced risk, Garth. Just because a stock is cheaper than it was a year ago does not mean it’s less risky rhan it was a year ago. If the price correction has not kept pace with deteriorating fundamentals, it’s actually more overvalued and more susceptible to a sharper correction than it was at the higher price. Now if what you’re really saying is that an asset priced at fair value is less risky than when it’s priced at an inflated value, well, duh. That’s the whole principle of value investing. But a good value investor does not look at price levels simply in a historical context to determine if an asset is trading at a good valuation or not. In fact, that’s a very bad way to do value investing. It’s a rookie mistake and it’s a popular canard that you see trotted about by TV show stock pundits when they’re trying to pump up some beaten up stock. “This stock is already down 30% from it’s peak – therefore the bad news is already priced in – it’s a buy!”. Yeah right, lol.

#271 Harlee on 06.04.12 at 1:52 am

#245 furst
It might take some time but you’re sure to find a style ,but whatever happens have fun with it. l’ll keep on eye out for your posts.

#272 disciple on 06.04.12 at 11:44 am

Daisy Mae… LOL, Heavy duty stuff… I guess you’re right. But it doesn’t have to be that way. You see, the simple way of looking at it is that we the people have given the private banking families the right to charge interest for money that we also give them the power to create out of thin air (via the Bank of Canada).

Mind you, this money, does indeed NEED to be created out of thin air for our lives to run, but for some inexplicable reason which no one on this blog, and certainly not Garth Himself, has indicated why, we have given this right to a private cartel.

As an analogy, imagine for a moment, if it was a rule, stupid, stupid, rule, that no one except disciple was allowed to sell houses in Canada. And if you wanted one, you would have to buy it from me at a marked-up value called interest. But of course, I didn’t build the actual houses; alas, that feat was accomplished by the HOUSE BANK OF CANADA, and I was merely the APPOINTED middleman.

Do you think this is fair? In a just and free society? “Well”, you ask, “What are the alternatives?” – Oh no, sir, that cannot be asked, otherwise you are a lunatic.

#273 disciple on 06.04.12 at 11:48 am

There is no mystery to our money system. It’s a scam called central banking. Banking should not be centralized, it should be free of centralized monopoly.

You either play along or you subvert it. The choice is yours. There is always a choice. I fight for freedom. What do you fight for?

#274 zeeman1 on 06.04.12 at 12:38 pm

#79 A Prairie Dog.

By your logic prices on bread and gas etc should never have spiked in the first place.

They used market prices to justify massive price increases almost overnight but when the market crashes for those commodities they don’t lower correspondingly?

Live by the sword, die by the sword.

But then I forgot we were talking about commodity markets and futures contracts where we know from experience logic and fundamentals mean nothing.

#275 Silver on 06.04.12 at 4:53 pm

#247 daystar

I have a better idea…
how about lets reduce the number of people paid out of the public purse in one way or the other from 63 % of Canadians for every ten people…. down to one manager for every ten living people.
we don’t need 6 managers/dependents on government welfare being supported by 4 people actually working .

… or yet…
stop tax breaks equal to 40 % of my wages from being given to US based companies as a tax break. insuring the ceo’s multimillion dollar pay scales.

I am forced to sign documents giving them access to my federal tax accounts in order to get the JOB.
It was stated in no uncertain terms…. That without them they could not get the tax break and they would not hire me without them…

I make $35.00 to $40.00 + an hour when i work.

thats several hundred million dollars a year in the lower mainland..,. in lost revenue.
I sure don’t pay that much in tax’s…. so I guess you and others get to help pay for my job…. thanx.

Keep pay’en Bitchs

Silver