A time to reap

Jennie will be 79 in July, drives her Prius like a silent, crazed teenager and just got an iPad. “I can play Euchre on it,” she says, with that laugh.

She moved into her bungalow in 1959, where she outlasted Frank and raised three sons, now long gone from the nest. It cost $14,000 new, and she just sold it for $657,500. “Kids bought it,” she told me, shaking her head. “Their parents had to co-sign the mortgage, and they had no money for furniture. So I gave them the beds”

Jen knows she scored. “Can’t believe they paid that much for the place, but it’s for them to figure out now. I’m just glad I’m out. Off to a new adventure.” That’s a rented condo with a sweeping view of a river, granite countertops and Prius parking below. The $600,000 Jen’s investing in a conservative portfolio of fixed bank preferred shares, REITs, various bonds and dividend-spewing ETFs, designed to yield an income of 4.2%. That’s $2,000 a month in her bank account – more than enough to pay the rent, buy the gas, and leave the six hundred grand untouched.

On the other side of the ledger, the kids now have a 1,200-square-foot bung, last renovated in the 1970s, three old beds and $600,000 in debt. And so continues an historic intergenerational transfer of wealth – equity to the old, debt to the young.

The kids are creamed, of course. They’ve bought when the bungalow was never worth more, and mortgage rates never less. Unlike Jen, they’re not launching into home ownership at the dawn of five decades of inflation, economic growth, expansion, confidence, cheap energy and the ascendancy of bricks and mortar thanks to demographic demand.

Jennie, on the other hand, has freedom. She’s totally liquid, diversified into a mitt full of assets, enjoying income where she once had expense. She extracted her equity at the moment of maximum benefit and is poised to sail through years of borderline deflation likely to return that red brick house to a former valuation. A time to sow. A time to reap.

Between 1959 and 2012 that bungalow gave an average return of 7.3% (shy of the stock market, which did 9.6%). If the experience were repeated, when the kids themselves turn 80, the house would fetch $31.5 million. To buy it would take an income of about ten million. So you can see what we have done, pushing this asset into the realm of the ludicrous. And still people think it will ascend without end.

Of course they believed that to the south, too. When everyone thought it was different there, middle-class wealth was concentrated into houses. Because they always go up. As we learned yesterday in a new study by the Fed, median net worth of US families crashed more than 39% (to just $77,300), and for three-quarters of that loss, blame real estate.

As a result, families are now saving less, over half have nothing put away for the future and 74.9% have debt – mostly mortgage debt.

There are a few lessons here.

  • Assuming the past will repeat when conditions are so changed is folly. The era of the house as everyman’s ticket to financial security is over. After pumping this to wobbly highs, it now epitomizes danger. It’s why this pathetic blog keeps warning about putting too much net worth into real estate.
  • The years to come hold more promise of deflation than inflation. Slow growth is a given, along with structural unemployment, spare industrial capacity, deleveraging and stagnant incomes. These are days when dollars are worth more, not less. Physical assets (cars, iPhones, houses) devalue and those with liquid wealth and financial assets do best.
  • It’s not different here. Or anywhere. Ever. Prices revert to the mean. All booms stop. Greed and fear end up in the same place. People want what’s dear and flee from what falls. It’s why most bought Nortel, lined up for gold, now camp out for McMansions. The only surprise is our inability to learn.

Jennie says she knew it was time. “Moving was tough,” she admits. “I had a little cry when the sign went up.

“So I went all around the house, and took down the family pictures. At that moment I knew it was just a place.

“Then I walked out.”

229 comments ↓

#1 furst on 06.11.12 at 8:52 pm

This post will be followed by a poem…..

#2 Dimitry on 06.11.12 at 8:57 pm

Best article this week

#3 sarah on 06.11.12 at 9:04 pm

wow. poignant.

#4 librarykaren on 06.11.12 at 9:06 pm

“So I went all around the house, and took down the family pictures. At that moment I knew it was just a place.

“Then I walked out.”

Smart lady.

#5 condopoor on 06.11.12 at 9:06 pm

Garth,

I know how much is at stake with your opinion and posts. If you’re right, you’ll be a national hero.

#6 Prepmonkey on 06.11.12 at 9:07 pm

1st You knot it!

#7 vinny on 06.11.12 at 9:08 pm

Yet another powerful artical ..well said and hat off to you Garth !!!

#8 Deano on 06.11.12 at 9:09 pm

Inflation adjusted price of that bungalow…112k.

Housing, cars, education…all vastly more expensive than in Jennie’s youth. But hey, we’ve got iPhones and cheap Wal-Mart goods, life is better, right?

#9 Renting In The GTA on 06.11.12 at 9:09 pm

Great post tonight!!!

#10 espressobob on 06.11.12 at 9:09 pm

Ah, the good old days!

#11 Bruno on 06.11.12 at 9:13 pm

Great post once again Garth!
I wanted your opinion on how REITs will perform when this house of cards comes down. I’m assuming you would stay away from the ones where their assets are composed of high risk new builds, condos and shopping malls in suburban sprawls. Thanks

#12 Dan in Victoria on 06.11.12 at 9:13 pm

Its a home when you live in it
Its a house when you sell it

#13 Kenny Banya on 06.11.12 at 9:18 pm

As someone in their early 30s I just find this really sad. It’s one thing to keep up the social contract and support retired people with my productivity at work (CPP, health care), but now my peers need to donate a mega-windfall to a senior citizen who can just chill for the rest of their life as a result. Poignant indeed.

Easy solution. Don’t buy. — Garth

#14 daystar on 06.11.12 at 9:20 pm

Paradox comparison, nicely done. Another excellent read, Garth.

#15 DM in C on 06.11.12 at 9:22 pm

Good for her. Enjoy, Jessie — well done.

#16 LH on 06.11.12 at 9:28 pm

A house is not necessarily a home. A home doesn’t have to be a house.

I own several SFH’s in downtown (C01, C02) Toronto. I don’t live in any of them (they are fully tenanted, paying me a yield comparable to REIT’s without the annoying Principal-Agency problem that dogs all public equities).

My home is where the family is (wife, kids). Currently this happens to be a rented apartment.

#17 Sask on 06.11.12 at 9:29 pm

Comments Garth? There does not seem to be any end in sight for Regina/Saskatoon. People keep saying Saskatchewan is an island due to its jobs, and resources.

http://www.leaderpost.com/news/Regina+average+house+price+above+300K/6765789/story.html

#18 Canadian Watchdog on 06.11.12 at 9:33 pm

McGuinty Government to Launch Condo Review Consultation http://news.ontario.ca/mcs/en/2012/06/building-a-better-condominium-act.html

#19 Jon on 06.11.12 at 9:34 pm

http://www.vancouversun.com/business/Vancouver+home+prices+drop+cent+three+years+Bank/6765028/story.html

#20 theviegasgroup.com on 06.11.12 at 9:42 pm

Garth,

I’m very surprised you are not bullish on gold until the printing presses are taken away from central bankers. The US, Eurozone, Japan are all facing a multi-year deleveraging cycle that SHOULD be highly deflationary. However, the modern central banker, led by Bernanke, are so fraught with fear from deflation that they will try to print their way out of it. Gold is not a doomsday hedge, it’s simply preserves one’s wealth against inflation. All the individuals who not only predicted but profited from the US housing bubble’s bust – Einhorn, Dalio, Bass, Faber, Grant – are all bullish on gold. That should tell people something.

Either the CB’s print and hope the debts can be unwound in slow, innocuous manner or we have a multi-year deflationary recession that puts the gold AND equities AND houses at MUCH, MUCH lower prices. Without the view that CBs will be printing money being long equities is equally brazen

#21 furst on 06.11.12 at 9:42 pm

On top of the world – a poem by Furst

I bought a house, I’m so glad
Leasing an apartment, made me sad
Going to spend the afternoon with a beer on My deck
This is freedom, no landlord breathing down My neck

Renting is throwing money down the drain
Renting is for those without a brain
So what if I bought with Zero down
So what if my parents had to co-sign, in case I drown
Who cares if I have no savings, in the bank
Who cares if the real estate market, decides to tank
It matters not, that the mortgage eats most of my pay
It matters not, that I have no extra cash for play
I’m tired of hearing the reason not to buy
I’m tired of being the one in our group who’s ‘that guy’
The guy who rented because he can’t afford a house
The guy who shared his apartment with a mouse

Those days are over, hear me roar
I’m larger than life, like the thunder god Thor
Here comes the mailman, it’s early dawn
To put some letters in the cute mailbox on my lawn
A letter from my company, the pay cheque this week
Life doesn’t get better, there’s nothing more I seek

Wait a sec, why’s this letter in pink?
It starts, Thanks for your tenure, but we no longer think
That your skills are required as our company expands
You no longer fit in, with our revitalized brand
We offer you a package of two months at most
But come to our new product launch, we’re gracious hosts

Damn, where’s my realtor I need him now
Mom and Dad are mad, I told them ‘Don’t Have a Cow’
I’ll sell the house and move back to their garage
Was my new house nothing but a mirage?
My dream was so close, yet so far away
No idea what do do next, maybe now’s the time to pray

#22 LuckyRenter on 06.11.12 at 9:43 pm

Toronto braces for deflating condo bubble

“Everyone is uncertain about what is going to happen in the condo market in the next few years,” said Steve Gagro, a senior manager at Laurentian Bank of Canada who specializes in lending to real estate developers.

With 325 condominium projects on the market and another 173 towers under construction, Toronto’s skyline is spiking with condo units and cranes, with more new buildings underway than in any other city in North America.

While it sounds like Canada may be importing the 2008 housing bubble from its neighbors to the south, nearly everyone in the industry argues that Canada is different.

More here:

http://www.torontosun.com/2012/06/11/toronto-braces-for-deflating-condo-bubble

#23 Onemorething on 06.11.12 at 9:48 pm

Jessie’s gonna party like it’s 1959!

#24 Chaddywack on 06.11.12 at 9:49 pm

Lots of sold stickers starting to show up in Vancouver. Everywhere I’m looking over the last week or so. I’d like to see how these sales translate on price reporting.

#25 Devore on 06.11.12 at 9:53 pm

#20 theviegasgroup.com

All the individuals who not only predicted but profited from the US housing bubble’s bust – Einhorn, Dalio, Bass, Faber, Grant – are all bullish on gold. That should tell people something.

Tells me you’re very biased in selecting your examples. Is Shiller bullish on gold too? Pretty sure you will find plenty of people who made money during the US real estate bust who don’t think gold is going to the moon, or anywhere for that matter.

#26 Johnny D on 06.11.12 at 9:53 pm

@Sask

The leaderpost might as well be a flier from CREA itself. Sask residents are among the most indebted of all Canadians thanks to the love of pickup trucks, expensive toys and of course realestate in the province. Reality will hit hard to many and hopefully to the greedy self serving civic politicians/realtors the most. Yes, for those of you who don’t know, Regina actually has city council members that are realtors and others who are closely tied to the real estate/construction industry. Regina’s front runner for the upcoming mayoral election is the president of the Saskatchewan Construction Association. Conflict of interest anybody? The stink of that alone is enough to drive me away from the entire province and never look back.

#27 A time to reap | The Retiring Boomer™ on 06.11.12 at 9:56 pm

[…] As published in The Greater Fool […]

#28 Mr. Lahey, Sunnyvale Trailer Park Supervisor on 06.11.12 at 9:58 pm

#21 Furst

“Wait a sec, why’s this letter in pink?”

Julian sprayed out his ubiquitous drink when he read this line. Your poems are the rage in Sunnyvale Furst. You are going to be the poetic rock star at the SASTGFBDCParty, perhaps second only to the bearded mystic oracle who writes this blog! Keep ’em coming!

#29 T.O. Bubble Boy on 06.11.12 at 9:58 pm

She should have taken the $600k and used it as 5% down on the most ridiculous house she could find… Then, signup for a 30-year amortization on a cash-back mortgage (to get her $600k back).

With CMHC still backing these stupid loans, is there any doubt that someone would offer her this mortgage?

#30 Observor on 06.11.12 at 10:02 pm

HOUSE VERSUS STOCKS…

Canadian Houses did very well as investments in any period ended 2012. (Or probably any period ended in a year since about 2002) But that certainly does not mean they will be good investments now.

“Between 1959 and 2012 that bungalow gave an average return of 7.3% (shy of the stock market, which did 9.6%).”

I think we should try to add in the value derived from living in it (to some priceless). Beyond the priceless value of a stable and permanent home location there is a financial value of the equivalent to rent even after deducting the costs of property tax and any and all maintenace and renos that is over and above that faced by a renter.

On that basis the house probaly beat stocks since 1959, but that won’t be true in most time periods.

Possibly we should also consider interest costs but then again both stocks and homes can be bought with borrowed money so maybe it is fair to assume a cash purchase of a house and stocks in 1959.

#31 Toronto_CA on 06.11.12 at 10:02 pm

Lord, in that Sun article that LuckyRenter #22 linked, there’s a commentor saying that Hong Kong has condos nearly 3 times what Toronto has, so that’s proof Toronto is not in a bubble.

I guess there are a lot of asian Canadians living here, but to paraphrase Lloyd Bentsen, “Toronto, you’re no Hong Kong.”

Do people realize how insane they are comparing Toronto to New York, Hong Kong, Tokyo, London, Paris, Shanghai, Singapore, etc.?

I guess not. The only city I’d think to compare it to is Chicago, as I’ve previously said. And in Chicago, you can get a lot more home for a lot less money.

#32 Easternman on 06.11.12 at 10:04 pm

#17 Sask

“There does not seem to be any end in sight for Regina/Saskatoon. People keep saying Saskatchewan is an island due to its jobs, and resources.”

Westernman why don’t you enlighten Sask on the real state of affairs in Saskatchewan…

#33 Can it be? on 06.11.12 at 10:05 pm

More people telling me they are going to buy. They are one paycheque away from disaster… But still going to buy. They are prequalified :( omg… It’s sad. I directed them to the blog. Now I just say… That’s great :)… Enjoy… You can’t save them. I appreciate this blog. I’m in a position where I can move up… But this would require a large debt for what I want to buy. Reading this blog keeps my sanity. Use common sense. If you have to ask yourself.. Who is buying these properties when prices are so outrageous… Your common sense is probably right. The market will have to correct. It’s inevitable…. Crazy times . Garth can only make suggestions… But it’s up to people to make their own decisions. When the market corrects, you migt be thanking Garth.

#34 Smoking Man on 06.11.12 at 10:07 pm

Garth Said
As a result, families are now saving less, over half have nothing put away for the future and 74.9% have debt – mostly mortgage debt.
………………………………………………………………..

That’s because they are stupid, They don’t even know that for the last 30 years: shaft ola……………..

They never got ahead of the curve, believed the teachers, and preachers, and Peter Mansbridge.

The good news is in spite of the machine cross checking them in the teeth, and kicking em in the face. They don’t an assault has been committed on them.

LMAO Track 6ers

#35 Inglorious Investor on 06.11.12 at 10:10 pm

During the great financial crisis of ’08-’09 I often wondered where the next bubble would form as the powers-that-be tried to reflate the system following the stock market crash and the housing crash.

Surely, a bubble would have to form somewhere due to all the funny money being pumped into the system. (Remember: they cannot tolerate monetary deflation for any length of time. The money supply MUST keep expanding one way or another, or the system collapses.)

I speculated––with tongue-in-cheek of course––that perhaps we would have a slavery bubble. The idea being that if other assets were suffering revulsion then maybe the money masters would attempt to resurrect a good old fashioned slave market. It worked for ancient Rome. How do you think the Roman elite were able to live so lavishly?

Well, maybe I wasn’t too far off. For while stocks have performed rather nicely these past three years and bonds perhaps even more so, there is one market in the US that has gone absolutely gangbusters: the student debt market.

As Dan Amerman points out this article: http://www.financialsense.com/contributors/daniel-amerman/student-loans-and-renndistribution-of-wealth , student debt will have a profound impact on the economy in the future. And since student debt cannot be discharged via bankruptcy, perhaps the banks will actually have slaves to exploit and do their bidding. Not quite the kind of slaves they had in ancient Rome (at least not yet). But debt slaves. In the end, does the reason for your oppression really matter?

Maybe the housing market in Canada has been inflated for the same reason. Once prices collapse, wealth will evaporate, but the debt will remain. Hey, whatever works.

#36 Smoking Man on 06.11.12 at 10:13 pm

The Climax of my previous comment showed have read

The good news is in spite of the machine cross checking them in the teeth, and kicking em in the face. They don’t even know an assault has been committed on them.

Heven help us if LA wins, Might Ducks 3, 4 5, and 6
Puke……………………….

#37 Market Bull on 06.11.12 at 10:16 pm

At 79 years, Jennie is far more typical of the age group that is looking to liquidate their prinipal residence. Take note that her home was also far more modest than the mythical McMansion that some would have you believe all seniors apparently inhabit.

Since the leading edge of the boomer generation is just now turning 65, there will be a long wait yet before the sell-off begins, if ever. Many seniors will either leave their home feet first, or kicking and screaming all the way to the long-term care facility, and only as a last resort.

Those would be the fools. — Garth

#38 Derek R on 06.11.12 at 10:19 pm

Loved this post. Lots of people seem to think that widows would never sell their house because of the memories and use it as an argument against raising property taxes, even though property taxes are actually the least economically damaging of all taxes.

So it’s outstanding to hear of a real widow selling up and saying, “So I went all around the house, and took down the family pictures. At that moment I knew it was just a place”.

Good for Jennie! I know she’s going to love her new life.

#39 Retired Boomer - WI on 06.11.12 at 10:23 pm

A mere 79 but, obviously blessed with much wisdom…… after all …………….’it’s just a house.”

Now a rental condo, no snow chores, no storm windows, no mortgage, if strata fees fly higher, what does she care? She can move if she must, but she is liquid. She HAS a legacy for her three kids when she croaks. No worries about being a “burden” and THAT is likely one of the best gifts an aging “silent generation” mom will ever leave their kids.

We Boomers likely will not be so lucky. Most still have debt, brats in college, or worse the “Boomerang Brats” who earned the degree, or are still finding themselves, but can not seem to earn their way in the world. Throw in an aged parent, or two, who can’t handle money any better than some Boomers, and their Brats and you have a receipt for disaster!!

Good thing most Boomers have time to get their stuff together, only the leading edges have retired already.

Have wonderful sunset years toots, and never take life too seriously, you’ll never get out of it alive.

Garth- one of the best posts I’ve seen here. Smart lady!

#40 6.75% on 06.11.12 at 10:23 pm

So Jennie make 6.75% on her $14,000 over that time.

(excluding all the costs associated with a home of course, like picture frames and xmas lights!)

#41 Smoking Man on 06.11.12 at 10:24 pm

The young have been shafted,

In Montreal they know it, and are venting.

In Toronto, they cheer at having no plastic bags.

Bubble Bursting? Perhaps

But the young ones in Toronto are not too bright. and with Mom and Dad’s advice who only know Real Estate.

Anything is possible.

#42 Mike as in Mike on 06.11.12 at 10:25 pm

Excellent post Garth. Thank you.

#43 Konst on 06.11.12 at 10:34 pm

Jennie it is.

#44 Gunboat Denier on 06.11.12 at 10:34 pm

39 RB – WI – you might enjoy this

http://www.cbc.ca/video/#/Shows/1221254309/ID=2167363287

“generation boomerang”

#45 HD on 06.11.12 at 10:36 pm

Furst, John G. Young and Somking Man……You guys are very interesting individuals.

#46 daystar on 06.11.12 at 10:42 pm

Easy solution. Don’t buy. — Garth

“The era of the house as everyman’s ticket to financial security is over.” – Garth

Right on both counts but now what? Where to invest… the easy choice is gone. What was once a misnomer, buy a home… own it outright over time with rent saved, buying a home was an equity builder for anyone single or couple, a great way to start a family but not anymore. Now RE is an equity sucking, finance busting fools play.

Invest? Most of us are too illiterate to try (and need more than 4.2%). Save? Our banks still stupidly encourage us to borrow lion’s share for things that don’t generate wealth. In the short term saving works, its still a preservation of wealth but I wouldn’t go long with whats coming for Canada’s currency and cost of living inflation, at some point it has to be invested but that takes literacy and self control from fear and greed. So many of us aren’t ready, its evidence is everywhere.

I keep thinking back on the choices our Harper government should have made but did the opposite and as a consequence this generation will pay for their mistakes (and treasons). We’re so politically and financially illiterate I’m not so sure this generation will even catch on to what has robbed them of the opportunities past generations took for granted. They will likely blame it all on themselves or boomers and elders who cashed in without ever really acknowledging who is most responsible for the lending environment driving up valuations to crazy heights to begin with (and guess who wants it that way).

We’re going to learn this one the hard way I’m afraid. I can only hope there is a public will to not just identify the politicians and corporate boards responsible, but replace them. Federal elections will take 3 years but corporately, some heads should be rolling even now. Who has been most pro government deregulation of RE within our financials and lobby groups not just privately/publically but in practice?

Who has most endangered their customers for short term profits for their shareholders? (there may and should be a flash quiz on this one)

Canada presently reminds me of the U.S. in 05′ and 06′ where the dummies and crooks in government and FIRE:

http://en.wikipedia.org/wiki/FIRE_economy

…were lauded as solid “visionary” leaders of our time, while media, in competition for advertizing and market share… propagandized the the great unwashed for one more year with “buy now or be priced out forever”, the market is “healthy” and “balanced” and our government/economy has “steady hands on the tiller” speak to milk the last of the greater fools as bankrupcy numbers kept rising… and rising. Its like watching the leaders of a herd of Buffalo airborn past the edge of a cliff with their followers running flatout fast behind. I guess some of us still truly don’t know how this one ends.

#47 furst on 06.11.12 at 10:45 pm

#28 Mr. Lahey, Sunnyvale Trailer Park Supervisor

I’m glad all of you at the park are enjoying my poetry. I can only assume that once a day, the park folk gather around, waiting with baited breath as the master of ceremony hits F5 on the PC connected to a projector broadcasting Garth’s blog. When my poem has been posted, you read it aloud. All in attendance are gripped by the words, moved by the emotion and as the last word is said, a collective sigh releases itself in unison. Ah, poetry can be perfection.

#48 live within your means on 06.11.12 at 10:46 pm

Great post. Smart lady. Though I’m younger, I’d love to follow in her footsteps.

#49 Boomer on 06.11.12 at 10:47 pm

Jen, good for you. I did exactly the same thing as you did. My husband died and I kept the house for 2 years. After that it was just to lonely to stay in such a big house. I too removed the family pictures, sold and on the last day sat on the front porch and had a good cry. I haven’t looked back and am now retired and enjoying my life, my family and my financial freedom. I do feel sorry for all of the house horny young ones who have bought into this housing mania and the relentless pursuit of the next big thing! Enjoy the next phase of your life Jen, party on!

#50 Jamaican_Gal on 06.11.12 at 10:50 pm

Oh, furst, your words are a delight. The mundane topic of real estate is transformed and becomes pleasing to the palate; when you speak, unfettered, dear poet.

#51 TurnerNation on 06.11.12 at 10:52 pm

Do not show DonDWest tonite’s post! Cunning boomers, led by their bearded, licensed, pied piper foisting their under-funded pension liabilities upon over-funded (debt) house horny Gen Xers!

It’s hip to be cool.

#52 Canadian Watchdog on 06.11.12 at 11:09 pm

Chart: S&P500 Growth Rates & Sustainability https://p.twimg.com/AuegbrvCMAATfc6.png:large

Yet again, stocks are at a defining moment as the Fed scales down its Operation Twist (QE3) purchase tomorrow: only to consider another round to sustain the market ahead of elections. A major challenge for the Fed is sizing the amount of purchases in order to keep investors confident. If they shoot too low ($200-300bn), investors may lose confidence and sell off. If they shoot too high ($400-600bn), this may spark a massive break-out sending oil back above $110 a barrel—dampening consumer spending and derailing the recovery again.

Of course, there is a possibility they may not announce any further QE on their next FOMC meeting. If this is the case, one could expect stocks to plunge until the Fed steps in again.

#53 Jamaican_Gal on 06.11.12 at 11:13 pm

Tonight’s post has a touch of whimsy. Nobody can resist the charm of a feisty old gal.

Goodnight, Garth and bloggers.

#54 Arse on 06.11.12 at 11:14 pm

Great post !

#55 a prairie dawg on 06.11.12 at 11:17 pm

If anyone thinks people are agitated and stressed out now, wait until they’re all realizing they got screwed, and/or have no way out.

Imagine ‘Montreal type’ protests, many times larger, and all across the country.

Won’t that be fun.

#56 Mr Buyer on 06.11.12 at 11:18 pm

#5 condopoor on 06.11.12 at 9:06 pm
Garth,

I know how much is at stake with your opinion and posts. If you’re right, you’ll be a national hero.
……………………………………
What is the ‘if’ all about.Look around.

#57 Not 1st on 06.11.12 at 11:20 pm

I don’t know which is more stupid…kids buying $600,000 homes or 79 year old geriatrics putting their life earnings into the stock market.

The kids should be in a starter condo or renting and the geriatric should be in cash.

This woman has no stocks. — Garth

#58 Stupesing in Cabbagetown on 06.11.12 at 11:23 pm

Yes Furst, your poetry is definitely in the great Canadian Binksian tradition.

#59 Pete on 06.11.12 at 11:23 pm

Hello garth,
I rember a few months ago you were telling some guy which you referred to as a ‘doomer’ that there would be no decline greater than 15%. That if the doomer’s expectations were realized, the country would be destroyed. That a correction of only 5%-15% would start a crash of extreme proportions. Then a few days ago you said that a drop of 12% (already happened) was just the beginning and that the drop could go to 40%. Are you startled by the rapidity which the housing situation is unraveling? Maybe that is why last week the U.S. Federal Reserve gave Canada a loan of $131 BILLION dollars to keep our financial system afloat.

Ever heard of averages? My target got a national price decline is 15%, in certain markets it could triple that. — Garth

#60 Mr Buyer on 06.11.12 at 11:25 pm

#37 Market Bull on 06.11.12 at 10:16 pm

Since the leading edge of the boomer generation is just now turning 65, there will be a long wait yet before the sell-off begins, if ever.
……………………………………………….
Dear Market BULL. This generational sell off will likely happen a while after the bubble has collapsed. I will give you that. And I will further agree that many will try to hang on hoping for bubble prices to return, likely right up to the end. Both these points still do not impact the fact that the bubble has topped. BUYER BEWARE. THE BUBBLE HAS TOPPED. NOW IS NOT THE TIME TO BUY A HOUSE. SALES ARE FALLING ACROSS CANADA AND PRICES ARE FALLING IN AREAS OF CANADA (and Market BULL knows this)

#61 John on 06.11.12 at 11:29 pm

“The $600,000 Jen’s investing in a conservative portfolio of fixed bank preferred shares, REITs, various bonds and dividend-spewing ETFs, designed to yield an income of 4.2%. That’s $2,000 a month in her bank account – more than enough to pay the rent, buy the gas, and leave the six hundred grand untouched.”
—————————————————-

This is pretty hard to understand. Where is the logic of “that’s their business” regarding the theft of 600 thousand dollars. Are we not a society? How does
win-lose as a financial strategy help anyone? The entire society pays for this screwing, in a thousand ways. It is so patently unsustainable, and so obviously dead end, that it barely merits analysis. It’s evident.

Stay on the first “side” of the ledger. This woman will not get to keep that money ( it’s June 2012 purported value). And the “stable” derivatives conditions are hardly something that can be counted on. Even in the most wildly optimistic scenario. And that’s not hyperbole. Examine the facts.

Again, these points are blisteringly obvious. What’s up here?

Perhaps it is so that the 600,000 remains 600,000 and is “untouched”, but I can’t think of any serious critical argument to support such an idea.

Don’t blame the seller. Pity the buyers. As for her invested funds, they have no derivatives exposure. I find these blog comments today enlightening. The level of financial illiteracy should have us all scared. — Garth

#62 Mr Buyer on 06.11.12 at 11:30 pm

I would like to say that even if America were firing on all cylinders and at the height of its economic might the Canadian housing bubble would still collapse. Do not buy the convoluted rational of confidence men. THE BUBBLE HAS TOPPED.

#63 John G. Young on 06.11.12 at 11:30 pm

#45 HD on 06.11.12 at 10:36 pm

Thanks HD. I think there are lots of interesting people posting on this blog, which is part of why I keep reading –but Furst’s poems, and Smoking Man’s insights, are definitely standouts.

Cheers,

John

#64 CrowdedElevatorfartz on 06.11.12 at 11:41 pm

HEY BPOE !
are you getting it yet?

“Between 1959 and 2012 that bungalow gave an average return of 7.3% (shy of the stock market, which did 9.6%). If the experience were repeated, when the kids themselves turn 80, the house would fetch $31.5 million. To buy it would take an income of about ten million. So you can see what we have done, pushing this asset into the realm of the ludicrous. And still people think it will ascend without end…..”

Thanks Garth, Excellent story.
I wish Jennie well……

#65 unbelievable on 06.11.12 at 11:45 pm

It amazes me the extent of this housing run and unaffortable by most apart from some pockets in Canada i.e. Thunder Bay, Moncton that are affordable to the average middle class person. The part that puzzles me is how people are able to get financing for these homes. The average house is now in the high 300’s in Canada but people still have to make their monthly payments, despite all the tricks the institutions get you to purchase the home. However you slice it there are monthly mortgage payments. Who is buying these homes? Is there lots of foreign money? Do people have lots of roommates and basement suites to help with the payments? Are people stretched to the max and have virtually no disposable income? I agree totally with Garth and would not be a purchaser/investor at this time in most markets of Canada. This housing sector needs to be doused with lots of water.

#66 The guy in the Orange Shorts on 06.11.12 at 11:47 pm

I don’t see why we have to play ” Charlie Brown Psychiatrist ” to a bunch of Loser Peggers.

They got their Hockey Team back ……so STFU.

#67 somecatchphrase on 06.11.12 at 11:49 pm

Great post tonight – best in recent memory. Archived in my file named “Garth Turner’s Greatest Hits.”

Who the hell knows what will happen over the next 53 years?

If Uncle Ben gets his way, by 2065, you might have Starbucks baristas and hair dressers earning $10 million a year putting 25% down on $30 million dollar “fixer upper” McMansions.

At the moment, such numbers sure seem laughable, but over a long time frame, it’s anybody’s guess.

#68 Crash Callaway on 06.11.12 at 11:56 pm

Thank you Jennie for the lesson in reality.
Hope more aging boomers learn that you can’t take it with you and there comes a point where you must see the “things” in your life for what they are just “things”
Breaking free from the sappy Hallmark sentimentality we are brainwashed with in terms of our shacks can be done once you taste the freedom.
A house is no different than a donut, hang on to it too long and it becomes a moldy treat you can’t off load.
Heaven help those doe eyed youngsters and that monster mortgage.
Party on Jennie!

#69 thinker on 06.11.12 at 11:59 pm

Garth – what are you suggesting is the fair return she should have got on that home?

Why is ok for the stock market to have that return and not real estate?

A stock portfolio would be worth over 32M in that time frame, so in theory, you can buy a home, borrow money from it and put in the market and over time you should be fine?

Your analysis is not well explained.

#70 Carpe Diem on 06.12.12 at 12:01 am

#21furst
Furst .. my I say
I think you have no sway.
You kept on writing
but it was boring.
Go for it baby
let me be happy.
In a few years, I won’t bother
since it will fall lower.
Dude you are doomed
since you will be consumed.
I think you are a realtor
so nothing in terms of a thinker.
I probably make much more than anybody you know
but sold that home and still saying no.
For this house or that is not a bargain
until people believe RE allows you to gain
again.

#71 By any Means on 06.12.12 at 12:12 am

Hello Blog Dogs,
I am a long term reader and very occasional poster on Greater fool.
I have sometimes wondered if some of Garths real world examples were real or fictional, used to make a point.
I know now how real they are. I know this because Jen is my Mom.

I am very proud of her and feel very secure with her team and plan.
A sincere thank you Garth and colleagues from our family.

#72 Retired Boomer - WI on 06.12.12 at 12:17 am

Furst -21-

Great -and alas, too accurate a poetic assessment of reality.

GunboatDenier-

Thanks for the link, but, alas “content only available in Canada.” Darn!

Daystar #46

Consider an Annuity for “guaranteed income” for a portion of your assets, or preferds, or a diversified international fund. The whole world isn’t going to hell in a handbag, only some parts of it. (you guess which parts)

You don’t get to be old and well off by not making wise choices, and some good luck as well.

My Crystal Ball never worked, so I don’t know the future either, but I pretty well guarantee you, from where I sit, the next piece of ground I buy will be an urn for my ashes.

In the meantime, I’ll try not to out-spend my years left, but the income should hold up reasonably well even in this low return world we live in. I like good Dividend paying equity shares of stocks-thanks. Guaranteed? NO but, as long as the people keep buying things, they will likely pay dividends.

I’m sure we all are noticing the world dilemma of Banks, and DEBT. Could there be a lesson in there for today’s young? Get them away from the dam phone long enough, they might even SEE it.

#73 Carpe Diem on 06.12.12 at 12:18 am

What is going on in MTL has nothing to do with the cost of university education. It has to do with the boomers never planned for retirement and their young who have debt over their heads before finishing a worthless degree. Now they are angry and haven’t figured out to just get a job or move where they can get a job. Since their parents told them English sucks and to buy a condo – they are 2X f*$#ed. I’m a gen-x French Canadian (from MTL originally) and I have no sympathy for the boomers or their off spring complainers. Suck it up and pay for my services.
There are a number of provinces that are fiscally compromised, coupled with the next recession (that Harper will blame Europe and not due to his RE and debt-oriented policies) … this will not end well or should be entertaining for those that are diversified.

#74 The Real Jimbo on 06.12.12 at 12:23 am

#20… “…or we have a multi-year deflationary recession that puts the gold AND equities AND houses at MUCH, MUCH lower prices.”

I’ve never understood the common view that gold would fall in deflation. It’s repeated frequently in the media but this view is not supported by history.

I don’t necessarily believe in the deflationary outcome but think, for a minute, of what it would be like… Imagine a global deflationary scenario in a highly-leveraged ($1/4 quadrillion in leveraged derivatives), indebted world. Think through what it would be like as the central banks and governments lose control of this highly manipulated debt ponzi scheme. Imagine, further, that you have $1M and want to preserve your wealth.

In a global deflationary meltdown, COUNTERPARTY risk would be a huge issue. Actually, it would be THE issue. It would be like nothing investors of today have even seen. As the dominoes fell, investors would be in a panic to find safe havens.

You decide to park your $1M in the bank. But what if the bank fails? And what if CDIC says, “Yes, you’ll get your money back – but on our terms. You’ll receive installments over 30 years rather than a lump sum. But we can’t start paying you yet because we are in crisis. Maybe in a year or two.”

Anticipating this, you instead park your cash in treasuries. But what if governments are insolvent and can’t pay? Or pay with devalued currency by suddenly announcing extra digits being added to currency “in this extraordinary crisis” (effectively hyperinflation in response to deflation)? Or alter the terms of your note by deferring the maturity date or rolling it over without your consent? Or limiting trading such that it is illiquid?

So, instead, you park your cash in corporate debt or shares. But in a global deflation, revenue would be tanking and risks of bankruptcy would be front and center.

So, instead, you bury your cash in your backyard. But what if, in the depth of the crisis, governments resort to hyperinflation or an alternate currency?

A global deflationary meltdown would not be orderly. It would be chaotic. Every morning would bring news of one entity affecting another which, in turn, would affect another.

Gold has no counterparty risk. That’s why, historically, it has done WELL in deflationary periods in real terms, measured against most other asset classes. A bar of gold can’t be defaulted upon or arbitrarily frozen (like an account can be) or printed or devalued.

In a deflationary scenario, I think I’d prefer to have a a significant amount of the $1M in physical gold with the goal of wealth preservation.

Gold tanks in deflation, while money grows more valuable. — Garth

#75 Aussie Roy on 06.12.12 at 12:28 am

Aussie Headlines

Steve Keen – Podcast

http://www.debtdeflation.com/blogs/2012/06/12/chris-marterson-interview/

In his recent paper entitled A culture of mania: a psychoanalytic view of the incubation of the 2008 credit crisis , Professor Mark Stein develops a theoretical framework around the notion of a manic culture, comprised of four aspects: denial; omnipotence; triumphalism; and over-activity.

“A series of major ruptures in capitalist economies were observed and noted by those in positions of economic and political leadership in Western societies,” he said. “These ruptures caused considerable anxiety among these leaders, but rather than heeding the lessons, they responded by manic, omnipotent and triumphant attempts to prove the superiority of their economies.”

http://www.debtdeflation.com/blogs/2012/06/11/a-culture-of-mania-a-psychoanalytic-view-of-the-incubation-of-the-2008-credit-crisis/

A GREATERFOOL and his future wages are easily parted.

Bank worker Heath Penbrook and first-year nurse Samantha Lay are just two of many first home buyers braving the property slump to beat the cutoff date for the state’s lucrative bonus scheme.

Victoria’s new home handouts – up to $19,500 for eligible buyers – end this month, but the federally funded $7000 first home grant will remain.

Mr Penbrook, 24, had no plans to buy a home this year but decided to act two weeks ago after his brother told him he would miss out on $26,500 in government incentives.

Five days later, he had signed a $108,000 deal for a block of land at The Range estate in Bendigo and chosen a $172,000 three-bedroom Metricon home. ”It’s going to be really financially tight in the time before I’m living there. Once I’m in it, I should be OK,” Mr Penbrook said.

For 22-year-old Ms Lay, support from her parents was the key to a contract for a $610,000 house and land package at Mirvac’s Harcrest estate in Wantirna South.

”It’s a good opportunity. I’ve got my parents to help me, to back me up,” Ms Lay said.

Comments on this article are also worth reading.

http://theage.domain.com.au/real-estate-news/first-home-bonus-boosts-market–a-bit-20120611-205an.html

#76 This is Wonderland on 06.12.12 at 12:34 am

#37Market Bull

Since the leading edge of the boomer generation is just now turning 65, there will be a long wait yet before the sell-off begins, if ever. Many seniors will either leave their home feet first, or kicking and screaming all the way to the long-term care facility, and only as a last resort.
—————————————————————–

Yup Feet First, thats what my Dad kept telling me, up until he had his heart attack last month, going in for bypass surgery at the end of June. Im looking after his 2800 squre foot house in Glen Abby, sits on a large lot that I swear needs mowing every other day; looking into a yard service and a cleaning lady. My mom who has to go in for knee surgery this Fall is worried about the cost of keeping the house up. Funny two years ago they were both healthy and very active, things can change on a dime.

#77 Nostradamus Le Mad Vlad on 06.12.12 at 12:39 am


Why females should avoid a girls night out after they are married . . .

The other night I was invited out for a night with the ‘girls.’ I told my husband that I would be home by midnight, ‘I promise!’

Well, the hours passed and the margaritas went down way too easily. Around 3am, a bit loaded, I headed for home.

Just as I got in the door, the cuckoo clock in the hallway started up and cuckooed three times. Quickly, realizing my husband would probably wake up, I cuckooed another nine times.

I was really proud of myself for coming up with such a quick-witted solution, in order to escape a possible conflict with him (even when totally smashed) . . .

Three cuckoos plus nine cuckoos totals twelve cuckoos (MIDNIGHT!)

The next morning my husband asked me what time I got in, I told him ‘MIDNIGHT’. He didn’t seem pissed off in the least.

Whew, I got away with that one!

Then he said ‘We need a new cuckoo clock.’

When I asked him why, he said,

‘Well, last night our clock cuckooed three times, then said ‘oh shit.’

‘Cuckooed four more times, cleared its throat, cuckooed another three times, giggled, cuckooed twice more, and then tripped over the coffee table and farted.’
*
#12 Dan in Victoria — Well pointed out, Dan and it fits nicely with Garth’s post tonight.

Good for Jenny — she saw an opportunity and simply took advantage of it, just as anyone else would. One main thing is that Jenny won’t be dependent or reliant on various levels of govt. — she did the smart thing, cashed in, invested and was liquid then rented.

Would that all of us were that sensible. Great post.
*
#21 furst — Great stuff! Keep it up!

#51 TurnerNation — “It’s hip to be cool.” — And an old fart!
*
Alice Cooper Welcome To My Nightmare; BPOE and Mikey the Realtor — This one’s for you. You will note that, in the table to the right, West and North Van are not even in the Top 25 of the world’s most costliest cities. My commiserations! Plus — Singapore’s a lot sexier (and cleaner) than Vancouver; The Fourth Reich Other EZone countries must avoid the Bundesbank; Parallel Time Frames GD1 and the Euro debacle; Ins. Cos. and Derivatives; Bank Runs soon to happen in the EZone? Wishful Thinking Reducing or eliminating debt properly;
Banks or Payday Lenders Who is worse? Former Prez. of Exxon Arabian says much of the ‘easy to get’ oil is done, but Arab states need to create 75 mln. jobs Good luck with that; China’s Distress Chart; 48:53 clip Steve Keen on 2012; Finale End of the Industrial Age.

Masks Could be the Spanish and Greek bailouts are hiding something bigger, like this; Fairy Tales; Naked Emperor; Disinflation gaining momentum; US RE Foreign investors; Italy mired; Impending Disasters (fiscally speaking).
*
Anorexia If parents are out of work or have little income coming in, how are they supposed to feed their kids? Tesco slumps Is it because people don’t have a wealth of money to buy products anymore? China – Iran The west would be nuts to go any further than it already is. If nothing else, they might try calling time on these stupid wars they are creating, but China vs. the US Could be a propaganda ploy for the Chinese; The Mariana Trench A few scrolls to reach the bottom feeders; Soggy Weather BC has had the rough equivalent, and so has Florida; Arc Lightning Never heard of it, but it exists; Something Wicked This Way Comes; Jericho is now Guantanomo; 9:33 clip The end of the last ice age had some strange consequences; Monsanto and Bill Gates Going after milk; Not Guilty Father may not face charges in this case; Universe is Cyclical and Circular (self-explanatory), and 12:27 clip Spirit science — the shift of ages.

#78 Soylent Green is People on 06.12.12 at 12:44 am

So nice to hear a sheep has been culled from the herd
.
.
.

#79 Sargon on 06.12.12 at 12:46 am

Bully for Jennie! I guess she’s lucky not to have been a baby boomer. Something about pigs and pythons not wanting to buy RE?

Can I get the address of that bung? I just may want to take it off those kids’ hands when they’re 80. I’ll probably throw in a ‘bully bid’ of 40 mil though, just to be safe.

#80 Al on 06.12.12 at 12:46 am

Between 1959 and 2012 that bungalow gave an average return of 7.3% (shy of the stock market, which did 9.6%) – the gain on the bungalow is tax free

Hardly. It cost 53 years’ worth of property tax. — Garth

#81 Trader on 06.12.12 at 12:51 am

Deflation… interesting to hear you mention that Garth. Seems like we have too much cash chasing too few returns…

#82 Mr Buyer on 06.12.12 at 12:51 am

“There would still be 27 months more of hard fighting, but the issue was no longer in doubt”…Comment made about some air war some time ago. Hindsight. Haunting words. BUYER BEWARE.

#83 Tony on 06.12.12 at 12:53 am

Re: #40 6.75% on 06.11.12 at 10:23 pm

But it was 100 percent tax free. A good analogy is the difference between an American winning an American lottery of 25 million and a Canadian winning a Canadian lottery for 25 million. One ends up with a lump sum of 10 million the other has 25 million.

#84 blase on 06.12.12 at 1:03 am

Great poem Furst.

I recently wondered why poets are seen in such high esteem by some.

I think I just realized the problem. Poems used to speak to people, but at some point probably with the surrealists, poetry became something hard to understand and in need of a translator.

Give me a good rhyming couplet any day.

#85 Aussie Roy on 06.12.12 at 1:14 am

Folks, I may have found BPOE’s problem.

Has he totally suppressed his Neocortex, and let his Limbic System control his thoughts and actions?.

Maybe this is why proper FACTS, don’t seem to matter to those like BPOE.

http://www.brainhealthandpuzzles.com/brain_parts_function.html

Gateway to Asia hey, well I’d hate to walk down the driveway from the gateway to Asia. Which western country has higher trade with Asia and is actually really close?

Here is a hint it’s not Austria, but add few more letters, it’s a little place (lol) full of resources and guess what it’s on Asias doorstep. Was full of HAM and very different until, guess what, it wasn’t.

#86 earlymidlifecrisis on 06.12.12 at 1:17 am

Good post, though i feel sorry for the young people that bought it. I walked down west Broadway today and saw quite a few shops for lease. One was a high end store. I’m not sure if it has always been this way, but it was the first time i noticed it.

#87 truth hammer on 06.12.12 at 1:19 am

With consumer inflation ( not the lies the gov tells you about 1.9% CPI) at 20% p/a Jennie has $1786 p/m Jenns going to have to tone down her exhuberance once she enters the grocery store. I hate to say it but 600 Large just ain’t what it used to be because of the ZIRP.

The govs own numbers tell us they’re printing 13.4% M3 each and every year……..this depreciation of paper curency and the hyperinflation in food, transpo. heat, electric, residential fee’s, monoply car ins rates , cable, telephone. internet….etc etc etc etc……well….I’m sure glad I don’t have to live on $1786 p/m now, never mind the furture value….which is simply put…fugly. It simply can’t done.

Give Jen five years and she will have to start eating the nest egg…..( which is exactly how the government has set things up for seniors – selling eats the nest egg and generates tax revenue- savings are a target for the government leeches) in ten years she’ll be sleeping in her Prius.( it won’t run because the batteries have died and she won’t be able to afford the $10,000 replacement cost)……numbers don’t lie and liars can’t figure.

#88 truth hammer on 06.12.12 at 1:31 am

Spains debt to GDP was only 108% compared to the US @ 120%…Japan at 230%…….Canada at 100+++ ( we have differant accounting here since the liberal feds offloaded the entire deficit on to the provinces) the national debt is over a trillion…the entire GDP is only 1.25 trillion…….if anyone thinks that the combined debt of the provinces is only 250 billion they’re on drugs) …who thinks we aren’t in line. for bankruptcy…..didn’t I hear that the police departments across the land have just loaded up on a billion dollars worth of crowd control equipment including tanks to use against the truth that will surely come to hunt the sheep of the land.

http://www.telegraph.co.uk/finance/financialcrisis/9322722/Spain-reaction-This-is-a-rescue-for-the-rich.-The-poor-will-only-get-poorer.html

And our fearless leaders talking about another recession….while the cupboard is bare and taxes are already at 80%………cash in hand is king amigo.

#89 Don on 06.12.12 at 1:49 am

39 Retired Boomer – WI

I really enjoyed reading your post – thank you for sharing. That’s exactly why I keep coming back to this site, day after day – for a good dose of common sense.

Congrats to Jennie.

To the young couple: Yah…ouch!

#90 Michelle on 06.12.12 at 1:52 am

@ #21-Furst

Good grief! I’m starting to admire your poetry Furst :) How long did it take you to compose that, and do you have a day job?

#91 DondWest on 06.12.12 at 2:03 am

“Easy solution. Don’t buy. — Garth”

Being young today is the equivalent of entering a game of monopoly late and finding out all the properties are already taken for cheap long before you were born. All you can do is then collect pass/go and pay outrageous rent or an outrageous mortgage. Either way, you must pay, and it’s a rip off. It’s a world of aristocratic landowners (the old) and working serfs (the young).
Aristocrats can’t survive without the productive class who feeds them. Every single working person under the age of 40 should go on strike if only they knew what was best for them. . .

With no young working, the boomers have no dough to collect, therefore no rent. If the game restarts it favours the young; therefore the boomers would have to compromise somewhere in the middle, which is what a strike is all about.

Unfortunately this will never happen because someone has to go first. And the person who goes first will be interpreted as a lazy sloth while everyone else is still working. This will lead nowhere. No easy solution, but the best thing the young could ever do would be to all simultaneously just give up and refuse to work until certain conditions are met, starting with affordable housing. Second condition is productive work, such as income tax, gets taxed less and unproductive work such as land values gets taxed 100%.

#92 Freedom First on 06.12.12 at 2:08 am

I like this post:) …….a house is not, and never was a home. Home is where the people live, memories are of the people. Houses, cars, jobs, these can come and go. Look after yourselves, your families, your finances, you will be okay. Live payday to payday to pay a mortgage…….you are too vulnerable to being screwed over……..life can be hard enough, don’t set yourself up. Garth is just trying to save your a$$. I am baffled that some people can argue with his logic. It is house-horny proof:)

#93 penpal on 06.12.12 at 2:12 am

@ # 25 Devore

re comment # 20 the viegasgroup

Yeah, he was selective alright!

He chose some of the BEST, WEALTHIEST and MOST SUCCESSFUL fund / hedge managers with GOOD TRACK RECORDS (with at least 3 real SELF-MADE billionaires listed – Bass, Dalio and Einhorn).

I’ll take that over the likes of Shilling any day. He can’t polish their shoes on any metric over time and these guys bet ALL of their own money over years to gain their wealth.

With respect to finding plenty of people with no interest in gold, well that just suggests that most people aren’t too good at investing, which is something we all know and is self-evident.

#94 drunknewfie on 06.12.12 at 2:19 am

garth. please clarify what appears to be an inconsistency: on the one hand you say assuming the past will repeat when so much has changed is folly; but then you also say that prices always revert to the mean (even when so much has changed?). can’t the underlying developments over time change the mean? why must all financial assets revert to a mean – seems rather simplistic to this somewhat simplistic newfie. thanks.

#95 MediaBuff on 06.12.12 at 2:23 am

#38: “even though property taxes are actually the least economically damaging of all taxes. ”

Property taxes are capital taxes, the *most* economically damaging of all taxes. Capital taxes hollow out capital, destroying its ability to generate wealth. Land transfer taxes too.

For economic efficiency, property taxes should be user fees (some flat, some variable), but by using market value assessment, gov’ts tried to make property taxes into income taxes. It turns out that property taxes don’t correlate with income much at all, and services received even less. So it just ends up being a tax on the marginal (market clearing) price of the property, which may or may not ever be realized.

#96 ANONYMOUS on 06.12.12 at 2:30 am

Unfortunately, the time where asset prices all rise, including bonds, stocks, AND homes, is quickly coming to an end.

– As interest rates rise, bonds will fall in value, so that’s not good.

– As countries come to terms with their debts, corporations face slowing consumer spending and higher borrowing costs due to rising interest rates, stocks will be flat for the next 10 years.

– And real estate: That will continue its slow melt, just like Japan experienced, over the next 15 to 20 years, the same way bonds and equities will melt too.

So if you want to make money for the next 15 years you will need to time the stock market, buy on the dips and sell at the peaks, no other way around it. And of course that’s next to impossible to do?

This woman holds bonds for the interest and the portfolio stability. They are of a duration that she expects to see them mature at face value, therefore they are risk-free. As for individual equities, she has none. — Garth

#97 Bilbo Bloggins on 06.12.12 at 2:31 am

Dat’s one smart granny!

#98 Buy? Curious? on 06.12.12 at 2:35 am

Bahaha! An old person on a skateboard! That’s so funny! Why? An ageing population clinging on to its youth thereby delaying the Next Generation its opportunity for success. Garth, can you write some more about old people screwing over young people? Please? And post some hilarious too.

Now if you’ll excuse me, I have to prepare some spring-loaded joke snakes in a biscuit tin and send to my parents. I like to think of it as Inheritance Management.

Bitter will kill you. — Garth

#99 Buy? Curious? on 06.12.12 at 4:15 am

76% of stats are wrong.

Smoking Man should run for MP in Rosedale South!

#100 Nubbers on 06.12.12 at 4:27 am

In the UK market (hence different dates for peak prices) I paid for some old git’s retirement in 1990 – big time.

In 2007, I shafted a young horney couple mere months before the UK market turned.

I still feel bad about both events.

It is surely not good for society that the older generations squeeze the life blood out of the younger generations, especially now that the young will have to support a disproportionate number of old farts.

Somehow, I don’t think this will end well. If I were 15-30ish or had been beguiled into a stupid amount of debt, I would be very, very angry right now. I rather suspect, or at least hope, that the old will reap what we have sown.

#101 Aussie Roy on 06.12.12 at 4:43 am

Aussie Headlines

Among major Australian cities, Adelaide surged the fastest up the rankings, climbing to 27th from 46th a year earlier.

By a variety of rankings, Australian cities are among the most expensive places to live and do business in.

Housing remains among the most unaffordable in the developed world, according to anti-planning group Demographia.

The Economist magazine also ranks Australia as having among the most overvalued property markets.

http://www.theage.com.au/business/australian-cities-jump-in-global-cost-rankings-20120612-207k0.html

Govt to throw more good money after bad attempting to prop up house prices. It failed last time but lets try pushing on the string once again. Nothing like doing the same thing over and over again and expecting a different result, it’s insanity.

FIRST home buyers purchasing new homes will have their grants increased from $7000 to $15,000 for 15 months and then pushed down to $10,000, in the key giveaway of today’s NSW Budget.

Where are those GREATER fools when you need them.

http://www.news.com.au/money/property/first-home-buyers-grant-doubled-in-nsw/story-e6frfmd0-1226392861922

#102 Ralph Cramdown on 06.12.12 at 6:44 am

“Between 1959 and 2012 that bungalow gave an average return of 7.3% (shy of the stock market, which did 9.6%).”

I think we should try to add in the value derived from living in it

Are you also going to subtract the value of maintaining and updating it? If you just fix the broken stuff and paint when necessary, that’ll probably run you close to 1-2%/yr, and when you eventually list to sell, the agent will describe as “lovingly maintained” (i.e. DATED). Add in for a new kitchen, bathrooms, light fixtures and the all important Decora switches and receptacles, and it’s a few dollars more. Wait, did you forget about property taxes?

#103 Cow Man on 06.12.12 at 6:57 am

Amigos:
Too often comments down playing real estate investment returns fail to note, principle resident net sales, are tax free. Just try to get the “bungalow returns” on any other, after tax investment. Basically nothing compares, on an after tax basis. Forced savings through mortgage payments and tax free gains.

Property tax, insurance, maintenance, buying and selling charges, amortization – all of these real estate-related costs are not a part of liquid asset investing. It is not so black-and-white. — Garth

#104 Steven Rowlandson on 06.12.12 at 7:05 am

She moved into her bungalow in 1959, where she outlasted Frank and raised three sons, now long gone from the nest. It cost $14,000 new, and she just sold it for $657,500. “Kids bought it,” she told me, shaking her head. “Their parents had to co-sign the mortgage, and they had no money for furniture. So I gave them the beds”
—————————————————–
That is a 47 bagger from start to finish over almost 53 years. Discounting the fact that it was on a place to live , as an investment return it was pretty good.
From my point of view though the price relative to market pay is absolutely unreasonable and out of line.

Frankly I don’t think the youngsters know better than to pay so much for so little. Unless they are part of the 1 percent they can not afford to buy that bungalow and shouldn’t ruin themselves trying. One of the serious failings of modern society is that young people are generally not taught the value of money and proper fiscal management. I can only assume that those that should do the teaching either don’t know or don’t want others to know. May be both. Perhaps it takes the hard teaching of another great depression to smarten people up for a little while at least.

#105 detalumis on 06.12.12 at 7:10 am

At first I wasn’t sure what the point of this story was, selling your house for a lot more than it’s worth to young people has been going on in earnest for the last 25 years. Whether Jennie lives in a granite kitchen rental condo is neither here nor there, she hasn’t renovated in 30+ years which means she has no interest in living in something nice and pretty.

I should think that really the point is hidden between the lines, like an Agatha Christie mystery. Jennie is entering the decade in life that 95 percent of people never exit from but you would never know it from the description. I’m sure Jennie hasn’t read “Never Say Die”, that’s Susan Jacoby’s book about old old-age, the real deal not the pretend one with the “feisty” Prius driving iPad euchre playing old ladies. It’s the one where you can’t drive anymore. It’s the one where the rate of Alzheimer’s doubles every decade after 65 so in 5 more years Jennie has an almost 50/50 chance of having it – don’t even think what happens at 90. Did you know that Jennie, I bet your doctor doesn’t even do any tests for it, they usually don’t.

For all the comments about generational theft and all that good stuff, I would say this, would you find a single 30 year old woman that would jump into Jennie’s body, 600K in the bank, what about 2 million in the bank, or 50 million? Nope – not a single one. No 30 year old man would jump into Rupert Murdoch’s body either or Warren Buffett’s.

Jennie’s money really is of no value to her, it can’t buy you health or time or love or happiness, it’s only worth is to her kids and grand-kids, they are the ones who really profit, like all seniors Jennie really doesn’t.

This blog is a swamp of self-emoting me-ness today, isn’t it?

#106 Regan on 06.12.12 at 7:12 am

Between 1959 and 2012 that bungalow gave an average return of 7.3% (shy of the stock market, which did 9.6%) – the gain on the bungalow is tax free

Hardly. It cost 53 years’ worth of property tax. — Garth

____________

The taxes and maintenance of the place were the price of having a roof over her head. She made huge capital gains on her tax-free investment and is fortunate to have done so.

It is interesting that you add that the stock market provided a better return over the same period. How is that more sustainable or reasonable?

I did not say either. It is a benchmark. Lighten up. — Garth

#107 House Horny Housewife on 06.12.12 at 7:13 am

Garth,

Just a cotton pickin’ minute here.

Are you for or against having a home as your sole investment for retirement ?

Needless to say, I know your position on this but is this truly the best case study you could come up with to prove your point ?

If the stock market did better than her home over these years then Jennie would have had more money in the bank had she rented rather than owned. Not only that, if the $600,000.00 is to provide all of her income then she is actually one of those people who had all of her eggs in one basket .. her house.

Do you honestly think that Jennie knew what would happen to the market over time (many decades keep in mind) ? Of course not. $14,000.00 back in 1959 was a heck of a lot of money and you did not specify if Jennie and her husband had to get a mortgage for this … meaning that $14,000.00 may not be at all what this house actually cost when you include the interest payments.

Jennie also had a cry when the sign went up so obviously this house served an important purpose throughout her marriage and the raising of her family.

Why don’t we call this story what it actually is … SHEER LUCK. Luck that the market did what it did during the decades that Jennie was raising her family. Luck that no one came along and built a big honkin’ garage or mini mall right next door to her house (thus ruining its value .. it’s not just the market that affects house prices you know). Luck that she had buyers who were related to her who could give her a decent nest egg to live on for the rest of her life … keep in mind that this was not an arm’s length transaction so we have no idea if the price she got for the place is the price she would have gotten on the open market.

Garth, this story does not help your cause .. not one bit.

HHHW

Hardly luck that she had the foresight and courage to cash out of an inflated asset at the right moment and prepare for the different years ahead. I hope this lesson is not lost on you. — Garth

#108 First to last on 06.12.12 at 7:26 am

More St. John’s info:
City Approves Huge Development Near Southlands

http://www.vocm.com/newsarticle.asp?mn=2&id=23972&latest=1

#109 John on 06.12.12 at 7:31 am

Nostradamus Le Mad Vlad wrote:

“Good for Jenny — she saw an opportunity and simply took advantage of it, just as anyone else would. One main thing is that Jenny won’t be dependent or reliant on various levels of govt. — she did the smart thing, cashed in, invested and was liquid then rented.

Would that all of us were that sensible. Great post.”
———————————–

Nostradamus Le Mad Vlad, with all your links, research and overall information, it would be hard to imagine other posters that offer more value. Plus, you keep a sense of humor, perspective …and you don’t preach. That’s rare when humans get together and discuss hard social or economic issues.

This is why I am confused by your comments above. How, after all you know, could you conclude that there is anything structurally or socio-economically positive or relevant in granny “cashing out at the casino”.

I have some questions for you. Why do you think it’s relevant? Do you really think she can “isolate” her cash from the ponzi’s effect as she puts her asset “worth” in other parts of the ponzi? Where do you see her next ten years? Her government? Her community? What’s holding her “liquidity” together? How “safe” are her investments.

The article has some entertaining writing of course. But from a “reality” perspective it’s myopic, limited by design or delusion, makes poor conclusions without relevant analysis and goes around in circles…not making much ground. Not for granny. Not for anyone.

It shows the power of purely emotional thinking in my view. It’s good, but now it’s over the top, and in reverse gear.

How could you be singing praises of a Sheeple 2.0 after all your research? It’s amazing. I’m not saying any of us wouldn’t and haven’t fallen to greed, fear and isolation. Especially if you’re an 80 year old widow in an uncertain world moving at 180k an hour. No argument.

But singing the praises of her move? Huh? Where and how do you come to that conclusion?

When would you plan on using serious judgment for the whole picture? What are you waiting for? More information?

Your comment is disappointing.

Your thoughts resemble a herd of paranoid cats. — Garth

#110 bigrider on 06.12.12 at 7:47 am

#57 Garth to not 1st- ” This woman has no stocks”.

Dividend spewing ETF’s contain stocks. REIT’s are a form of equity.

Garth, you have to stop insinuating that 4.2% or greater, can be had without equity , or exposure to financial markets and the inherent volatility that comes with it.

Obviously the old lady made a good move selling her house and investing, but she will now have to get used to quarterly statements that fluctuate a few percentage points or so…a hard thing for old folks of her era ,an era characterized with 12% or more gauranteed GIC’s and CSB’s, to get used too.

It is an income portfolio, and minor fluctuations in the underlying assets are simply not germane. REITs are not stocks, and a 4% return on a fixed-income portfolio can most definitely be constructed without equity. Of course she can invest in GICs, get half the income and lose purchasing power daily. It seems that would be your choice. — Garth

#111 Andrew on 06.12.12 at 8:04 am

can you believe this .. I guess the its different here will never go away..

from TD bank

The bank’s analysis is consistent with other warnings that Vancouver and Toronto real estate is generally overpriced, but supported by low interest rates and a stable economy.

That’s not likely to change this year unless there’s a major economic shock from outside the country, the TD report said.

They said the market segment that’s at greatest risk in both cities is condominiums, but suggested there may be enough demand to absorb the new supply that has been built in recent years or currently under construction.

http://thechronicleherald.ca/business/106192-vancouver-toronto-home-prices-will-dip-15-per-cent-td-bank-says

#112 T.O. Bubble Boy on 06.12.12 at 8:05 am

Here’s some predictable “journalism”:
Ask a Realtor: Should I Just Rent in This Market?
http://www.huffingtonpost.ca/susanne-hudson/renting-vs-buying_b_1568869.html?ref=canada-business

Guess what the answer is?

#113 TurnerNation on 06.12.12 at 8:19 am

#67thinker on 06.11.12 at 11:59 pm
“Why is ok for the stock market to have that return and not real estate?”

‘Cause a house is not an asset unless it’s a rental business. Real companies – Encana, Starbucks, CN, CNR, MSFT, AAPL, Boardwalk REIT, need I go on – own revenue producing assets and technology, which grow and grow.

A 60-year old bung with musty basement, suspect roof, and property taxes, insurance and hydro rates rising by 3% yearly, is not an assset, not a business. Why should its value rise?

#114 MarcFromOttawa on 06.12.12 at 8:22 am

Gold tanks in deflation, while money grows more valuable. — Garth

I disagree Garth.

#1 Gold was forcefully confiscated by FDR in 1933 and revaluated from 20$ to 35$ (increase of over 70%).

#2 One could argue that the U.S. has been in deflation for 5 years (with trillions in wealth erased from U.S. real estate, 10 year U.S. treasuries at 1.5%, overall credit down if you exclude student debt, peak oil, changing demographics) and gold has more than doubled in the last 5 years.

Also, if one thinks that gold is money your sentence becomes an oxy moron or non-sequitur.

Here’s a good article about the history of gold price movements:

http://globaleconomicanalysis.blogspot.ca/2009/09/so-whats-behind-moves-in-gold.html

I apologize for talking about a shiny rock on a real estate board.

Sincerely,

Deflation is not depression. No point there. And the US has suffered asset deflation (real estate) combined with price inflation (cost of living). Gold is not money, and never will be. — Garth

#115 housedoc on 06.12.12 at 8:42 am

I hate the poetry!

#116 Karie on 06.12.12 at 8:52 am

Jennie`s story is combined luck and intelligence – She held onto something that was worth a lot of money when she decided to sell. She made the decision to have cash and investments and enjoy it while she can. Good for her!

To Harlee – Glad you had such a memorable trip. Hope you get to Japan some day, I`d love to go there too!

Amazing job DM in C that you have to get to go to such exotic places.

Smoking Man – In your story the other day, I think the 55 year old wins since your definition of winning is the one who has the most painless fun. The man who spends his time and money on drinks and hookers is in deep pain that he doesn`t know how to subside.

Furst – If Garth doesn`t include at least one of your poems in his next book, I`m not buying it. :D

Last thing is while history may repeat itself in terms of booms and busts, I think technology is what can disrupt any pattern. What if someone invents something to make oil obsolete, what if someone invents some kind of green house to live in that cuts your utility bills by 90%, what if there is some unpredictable natural disaster that changes everything. There is no crystal ball, only assumptions based on past patterns and predictable human behaviour.

#117 fancy_pants on 06.12.12 at 9:14 am

reading this post really reminds me what society has sacrificed for stainless appliances and granite countertops. A house used to be a place to hang your hat and raise a family. People were grateful for the simpler things in life having gone through a depression and a world war. The future was filled with hope and opportunity. Jennie reminds me of what was – and fond memories they are.

This lady has made an astute decision and followed through even though her emotions pressed her to remain in the house filled with memories. Emotions make a great caboose but a terrible engine. Congratulations to her for letting go of once was and preparing for what lies ahead. That takes courage. Jennie, you sold the house, but the memories you hold forever. Take care.

#118 Grantmi on 06.12.12 at 9:14 am

My question?

Where the hell is all the REST OF THEIR money for that length of time. Hell… At $14k in 1959. They should have paid that sucker off years ago, and the new found money from the retired mortgage invested in some other vehicle. ( could be stocks , or whatever.)

But you say she has no other investment then the house money windfall.

I’m puzzled. (which is not hard for me)

#119 Buy? Curious? on 06.12.12 at 9:14 am

Bitter will kill you. — Garth

Not as fast as despair and depression. My age group, Generation X, or in my case, Sex, is the Jan Brady of the times. I’ve got kids on one side, old parents on the other. (whiny voice) “Boomers, Boomers, Boomers! How come they get to go to the dance while I study?”

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

Daycare is about $1500 per month, per kid, because my wife and I have to work crap jobs while my parents stay in a $850k 5 bedroom home, gardening in between travelling on cruises to places I may never go. Garth, have you ever had to sit through a slide show of old people in Jamaica only to find out that their resort was called Hedonism? It was like watching bipedal pachyderms with bad perms trying out for the UFC. The worst part is that I had to show them how to download the pictures to their brand new MacBook Pro.

On the positive side, they did bring me back a thong and fake dreads. Yea Mon!

I am sure they regretted having you. I would. — Garth

#120 a prairie dawg on 06.12.12 at 9:16 am

#116 housedoc

I hate the poetry!

– — –

So far it’s been closer to Dr. Suess than actual poetry.

#121 bigrider on 06.12.12 at 9:19 am

#111 Garth to Bigrider- “…… Of course she can invest in GIC’s and get half the income and lose her purchasing power daily. It seems that would be your choice.”

Huh ? What ? Is that how you read Garth.??

Where did I say she should invest in GIC’s ? I said she comes from an era where GIC’s were the investment of choice since rates of return were much higher back in her day. . I also said that getting used to fluctuations in portfolio value will be hard for people of her era.

I have also noticed that your rate of return projections have come down to 4% in the above example from the 6 and 8% returns you regularly speak of in the past. No matter , I am sure it’s because of the greater tilt towards fixed income Jennie’s portfolio has.

By the way, good luck with the bond component going forward. With yields where they are, no friggin way bonds will deliver a fourth of what they have past ten years.

A quality bond held to maturity is risk-free in both capital and income. — Garth

#122 Steve on 06.12.12 at 9:21 am

Garth, nicely written posting today, and generating some diverse comments. Your responses are often the most interesting, like this one:

This blog is a swamp of self-emoting me-ness today, isn’t it?

One of the ideas circulating these days is that the internet lets like-minded people band together into self-reinforcing groups (hence Arab Spring, Quebec protests) and perhaps there is an undercurrent of self emoting me-ness in a portion of the faithful here?

It is clear there is a groundswell of frustration (often quickly escalating to anger) throughout the world these days, and it seems a human condition to need someone to blame for our woes. It will be a surprise to me if we do not devolve such that we are faced with daily throngs of angry mobs over the next decade, not really sure who to be upset with, but definite that ‘we’re not gonna take it anymore’.

Blame the rich, wait, blame the government, no it’s Boomers. Hang ’em ALL! (No, not really, that was tongue in cheek, I do not have a twitter account for you to follow, and I do not know the location of the next protest…)

So now that is out of my system: Let’s not blame Jennie, and the generation(s) she represents for us today (after all, we all have relatives from older generations) for doing what is smart. She took Garth’s advice, and cashed out of her real estate holdings at or near the peak of their value. She did not buy the house in 1959 as an investment, or as a retirement savings vehicle, but she wisely recognized, now, that it was time to sell.

Sadly, many in her position will not be that wise, and many will not have Garth, or a like advisor, to make sure they have set themselves up for a financially successful retirement. Sadly, the house horny youngsters who do not listen to or perhaps do not even know about Garth and his message, will end up financing retirees final decades. The transfer of equity will proceed, regardless of what each of us thinks, through one mechanism or another. The brightest among us will not be the greater fools.

Congratulations to Jennie on a bright, bold, brave move at 79, and to Garth for helping her do it right.

#123 Grantmi on 06.12.12 at 9:23 am

#116 housedoc on 06.12.12 at 8:42 am
I hate the poetry!

I just hate the guy who recites it!

#124 Market Bull on 06.12.12 at 9:28 am

“Between 1959 and 2012 that bungalow gave an average return of 7.3% (shy of the stock market, which did 9.6%).”~ Garth
_____________________________________________

Any comparison between owner-occupied housing and the stock market, that does not account for tax-free capital gains AND imputed rent is inaccurate.

While it is true that a home you live in doesn’t produce a positive cash flow, it provides an invisible income in the form of a rent that would otherwise be paid to a landlord.

Best of all, the “income” provided by a principal residence is also not taxed because it is simply transferring money from one pocket to another. Your personal residence does provide you with an income; you just don’t see it.

The financial asset portfolio would have had no carrying, occupancy or large transactional costs (including property taxes, of course, plus land transfer taxes), which real estate owners must finance. It was included as a benchmark. I am surprised at your lack of perspective. — Garth

#125 CountryLover on 06.12.12 at 9:33 am

Good for Jennie! I think at 79 freedom and security are key things that one would want in life.

I have learned so much from this blog. One was to build up a rainy day fund and TFSA. Didn’t realize we would need it so soon though as my hubby resigned his job this Spring due to extreme stress. Thank goodness we had savings and he is now looking forward to a brand new career direction thanks to our ability to ride out these months. It reinforced that my husband and sons are what is truly important in life (not the large combined income we had) and to live within our means translates into the ability to make choices. I have no doubt that this major change in our lives will lead to a better future – and he is so much happier without the stress – already taking courses for his newly chosen career along with working on our house. I frankly don’t care if he makes a huge salary anymore as long as he is happy and making something. I luckily make a great income and am proud to support my family as an equal partner to him.

Money truly doesn’t equal happiness, but it sure can equal security, choices and freedom.

#126 MarcFromOttawa on 06.12.12 at 9:45 am

#114 TurnerNation

A 60-year old bung with musty basement, suspect roof, and property taxes, insurance and hydro rates rising by 3% yearly, is not an assset, not a business. Why should its value rise?

I agree that it’s better to rent a bungalow if it’s cheaper than buying it.

But I wholeheartedly disagree when you say “a 60 year old bungalow is not an asset”. The land has inherent value plus you get the benefit of normalizing housing costs over a long period of time.

RE prices tends to rise with inflation in general as the value of dollars decreases.

#127 gladiator on 06.12.12 at 9:53 am

The content of the post is closer to “a time to rip” as in boomers ripping off the young generations.

DonDWest will read it as “a time to RIP” lol

#128 buylow on 06.12.12 at 9:56 am

thank you Garth from Jennie’s grandkids – we get to inherit all her worth and pay for our $600,000 mortgage – yippee!! Going to book another family vacation – on credit of course – thanks to nana Jennie!!

It all works out in the end!

Jennie inherited nothing. Why should you? — Garth

#129 cramar on 06.12.12 at 9:59 am

Garth, your best post to date! Perfectly sums up months of warnings, stats, and admonitions. Have to agree with you that the comments today are “enlightening”!

My only concern over Jennie is that maybe she waited too long to enjoy the remainder of her life. But then I hope she is like my mother, who died last year just shy of her 98th birthday, with a mind very sharp to the end. May you live long and prosper Jennie! But I see you got the latter down pat!

#130 cramar on 06.12.12 at 10:09 am

#182 [yesterday] Norrin Radd on 06.11.12 at 8:21 pm
Hi Garth,
Looong time reader…0 debts, renting, young family, stable income in the 70′s, thinking of buying a house in Guelph in the 300′s. Am I crazy or is it a great time to jump in?

—————-

You didn’t give one critical piece of information. What is your downpayment? If you buy now are you prepared to have your $300’s house loose 15% of its value over the next few years? Maybe only if you have a sizable chunk in equity through a large downpayment. Would you be better off years from now investing your sizable downpayment and continue to rent?

#131 Steve on 06.12.12 at 10:10 am

Jennie inherited nothing. Why should you? — Garth

What? A large inheritance is not a right? Why do we have parents and grand-parents if it is not to finance our lives? Next you are going to be telling us we should be responsibe for our own life success (or lack thereof).

Are you some kind of radical or something?

#132 bill on 06.12.12 at 10:11 am

way to go Jen.
you knocked that one right out of the park…. Home run.

#133 DM in C on 06.12.12 at 10:20 am

117 Karie

Yes, I realize every day how fortunate I am — otherwise I could not have taken my mom to her dream trip — the palace of Versailles. We are very fortunate to be close to the 1% and I am thankful for the job.

But we still rent. And we make hay while the sun shines. Nothing lasts forever.

#134 Canuck Abroad on 06.12.12 at 10:26 am

Why so much hating on Jennie? She made a great decision and got out when the getting was good. Many of the comments seem to be along the line of “her money’s no good to her” (so she should waste it?) or “she’s a bloodsucking pariah leaching off the young “(nobody forced them to buy) and so on. And so what if she doesn’t get the whole 4.2% that so many are skeptical of. She has over $600k, and a life expectancy of what, 10 years? 20years? Seems to me should could even live a little on the capital and still not run out. But of course there are a bunch of you out there who think she ought to stop spending today and leave it all to her kids!! Who are the leeches now?

#135 KingBubbles on 06.12.12 at 10:32 am

Garth,

What type investment accounts would someone like Jennie use for her nestegg?

At her age an RRSP is an impossibility so would it be best put into a RIF or other accounts?

Thanks

RRIFs and RRSPs are only vehicles, not investments. They simply defer taxation until income is received. — Garth

#136 bigrider on 06.12.12 at 10:39 am

Garth, I think you should comment on the merits of, or pitfalls of investing in first and/or second mortgages.

Many deeply pocketed individuals I know are getting 8% on first mortgages fully secured, max ratio 75% of value of property and second mortgages are getting 15%.

Ignoring second mortgages and the inherent and obvious risks, what the heck is wrong with first mortgages , lending 75% max to property value, at 8% clip.

I find it hard to dispute that.

#137 Mixed Bag on 06.12.12 at 10:39 am

Great post today Garth, bookmark it for a future book, as it is up there. Good for Jennie for taking care of herself.

Silly young ‘uns for taking on that ridiculous mortgage, and sillier parents for co-signing that large amount. If you have to co-sign, at least put yourself on the title. Too many disaster co-signing stories abound to not protect yourself at least that much.

Funny how posters keep re-iterating each other’s message, and Garth replies with the same diversified portfolio explanation.

Garth, you’ve posted this sentiment before, but it bears repeating, and I’ll quote you: “The era of the house as everyman’s ticket to financial security is over.” This belief is stronger than religion. We’ve been raised with this belief since we were born. How do you counter a belief system?

#138 Smoking Man on 06.12.12 at 10:41 am

#117 Karie

Your wrong the 55 year old is the losser.

We are sold a bill of goods since birth that working hard following the rules will bring success. Its call slave conditioning. Your parent teachers and prechers pass the traing down. Look how much power this conditioning has.

An electrician resently won 50 million yet he does not plan to quit his job. You know why? He is a trained dog who dose not know any better.

Leased sweat, the most brains, and the avid risk taker always wins period

Lie to yourself if you want

#139 Mixed Bag on 06.12.12 at 10:47 am

#35 Inglorious Investor on 06.11.12 at 10:10 pm

I believe you are correct. The education debt slavery is ingenious. Convince people that they need a higher education to get a good job. Everyone’s doing it now, so they won’t, they’re average now. So now they need more credentials, which means taking on further debt. Then they work in fear, not confidence, because of the debt load they carry. Working in fear means you take less risk, maybe won’t move on to the better job, won’t get up the courage to ask your boss for a raise.

Blindly following “what you’re supposed to do” won’t work anymore.

There are some smart comments today. Some.

#140 jess on 06.12.12 at 10:49 am

Blocher faces probe over banking secrecy breach swissinfo
Jun 11 – “Parliament has given the green light for the strongman of the rightwing Swiss People’s Party, Christoph Blocher, to be investigated over alleged violations of banking secrecy laws in connection with the former head of the Swiss National Bank … It is a rare occurrence that parliament votes to deprive one of its members of his or her immunity from prosecution.” Interesting also in view of the apparent weakening of bank secrecy as reported here.
============

“If the U.S. pressured Liechtenstein to allow for “fishing expeditions”, then other foreign governments will likely follow,” states Rubinstein. Now, DOJ can avoid going to court, and requests for broad banking information can now, occur government-to-government

Read more: http://www.timesunion.com/business/press-releases/article/Liechtensteinische-Landesbank-Records-to-Be-3625866.php#ixzz1xaM9ka9K

========

Baucus said that under the current system, protections to prevent companies from shifting income to tax havens to avoid taxes have worsened, and he said more needs to be done to keep jobs in the United States.

“The U.S. loses billions in revenue every year to tax havens,” Baucus said
==

CHICAGO—The chief executive officer and the head trader of the bankrupt Sentinel Management Group Inc. were indicted on federal fraud charges for allegedly defrauding more than 70 customers of more than $500 million before the firm collapsed in August 2007, federal law enforcement officials announced today. Sentinel, which was located in suburban Northbrook, managed short-term cash investments of futures commission merchants, commodity pools, hedge funds, at least one pension fund, and other customers. The defendants, Eric A. Bloom and Charles K. Mosley, allegedly misappropriated securities belonging to customers by using them as collateral for a loan that Sentinel obtained from Bank of New York Mellon Corp. (BoNY) that was in part used to purchase millions of dollars worth of high-risk, illiquid securities not for customers, but for a trading portfolio maintained for the benefit of Sentinel’s officers, including Mosley, Bloom, certain Bloom family members, and corporations controlled by the Bloom family.

Bloom, the president and CEO of Sentinel who was responsible for its day-to-day operations, allegedly misled customers four days before Sentinel declared bankruptcy by blaming Sentinel’s financial problems on the “liquidity crisis” and “investor fear and panic” when he knew that the actual reasons for Sentinel’s financial problems were its purchase of high-risk, illiquid securities; excessive use of leverage; and the resulting indebtedness on the BoNY credit line, which had a balance exceeding $415 million on August 13, 2007. Sentinel declared bankruptcy on August 17, 2007.

The case is one of the largest criminal financial fraud cases ever prosecuted in federal court in Chicago.

http://www.fbi.gov/chicago/press-releases/2012/ceo-and-head-trader-of-bankrupt-
sentinel-management-indicted-in-alleged-500-million-fraud-scheme-prior-to-firms-2007-collapse

#141 Canuck Abroad on 06.12.12 at 10:49 am

Jennie, if your children are like any of the horrible Gen X-ers posting here today you should immediately book a round the world cruise (120 days minimum) in the most expensive suite you can find on a super lux cruise line. Meet a nice toy boy there and announce to the kids that you are getting hitched and leaving everything to him. You won’t of course because next you should move to a much more luxurious rental so that you can easily breeze through that $600k and have nothing left over. Make sure it has a garden so you can garden in between cruises.

#142 luc on 06.12.12 at 11:04 am

Where the hell is all the money in Canada ?

Recap I love numbers…

Garth says 70% own a home
Garth says 70% have no corporate or public pensions
Garth says 150% debt to income ratio mostly mortgage
Garth says 50% have no savings
Garth says 40% have trouble paying monthly bills
Garth says average RRSP could last max of 6 years
Garth says 80% of TFSA held in cash
Garth says 43% might fail a 2% mortgage hike

Here are the numbers on the richest 1 per cent in Canada all 270,000 of them census 2006:

Mean income: $452,887/yr (versus $36,000 for the other 99 per cent)

Gender: 82.7 per cent male

Work habits: 50+ hours/week (10 hours a day !!!)

Age: 35 and 64 years

Occupation: Doctors, dentists, vets, senior management, finance industry professionals
(where are the lawyers ?)

Source: Canadian Inequality, UBC research paper
http://milescorak.files.wordpress.com/2012/05/clsrn-working-paper-no-100-green-lemieux-milligan-and-riddell.pdf

#143 oh canada on 06.12.12 at 11:05 am

this is how you get rich, use housing scam or sell some natural resources. no wonder banks are making huge profits, screw youth with mortgage and suck blood, and get deposits for overpriced sold houses.
typical crappy condos were build next door, it says all units were sold except commercial space. so no interest in business, no jobs, just a very big gov’t sponsored idiot pampering ponzi scheme.
80 year old with $600,000 won’t start a business, won’t innovate, just feed themselves. So surely working class will be screwed and smart ones will probably move to some other countries. i wish all goes down and down deep.

Nauseating. Not the system. You. — Garth

#144 Ralph Cramdown on 06.12.12 at 11:08 am

Jennie inherited nothing. Why should you? — Garth

In previous posts, you’ve told us how pay-as-you-go entitlement programs plus boomer demographics are inevitably going to result in increased taxes (and perhaps decreased services) for the generations that follow. If they’re already planning on sticking us with the bill, is suppressing the “Die Broke” movement too much to ask?

#145 Ronaldo on 06.12.12 at 11:10 am

http://www.nytimes.com/2012/06/12/business/economy/family-net-worth-drops-to-level-of-early-90s-fed-says.html?_r=2&emc=eta1

The future of Canada, a likely scenario. Jen will be applauding her move in a few months time.

#146 Ronaldo on 06.12.12 at 11:16 am

#132 Steve – you are joking of course?

#147 zeeman1 on 06.12.12 at 11:20 am

#13 Kenny Banya.

No one here ever signed any kind of social contract, and no one forced the little idiots to buy the nice lady’s house.

Shape up.

#148 truth hammer on 06.12.12 at 11:24 am

One fact could brighten jennie’s old age financial picture …under BC law a destitute parent can sue their children for material support…….a 1930’s law still on the books.

*If the old dude on the skateboard breaks a hip…statistically he’ll be dead with 18 months.

BTW….she overpaid bigtime if she paid 14K in 59 ….houses were still selling for under ten grand in the 50’s……..they wouldn’t have appreciated into the 14’s until the mid to late 60’s. You could buy an apartment bldg in False Creek for 14 G’s in 59.

Do you work at being an peckerhead, or is it genetic? — Garth

#149 Steve on 06.12.12 at 11:27 am

#148 Ronaldo on 06.12.12 at 11:16 am

#132 Steve – you are joking of course?

Of Course!

#150 ANONYMOUS on 06.12.12 at 11:30 am

(“The $600,000 Jen’s investing in a conservative portfolio of fixed bank preferred shares, REITs, various bonds and dividend-spewing ETFs,”)

(“This woman has no stocks. — Garth”)

Garth; bank preferred shares IS stocks. And dividend-spewing ETFs contain stocks. And if she is holding bonds and rates rise, she’s going to take a BIG HIT to the bottom line!

Preferred shares are not considered equity, but fixed-income, since they act more like bonds with a par value and fixed dividend (the best kind for her). ETFs can provide such vast diversification that volatile is minimized and, if you wish, hedged. Bonds are risk-free and income-secure when held to maturity, which is her intention. If you are too scared to invest in these assets, get used to KD. — Garth

#151 Canada going down the tubes on 06.12.12 at 11:37 am

The Canadian government did a wonderful job in ruining Canadians and Canada. The youth will borrow borrow borrow until they go bankrupt and so will the immigrants. Then they will leave Canada by the tens of thousands. Many immigrants are now leaving no future Canada and going back to India where the future is bright and real. Canada and the US are a FANTACY and they are the best at make believe. The world is getting sick of NA bs fantacy and lies. The US is finished and Canada is next. No futue in Canada and every boomer knows it.

#152 Harlee on 06.12.12 at 11:43 am

#142 Canuck Abroad
Exactly right ! Power to the old folks !

#153 truth hammer on 06.12.12 at 11:46 am

KEEPING THE ELITES IN LINE. STOP TAXATION

http://www.usatoday.com/news/nation/story/2012-06-11/north-dakota-property-tax/55533784/1

AS REPORTED IN TODAYS URBAN SURVIVAL…GREEK CIVIL SERVANTS WAGES CUT IN HALF….A LESSON FOR CANADA IS THAT THEY STILL SHOW UP FOR WORK.

http://urbansurvival.com/week.htm

#154 Alex N Calgary on 06.12.12 at 11:47 am

Is the point of this article to remind us now is the time to sell and not buy? You often speak about how real estate is not long term savings for retirement, but didn’t this woman just cash in her long term savings real-estate for retirement? I suppose the idea is that if you buy real estate at a reasonable level and sell at an appropriate time,it can be used for just such a purpose. However, flipping and investment condos etc aren’t going to pan out at this point in time. Heh heh, funny about how much the house will be worth in the future at the trend the house increased.

Also people here in Calgary really have no idea on what commodities are up to, you’d think with all our jobs sitting on it, someone would mention to me once in a while that oil just took a huge drop and Gas is in oversupply like crazy, yet nobody has any idea….

#155 Timing is Everything on 06.12.12 at 11:59 am

#143 Timing is Everything

Language? The statistical reality? The vid?

#156 jess on 06.12.12 at 12:00 pm

… the advertisements, guaranteed happiness and the “growth” a crucible for change

Gurgaon, the luxury Delhi satellite city at risk of drowning in its own sewageBuilt by private developers without proper infrastructure

Hamilton Court, meanwhile, is rarely courted at election time. Inside its gates, the Chands have everything they might need: the coveted Sri Ram School, a private health clinic and clubhouse next door, security guards to keep out unwanted strangers and well-groomed lawns and paths for power walks and cricket games.
http://www.nytimes.com/2008/06/09/world/asia/09gated.html?pagewanted=all

“Women and children are not encouraged to go outside,” said Madan Mohan Bhalla, president of the Hamilton Court Resident Welfare Association. “If they want to have a walk, they can walk inside. It’s a different world outside the gate.”

#157 Buy Curious on 06.12.12 at 12:03 pm

Canuck Abroad 142 and Harlee 154, you make me sick to my stomach!

#158 bigrider on 06.12.12 at 12:24 pm

#122 Garth to Bigrider- ” A quality bond held to maturity is risk free in both capital and income”

And it will be free of any return worth mentioning for the next ten and possibly 20 years.

Bonds were a free ride past 25 or so years. Did wonders for a diversified portfolio.

The free ride is now gone.

A quality bond held to maturity is risk free in both capital and income. What part of that do you not understand? — Garth

#159 Timing is Everything on 06.12.12 at 12:30 pm

Life expectancy at birth, by sex, by province – Statistic Canada

http://tinyurl.com/6ovguwb

#160 new_era on 06.12.12 at 12:35 pm

The only thing keeping up the American and Canadian ponzi scheme is the Euro collapsing.

http://www.reuters.com/article/2012/06/12/markets-canada-dollar-bonds-idUSL1E8HC2PD20120612

When the time comes (and there will be a time) when greece, spain, italy portugal’s real estate get plummelled and the country begins to stablize and get their act together. People will be dumping the american and canadian dollars to get into the euro countries (either as a union or split up). Because the chances of their currency gaining on ours will be great.

So at that point who will be buying our debt?

We will be face with the harsh reality of more debt then those countries, ultra low interest returns, Blooming dollar compare to those countries. VS a cheaper real estate, 5-7% returns on the currency.

#161 Derek R on 06.12.12 at 12:37 pm

#96 MediaBuff on 06.12.12 at 2:23 am wrote:
#38: “even though property taxes are actually the least economically damaging of all taxes. ”

I could give quotes from economists ranging from Adam Smith to JS Mill to Milton Friedman to Joseph Stiglitz to back that up but I’ll leave you to Google them for yourself.

Property taxes are capital taxes, the *most* economically damaging of all taxes. Capital taxes hollow out capital, destroying its ability to generate wealth. Land transfer taxes too.

Ah, I see the problem. You think that real estate is capital. Well, yes and no. Capital is man-made so the house part is capital alright but the land part isn’t. And taking Jen’s bungalow as an example, we have a house worth maybe $57,500 sitting on a lot worth maybe $600,000. So the property tax on it is 9% capital tax and 91% land value tax. I totally agree that capital taxes destroy capital but land value taxes don’t destroy land. The land will still be there a thousand years from now, no matter how high the tax. So the property tax is 91% good and could be even better if it was reformed to remove the capital tax part.

Land transfer taxes should be abolished though. They just freeze up the market or make people indulge in tax avoidance tricks like putting the property into a limited company and then selling the company instead of the property.

For economic efficiency, property taxes should be user fees (some flat, some variable), but by using market value assessment, gov’ts tried to make property taxes into income taxes. It turns out that property taxes don’t correlate with income much at all, and services received even less. So it just ends up being a tax on the marginal (market clearing) price of the property, which may or may not ever be realized.

Property taxes are basically user fees. You are paying for the courts and laws which allow you to evict people from your property and sue them for trespass. The more property you have and the more people about, the more protection you need. In a rural area that may not be much so property taxes are low. In an urban area the city may also be providing you with law and order, fire brigade, animal control, theatres, fireworks, etc. so the user fee is higher. And why should property tax correlate with income? It’s a user fee like insurance. That doesn’t correlate with income or services received any more than property tax does. But people still pay it for the services they might use. And that’s how it is with property tax.

So I stick to my guns. Property tax (particularly when it is only levied on the land portion of the property) is the least economically damaging of all taxes.

#162 bigrider on 06.12.12 at 12:43 pm

Surprised Garth that you have no response to my comment above with regard to the rampant private lending that is occuring in T.O, among well healed investors, toward first (and second) mortgages.

I would think that you would devote an entire entry to the subject, let alone a brief response, given the aggressive tactics lawyers and mortgage brokers are giving to their respective clients.

Not only is RE ‘winning’ the fight for greater and greater proportion of average guys net worth through greater debt, but now those with substantial liquid and financial assets are being won over, again for the proliferation of RE.

I know for a fact that it is common for these professionals to denounce the merits of financial markets
in order to garner said assets from diversified portfolios and into mortgages for ,of course, a fee.

Some of the individuals on this blog, with money, could easily be enticed with an 8% return from a first mortgage , fully secured against a loan to value ratio of 75% max.

What say you?

Chasing yield is a good way to suicide. — Garth

#163 Mr Buyer on 06.12.12 at 12:45 pm

#153 Canada going down the tubes on 06.12.12 at 11:37 am
The US is finished and Canada is next. No futue in Canada and every boomer knows it.
……………………………………………..
I will take Canada over any other place hands down. I just won’t drop every cent I will make for the rest of my life just to stay out of the cold. Before the manufacturing countries get to puffed up just remember we chose to follow the path of least resistance leading to all our jobs and our children’s jobs being exported from our great land. We are just beginning and a citizenry such as ours sometimes needs a good hoof in the nads to wake up and get back on the ball. Finished, hardly, there are are fish shops here in the town I live in that are likely older than Canada. We are just beginning and like toddlers we believed fairy tales but less so with each passing day.

#164 jess on 06.12.12 at 12:50 pm

i know a young family who are thinking of purchasing a house where the “contractor ” put the title in his daughters name although the daughter never moved in. There are saying things like will not charge legal fees etc etc and sell this property to you without listing 185k rather than the 215 .if we list? Also they are recommending a ten year loan. They are a One income family with a four year old and need auntie to cosign . I told them what i learn from this blog to no avail .

Is this not a tax fraud? What would happen to the title in this case to the unsuspecting young buyers?

#165 John saccy on 06.12.12 at 12:51 pm

Stock Valuations do no t drive today’s markets.

Bernanke’s actions do.

U.S. Stocks Gain Amid Speculation of More Fed Stimulus.

http://www.bloomberg.com/news/2012-06-12/u-s-stock-futures-rise-as-fed-official-backs-stimulus.html

#166 I work at a bank & rent on 06.12.12 at 12:52 pm

The most important piece of wisdom that I saw here was the last thing she said;

“So I went all around the house, and took down the family pictures. At that moment I knew it was just a place. Then I walked out.”

#167 Bill Gable on 06.12.12 at 1:08 pm

I think the tone of many of today’s posts point to a building “generational tension” – and that does not bode well for the decades ahead.
The post itself is vintage Garth, and superb.

One sidebar – 20/20 Monday night – and a piece on Miami, New York and LA…on kazillion dollar condos, being snapped up – cash…biggest customers? Russians.

So they decide 20 million cash for a condo in Miami, is a better choice than a cloudy, wet backwater like Vancouver?

It was like Cam Good on steroids, as the reporter hung out with some RE genius, who drives a zillion dollar sports car, and spends his nights getting gooned out of his skull, with his RE buddies.

The deals are all cash. Twenty, thirty million, or more. No sweat.

Question – how did these buyers accrue 30 million?

Meanwhile, most of the USA is seeing RE still crumbling.

My best man, lives in Jupiter, Florida, and has had his house on the market for three years – 4 price drops. Flies.

Oy vey, is this going to be interesting.

#168 disciple on 06.12.12 at 1:20 pm

#35 Inglorious Investor… “student debt cannot be discharged via bankruptcy”…

I find it hard to believe that you are this narrow-minded? Perhaps take a stroll somewhere far from your ivory tower cubicle office once in a while just for fun? Trust me when I say that desperate people don’t need no stinkin’ bankruptcy law to “discharge” their fake debt… Defaults on a massive scale are unstoppable and inevitable once people realize it is really that simple.

That is what politics is for, to change the rules, and that’s why TPTB don’t want young people to get involved… How long has Europe been on the brink? Just default already… and throw the financial parasite class out with the rest of the trash…

#169 Canadian Watchdog on 06.12.12 at 1:25 pm

CMHC Mortgage-Backed Securities By Issuer (May Data) http://postimage.org/image/4fmicndrh/

Brokers going broke. Banks winning $$$

#170 Timing is Everything on 06.12.12 at 1:27 pm

Meanwhile, back in Langford, BC… “It’s not just old perverts that go to these places [Strip clubs]. There’s more women than men in most places now,” he said.
“The landlord is not impressed that I’m going this [route] either, but it’s down to survival mode now.”

‘Cash crunch has B.C. bars turning to strippers’

http://tinyurl.com/crbzrfx

#171 Timing is Everything on 06.12.12 at 1:36 pm

#165 Timing is Everything

Broken link. Try this…

http://www.canada.com/health/Cash+crunch+bars+turning+strippers/6769644/story.html

#172 timbo on 06.12.12 at 1:40 pm

http://nymag.com/daily/intel/2011/11/absolute-morons-guide-to-the-euro-crisis.html

“Swine flu! Shit, I knew that wasn’t over.
No – PIIGS: Portugal, Italy, Ireland, Greece, and Spain. All are countries that have lots of debt relative to the size and strength of their economies. Investors worry that any one of them could default, and bailing out one will just make lenders freak out about the next miscreant in line. You see it in interest rates: Italy’s short-term borrowing rates almost doubled from about 3.5 percent in October to 6.5 percent in November. European businesses are getting squeezed now, too, which bodes ill for these economies. At some point, it simply becomes too expensive to keep rolling over debt, even with painfully deep cuts to government spending.”

Worth a laugh or two…….

http://treasureislands.org/steve-keens-savage-predictions-for-britain/

““The level of debt the UK has taken on is breathtaking. I thought the USA was bad when it had a total private debt ratio of 300% of GDP. Even the treasury has your debt at 450 percent of GDP. Whereas the US financial sector debt peaked at 120 percent of GDP, yours is 250 percent. And at various times in the last 3-4 years, something like 60 percent of demand in the economy has come from rising debt.”

Those numbers are big !!! shhh..gorilla in corner……

#173 truth hammer on 06.12.12 at 1:43 pm

Net worth in the USA has plunged 40% since 2007. The ponzi scam in Canada is only still supported by the sheeple willing to be fleeced by ever increased taxation. The inflation train was stopped in the US…..in Canada it will crash into the wall when we hit 100% taxation….which according to the accountants is over 80% today taking direct and indirect taxation into account. See you on the other side.

And I agree with #153 to a degree……most professional immigrants I know are bringing their families to Canada ( including both sets of elderly parents and all the in laws) and then going back to their home countries to work tax free because of the taxation here. The free stuff for the dependants is good…but who wants to pay those taxes they say. Trouble is that Canada gets stuck with the bills for the tsunami of immigrant seniors we are seeing wash ashore.

It wasn’t taxation which stole middle class wealth in the US. God, you’re tedious. — Garth

#174 Silver on 06.12.12 at 1:46 pm

#96 MediaBuff

…. someone who gets it.
Ask your Assessment Authority to show you how they arrived at the assessment…
… for me it was one building’s “sale” in each of the previous 5 years in vancouver which was used as the “comparable” to raise my property tax’s from $5,000 to $19,000 + a year…
it’s taken me 5 years to get that out of them…
Ask them to supply signed documents showing how they arrived at that value,
… the Assessment Boards claim they don’t have to sign and back up their documents and financial statements…
“They are only a Guideline”,… not a “guarantee”…
Costs over Twice my Mortgage Payment doubled up each month. Good bye any “Real Equity”/ “Capital” build.
…so closing shop and selling out. moving the build work to asia.
Lets see how “Real Estate” “Growth” generates a “real tax base” for all those nice Gov./Public Pensions when there’s no GDP happening… and nothing but Gov. supported jobs. For big corporations.
Privately owned small business’s bottom line is getting smashed by the tax grab’s…
…what was it…. a 30% raise for council, and 15% for employ”weeds”. and all the obligatory increases in the generous benefit packages…..
love “Blacks Law Dictionary”
Silver

#175 Debtfree on 06.12.12 at 1:46 pm

@ smokingman I think I’ve found your nirvana .

http://www.castanet.net/edition/news-story-76408-23-.htm#76408

#176 Derek R on 06.12.12 at 1:47 pm

#155 truth hammer on 06.12.12 at 11:46 am wrote:
KEEPING THE ELITES IN LINE. STOP TAXATION
http://www.usatoday.com/news/nation/story/2012-06-11/north-dakota-property-tax/55533784/1

The Elites will be down on their hands and kneespraying that this passes. Because if it does all that money the sheeple had to pay in taxes will now be available to pay higher rents and bigger mortgages. And who owns the majority of the rental properties and the banks? You’ve guessed it!

So I predict that this will cause property prices and bank profits in North Dakota to rocket, if the ND sheeple are stupid enough to vote for it (as they probably are). I think that anyone who wants make a killing should buy ND property or bank shares now. But what do I know?

#177 Tonino, Nonno Nicola's Grandson on 06.12.12 at 2:19 pm

#164 Big Rider

“Some of the individuals on this blog, with money, could easily be enticed with an 8% return from a first mortgage , fully secured against a loan to value ratio of 75% max.”

Nonno told me to respond on this one Big Rider.
Mortgage fraud by unscupulous lawyers and mortgage brokers is alive and well in the GTA. Who would borrow at 8% when the big banks are throwing money away for 3%? There is something wrong with the picture Big Rider and I know this from the first hand experiences of some of Nonno’s friends that have been burned in mortgage scams. One lawyer was disbarred over his role in mortgage scams. The old adage ” if it sounds too good to be true” applies. Nonno says emphatically, “tell Bigga Rider to stay the hella awaya from da mortgageees!”

#178 bigrider on 06.12.12 at 2:38 pm

#160- Garth to Bigrider- ” A quality bond held to maturity is risk free in both capital and income. What part of that do you not understand?”

Laughable Garth ,that you would think I do not understand.

You are correct, bonds held to maturity are risk free in both capital and income. The obvious has been confirmed.

Just don’t expect any income worth mentioning… that fact not so obvious to the uninitiated.

I would venture a guess that a five year GIC, is also risk free in both capital and income and I would also guess that a five year GIC at 2.5%, give or take, taken out today, will handily outperform any bond ETF, whether or not but especially if you include a management fee to an advisor on the ETF.

I’ll understand if you delete this one. Still want to remain friends though..LOL

GICs pay less and are not liquid. — Garth

#179 bigrider on 06.12.12 at 2:47 pm

#164 Garth to Bigrider- “Chasing yield is a good way to suicide”.

I would love to hear from you how a 1st mortgage secured on a property to a max of 75% of an appraised value(conservatively appraised deliberately so by the lender) is a road to suicide.

I mean that not as a challenge to your point of view Garth, sincerely. This really is something I do not understand. I have trouble rebutting the obviously successful people around me who lend out regularly and who continually scoff at the financial markets.

If a creditworthy person can borrow money from the bank at 3%, what does it tell you about a person who needs a private mortgage at 7%? How can you be so naive? — Garth

#180 DM in C on 06.12.12 at 2:48 pm

One /rant I have on the generational issue. Background: My father (64 this year, retired on gov’t pension since 50) is adamant that he will even reverse mortgage the house if necessary — he has no desire to leave any money to the three of us. What’s his is his. My MIL abandoned my spouse to the system when he was 12 and abdicated all parental rights.

We are not looking for ANY type of inheritance, given the parental situations — but given their narcissistic outlooks, they better not look for any help from us when their luck (it’s not good financial management, that’s for damn sure) runs out. They’ve made it clear their money is theirs….. so good luck in old age. Our Boomers can pound sand.

We don’t care what happens, because they only care for themselves. Don’t show up on our door, hat in hand. And we don’t expect our kids to suffer for any poor decisions on our part. They’re going to make enough of their own.

My point? Don’t count on anything/one but yourself. Make decisions based on actuals, not future hopes and wishes. People are greedy and stupid. That never changes.

#181 bigrider on 06.12.12 at 2:57 pm

#179 Tonino, Nonno Nicola’s Grandson. On the issue of private mortgage lending

Well, I really appreciate this one from Nonno, Tonino.

I have no intention of participating because I just don’t know enough about the process and simply feel uncomfortable with the lack of liqudity . I agree, the unscrupulous lawyers, RE agents and Mortgage brokers are something to look out for.

However I know of many well healed individuals of Italian decent who do so regularly. They diversify there bets on many deals and although I have heard of a few that were forced to foreclose on mortgagees in arrears, by the time they take over the property they make better off then if the mortgagee had continued to pay.

It’s hard to ignore , or should I say discount completely , the consistency of returns.

#182 jay on 06.12.12 at 2:59 pm

Too bad her husband didn’t get to in joy the $600k,plus the ACB on the home is closer to 300k over that many years…young buyers will be all right ,after the reno will sell for 1.2 million

#183 dd on 06.12.12 at 3:00 pm

Jim Sinclair’s Commentary

This is classical definition of debt monetization, which is what makes up QE. It never stopped.

As foreign buying per the TIC report and US need rises, the Fed will be the primary buyer well into the future.

Top Customer: Under Obama, Fed’s Holdings of U.S. Debt Have Jumped 452%
By Terence P. Jeffrey
June 7, 2012

#184 Mr. Lahey, Sunnyvale Trailer Park Supervisor on 06.12.12 at 3:00 pm

#126 Country Lover

Hear, hear! Kudos to you and your family for your decision. You will not regret one minute of it and the less stress will equate to better health and more time with the family. Well done! Bubbles says with the extra time your hubby has he should visit us in Sunnyvale or better yet, attend the SASTGFBDCParty!

#185 Mr. Lahey, Sunnyvale Trailer Park Supervisor on 06.12.12 at 3:10 pm

#117 Karie

“Furst – If Garth doesn`t include at least one of your poems in his next book, I`m not buying it. ”

Karie, I can’t speak for the bearded mystic oracle, all knowing, all wise, soothsayer who writes this pathetic blog (his words not mine)but I would like to think Captain Garth will give Furst some sort of recognition at the SASTPGFBDCParty.

#186 NAM not HAM on 06.12.12 at 3:17 pm

BPOE,

Go to vreaa and look at the posting under “Richmond listings iPhone images”.

Warning!! Have your puke bag handy.

#187 mingeford on 06.12.12 at 3:18 pm

# Big Rider and #179

Sure, the banks are lending at low rates but that is for clients with good credit and reliable income source. The private mortgage issuer takes on the higher risk clients, hence the lender will lend at a rate that matches the risk profile. The client knows their situation and will have shopped around prior to going for this option. Besides, as you say the loan is fully secured with the equity in the property and simply requires both parties to retain good lawyers to draw up the contracts. By the way, the borrower pays all legal and appraisal costs plus any arrangement fees the private lender wishes to add.

With regards to second mortgages, they tend to be for a very short duration and again are fully secured with remaining equity in the property and the option to commence Power of Sale proceedings in the case of default is always there. Again, all associated cost would be borne by the borrower.

In conclusion: a great return on ones investment.

That’s a joke, right? — Garth

#188 Mr. Lahey, Sunnyvale Trailer Park Supervisor on 06.12.12 at 3:19 pm

#47 Furst

I can only add psychic to your growing list of talents. There is literally a mad scramble to be able to read your poem over the Sunnyvale speaker system. Last night Ricky and Cyrus got the guns out in a heated dispute of who would read the daily poem by Furst! I have had to make a schedule of readers to prevent bloodshed! Bubbles is on cloud 9 knowing he has been selected to be the reader tonight. We are waiting for this evening’s gem Furst. Make it another good one!

#189 Really on 06.12.12 at 3:31 pm

Ouch…
A very well written scary yet strangely en outraging post. Good job Garth.

#190 Can it be? on 06.12.12 at 3:40 pm

Our economy is in trouble

#191 Devore on 06.12.12 at 3:44 pm

#75 The Real Jimbo

In a slow deflation, pieces get rearranged, and life goes on. Cash becomes more valuable. If your scenario of runaway deflation cascading through the economy and a hyperinflationary response comes true, wealth preservation will be the least of your worries. No one’s going to want your bars of gold, and if they do, they’ll want them so much, you might as well not have them. This is a fail strategy, no one would be able to buy their way out of that mess.

#192 bill on 06.12.12 at 3:48 pm

sometimes, you just know clicking on a link is a bad move…. dont let that stop you from finding out what DA ‘s wife looks like..maybe its bpoe’s . not sure. I got scared partway through and left.

http://www.youtube.com/watch?v=_ykAoI8wurk&feature=relmfu

if you are really brave :

DELETED

#193 John G. Young on 06.12.12 at 3:49 pm

#139 Smoking Man on 06.12.12 at 10:41 am

“Lie to yourself if you want”

With respect: back at you…

Self-deception is at the root of many addictions.

John

#194 daystar on 06.12.12 at 3:54 pm

#73 Retired Boomer – WI on 06.12.12 at 12:17 am

Excellent advice.

“You don’t get to be old and well off by not making wise choices, and some good luck as well.” – RB

Wise. Appreciate your taking the time to comment. I’m putting this link up because:

http://en.wikipedia.org/wiki/Fixed_income

Maybe slightly more than 1 in 10 actually know what fixed income is? (ok, maybe less) Perhaps readers will become more engaged when they see sluggish world economics as a result of wreckless leverage to the middle class created by some of the very same entities that profit off insurance against it and its become highly organized in the form of derivatives. Already, changes to the system to facilitate the wealth transfer from Canada to the U.S. has begun.

http://www.bankofcanada.ca/2012/04/press-releases/bank-of-canada-designates-canadian-derivatives-clearing-service-under-the-payment-clearing-and-settlement-act/

What mystifies me is how we can elect a Republican PM and expect a different result from the U.S. housing example. Inequality. Abuse of power. Are there better reasons to educate than this?

#195 Devore on 06.12.12 at 3:55 pm

#94 penpal

In your zeal to be clever, you missed the point. Which was that there is no link between predicting US real estate collapse and interest in gold, as was bombastly claimed. Perfectly smart, rational, informed and wealthy people foresaw the housing bust, but aren’t gold nuts.

#196 John on 06.12.12 at 4:05 pm

Cramer wrote:

“Garth, your best post to date! Perfectly sums up months of warnings, stats, and admonitions. Have to agree with you that the comments today are “enlightening”!

My only concern over Jennie is that maybe she waited too long to enjoy the remainder of her life. But then I hope she is like my mother, who died last year just shy of her 98th birthday, with a mind very sharp to the end. May you live long and prosper Jennie! But I see you got the latter down pat!”
———–

I’m trying to follow these leaps of logic. You’re aware of what’s going on with the world economy? Where are you getting the “prosper” part from?

This is an excellent space being provided for people to debate ideas and think for themselves. So, without hiding behind anyone or anything, I challenge you to lay out your independent thought as to why this woman is supposed to be “prospering”. What are your fundamentals? Because you sound like a follower.

Anyone? I’m hoping either someone lands the plane or lets one take off.

Maybe it’s just not the place to have that kind of discussion. Starting to look like that’s a “limit”….sort of like the alcoholic family that talks about eveything…except Dad’s drinking. I’m asserting that questioning some of these leaps of logic is pretty important.

Are you on drugs? — Garth

#197 Dr. Fred on 06.12.12 at 4:45 pm

Who isn’t a ‘kid’ if you’re 150 years old?

53 years and a crappy annual rate of return. No cash flow, property taxes, maintenance and utilities for over 5 decades, and realtor fees.

Nice story.

#198 bill on 06.12.12 at 4:46 pm

I am sorry Garth.
inappropriate. wont do it again.

#199 Canadian Watchdog on 06.12.12 at 4:53 pm

Australian courts rule against lenders as boom-time low-doc loan frenzy unravels http://tinyurl.com/6p9f3um

“As with the boom-time predatory lending practices in the US — which triggered the global financial crisis — The Australian has found low-income earners, the elderly, pensioners and those with limited financial experience have been hit hard by the practices.”

“Thousands of such borrowers — tens of thousands by some estimates — were stung by abuse of low-documentation and no-documentation loans, which required little or no evidence of a borrower’s income, but which usually were secured by a person’s family home.”

“The emails show it was standard practice for many major banks and scores of non-bank lenders to aggressively spruik such loans to their mortgage brokers, which dealt directly with unsophisticated or “mum and dad” clients. So-called low-doc loans, created in the 1990s, were used by a very small niche of self-employed people who were unable or unwilling to provide financial information to their banks to secure a loan.”

We’re different right?

#200 syd on 06.12.12 at 4:55 pm

iphone view of richmond listing – wow!!!

http://vreaa.wordpress.com/2012/06/12/richmond-listings-iphone-images/#comment-40466

#201 truth hammer on 06.12.12 at 5:06 pm

Hmmmmm…are Garth’s retorts distinctly testy today :(

#178 Derek…..the ‘Elites’ are the civic servants who have been praying off the tax dollar to keep an escaltion in their luxury lifestyles sailing ever skyward.

Banks only profit when suckers walk in the door….the civil service and the entrenched unions keep draining the pool even when the taxpayer is anemic. This was the big issue in Wisconsin with the recall fight ending last week. People there woke up and found themselves beholden to legacy contracts that were bleeding them dry and every service was going unpaid for because elite unions had burrowed in an were taking all the available revenue. I’m surprised how many don’t understand the differential between public and private enterprise.

BTW we have the same situation in Quebec, Ont and BC…..legacy contracts are taking 100++% of entire ministries revenue so that no money can be directed to the population. We are having to borrow ( issue bonds) in order to finance hospital equipment and bricks for schools.

The public shouldn’t have to walk run and sacrifice for additional charity fundraisers when we have such a huge tax bill……what we need is to claw back the legacy contracts and fluffy perks that have been granted to the elites.

Case in point is the recent ‘severance pay’ scandal paying 1.6 billion dolars to civil servants who weren’t laid off…all due to a legacy leftover from a previous administration. Canada is top heavy with these legacy boondoggles that can be easily chopped. C’mom does anyone think that civil servants are going to stop going to work if their numbers are reduced, the pay chopped, pensions rationalized and union leaders sent to reeducation camps in a northern gulag? Like in Greece they ares till showing up despite a 50% paycut.

Time for the taxpayers to take back control of how our money is spent.

And Garth yes…to both assertions…….truth telling and an honest work ethic runs deep in the gene pool.

#202 Bigrider on 06.12.12 at 5:08 pm

#181 Garth to Bigrider- ” if a creditworthy person can borrow money from a bank at 3% what does it tell you about a person who needs a private mortgage at 7%. How can you be so naive”

Garth, only 7 , yes , 7 income tax filers filed an income tax return showing north of 200k income in Klienburg in 2010. This in a neighborhood where houses routinely sell for 1.5 to 2.5 mill and maseratti and ferrari’s are commonplace( no they are not all leveraged to all the bumpkins on this blog).

How can you be so naive.

Underground market for various businesses not reporting in the traditional sense, alive and well.

Get some better friends. — Garth

#203 I'm stupid on 06.12.12 at 5:09 pm

200 comments and counting, Garth you might be on to something. I think when this pathetic blog gets 300 comments a day most will realize that they are actually “poorer than they think” not richer.

Nice post today. Good for that lady, she should enjoy her golden years to the fullest.

#204 Nostradamus Le Mad Vlad on 06.12.12 at 5:23 pm


#110 John — “This is why I am confused by your comments above.”

Hi John. There are other posters who write much better than I do, and give a much clearer perspective on where I’m coming from. So . . .

#117 Karie — “Jennie`s story is combined luck and intelligence . . .”,
#123 Steve — “Congratulations to Jennie on a bright, bold, brave move at 79, . . .”
#126 CountryLover — “Good for Jennie! I think at 79 freedom and security are key things that one would want in life.”,
#133 bill — “way to go Jen. you knocked that one right out of the park…. Home run.”
#135 Canuck Abroad — “She made a great decision and got out when the getting was good.” — and —
#147 Ronaldo — “Jen will be applauding her move in a few months time.”

If someone offered either of us a winning $1 million lottery ticket free, already verified and no strings attached, the cash was ours and free to do with it whatever we wanted, then hands down and no questions asked, I would gladly accept it and put it into a 45-55 plan as Garth suggests, mainly for preservation and a guaranteed monthly income.

Money is a tool like anything else, so I would have no guilt feelings at all. What I would need is a monthly fluctuating income while leaving the principle untouched, for at least a quarter of a century (one must outlive one’s incoming cash flow, in order to avoid living on KD and fruit punch).

This goes with #172 Timing is Everything’s post — “. . . but it’s down to survival mode now. ‘Cash crunch has B.C. bars turning to strippers’ ”

If the cash crunch is getting to be that bad (which it is — the withdrawal of money by deflation and other means), then taking care of myself and paying my own bills and staying out of debt would be at the forefront of my life.

When I was in the workforce, I used to play lotteries for fun, because I could afford to lose X amount of dollars. Now, I’m not, so I don’t. My two cents worth.

#205 Florida Bubble 1920 on 06.12.12 at 5:36 pm

“Florida Real Estate Bubble

The 1920’s, in America, were a time of great prosperity. Skilled and educated working Americans had jobs providing numerous fringe benefits, paid vacations and pensions. In addition, automobiles were becoming commonplace for the wealthy and middle class allowing cross country travel. This good fortune set the stage for the Florida real estate bubble.

Starting in 1920, many Americans became enamored by the materialistic and prosperous lifestyle of the time. During this time, the stock market was moving forward at an extremely fast pace. Many investors were becoming quite wealthy. Florida became a hot spot for these newly rich people, who didn’t enjoy the cold. Many whole families took vacations to Florida. It was at this point that tourism started booming and land prices were skyrocketing. Many astute investors took notice and started buying Florida real estate. The population in Florida was growing exponentially and housing couldn’t meet the demand. Florida became the “playground of the rich and famous”. Illegal casinos and drinking parlors became widespread in Miami.

At this point, almost anybody could invest in Florida, even without much money. Credit was plentiful and soon everybody in Florida was either a real estate investor or a real estate agent. In 1922, the Miami Herald became the heaviest newspaper in the world as a result of its humongous real estate advertisements. People in the North heard about the real estate prices “doubling and tripling”, causing a snowball effect. Capital was rapidly pumped into the real estate market. Whole golf communities were developed, such as Temple Terrace. Resorts and retirement communities were developed almost overnight. Mansions were sprawling in every area, as were swimming pools. As always, waterfront property was the most desirable. Florida was seen as a veritable Utopia.

Real estate prices quadrupled in less than one year. An elderly man invested $1,700 in property and by 1925 the property was worth over $300,000! It seemed you could do no wrong by just buying any property in Florida and become a millionaire. By 1925, real estate prices had become so exorbitant that buying land wasn’t affordable any longer. New investors failed to arrive and old investors started to sell. Panic arrived, as it always does, and the real estate market crashed. Prices kept moving downwards as heavily indebted investors tried to sell to avoid bankruptcy. In most cases, no buyers arrived, and the investors were bankrupt from the enormous mortgages.”

#206 bigrider on 06.12.12 at 5:41 pm

#204 Garth to Bigrider- ” Get some better friends”

I have, you and nonno Nicola.

#207 john on 06.12.12 at 5:43 pm

“It is an income portfolio, and minor fluctuations in the underlying assets are simply not germane. REITs are not stocks, and a 4% return on a fixed-income portfolio can most definitely be constructed without equity. Of course she can invest in GICs, get half the income and lose purchasing power daily. It seems that would be your choice. — Garth”

I like you Garth, but that is a simplistic and poor explanation.

1) Look at the yields on the latest BBB-rated bonds Altalink and Rogers 5-years (3.67% and 3.00% respectively). Hardly easy to earn 4% without going sub-investment grade…
2) REITs are equity. You can’t say that they are some magical vehicle that aren’t affected by external factors. Most betas are in the 0.5-0.6 range. So not totally immune. As well, you’re fundamentally exposed to the commercial mortgage market and commercial property cycle, as well as the economic stability of your tenants. How are REITS in Calgary going to do if oil is at $50?

The portfolio is far more weighted to bank preferreds (5.2%) than bonds (a mix of corporate, government, high-yield and real return), with a modest REIT component. The objective is income, which is accomplished handily with an overall yield of over 4%. The downside risks are contained through quality assets and assured by daily monitoring. In a scary world, this is a safe haven. — Garth

#208 Ronaldo on 06.12.12 at 6:05 pm

#164 Bigrider

”Chasing yield is a good way to suicide. — Garth”

As 3000 who invested in the link below discovered. Many ruined savings, retirements and relationships.

http://www.churchlegal.com/News-Archives/Supreme-Court-rules-against-victims-in-Eron-scandal.pdf

#209 bill on 06.12.12 at 6:21 pm

”You could buy an apartment bldg in False Creek for 14 G’s in 59”
wasnt false creek entirely industrial at that time?
I dont recall seeing apartments down there.

#210 TurnerNation on 06.12.12 at 6:39 pm

For the ERF.TO followers (falling knife) they just now cut dividend in half. Previously it was yielding 16%.

In other news the restaurant income trust SRV.TO today just increased distribution, will be yielding close to 10%! However, all food income trusts (Boston Pizza, Pizza Pizza) have seen large stock price jumps, already, this year.

#211 Ret on 06.12.12 at 6:43 pm

If you have bought a condo in T.O. or are thinking of doing so, you need run out immediately and get a copy of Toronto Life magazine (July) and a mickey bottle of spirits.

Pour a stiff drink and slowly read the article. Drink the rest of bottle.

Developers, politicians and construction trades all working hard to produce the slums of the future today. The window glass issue is well known but lots of building deficiencies lurk within. It is a rigged deck against the buyer.

New home warranty? Forgetaboutit suckers. You bought it, you got it. Is it any different in Calgary or Van?

#212 Westernman on 06.12.12 at 7:11 pm

DondWest @ # 92,
” Every single person under the age of 40 should go on strike …”
Strange, I thought they were…

#213 CrowdedElevatorfartz on 06.12.12 at 7:16 pm

@ #211 Bill
I remember looking at a Loft in Yaletown in 1985 that was for sale for 60k @ 16% interest. Crickets…… No takers.
Yaletown at that time consisted of almost empty brick warehouses and intoxicated bums sleeping behind garbage bins, hookers plying their trade at Helmcken and Richards, junkies staggering about in a haze of paranioa and heroin….. A dead, industrial area of downtown Vancouver that was on its last legs.

Then it was rezoned……
Nobody expected the boom that followed Expo’86.

The difference now is amazing, subway stations, trendy restaurants, 90% new condos(that leak), shops, small parks,people chasing after their dogs to scoop up the turds, etc.

A 800sq ft. condo there costs what? 400k? 500?, 600?

But now the place is too crowded! It was at the edge of the Vancouver riots. Parking is a joke. A quiet nights sleep is impossible with the sirens, trucks backing up, Harleys roaring to the next light…..

BPOE? Indeed.

#214 mel in victoria on 06.12.12 at 7:28 pm

Deflation is not depression. No point there. And the US has suffered asset deflation (real estate) combined with price inflation (cost of living). Gold is not money, and never will be. — Garth

…And before we came up with paper money, gold and silver coins were called….?

Credit. — Garth

#215 new_era on 06.12.12 at 7:35 pm

There you go garth. This article says it all.

The analyst whom are puppets of the government and banks say no bubble. But the soldiers in the trenches are worried and think there is a bubble

http://www.torontosun.com/2012/06/11/toronto-braces-for-deflating-condo-bubble

“Lots of people think that offshore buyers are just coming in to buy, buy, buy. That’s completely wrong, because they’re more cautious than local buyers,” says Tony Ma, president of HomeLife Landmark Realty Inc Brokerage in suburban Toronto.

http://www.theglobeandmail.com/news/national/foreign-investment-cuts-both-ways-in-toronto-condo-market/article4246468/

#216 NAM not HAM on 06.12.12 at 7:36 pm

Garth,

Is your balanced portfolio constructed for this type of economic conditions? Or has it always been the same?

Thanks

#217 mel in victoria on 06.12.12 at 7:54 pm

Deflation is not depression. No point there. And the US has suffered asset deflation (real estate) combined with price inflation (cost of living). Gold is not money, and never will be. — Garth

…And before we came up with paper money, gold and silver coins were called….?

Credit. — Garth

…Close…

http://www.gold.org/government_affairs/gold_as_a_monetary_asset/role_in_international_monetary_system/golds_history_as_money/

#218 Nostradamus Le Mad Vlad on 06.12.12 at 8:03 pm


Transferring to Italy Another domino due to fall, along with the Vatican; US Fed and Ins. Cos. Yesterday, a link hinted at Ins. Cos. and Derivatives. Today, the US Fed is going after Ins. Cos. money; US Wealth If wealth plunged, then stop all these dumbass wars; Rage Against The Machine Spain’s turn; North Dakota in the process of ending property tax? The Economic Downturn consists of many events, not just economic; Germany has a cold; Blame Game While citizens lose; Gold Deposits Why is Turkey collecting gold? Something up? Texas Time to secede.
*
Russia prepares army unit for Syria, Oz and NZ “Getting ready for the war on China?” wrh.com, plus The Pentagon a.k.a. The Troublemaker; Fukushima One leaving, possibly more to follow; Flame “But MSNBC dares not breath the name of the other country behind STUXNET, DUQU, and FLAME, “I”, “S”, “R”, “A”, “E”, “L”! (Shhhh.)” wrh.com; Syria Air strikes? What for? They haven’t done anything, like Libya or Tunisia; Smart Meters Not great reviews; Polio vaccines cause paralysis in 47,500 Indian children.

#219 bill on 06.12.12 at 8:24 pm

#216 CrowdedElevatorfartz on 06.12.12 at 7:16 pm

there have been changes thats for sure.
the easthope brothers used to cast their engine cases and what not down there on granville island I think..
I can recall going through the worksite on the south side of the creek as the condo’s went up.
wandered through it one night. it was very surreal.
it reminded me of a scene from clockwork orange when alex returns to his parents home/townhouse /condo
.very desolate and littered.not much lighting. expected to see alex and his droogs at any time.
the build quality would make cry.
I rented briefly in the area between granville and burrard bridges at a place called ‘mariners walk’
stuff broke incessantly . mystery floods as some cheap piece of crap gave up the ghost somehwere behind the walls.
and those condos right on the water there with the lovely ponds beside them? dont buy one of those.
the ponds leak into the condos beside them.
the whole ‘pennyfarthing’ site was a joke. just pure crap at insane prices. actually any price would be crazy as the quality is just not there. nice view though.
A bit hard to enjoy as the traffic and people noise from downtown was deafening . it never stopped although the sirens wound down at around 4 in the morning.
do you think many people gumboot it across those bridges? with marginal exhaust silencing? oh yeah.

#220 CRA on 06.12.12 at 8:28 pm

#204 Big Rider

“Garth, only 7 , yes , 7 income tax filers filed an income tax return showing north of 200k income in Klienburg in 2010. This in a neighborhood where houses routinely sell for 1.5 to 2.5 mill and maseratti and ferrari’s are commonplace..”

Thanks for the heads up Big Rider. Going to have to audit some of those Kleinburg tax returns…

#221 Daisy Mae on 06.12.12 at 9:12 pm

#165 Mr Buyer: “Before the manufacturing countries get to puffed up just remember we chose to follow the path of least resistance leading to all our jobs and our children’s jobs being exported from our great land.’

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

We have everything we need right here — in Canada. We have oil, we have the land to grow crops. We can manufacture anything we need. We have it all. We are capable of being totally self-sufficient. What is wrong with this picture?

#222 john on 06.12.12 at 9:35 pm

“The portfolio is far more weighted to bank preferreds (5.2%) than bonds (a mix of corporate, government, high-yield and real return), with a modest REIT component”

Fair enough Garth. However, using the term “fixed income” is a bit…disingenuous, purely from the sense that your income largely comes from bank pref divy’s and REIT distributions. It’s semantics, but ultimately there is a big difference in investing in a security where the company can be put in to default for missing its payment to investors versus one who cannot.

Not that I see the banks missing their pref dividends, but REIT distributions, you never know.

#223 Retired Boomer - WI on 06.12.12 at 9:59 pm

#196 Daystar

People confuse “Insurance” with terms such as CDS, CDO, must mainly “Derivatives” all true time.

A derivative is simply a bet between 2 entities at the core.
There is no insurance or “Guarantee” beyond the capabilities of the two making the bet. You can buy a form of performance guarantee, called a Credit Default Swap or CDS which looks like insurance, but is not backed with any type of money reserve as an actual “Insurance” ;olive would be. Confused? Yeah, it’s what basically caused the 2008 Banking crisis in the US to become a CRISIS!!!

We have not learned our lesson in that CDS are not regulated, in fact it is impossible to knows who, what, when, where, and WHY a CDS was issued.

We have “bits & pieces” of data, but no actual clearing system, except for those wI believe that means the same 2 counterparties)??

What we DO know is most US financials have many multiples of their core capital at risk in total derivative exposure. It is not likely all of it is going bad at once or, in one BIG BAD bet, but it is scary, and not knowing the sum total is sheer idiocy in my cheap little book.

Look where unrestrained EBT has gotten the PIIGS of Europe, the US, and Canada with 100% or better of the national GDP in DEBT totals. Add in the costs go social promises coming due in the years ahead, I would tell you we all functionally bankrupts.

So, now that I’ve set the mood, we ARE all in this together, how can we begin to untangle the mess?

Your helping to educate us all is appreciated, I just hope some of the activists get some more media attention, as to this point, we aren’t hearing enough.

#224 Snowboid on 06.12.12 at 11:39 pm

#203 truth hammer on 06.12.12 at 5:06 pm…

“And Garth yes…to both assertions…….truth telling and an honest work ethic runs deep in the gene pool”

Sadly the pool package didn’t include independent thought.

#225 penpal on 06.13.12 at 1:19 am

@ # 197 Devore

I am hardly clever – pretty dumb actually!

You Devore, on the other hand, are an investment genius I am sure!

And, oh so much smarter than a group of self-made billionaires.

I’d hardly call Ray Dalio, Kyle Bass or David Einhorn goldbugs, nor Marc Faber nor Jim Grant.

Great investors, legendary money managers and very prescient would be more fitting.

The point is that smart people (and I guarantee far more astute than either you or I will ever be) who have had great investment calls are also investing heavily in gold and have been doing so, successfully, for several years at least.

They are all wrong, eh Devore?

Why don’t you open

#226 Daisy Mae on 06.13.12 at 9:11 am

Daisy Mae on 06.12.12 at 9:12 pm
#165 Mr Buyer: “Before the manufacturing countries get to puffed up just remember we chose to follow the path of least resistance leading to all our jobs and our children’s jobs being exported from our great land.’

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

We have everything we need right here — in Canada. We have oil, we have the land to grow crops. We can manufacture anything we need. We have it all. We are capable of being totally self-sufficient. What is wrong with this picture?

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

After thinking about it, I realize my views are simplistic.

You’re just too kind to set me straight. LOL

You must shake your head ALOT….

#227 Renting in Regina on 06.13.12 at 10:28 am

Johnny D and Easternman,

The Leaderpost just published an article about the sad state of renting in Regina. The article claims that the lack of options are due to all the high paying jobs available (I’m assuming they mean those at the refinery). I’ve lived here about five years. My rent has doubled in that time. I still try to save 10 per cent of my cheque each month, but for the most part, any gains in wage I make go straight to the landlord. :

Regina’s vacancy rate falls to 0.6 per cent, lowest in nation

Read more: http://www.leaderpost.com/business/Regina+vacancy+rate+falls+cent+lowest+nation/6769707/story.html#ixzz1xgQ0Auuj

#228 Johnny D on 06.13.12 at 11:09 am

@#230 Renting in Regina

The story is more of a bragging point for how awesome Regina is. Leaderpost is full of stories like that when it comes to jobs and realestate.

#229 Johnny D on 06.13.12 at 11:13 am

Furthermore, it doesn’t help that Regina’s mayor, city council, and several developers have made it so more apartments are now “condos”.