Men

Teresa has a little problem. “My husband,” she says. That’s good. We do husbands here.

“After reading your blog faithfully for some time I convinced hubby to sell the house. It sold quickly. Now he would like to dive back in and purchase a similarly-priced house because of the great neighborhood,” Teresa tells me (they live in Victoria). “He argues that this purchase would be a lateral move and even if there’s a correction our original home would be correcting as well. Since we won’t be needing a mortgage he thinks that renting would be throwing our money away.”

We get that a lot. Go on.

“I know we’d be losing our liquidity status by purchasing and I’m certain the market will drop, but he thinks this doesn’t matter because we would have felt it anyhow had we not sold. What are your thoughts? Is he right?”

Let’s talk about those crazy Greeks and Spaniards in a minute. First, your crazy macho spouse.

If your house is typical for self-infatuated Victoria, it’s worth about $600,000. That means you forked over roughly $30,000 in realtor commission to sell. To turn around and buy a $600,000 house will cost $10,000 in BC property transfer tax alone. Add in legals, title insurance, moving, drugs and beer, and you end up spending between $45,000 and $50,000 just to cross the street into an identical house.

Is your husband currently sober? Then ask him how pissing away fifty grand on fees and taxes is better than spending the same amount on rent over two years while your $600,000 is earning $72,000 in a conservative portfolio at 6%. I can pretty much guarantee the average city house will not be adding a grand to its value every month for the next twenty-four.

In fact, there are many reasons to believe just the opposite. So, cue the Europeans.

Few people (like hubby) seem to realize today’s macroeconomic threats are far greater to the owners of illiquid assets like houses than financial stuff like stocks, bonds or trusts. There are many reasons. The fact you can unload an ETF in three minutes is one of them. In a world of volatility, rapid change, shifting sentiment and events beyond your control, liquidity is king. All it might take is for a bunch of badass skinheads to win the Greek election Sunday night, with carpet coverage on CNN, and people don’t feel like buying houses in Edmonton anymore.

Real estate, remember, is the most emotional of assets. For nine of ten buyers, it takes extreme leverage, and that requires confidence. Media hype about a global recession is more than enough to chill even the most testo-drenched market bull.

Of course most of Canada’s already in prime space for a correction, even without the souvlaki. Average home prices from BC to Halifax have never been higher, and everywhere they’ve been financed by record debt, not income gains. In fact billions of dollars have come out of mutual funds, stocks and retirement savings since 2008, to migrate into real estate and help goose property values. We’ve put virtually every chip we have on red.

More profound than a scare which scatters buyers and makes your house unsalable, Teresa, are potential events which can destroy its value. This matters if hubby is planning on buying today – before the correction. Never again in your life will you have such potential risk from real estate.

While central banks are already amassing reserves for a Sunday night rescue should the Greeks revolt, the potential for global economic slowdown is quite real. Spanish bonds are near junk status, China’s trying to engineer a soft landing and America’s heading into presidential paralysis. While it will not result in a 2008-rerun, the odds of a commodity-based economy like Canada’s being impacted are large. Don’t expect disaster, failing banks or crashing markets. But anticipate something worse: more lost jobs.

Nothing puts housing in the ditch harder than unemployment. Even banker boss Marc Carney knows that. A rise in the jobless rate – the quick result of enhanced mayhem in the euro zone – could put oodles of families under water, in no mood to shop for real estate, and likely thinking about dumping their own digs.

Or, as only Marc the Bard could phrase it: “The high indebtedness of the household sector and elevated valuations in the housing market require continued vigilance. These conditions make households especially vulnerable to adverse shocks.”

So Teresa babe, don’t let it happen. You’ve mercifully, narrowly escaped a doomed housing market in Victoria, to emerge with fistfuls of cash, freedom and choices. To turn and dive back in would be to waste an obscene amount and re-embrace risk.

So, take action. Just say no.

And if that doesn’t work, pout, pucker and relent. Tell him you love the idea because now your mother can move in.

204 comments ↓

#1 DEAN on 06.14.12 at 10:09 pm

Love the blog +1

#2 T.O. Bubble Boy on 06.14.12 at 10:11 pm

In fact billions of dollars have come out of mutual funds, stocks and retirement savings since 2008, to migrate into real estate and help goose property values. We’ve put virtually every chip we have on red.

Should’ve listened to Wesley Snipes in Passenger 57.
http://www.imdb.com/title/tt0105104/quotes?qt=qt0156470

#3 Claudius Emperor on 06.14.12 at 10:14 pm

saying NO to F

#4 TnT on 06.14.12 at 10:14 pm

Anyone catch Toronto cp24 tonight? Show called Hot Property and their star realtor got a little hot under the collar denying any bubble for Toronto. He said “all this bubble talk is beginning to tick him off”

Lawlz

#5 bubble on 06.14.12 at 10:16 pm

http://thepoliticalcarnival.net/2011/01/07/rep-lamar-smith-issues-first-doj-oversight-letter/firstplace/

:)

#6 Ravishing Rick on 06.14.12 at 10:16 pm

May all you losers know that im first

#7 NAM not HAM on 06.14.12 at 10:17 pm

Anyone noticed the MLS is missing a whack load of listings for the REBGV? I’m talking like 80-90% of attached listings poof!!! Looks shady.

#8 TaxHaven on 06.14.12 at 10:18 pm

Six percent cannot be “conservative” – not in this climate. No one pays out 6% unless they’re either desperate for funds or Allen Stanford.

Financial repression: “A 1.5% real return could be a dream.” http://www.theglobeandmail.com/globe-investor/personal-finance/the-sad-end-of-saving-and-investing/article4257700/

6% SOUNDS a lot better than the going rate of 1-2% with which we in the real world make do. And I’ll bet they won’t see the underlying risk until it blows up in their faces.

Don’t invest much, do you? — Garth

#9 the word of reason on 06.14.12 at 10:18 pm

WHO DA MAN!!!!

#10 Leggendario on 06.14.12 at 10:18 pm

Really nice post Garth………. Can’t wait for you to right something about Saskatchewan, especially about Saskatoon and Regina.

#11 Just Say No on 06.14.12 at 10:19 pm

What people will do to avoid paying rent!

#12 Gypsy Kid on 06.14.12 at 10:19 pm

why do people think renting is wasting money?
you live there…thats not a waste.

#13 Guy in the orange shorts on 06.14.12 at 10:20 pm

fffiiirrsttttttt !

One is the loneliest number…

#14 Preferreds help on 06.14.12 at 10:21 pm

Greece
Secret polling numbers may be driving Greek banks stocks straight up.

Greek banking stocks surged 20 percent Thursday “amid market talk that secret opinion polls were showing that a government favorable to the international bailout agreement was likely to emerge after the June 17 election,” Reuters reports.

#15 v on 06.14.12 at 10:24 pm

numero uno

last post it was suppose to say 800 large not 8 large

#16 Just sold in Vancouver on 06.14.12 at 10:25 pm

I just hope things will hold intact till July 9th and i can get a cheque deposited in my account….

#17 Intuitive Missus on 06.14.12 at 10:28 pm

In real estate it’s not just about Location Location Location.

It’s also about Jobs Jobs Jobs.

As long as people are working they will buy houses. When they feel insecure in their jobs or outright lose them, the last thing they can or will do is buy houses.

And Teresa. Tell hubby to chill out for a bit. You’ve done the right thing. Don’t let him screw it up.

#18 50% correction predictor on 06.14.12 at 10:30 pm

For people who bought in the last three years, I declare the door for you to escape unscathed has been shut!

Read them and weep!

#19 Not 1st on 06.14.12 at 10:31 pm

Garth, you have finally taken off your rose colored glasses regarding Europe, U.S. and China and the serious mess they are in. Canada stands in the cross-hairs.

Hardly. — Garth

#20 MC on 06.14.12 at 10:32 pm

I wonder…QE3 on Wednesday??? If not, thats probably a great short opportunity on gold…..

#21 APA on 06.14.12 at 10:32 pm

Garth,

Given the uncertainty you suggest, can you describe a situation in which the liquidity of stocks, preffereds, and ETFs, would result in some real advantage? Once the sell signal hits, that would also be immediately acted upon by everyone else? (thereby resulting in an immediate and significant price drop). Last time around, it was stocks that dropped by 40% quite quickly, not housing…..

It’s not 2008. — Garth

#22 Smoking Man on 06.14.12 at 10:33 pm

A Business Plan WOMAN

Nothing drives me more nuts than when little twerps come on Gratho’s blog and say LIVE WITH IN YOUR MEANS.

First off what business is it of anyone to advise random strangers what to do with their finances, when the primary motivation is not coming from a prospective of success but rather loser doom..

My profile on these worm holes, is the loser, never took a risk, will be borderline poverty your entire life. What is the definition of live with in your means anyway. If you have a real education you will know that your means are unlimited, if your schooled and bought the honesty cool aid your doomed.

On TV shows the good cops always get the bad guys, In real life the bad guys win most of all the time. They only catch tiny bit of what’s going on.

In a Business start up you got to do what you love, or you will fail, Richard Branson could never have made a facebook, and Zukerburg could never have launched Virgin Records.

Was cursing my new boat in port credit, and checked out the Charter fishing boat companies. Some nice boats but all the captains looked like they spent time in jail. If you like fishing here is a million dollar Idea.

Hooks Charter Fishing,

guess you know where I am going with this.you target the young bay street puppies, have a platform on the bow where they can knock golf balls into the lake. Have two hot ladies to serve the booze and for massages, wink. You charge a crazy fee 3 times what the other guys charge. Pay the ladies well so they come back for more, and Never touch your own merchandise.
Word of mouth will travel, so when ever the boys come in from NY or London, Hong Kong and need entertained, they are yours.

I hate fishing or I would do it.

Gartho Be a Sport don’t kill the link on my name I got a great pic

#23 pat on 06.14.12 at 10:33 pm

Scotiabank says Canadian realestate demand has cooled due to moderate income growth and tighter mortgage insurance rules. In addition, it says there is a bigger supply of houses up for sale by buyers to choose from.

Someone said this before but i cant remember who or when hm

#24 Lily Joe on 06.14.12 at 10:34 pm

Don’t do it Teressa,

A handful of cash is sooo less stress than a big load of debt!

You are sitting pretty right now~

#25 ShockednAwed on 06.14.12 at 10:35 pm

1st

#26 Canadian Watchdog on 06.14.12 at 10:36 pm

#161 Market Bull

“Sales – 2,292. Average Price – $518,092.”

As I’ve debunked many times already, the average price is only total volume divided by sales, of which recent gains were partly made by pre-con or “offline sales” that were never sold on MLS in prior years. BTW, 2,292 sales is one short week to beat last year’s 4,787 mid month sales, then again, TREB will revise the numbers to their liking.

It’s only a matter of time before TREB’s average price retraces so fast it’ll make your head spin. Once new property sales decline there won’t be any extra volume to boost the average price: that’s when prices get reacquainted with gravity.

But hey, don’t take my word for it, here’s your own credible source who admitted MLS’s average price was “overstated” from 2009-2011. http://postimage.org/image/p8hpjl3e9/

I know I know. Toronto is different and unstoppable. Right.

—–

Interesting post from your buddy McLister over at Canadian Mortgage Trends: Subprime Mortgage Renewal Risk http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/06/subprime-mortgage-renewal-risk.html

And with HSBC now fleeing too, the rest of non-bank financials will follow suit as liquidity dries up to nil subprime loans. http://postimage.org/image/4fmicndrh/

Juxtapositions: https://p.twimg.com/AtdlpYhCAAEHJT6.png:large

#27 Paully on 06.14.12 at 10:36 pm

Teresa, after you get over the mental block and actually move into your rented house, it doesn’t feel any different from owning. I know, because I just did it. It just feels like my new house, and it feels even better with a whack of cash to invest to help pay the rent.

When the drain in the basement backed up, the landlord paid to have the plumber snake the drain, not me. Woo hoo!

It was really hard to find a house that we liked, but eventually we did and now we are really happy in our new house.

#28 Snowboarder on 06.14.12 at 10:38 pm

That shark reminds me of our Canadian Real Estate Monster breaking the surface with CREA trying unsuccessfully to push it back down.. :)

Great post Garth, Thank you.

Thanks. But I just sank the shark. — Garth

#29 Smoking Man on 06.14.12 at 10:41 pm

Garth

That pic is so true to life it’s amazing, you should have photo shopped blond hair and boobs on the shark, but then again who can’t get it’s meaning.

Nice

So obvious it couldn’t last. You know the feeling. — Garth

#30 Walter Safety on 06.14.12 at 10:46 pm

Few people (like hubby) seem to realize today’s macroeconomic threats are far greater to the owners of illiquid assets like houses than financial stuff like stocks, bonds or trusts. There are many reasons. The fact you can unload an ETF in three minutes is one of them. In a world of volatility, rapid change, shifting sentiment and events beyond your control, liquidity is king. All it might take is for a bunch of badass skinheads to win the Greek election Sunday night, with carpet coverage on CNN, and people don’t feel like buying houses in Edmonton anymore.

Really? People don’t have to realize anything macroeconomic. They just have to remember the reality of their experience over the last ten years with stocks ,bonds and trusts .
Most people have never been liquid so they prefer the feelings from illiquid housing over the feelings their experience tells them they will get from stocks ,bonds etc.
There may be more safety in numbers than you realize.

If you’re looking for wisdom in what the majority of people do, good luck. There’s a reason most are struggling. — Garth

#31 jay on 06.14.12 at 10:48 pm

I was talking to a friend in the lowermainland, he’s on strata council he was telling me about there being two foreclosures in his townhouse complex.

last week i talked to a relator, she was telling me about how a local devolper can’t sell a large number of homes beacause there worth less now. theres a large number of forecloseres on the market.

She told me not to buy foreclosures, cause your not protected from damage when i asked.

#32 Johnny on 06.14.12 at 10:55 pm

I agree that Real Estate could be the worst place to have all your wealth in right now. But I’m starting to wonder about the constant reference in this blog to how it’s a given that you can get an easy 6% return on money in a “conservative portfolio.” That just doesn’t sound realistic to me right now.

Solid bank preferreds pay 5%+ in dividends, so with the tax credit it equates to a 6% GIC. How hard is that? — Garth

#33 Smoking Man on 06.14.12 at 10:56 pm

Garth Said:

While central banks are already amassing reserves for a Sunday night rescue should the Greeks revolt, the potential for global economic slowdown is quite real. Spanish bonds are near junk status, China’s trying to engineer a soft landing and America’s heading into presidential paralysis. While it will not result in a 2008-rerun, the odds of a commodity-based economy like Canada’s being impacted are large. Don’t expect disaster, failing banks or crashing markets. But anticipate something worse: more lost jobs.
Nothing puts housing in the ditch harder than unemployment. Even banker boss Marc Carney knows that. A rise in the jobless rate – the quick result of enhanced mayhem in the euro zone – could put oodles of families under water, in no mood to shop for real estate, and likely thinking about dumping their own digs.
……………………………………………………..

MSM has not been able to derail the Crazy GTA Market, So C is taking his best shot..

Europe is about to go over the cliff, when that happens the Prime Rate will need to go to Zero. Preferds will rock Thanks Garth.

If he can’t take the steam out of the insanity, when he is forced to cut the rate, track 6ers will go nuts, their dogs will be putting in offers

#34 Dan in Victoria on 06.14.12 at 10:56 pm

Hi “Teresa”
We sold out over a year ago.
We too would not have a mortgage if we jumped back in.
I’m in Victoria, I’m in the trades, I can build my own house very, very economically.
I know every type of tradesman, know just about every place to get a deal.
You know what I am doing?
Sitting tight for now, renting.
Do some research, get your realtor to send you updates.
The market is generally moving down.
There is a bit of a spurt in building right now for sure.
BUT these new places have to sell.
Its not time to pull the trigger yet, wait.

#35 Einzatgruppen kanada on 06.14.12 at 10:58 pm

Pssst Sherry @Ritz don’t know if bought.

#36 The 6% solution on 06.14.12 at 11:01 pm

“$600,000 is earning $72,000 in a conservative portfolio at 6%” ….. Can you let us all in on the secret of the 6%? Or do we have to become investment disciples with your company to get in on the action? Only the GreatestFool would put $600K in something that “earns” 6%, cause the chances of getting your $600K back ain’t good! The fact of the matter is that it will earn you only 2% – most likely with significant tax implications, you would still need to top up to pay your monthly rent.

This has been answered many times. I suggest you stop getting your advice from [email protected] — Garth

#37 Canadian Watchdog on 06.14.12 at 11:01 pm

Here come the brand spanking new detached home assignments on Craigslist.

$888000 / 4br – http://toronto.en.craigslist.ca/yrk/reb/3077895047.html
$605000 / 3br – http://toronto.en.craigslist.ca/yrk/reb/3074411315.html
$665000 / 3br – http://toronto.en.craigslist.ca/yrk/reb/3074410799.html
$609900 / 3br – http://toronto.en.craigslist.ca/yrk/reb/3073949639.html
$899000 / 4br – http://toronto.en.craigslist.ca/yrk/reb/3045544254.html

Bye bye TREB volume @ Market Bull

#38 T.O. Bubble Boy on 06.14.12 at 11:04 pm

Here are some fun numbers for Vancouverites.

Based on this Vancouver Sun article, there are 217 Executives from Vancouver companies who made $1M and up in 2011:
http://www.vancouversun.com/business/executive-pay/execpaysearchresults20102011.html?appSession=015299149350435&RecordID=&PageID=2&PrevPageID=&cpipage=9&CPISortType=&CPIorderBy=

And, there are somewhere around 1000 properties on realtor.ca priced at $2.5M and up in the Vancouver area.

So, using a “normal” 2.5-to-1 price/income ratio, every 7-figure executive would need to buy a property every year for nearly 5 years to absorb this inventory.

Or, everyone can pray for HAM.

#39 Harlee on 06.14.12 at 11:05 pm

Aww, Garth sank the shark.I guess that’s better than the other way around.
Teresa’s husband should recall the old Steve Miller song. You know…’Take the Money and Run’. Also, listen to Dan in Victoria @#33.

#40 Gmaz on 06.14.12 at 11:05 pm

Any data on SFH for Mississauga.
Mississauga realtors keep pressing me that that this area is where all the Toronto sheep are flocking to.

#41 Mic D'angelo on 06.14.12 at 11:06 pm

Garth, you said that bond yields will be higher in 12 months. B.C. strip bonds Dec-18-2031 is yielding 3.62% and B.C. 2042-June-2042 4.30% coupon is yielding 3.28% and even Quebec 2043-Dec-1 4.25% coupon yielding 3.55% today. They were yielding 4.55% to 4.71% about 18 months. I remember an Ontario 2027 Jan-1 strip bond was yielding 4.907% on February 2010.Bond yields rise but only after staying at a lower level. In October 2008 provincial strip bonds and long term bonds were yielding 5.25% to 5.5%. The strategy of waiting for interest rates to rise is like believing in the tooth fairy. Good luck people.

You do not buy bonds at this time just for yield. — Garth

#42 golem on 06.14.12 at 11:18 pm

Can someone explain how is it possible that Canadians have a debt to income ratio of 150%

How can you pay 50% more per month than you make.

#43 Phil Indablanque on 06.14.12 at 11:20 pm

Teresa,
Two words, Bear

#44 BigBear on 06.14.12 at 11:21 pm

Hi Theresa, I am vacating a nice 1800 sq ft dated 2 bedroom rancher with double garage in the Mt Doug area July 15th. $1675 a month. I can’t find decent work here in Victoria so we’re headed back east where at least we have some family to help us get back to living. If you’re interested in our place, ask Garth for my email. Garth, I’d like to help this like minded lady out. She can do a lot worse out here. Feel free to provide my email to her, but don’t delay, I have to give my notice tomorrow.

PS, if you were going to buy this place, it would list (AND SELL) in the high 5’s. After plunking down 10% you’d be looking at a monthly mortgage payment of about $3300. $1675 is a steal in this area. If that doesn’t wake hubby up, nothing will.

#45 Phil Indablanque on 06.14.12 at 11:22 pm

Mountain
kinda loses the effect in 2 posts but i’m sure you get the idea

#46 waiting on 06.14.12 at 11:26 pm

Another anecdote on the emotional impact of real estate.
My friend met an acquaintance a few days ago. Newly married, the couple own two condos.
They decided to sell one which had been purchased a few years ago. When the realtor told them they’d get $30,000 less than what it was purchased for, they decided not to put it on the market. Instead they are going to wait until prices “go back up” even though the unit will sit empty, in a non-rental building, with taxes and monthly condo fees to pay. The thought of “losing” money on the unit is overwhelming the common sense of what it’s going to cost them to probably lose more money …

#47 BigBear on 06.14.12 at 11:32 pm

Follow up to my earlier figures of $3300 for a “mortgage” payment.

I should have left out “mortgage” Monthly payment on 540K at 4% plus taxes will bring you to approx $3300.

#48 vatodeth on 06.14.12 at 11:35 pm

Teresa, you just won the lottery and your husband wants to spend it all on more tickets, instead of investing it all and getting a continuous return. Who cares though, because you’re breaking even anyways… Either way I hope it all works out for you and your husband.

#49 DaBull on 06.14.12 at 11:35 pm

Yahoo!!!…. made 27k today on a 100k investment yesterday in HNU. Life if good.

#50 ozy -against all ods on 06.14.12 at 11:42 pm

Regular kanatian folk ignoring buzz about overpricing, diving head on in the cold waters, against all ods, prices and un-afordability stabilize at historically insane levels this year. Beleive it or not, regular kanatian folk ignorance can and will lead to this.
Come spring, prices in top hoods jump 15% while prices in bottom hoods, fall 30%.
The correction will not affect all the same.
The cash rich will get richer and the debt rich will get poorer (rates will play the referee’s role).
Amigos, don’t be a regular folk, thread carefully, buy smart or DON’T BUY AT ALL !!!!!!!!!

#51 waiting on 06.14.12 at 11:42 pm

In spite of what we’d like to think, we are not isolated from economic conditions in the rest of the world.
Just because we dodged the bullet in 2008 doesn’t mean we’re immune to a housing downturn now. We have a level of household debt that we’ve never seen before in this country. It’s scary. Our “sound” banking system doesn’t mean we can borrow ourselves into a lifetime of debt. Everyone who thinks they “own” when the bank holds mortgages worth 95% of their house is delusional.
Here in the lower mainland, 200 people found out they’ll soon be out of a job as Nokia announced plans to close their Burnaby facility and a few days ago we found out that the massive shipbuilding plans are not as rosy as first predicted. Defence Department budget cuts are already resulting in delays and reductions in the number of ships. While the Halifax and Vancouver shipyards were “selected” for the work, no contracts were signed. According to Terry Williston who headed the group managing the process, “… there’s a tremendous amount of difficult work to be done in order to get to those contracts.”

#52 Listened to Garth and bought a house in the US on 06.14.12 at 11:48 pm

#49 @Dabull

You’re sounding like a pump and dumper. Sure you’re not a realtor?

#53 NFN_NLN on 06.14.12 at 11:49 pm

“While it will not result in a 2008-rerun, the odds of a commodity-based economy like Canada’s being impacted are large. Don’t expect disaster, failing banks or crashing markets. But anticipate something worse: more lost jobs.”

Wait, can’t Canada just lower interest rates if there is a real emergency? Then we can just pay people to borrow money.

#54 Guy in the orange shorts on 06.14.12 at 11:53 pm

This blog has been overtaken by Amazonian Loserpeggers….

There was a photo of Flaherty petting a Great White Shark when I porned on….

#55 Strack 6ER on 06.14.12 at 11:57 pm

Smoking Madman,

I’m a track sixes, and if rates go down I’ll buy every condo I can get a loan for!

Your so right, I LOVE YOU.

#56 Carpe Diem on 06.15.12 at 12:10 am

#42golem

http://en.wikipedia.org/wiki/Debt-to-income_ratio

#57 Retired Boomer - WI on 06.15.12 at 12:13 am

#22 Smoking Man….

The vast majority of people I read on this blog do not strike me as being entrepreneurs (business owners or creators), but rather people who are employed by others, either corporations (and I own parts of several) or individuals (which I do NOT parts of).

Not being a business creator, owner where is the logic of NEEDING credit all your dam life to make your life work?
The answer, my friend, is you do not. Too many have house payments, car payments, and perhaps credit card debt they fail to fully pay off each month allowing the financial charges to accumulate, and escalate. Fewer, who HAVE debt, and let’s be honest, most anybody under say age 50 does have some, have developed and are working a plan to retire that debt.

Look at how plucked up my country (the US) is with busted mortgages, student loan debt, etc etc. What percentage of US homeowners own their places outright?
About 25% I would guess. What percent of the US or Canada could write a cheque for $20,000 on a moments notice? Glad to be among those few who can. It’s called FREEDOM, and I earned it, thanks.

Starting a business, sure take own an appropriate amount of debt. Raising a family, and working for an entity, keep to VERY “reasonable” and have a plan to retire it, build some wealth so you can own a business if you wish, or retire without needing the governments’ piddling promises.

I came from a business family, and personally have NO desire to own, or run a business! I just wanted all the power with none of the responsibility, and I found it.
Who the hell wants to work all the hours? I have a life, no worries, and solvent. Don’t blame ME for MY own choices, and I won’t chastise you for yours. seems fair to me.

I am just a high school graduate, and agree with most of your rants on education, and following the herd. Do have a wee bit of talent, and in retirement, i still do some select consulting, at ABSURD charges I might ad. Great FUN!!

Do enjoy your posts!!

#58 zeeman on 06.15.12 at 12:15 am

Garth, you are painting a scenario where Governor Carney will bring rates to zero, fixed mortgage rates will drop resulting in canadians to go on buying more real estate and i don think there will be any major job losses from the europe crisis…….back in 2008 there were some manufacturing jobs that were lost but that is nothing new they have been losing jobs for years…………how is this suppose to lead to a correction in real estate that you continue to forcast for the gta

My, we have short memories. — Garth

#59 Guy in the orange shorts on 06.15.12 at 12:16 am

Victoria..

Basically, it is referred to as the the land of the “Newly Wed and Nearly Dead”.

It serves no useful purpose, it is the Winnipeg of BC re hood ornament for Confederation …and the “Quebec of BC” re: freeloaders.

Hopefully, the tectonic plates will collide in such a way that it(and the rest of Vancouver Island) floats out sea..and sinks…cause it really ruins a good ocean view for rest of BC.

History will show that Vancouver Island is equivalent of Australia to Britain, send the lower class riff -raff there.

#60 Tim on 06.15.12 at 12:23 am

“Few people (like hubby) seem to realize today’s macroeconomic threats are far greater to the owners of illiquid assets like houses than financial stuff like stocks, bonds or trusts. There are many reasons. The fact you can unload an ETF in three m”

Stocks can drop 10- 20 percent or more in a day- even blue chips, houses don’t drop 20 percent in a day. Despite all the hysteria out there, housing is only off about 10 percent over an entire year. It is much less volatile that a stock portfolio. Of course it is less liquid. Many lost 30 percent in a month during the last financial crises. Where did housing drop by 30 percent in a month?

The greatest stock drop ever was 19 per cent — 25 years ago. Never repeated, and likely never will. The bounce back was quick. Learn, then type. — Garth

#61 Observor on 06.15.12 at 12:33 am

If you’re looking for wisdom in what the majority of people do, good luck. There’s a reason most are struggling. — Garth

Amen to that, you don’t beat the crowd by following the crowd.

I’ve been close to 100% invested in stocks all my investing life (started with $2,000 in 1989). Many contributions later and many gains (and some losses) later I am just over the $1 million mark.

Over long periods of time (10 year stretches) including since 2000 I have averaged right around 11% per year by being in the right stocks and doing just a bit of market timing.

The annual return however has ranged from minus 23% in 2008 (that hurt a lot) to 44% in 2009. But the average has indeed worked out to about 11% per year. Possibly I am taking huge risks but then again I don’t touch penny stocks, and rarely touch commodities. For me it was mostly financials (went in heavily after the crash), restaurants (think Tim Hortons), retailers, some real estate companies, various service companies, and lots of others. Mostly they pay dividends but not all.

#62 Carpe Diem on 06.15.12 at 12:36 am

Take the money and run.

If hubby cannot figure things out …. say bye bye.

Split.

As a liquid couple. Tis the time.

My wife and I have been liquid for over 1 year (but less than 2) … the sense of freedom … the common look when the teacher mom buy a townhome with 5% down … the stocks go up and down … sometimes I would love my investment guru to drop everything in canadian banks and make that 6% … but is that wise?

In the end, it’s only money. But having it all in one address is very foolish.

Mine is not in one address – It’s diversified. Some in REITs so I get RE exposure.

Outside my RE dude … I have some play money. I play specific stocks. Some that went +40% (mining stocks) in the last few weeks!

But that is my play money. I can win I can lose … whatever.

My cash is not in one asset (unlike my landlord) who has to pour more per month (in this castle). New this, new that, fix this, chop that, … and this is a really nice home I would love to buy but instead rent. So far, renting seems like the fiscally sound choice. No taxes, no maintenance fees, just a stress free home that allows for investment outside RE.

than as an owner I’d be pissed off of going to home depot.

#63 Nostradamus Le Mad Vlad on 06.15.12 at 12:37 am


Men. The less said about them, the better! For Teresa’s husband and this.

“First, your crazy macho spouse. We do husbands here. That’s good. Is your husband currently sober? We get that a lot. So, cue the Europeans.” — Don’t ferget the Italians, French, Portuguese, etc. The banxters, lobbyists and politicos are drunk on power. Sheeple are just drunk, but don’t know why.

“And if that doesn’t work, pout, pucker and relent. Tell him you love the idea because now your mother can move in. Just say no.”

Give him the ultimate ultimatum — he can have another house with your mother, while you rent alone. Allow five seconds to think about it, say time’s up and I’ve already made my choice.
*
#33 Smoking Man — “Europe is about to go over the cliff, when that happens the Prime Rate will need to go to Zero.”

Hi SM, disagree slightly with you there, ‘tho the end result is going to be a whole lotta SHTF at roughly the same time.

Few days ago, a link posted said when China crashes (deliberately or otherwise), that’s when Canada will slide into the abyss big time. Maybe that’s why Harper was in China recently sucking up to them.
*
9:13 clip Further to what I mentioned earlier, apparently Obomba has arranged with SArabia to keep oil down until after the election; Dumped 9K paper silver contracts in ten minutes; China Biggest gold buyers; Turning Soft US economy;
Socialism and Economics Not the greatest match, and Italy does a fuddle-duddle; How Times Change (very quickly); Tokyo High cost of living, and Raising A Child in America ain’t cheap either; Chart Of The Day Peak oil? Hmmmm; Inflation around the world; Six Corporations control 90%+ of the m$m; Unilever Job cull; Panic UK Govt. bails out banks. That’s a Furst! Gas Prices down, so why are drivers paying more? Cycles of low-paying, part time jobs; Cutting OAP Benefits More austerity so the rich prosper; An American Tale Debtors’ prisons next.

*
‘Net Privacy How to turn on Do Not Track in browsers; Monsanto’s new corn for human consumption; Vampire Skeletons What is left of Canada from the CPC under Harper; Family abuse Kids suffering the most; In Living Color Blue lobster; Sheik Yerbootie Not Frank Zappa, but a colorful selection of birds; 1:55 clip Public Service announcement on conspiracy theorists. The govt. is always right! But Conspiracy Theories are often true; Electronic Privacy Who has it; 20:37 clip Agenda 21 and how it will affect us; Right to Bear Arms Seems US citizens may lose it; Russia’s Sukhoi superjet crash; Things That Go Bump In The Night.

#64 jp on 06.15.12 at 12:38 am

Garth, why not implement a +1 button from Google.

That way if we all can +1 all your articles, it will show up more in the google search and hopefully reach a wider audience.

#65 Jon B on 06.15.12 at 12:39 am

6% return on the conservative portfolio. Bank preferred shares. Sounds good. Details please?

#66 BigAl (Original) on 06.15.12 at 12:45 am

#22 Smoking Man

Smoking man, your rants against formal education don’t hold water. Plenty of successful entrepeneurs that have formal education, and plenty of dropouts that are poor. You cherry-pick examples examples of successful dropouts like Richard Branson knowing full well he is dyslexic and supports your theory about formal education dulling one’s business sense. But you conveniently omit people like Trump (Wharton School, U. of Penn), Buffet (Wharton, U. of Nebraska, M.Sc. Columbia), or Carlos Slim (National Autonomous U. of Mexico).

You’re right that formal education isn’t needed to be a successful business person at all. You’re right that the business world has allowed the HR industry to over-grandize themselves, and over-credentialize many many jobs that don’t need those credentials, choking creativity in our businesses just to cover their own asses in the hiring process.

But you’re absolutely wrong about formal education dulling the natural business sense innate in certain individuals.

#67 TaxHaven on 06.15.12 at 12:56 am

Let’s put it this way: if the ‘doomer’ scenario DOESN’T come about, all we can be very sure of is that central planners somewhere have been busy extending, pretending, printing, hiding and praying.

Things that aren’t solvent SHOULD go bust…
Things that can’t go on tend to stop…
Things that aren’t marked-to-market will be…
Things that look too good to be true aren’t true…

#68 Sargon on 06.15.12 at 12:57 am

It’s truly sad how ‘investors’ have been conditioned to accept piddly returns, so much so that 6% invokes fears of some sort of Madoffian scheme.

Looks like TaxHaven won’t be needing a tax haven, since he won’t be making any returns to speak of.

I’m thinking orange shorts stuffer?

#69 daystar on 06.15.12 at 12:59 am

#21 APA on 06.14.12 at 10:32 pm

Equities in commodities on average have already dropped 40% over the last few months. In 08′, it was more like 80%. Don’t believe me, check the index historical charts on http://www.tsx.com . An investor should know this. Whats happening in the markets is not 08′. Not even close. Think about Europe as an example. The media loves to focus on the PIGGS. What about the rest of Europe? Right.

The thing about housing is that some folks buy housing with extreme leverage (5% down). What happens in a market downturn in housing in a market where no one is buying? That’s right, it sits. And sits until prices get reduced again… and again… and maybe it moves but if sentiment goes sour on something more than extreme valuations like it did in the U.S. with unemployment and foreclosures fueling it, look out, that house sits some more and we get to find out how truly illiquid housing can actually be. Selling under these scenarios means a certain equity loss for those who bought in late… and then not so late and with recourse loans in every province except Alta, buyers who bought in particularly since 07’… 08′, will end up either losing money they’ll have to finance to pay off or declaring bankrupcy with banks taking your earnings over the next 9 years until you either paid it off or lose a generation trying to wait it out. Its not 08′ in housing either. In my opinion, its worse and we’ll see it in spades next year.

#70 BigAl (Original) on 06.15.12 at 1:01 am

#22 Smoking Man

Oh…and also Smoking Man…Trump, Buffet, Carlos Slim, and even GTA business men don’t go around on average Joe message boards (no offense to Garth) and try and brag about their conquest of gals from rub’n’tugs. (Mississauga rub’n’tug gals no less!).

#71 daystar on 06.15.12 at 1:05 am

#22 Smoking Man on 06.14.12 at 10:33 pm

I like your backdrop. :)

#72 BCObserver on 06.15.12 at 1:17 am

Your “It’s not 2008.” in #21 sounds almost like “It is different here in Canada” ;)

Not even remotely close. — Garth

#73 a prairie dawg on 06.15.12 at 1:22 am

#10 Leggendario on 06.14.12 at 10:18 pm

Really nice post Garth………. Can’t wait for you to right something about Saskatchewan, especially about Saskatoon and Regina.

– — –

No, your other write…

#74 BCBOUND on 06.15.12 at 1:30 am

Ha! Bad decision fueled by testosterone instead of the nagging, horny housewives.

#75 a prairie dawg on 06.15.12 at 1:37 am

#42 golem on 06.14.12 at 11:18 pm

Can someone explain how is it possible that Canadians have a debt to income ratio of 150%

How can you pay 50% more per month than you make.

– — –

It’s total debt, to total income per year, expressed in a ratio. It’s NOT how high your debt payments are…

#76 patiently waiting on 06.15.12 at 1:44 am

Here are some recent price reductions of current active listings in what was last years HAM heaven White Rock: Note that listings that do not show an overt price reduction are homes who’s listing was terminated or expired and then re-listed at a lower price. I expect that this type of information is just as common in other areas such as Teresa’s Victoria area (probably worse there) but the info is not getting out to the regular public as the secret of how things really are is a closely guarded secret of the realtor cartel. I also noticed that there is an increasing number of Realtors listing their homes for sale, and an increasing number of significant bonuses (i.e. $10,00 selling bonuses) being offered to top up commissions of Buyer’s Agents . . .

http://mlslink.mlxchange.com/DotNet/Pub/EmailView.aspx?r=1278715377&s=BRC&t=BRC

#77 ZRH2YVR on 06.15.12 at 1:53 am

6% on $600,000 – — $36,000 – – – has nobody else found that math error???? I agree with the the concept and the 6% but Garth had 3 too many tonight before he multipled $600,000 times 6%.

No error. Over two years. — Garth

#78 Mic D'angelo on 06.15.12 at 2:06 am

Garth, to response #41 give me a list of why you buy bonds other than just for the yield besides safety,liquidity and asset diversification.

Yield, safety, liquidity and asset diversification. And the occasional capital gain. — Garth

#79 Humpty Dumpty on 06.15.12 at 2:15 am

The Genius of Mutual Indebtedness – Nigel Farage

http://www.youtube.com/watch?v=TN_1mF-3JTI&feature=player_embedded

Adverse shocks! It must be a mutual thing…..

#80 dosouth on 06.15.12 at 2:34 am

It’s different way out east there in London, Ontario…..the big bounce back coming soon – heck the media says so (so it must be a lie)

http://tinyurl.com/7zkugc7

This must be worth some type of response by you Garth?

#81 Last (still reading the blog just not the comments) on 06.15.12 at 2:42 am

@ tax haven, 6% is really 8-9% once you take into account the dividend tax credit (insert glazed over eyes here) I realize that of course you insert taxes into the equation the average person, we’ll….. You get the picture.

#82 Last (too many comments to read)) on 06.15.12 at 2:48 am

To answer the question conservative regular dividend stocks currently have yields of 4-5 percent (6-8 after tax) and preferreds have 6%. This are very conservative investments.

If you want to know more about investing for Canadians subscribe to Canadian Money Saver ( no connection) and stop making such dumb comments.

#83 Ronaldo on 06.15.12 at 2:56 am

http://www.myvirtualmortgagebroker.com/5-Year-Mortgage-Rates-Historical.html

Chart on historical 5 year mortgage rates 1970 – 2006. Shows where we’ve come from and where we may be heading next. Interesting to note that when the housing crash occured in fall of 74 that the rates had only increased about 2% to around 12% from 1972 when housing prices started to skyrocket. That is only a 20% rise. Even at that, an average house was only 3.5 times an average salary for 1 person. Not the 10 times family income as is the case for Vancouver now. Even just a 1% increase would send many recent buyers to the poor house.

#84 Men | The Retiring Boomer™ on 06.15.12 at 3:04 am

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

#85 Buy? Curious? on 06.15.12 at 3:15 am

Never again in your life will you have such potential risk from real estate. – Garth

This is the equivalent of shouting “Fire” in a crowd movie theatre.

#86 Aussie Roy on 06.15.12 at 3:16 am

Aussie Headlines

Never under estimate the power of compounding interest – Einstein

Compounding is great when you’re saving money. You earn interest on your savings and when you receive the interest you earn interest on the interest.

But when you’re borrowing money with no plans to pay back the loan or the interest, then compounding works against you…and fast.

Then there is Aussie sub-prime.

That’s right, according to the Australian, there are eight to ten times more Aussie sub-prime loans than most previously believed.

In fact, if the Australian and Fitch Ratings are right, Aussie sub-prime lending was or is only slightly lower than US sub-prime lending levels.

So rather than the banks being more prudent with borrowing standards, they were knee deep in dodgy loan applications.

http://www.moneymorning.com.au/20120614/australian-housing-how-to-avoid-this-paupers-retirement-trap.html

Steve Keen in Canada

In a very timely move, the Australian Senate Standing Committee on Economics established a hearing into the post-GFC banking sector. I was pleased to be invited to make a submission, which I completed just before leaving Australia for one month’s research into monetary economics with mathematicians at the Fields Institute in Toronto.

The submissions have just been made public.

http://www.debtdeflation.com/blogs/2012/06/15/submission-to-the-senate-economics-committee-post-gfc-banking-inquiry/

In a somewhat alarming occurrence, Gail Kelly, Westpac’s chief, came out in support of Mr Sayce yesterday. Well not exactly. We’re sure she’s not the type to read anything as provocative as Money Morning. But she did say that the years of compound growth for house prices were over…for good.

That’s hardly a revelation to long time readers. But when a bank boss comes out and says it you know the boom is well and truly dead.

It points to the psychological change that takes place as boom turns to bust.

http://www.dailyreckoning.com.au/the-winds-of-change-for-the-australian-economy/2012/06/15/

It turns out Australian mortgage brokers and banks used every trick in the US subprime book to expand lending during the housing boom. There were low-doc loans. There were no-doc loans. And mortgage brokers often did not even call potential borrowers to verify that their employment or income information was correct.

This was all standard practice in a credit bubble. Mortgage brokers work on volume, and they don’t own the loan. Their incentive is to approve as many loans as possible. Those loans then go to a bank or bigger firm which securitises them and sells them to investors.

http://www.dailyreckoning.com.au/the-rbas-mortgage-market-denial/2012/06/13/

#87 daystar on 06.15.12 at 3:24 am

We should definitely be worried about what Mark Carney is saying here:

http://www.thestar.com/business/article/1211307–canada-vulnerable-to-eurozone-crisis-bank-of-canada-s-mark-carney-warns

“Using a hypothetical stress test, the bank says a three per cent increase in unemployment — about the same as occurred in the recent recession — would almost triple the proportion of indebted households that would go into arrears. The current rate is currently about half a per cent and could rise 1.3 per cent under that scenario.” – The Star

3% unemployment would lead to 1.3% in arrears. If this risk assessment doesn’t scare us, keep reading. (I feel like picking something apart today and David LePoidevin is our lucky guy but I’m easy on him, helps to have manners)

http://www.bnn.ca/News/2012/6/8/No-end-to-housing-bubble-chatter.aspx

This dude is worth a listen. He’s not right about everything but he’s connected some dots. David makes some key points already covered on this site but worth repeating. (I know, I know, he’s a bear on banks, me not so much in the near term, I’m with Garth, we’ll get to that later)

“If you look at median house price in the United States, at the peak it hit $265,000 US and today in Canada it’s at $375,000,” he tells BNN. “We are 42 percent higher today in Canada than the U.S. was at the peak and we are 93 percent higher than the median price in the U.S. today, which is $195,000.”

With a loonie near par, these are scary stats. David’s stats reveal just how far this bubble has overshot a devastating RE/credit bubble in the U.S. . It can’t happen without the direct participation of our elected federal government and our banks and to put it bluntly, our political voters and shareholders have voted unwisely.

David mentions that banks are a bad bet due to over exposure to RE (CIBC is over 50% exposed to RE as an example) and sites that in the 90’s when Canada went through its last RE correction, banks were roughly 13% exposed to RE and had trouble. The difference today is that CMHC 100% insures mortgages and with HELOC’s the Harper government introduced 95% insured HELOC’s in 06′ (from 60% prior I think? Talk about deregulating credit) that was “tightened” to 90% in Feb of 2010 and dropped again from 90% to 85% announced in March of 2011 (taking effect in May). OSFI changes will further reduce CMHC HELOC insurance to 65% later this year. CMHC also 90% insures private loans so essentially CMHC backstops almost all losses Canadian banks face in real estate.

The risk to Canadian banks won’t come from RE defaults or HELOC’s (unless this bubble still unbelieveably has legs for another couple years), it will come through personal and business loan defaults caused by recession which is much more likely… but a good year or so away from causing investors worry in banks. (In 2 years, start to get very worried, banks do poorly in RE led recessions and its all part of Harper’s plan to eliminate foreign ownership restrictions on Canadian banks. Yeah Canada, you voted unwisely)

Ok, David continues on with China:
– July 1st immigration changes from last year mean you can’t buy a Canadian citizenship with 800 G’s in your pocket like before.
– Chinese RE has dropped in 20 of 22 largest cities.
– There are almost as many empty condos in China than all of the condo’s built in the U.S. Major oversupply there and valuations are tumbling, its highly likely that their own RE bubble has peaked and popped.

Translated, HAM is toast. Its been said over and over here on greater fool that when China RE hits the skids, HAM is cooked. (and its not just west van we should be worried about, this effects T.O., Montreal and spins off in places like Victoria)

According to David 7.5% of Canada’s jobs are currently employed directly (not indirectly) in housing construction. (I looked into it, he’s wrong from what I can tell, its direct and indirect, 7 years of minority Con governments, nope, 5 he’s wrong there too) There is a chart in the video link that outlines the U.S. peak of construction employment at 5.8% in comparison.

http://www.mortgagetalkcanada.ca/2012/02/taking-a-closer-look-at-the-canadian-housing-economy/

The link above solidify’s direct and indirect jobs in Canada employed through RE at 8% (1.4 million) but the breakdown is missing right down to wholesalers and retailers of hardware and building supplies, loggers, mill workers, trucking and shipping etc. . It wasn’t easy looking for government stats on this so I gave up. (cutbacks, if this information was ever there to begin with at statscan, this current motley crew is so transparent) Still, the consequences of a bursting RE bubble in Canada concerning unemployment is worth more than a few lines:

http://www.nytimes.com/interactive/2012/04/27/business/working-off-a-housing-oversupply.html

If the U.S. is any example of what Canada’s future is going forward, we can expect to lose half of the construction industry jobs we have today or more over a 5 year period. Thats likely a 3 to 4% hike in unemployment from a RE bubble gone bust over 5 years, potentially as much as 500,000 to 700,000 full time jobs directly or indirectly related to RE alone and higher numbers in a high interest rate scenario. 2% unemployment is likely to come in the first year or “correction” or “soft landing” as media will bill it, set apart from other negative downside risks such as higher rates chewing up RE valuations and equity. How will these jobs be replaced, especially if a higher interest rate environment creeps in crippling equity and consumption in general?

Uhuh… and this brings us back to banks needing to generate production elsewhere (commodities, investment in emerging economies) but before I dive into it we should note that David was wrong with interest rates not being a factor with U.S. housing valuations going down as well because they were. The rise in interest rates (this is fed rate by the way):

http://en.wikipedia.org/wiki/File:Federal_Funds_Rate_1954_thru_2009_effective.svg

…in 06′ created ARM’s and Alt A’s that the mortgage industry spun out with no interest mortgages for 2 to 5 year kind of stuff to continue inflating the bubble and it created a tremendous amount of toxic debt that is still working itself through the system.

The 06′ and 07′ period created a nightmare of Alt A’s and ARM’s that needed 5 years to unwind through the entire financial system:

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

http://en.wikipedia.org/wiki/Adjustable-rate_mortgage

http://www.doctorhousingbubble.com/wp-content/uploads/2009/05/creditsuisse.jpg

As the ARM’s and Alt A’s unwind through to the end of this year, the last of the shady mortgage haunts from stupid ARM’s and Alt A’s will be over in the U.S. and U.S. housing, even with its shadow inventory and oversupply will modestly recover.

But I digress. This is old ground rear view mirror stuff here at greater fool. Its Canada we’re talking about. The land of potentially fast growing negative equity from extreme leverage plays by the middle class during our own bloated RE/credit bubble headed for bust from higher unemployment, never mind higher rates.

How did David do really? He’s right about a RE bubble. He’s right about China. He’s right about Vancouver and He’s right about unemployment risk relating to RE. If David had a couple days to read the archives here at greater fool, he would have been right about almost everything else and hubby? If your reading this, Teresa is right too.

#88 Aussie Roy on 06.15.12 at 3:26 am

There seems to be people here who think lowering interest rates will stop house prices falling. Clearly these people don’t consider the huge influence, emotion has in any market.

House prices are driven by emotion and debt, remove just one and the result is the same, falling prices.

Remove both these drivers and falling prices turn to collapse.

Ever wondered why lowering interest rates doesn’t save all markets?. The sentence below is the key.

“It points to the psychological change that takes place as boom turns to bust”.

Wages drive sustainable house prices, not emotion and debt.

#89 Suggestion for future blog on 06.15.12 at 6:05 am

Sir Garth,

Could you explain why 2008 will not happen again?

#90 John on 06.15.12 at 6:07 am

Garth wrote:

“So Teresa babe, don’t let it happen. You’ve mercifully, narrowly escaped a doomed housing market in Victoria, to emerge with fistfuls of cash, freedom and choices. To turn and dive back in would be to waste an obscene amount and re-embrace risk.”
——

I contend that you are mixing fact with fiction here, over-simplifying this person’s situation and the context in which it is ocurring. Absolutely yes to the caution and stoppage of play. “Stopping the bleeding”. A resounding no to “fistfulls of cash and freedom”.

I once heard a great analysis about what it’s like for an addict to quit using drugs or alcohol: “The drinking alcoholic is lying down at the starting line of his life. When he gets sober, he stands up. Nothing more”.

Without the advice you’re offering here, this woman CAN’T WIN. Absolutely agreed, and your focus on the premises you present ( defined scope), is likely what has allowed you to make such a strong case. The problem is that you are confusing sobriety with recovery.

If Teresa has that “moment of clarity”, she can stop using and “thinking in reverse” and arrest the life-damaging choices. But going back into the bar to switch from beer to whisky isn’t going to work.

The “diversification” argument as a solution doesn’t fly and your case isn’t strong. Sure, risk is risk…we do our best. You need to think and act. To “act on your own behalf”….and get help from the right people. But that argument would only be clean with a continuing rigorous discussion about how the world economy is unfolding.

The “portfolio” focus needs to be challenged. Simply because of the overwhelming possibility of a much deeper paradigm shift at every level of Canadian society.

#91 NOBODY on 06.15.12 at 6:37 am

When’s that prophetic RE crash coming?
According to a website that doomers used to refer to Calgary will normalize in 300 years:
http://www.chpc.biz/plunge-o-meter.html

Any thoughts?
More proof that Garth will be proven wrong. But also will be remembered as the goof that scared impressionable old ladies.

Haven’t priced a resale condo in Cowtown lately, have you? — Garth

#92 House on 06.15.12 at 6:55 am

Unemployment? Sure didn’t Jim say we had gotten all those jobs back and more under his and Stevies great leadership?

#93 bigrider on 06.15.12 at 8:10 am

Garth, lots of talk (denial) about the ability to make 5% on bank preferreds and a 6% overall rate of return on a portfolio after dividend tax credit. It might help people if they knew how much of a diversified portfolio you allocate to preferreds.

There is no one-size-fits-all, as you know. But half of the fixed income portion would be in line. — Garth

#94 REIT Investor on 06.15.12 at 8:18 am

Garth – what are your feelings about investing in REITs – it is real estate.

Look in the archives. — Garth

#95 bigrider on 06.15.12 at 8:28 am

To the comment about CP24 yesterday night.

Vince Gaitano, monster mortgage, when asked about government of Canada’s concern that we may be in a housing bubble said, quote ” no, I don’t think we are, banks have been pretty prudent in there lending practices and although people may be ignoring credit card debt they are chipping away at there mortgages”

People watch this show more widely then they log onto this blog

#96 bigrider on 06.15.12 at 8:38 am

Al Sinclair, from CP24 yesterday night when asked for advice for people out there looking to buy.

Quote ” It is a very healthy market for buyers and sellers, interest rates are low, get in” .

Unreal.

#97 Jim Lahey, Sunnyvale Trailer Park Supervisor on 06.15.12 at 8:38 am

There was a great void in Sunnyvale the last two eves. Granted the usual shenanigans were going on. Ricky and Cyrus got into a gun duel. Bubbles came back from the supermarket with a whack of shopping carts. Julian, glass in hand, was making a deal with some shady characters. Randy, shirtless as usual, was eating his load of burgers at Phil’s hamburger stand, etc. However, what didn’t happen at the appointed hour was the poem reading over the loudspeakers of this blog’s favourite real estate crash writing poet, FUUUUURRRRRRRSSSSTTTTT. We all can imagine how hard it is to crank out so many poems Furst and the time off is well deserved, however… How about one for the weekend to keep the gang at Sunnyvale happy? We will be waiting this eve…

#98 bigrider on 06.15.12 at 8:42 am

DELETED

#99 Hurricane Hazel on 06.15.12 at 8:44 am

#70 Big Al Original)

“…and try and brag about their conquest of gals from rub’n’tugs. (Mississauga rub’n’tug gals no less!).”

Smoking Man is bragging about rub’n’tug conquests? Someone should tell him that the conquest is in the payment or is he getting their services pro bono? Second, easy on the hard working rub’n’tug gals of Mississauga!

#100 Sydneysider on 06.15.12 at 8:53 am

#86 daystar

I appreciate your research efforts.

#101 John on 06.15.12 at 9:08 am

golem on 06.14.12 at 11:18 pm Can someone explain how is it possible that Canadians have a debt to income ratio of 150%

How can you pay 50% more per month than you make.
——————————————————————–
Canadians are borrowing money. Many borrow from their fake gains in housing HELOC just like the Americans as well as LOC , credit cards , pay day loans etc. Canada is a house of cards.

#102 a prairie dawg on 06.15.12 at 9:09 am

“He argues that this purchase would be a lateral move and even if there’s a correction our original home would be correcting as well. Since we won’t be needing a mortgage he thinks that renting would be throwing our money away.”

– — –

Theresa, he’s 100% wrong.

-It’s not a lateral move at all. That would be trading 1 house for another, directly. You traded 1 house for a fat tax free capital gain at the top of a huge market cycle. Trading that cash windfall now for another house is the riskiest move you could make.

Invested correctly the cash windfall should pay the rent, just in earned interest/dividends. That also means no more repairs or major expenses coming at you unexpectedly. It’s now the landlords problem…

It sounds like he’s suffering from he-thinks-he-knows-what he’s-doing, but he’s also got a mild case of herd-mentality. Left untreated, it can also lead to his-head-is-where-the-sun-don’t-shine syndrome.

Tell him to seek medical help…

“Nurse! 10cc’s of common sense. Stat!”

#103 Gmaz on 06.15.12 at 9:11 am

Another day of above asking price sales in Mississauga.
Also, new listings on MLS have gone up.
Churchill Meadows has a bunch of 900-1.5Million listings now.
I’ve never seen that before. What is going on in Mississauga?

#104 John on 06.15.12 at 9:15 am

Smoking Man wrote:

“guess you know where I am going with this.you target the young bay street puppies, have a platform on the bow where they can knock golf balls into the lake. Have two hot ladies to serve the booze and for massages, wink. You charge a crazy fee 3 times what the other guys charge. Pay the ladies well so they come back for more, and Never touch your own merchandise.
Word of mouth will travel, so when ever the boys come in from NY or London, Hong Kong and need entertained, they are yours.
———–

That is exactly, exactly how it works. I used to work in Port Credit Harbour Marina. A grim place.

You are write on “how it works”….and the honesty part. And the crappy education part too. It most certainly is koolaid. Having said that, maybe the honesty is for yourself and doesn’t mean much in the interactive model.

There are a lot of “resources” in my family…and in at least one scenario it was built up just as you say. Ironic, because the boat was a lynch pin in it all. The end result is that the “bad guys” are just human ( and prepared to do whatever it takes to gain and keep power), and they are not able to gain or keep power. Although it sure doesn’t appear that way does it.

If you want that, you have to step out of that game and into real power…which is built exclusively on emerging, learned, and imperfect honesty.

I agree that the “live within your means” stuff is patronizing, ignorant nonsense. The “Track 6” reality.

That was a killer to hear that one: I took the GO train all through highschool and university. Ouch. How’s that for a flashpoint of koolaid consumption and blind obedience.

#105 timbo on 06.15.12 at 9:17 am

http://www.insideinvestingdaily.com/articles/inside-investing-061412.html?sub=TD&o=731993&s=736904&u=48412125&l=448872&r=Milo

“And then there’s Brazil. Its deepwater drilling efforts are the envy of the world. State-run Petrobas has about 100 billion barrels at its fingertips.

All told we’ve uncovered a staggering 1.5 trillion barrels of recoverable oil in recent years. It’s already changing the spread of the world’s wealth and power, but the biggest changes are just now creeping onto the horizon.”

And here I was looking forward to $200 oil……..

http://www.bloomberg.com/news/2012-06-15/manufacturing-in-new-york-area-expands-at-slower-pace.html

“The Federal Reserve Bank of New York’s general economic index dropped to 2.3 this month, less than the lowest forecast of economists surveyed by Bloomberg News and down from 17.1 in May. Readings greater than zero signal expansion in the so- called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. The last negative reading was in October. ”

Cough, sputter………..

#106 Mackie on 06.15.12 at 9:17 am

Folks, stop worrying. The good people at CREA have announced average house prices are going up and home sales are rising. woo hoo. The recession is over. Buy homes now before they go up. :O Would some media pls call them out publicy for their BS.

#107 abraxas on 06.15.12 at 9:19 am

No conservartive portfolio can net 6% returns these days. This is hogwash. In this brave new ZIRP world a 4% yield on a conservative portfolio is considered great performance. Nobody gets 6% nowadays without sticking out their necks.

Daily we are treated to evidence of (a) no financial education and (b) the destructive influence of advice garnered at the local bank branch. I regret so few are informed. — Garth

#108 Sun on 06.15.12 at 9:20 am

Hey garth what type of correction will happen in the Fraser valley. You havn’t done any posts on that for a long while.

I didn’t realize anyone still lived there. — Garth

#109 Observor on 06.15.12 at 9:20 am

SMOKING MAN AND EDUCATION

I believe it was Francis Bacon writing a couple hundred years ago agreed with Smoking Man and who said…

“There is no great concurrance between learning and wisdom”

This was quoted in the front of one of my engineering text books…

My father had grade 11 and started several sucessful businesses by the time he was 30. Three of these lasted for decades, one is closing in on 50 years in business. He became easily within the top few percent of successful people in his small town.

SMOKE ON…

#110 squished18 on 06.15.12 at 9:34 am

Hi Garth,

Care to share just one investment to be part of a conservative 6% porfolio?

Thanks,
squished18

#111 GTA REALTORS IN A PANIC. on 06.15.12 at 9:34 am

Just on BNN ….Debt to income ratio hit another record in Canada 154%. Canadians will borrow themselves bankrupt. The housing bubble in Canada is bigger then the US housing bubble. Buying into RE now is a good way to go bankrupt. Those early in the game will also go bankrupt but they lived it up on borrowed money. Prices will revert back to its mean and that could result in over 50% correction.

#112 Rod on 06.15.12 at 9:35 am

“Canadian housing market headed for a correction, BoC says

“Central bank warns country remains vulnerable to euro zone fallout”

http://www.vancouversun.com/business/Canadian+housing+market+headed+correction+says/6782156/story.html

#113 earlybird on 06.15.12 at 9:42 am

#22 Smoking man.. “live within your means” That saying drives me insane, what a horrible thing to recommend to people, it does come from a mindset of limitation, I prefer to expand my means….

Its sad that 6% is such a shocker to many!?!?! Wouldnt the 6% cover the majority of anything they decide to rent? Buying back into the housing market at this point in time would be a monstrous waste of money. Get that 600 G working for you!!!! Maybe try renting for a year or 2, treating it like a mid life adventure : ) Lots of Macro events happening, glad to see people aware of them, Europe needs to go off a cliff….to cure what ails them. As for Canada, what little rate maneuvering room we have left is not going to make a difference anyways, but a bout of job losses will surely kibosh this malinvestment into real estate. Seems like everyone is waiting for a big black swan event, recency bias I guess….Should be an exciting weekend!

#114 Not there yet... on 06.15.12 at 10:06 am

I am trying to believe the “market has peaked in the GTA” discussion. Very hard. Then I read about a “top-up” in my neighborhood (i.e. a bungalow that has another story built on top) selling for $345,000 over asking, final price $1.62m. This is not willowdale or forest hill or even the annex, this is east toronto.

We’re not done yet… I fully expect to see semis for $2m before this really pops.

#115 Herethere on 06.15.12 at 10:16 am

If I may add to John analysis on Teresa’s question and Garth writing, while concurring with it. It is wothwhile to add to the mix to have a better grasp of how deep the paradigm could be. We must not forget to realize that it could affect even an increment on monocotiledoneas perennes, that could be detrimental of the outcome. However to assure the creation of a new benchmark, it became imperative to know at all times according to celestial charts, where is Mars traveling thru Jupiter house or any other house. And it is essential, regardless on what house, Uranus must be safe at all times. And that it should be the benchmark.

I didn’t realize you were an economist. — Garth

#116 TaxHaven on 06.15.12 at 10:19 am

In the jurisdictions under the control of “developed” governments interest rates are artificially set, with printed money, by those governments’ central banks. Those rates bear no connection wiith the real market for money.

That rate is currently under 1%. That means that borrowers at the top end, if large enough and connected enough, can borrow for almost nothing. Those further down the line will pay a bit more and, in fact, the average mortgage-holder pays – what? – only 3-4%…

Mortgage-holders and HELOCS notwithstanding, money should be borrowed only for the the purpose of making bona fide INVESTMENTS. In a no-net-real-growth economy – such as we have now – there aren’t too many of those around, are there?

So why would any entity willingly pay depositors six percent+?

Either they are actually in desperate financial shape and have no access to cheaper money…

…OR they are not “investing” the funds received but are speculating somewhere, either in the equity markets, in derivatives or swaps or overseas or in some puffed-up asset class like oil. Or housing! Haha.

Logic – and the big picture – escapes many people. In any case, either your expected return or the return of your principal is in more doubt than you think.

#117 TaxHaven on 06.15.12 at 10:26 am

“The spillover from an unbridled European financial crisis would carry over to this side of the ocean, first rocking the U.S banking sector and then ours. Already debt-burdened households would begin defaulting on their mortgages, banks would start tightening their lending, jobs would be lost and the hot housing market would go into the deep freeze…”

…and…

“The Bank of Canada went even further in its analysis, saying house-holds could be hit by two inter-related shocks – a big drop in house prices and a sharp deterioration in labour market conditions.”

http://www.vancouversun.com/business/2035/Euro+crisis+could+cross+ocean+Bank+Canada/6787247/story.html

Haha, Canadians! Welcome to the real world.

#118 DaBull on 06.15.12 at 10:38 am

#52 Listened to Garth and bought a house in the US on 06.14.12 at 11:48 pm

HNU is the forward month natural gas ETF from Horizon. I actually dumped just before markets closed yesterday, about 6 hours before I posted my comment.

#119 Toronto_CA on 06.15.12 at 10:41 am

Did we just hit the peak?

http://www.bnn.ca/News/2012/6/15/Homes-sales-prices-fall-in-May.aspx

“The average price of homes fell 0.3 percent in May from the same time last year, the Canadian Real Estate Association said on Thursday.

Housing activity is also showing signs of cooling, with the number of sales falling 3.1 percent in May compared to April ”

And that’s from the lying snakes themselves, the CREA.

#120 Karie on 06.15.12 at 10:48 am

Teresa – over the many years of reading Garth’s books and blog, he has always come across to me as being anti-real estate and I could never figure out why.

Now I think Garth is about balance and minimizing risk – rule of 90, diversified portfolio, etc. He thinks you would be better off renting given your situation and not being heavy on one sector like real estate.

Your husband does not seem to want to rent. I’m sure you could come up with something that you can both agree on. If you don’t both buy into the plan, you might start blaming each other if things go wrong or one of you might say I told you so if their way of thinking comes to be.

How about something like – you’ve already sold, why not rent for 1 year and then consider buying. Then your husband would see renting as short term and you might both like it and want to continue to do so for longer or you might decide that prices have dropped enough that you want to buy back in and you will have hopefully made money on your investments over that time too.

I hope you can work something that you will both be satisfied with and have a long and happy marriage.

#121 Doug in London on 06.15.12 at 10:53 am

Well, this topic is quite a change from the usual. It seems most of the time it’s the woman who wants to get into the housing market while the man is actually considering the advantages of being mobile, liquid, and not burdened by high mortgage payments.

Garth said: billions of dollars have come out of mutual funds, stocks and retirement savings since 2008, to migrate into real estate and help goose property values. That tells me it’s prudent to do the opposite. Eventually the tide will turn, and anyone who invests in equities now will look like a genius.

#122 Halifornia on 06.15.12 at 11:02 am

Bc to Halifax? What about Nfld? There’s a case study!

#123 truth hammer on 06.15.12 at 11:10 am

Just got back from Victoria…….plenty of for sale signs ……pretty much evey block in the nice area’s…plenty of stock…..can’t see any reason to rush out and buy…….inventory seems to be growing every six weeks or so……I’d wait……downtown condo’s ditto……bldgs that had a waiting list for presales now have plenty of listings going unsold…….real estate is a mugs game at this point in time.

People forget that real estate in BC is cyclical in BC…..the illusion this time is the facade created by the ZIRP ( btw Greenspan was interviewed on BNN over the weekend and he still denies that the ZIRP he started when he bailed out the Tech Bubblesters was ‘not an issue bwahahahahahahah) which has extended this business cycle artificially. Going back 60 years though we see that the past waves have been of approx 7-9 years up…..2-4 years trough…..and 7-9 up ……with the last two downturns both in the dumps for exactly 12 years. If that not very scientific assumation proves correct a third time and the swoon has begun….we won’t see another uptick until 2024………..yikes!!! But this is exactly what has happened in the past…..so….get ready…and remember “theres no rational reason to buy real estate when the market is falling”.

If the TD Bank prognostication is correct and we have a shorter than average drop of only 3 years then anyone who purchased over the past three years will lose up to 40% of the assessed value…….far in excess of their 5% ‘equity’. ….more if rates rise over that period of time. However at this point it doesn’t matter if rates rise…the market is still going to fall….the question is ‘how much?’ I think 15% IS CONSERVATIVE…..markets never march to the banks predicted levels….they always tend to overshoot the estimates and ‘stay irrational longer than you can stay liquid’.

#124 truth hammer on 06.15.12 at 11:13 am

corr: should read 7-9 years down….2-4 years peak….7-9 years down…….2-4 years trough….sorry …fat fingers this am.

#125 Observor on 06.15.12 at 11:18 am

NO NET MONEY CAME OUT OF STOCKS

How, exactly does money “come out of stocks” for investors as a whole?

What one investor sells, another has bought.

When stock prices fall, no net money has been withdrawn. Instead wealth has dissappeared into thin air.

Just because analysts talk endlessly about money flowing out of stocks or flowing in does not mean it is true.

Money flows into companies only at IPOs and other sales of shares by a company (which is realtively ratre), and it comes out as dividends and stock buy-backs.

Investors trading with each other cannot withdraw or insert any net money.

Scared retail investors sell to confident professional ones, then buy bungalows. — Garth

#126 stickler on 06.15.12 at 11:23 am

@ #115 Herethere
” Uranus must be safe at all times ”
>> HA Good one

#127 Suede on 06.15.12 at 11:34 am

#110 Squished

Here’s 6% on the dot:

http://www.theglobeandmail.com/globe-investor/markets/stocks/summary/?q=BMO.PR.O-T

(Haven’t dug deeper to find out what type of prefferred this is, so i’ll leave that up to you)

Otherwise, put in your “Dividend Yield” criteria along with any other metrics in the following and watch all the 6%’ers spit out. There are 140 alone in the financial sector if that whet’s your appetite.

http://www.globeinvestor.com/v5/content/filters.html

Alternatively, I know a place you can get 8%, but you’ll have to send a money order to a Nigerian prince that’s about to get his inheritance ;)

#128 Suede on 06.15.12 at 11:42 am

Wow

First the $100 hotdog (which is fantastic) and now this:

http://news.yahoo.com/blogs/sideshow/450-pizza-sold-canadian-restaurant-171550998.html

Some Vancouver entrepreneurs know how to get spotlight….Business ideas of charging exorbinant amounts for products – that actually have a market.

#129 john on 06.15.12 at 11:51 am

Just returned from Odessa Ukraine from a two week vacation. Cry me a river for the poor Ukrainian. I have never seen so many luxury cars in one place as downtown Odessa. Bentley, Ferrari, Maserati, Porsche, Range Rover, Lexus, Mercedes a dime a dozen. The only car I didn’t see was the Jag, presumable because the rich people in Odessa don’t think that it is up market enough! Gasoline is cheaper in the Ukraine than Vancouver! No carbonNazi taxes, of course! No one arm bandits, a.k.a. parking meters downtown, of course!
The waterfront beach area of Arcadia puts White Rock in the shade, that’s for sure. Very beautiful area, even the local stray dogs were happily lapping up the sun the afternoon when I was there. As far as the locals they dress better than people in Vancouver. Well how could this be since we are so rich? Well perhaps we are not as wealthy as we think. This is a subject that our host Garth continually addresses. Ask a Vancouverite about wealth and the answer is always the same. The reply is the value of his residential property. Well a house is a just place to live in. It is not a replacement for an investment portfolio.
One thing that most people miss is PPP a.k.a. purchasing power parity. The price of food is much lower in the Ukraine, and better quality also, there are no toll bridges, and no property taxes. To be fair the standard of living is a mite higher in B.C. and our stock of housing is superior. Outside of the downtown area the buildings in Odessa are much in need of a spruce up and that’s for sure. The difference in standard of living between B.C. and the Ukraine is simply not as great as imagined by the average person.
On another subject the women of Odessa were very beautiful and dressed to the nines. I don’t want to mention some of the more flamboyant dressers, or lack of dresses, or see through dresses with g-string bikini panties because this is a family site and I know that our host would not approve of mixing economic comments and sexual titillation. By the way these were average ladies and the dressing style represents a different culture.

#130 jess on 06.15.12 at 11:54 am

sickos

http://truth-out.org/news/item/9804-health-insurance-companies-plowed-over-$107-million-into-electing-speaker-boehners-anti-health-reform-congress

Health Insurance Companies Plowed Over $107 Million Into Electing Speaker Boehner’s Anti-Health Reform Congress
The money was hidden in 501(c) groups

#131 AG Sage on 06.15.12 at 11:57 am

>#37 Canadian Watchdog on 06.14.12 at 11:01 pm

Isn’t it false advertising if they don’t show the neighboring house 6cm from the eaves on either side?

#132 Bottoms_Up on 06.15.12 at 12:04 pm

#110 squished18 on 06.15.12 at 9:34 am
Hi Garth,
Care to share just one investment to be part of a conservative 6% porfolio?
Thanks,
squished18
——————————————-
Believe it or not, he might just say “gold” (at 5%).

#133 Bottoms_Up on 06.15.12 at 12:07 pm

#107 abraxas on 06.15.12 at 9:19 am
——————————————-
Take a look at pension investment funds…they easily do better than 6%/yr. Obviously they have more clout as they are so big, but they are also well diversified.

If 14.5% returns are capable by them, why couldn’t one get 6%?

http://www.investpsp.ca/en/public-service-pen-plan-ff.html

#134 NAM not HAM on 06.15.12 at 12:22 pm

Hey garth what type of correction will happen in the Fraser valley. You havn’t done any posts on that for a long while.

I didn’t realize anyone still lived there. — Garth
—————————————————

800,000 people just disappeared.

If you’re talking about the whole FVREB, prices are pretty much flat YoY. The further east you go, the less activity you will see. Nordel seems to be the strongest out of all the areas. Abby looks shaky. 6 moi overall.

#135 ozy - if you read this on 06.15.12 at 12:34 pm

if you read this, and you are horny to buy a house, you should probably stop.
1. unless you have 30-70% downpayment
AND
2. unless you KNOW (not your agent) what you ARE DOING, stop right there.

Great Risk Ahead ——–> Fall of 2012, GTA peak, Falling Housing Rocks

#136 Tony on 06.15.12 at 12:54 pm

Re: #8 TaxHaven on 06.14.12 at 10:18 pm

You go to the head of the class. Usually it’s the more conservative quote investments that end up putting you in the poorhouse for the simply reason just like horseracing the favourite is always over bet. What’s deemed as risky is usually where you make the most money because all the sucker money is on the other side of the trade.

#137 Bulls eye on 06.15.12 at 1:02 pm

I’m not impressed with the Cover of the Calgary Sun this morning suggesting that we are going through a boom. The cover gives you the effect that it’s factual in its report until you read the article full words expressing its support on “expectation”, “forecast” model ahead. Bunch of BS.

#138 Davey Boy on 06.15.12 at 1:07 pm

Not that Garth needs any defending, but to all those people that question a balanced and diversified portfolio I’ll give you my personal experience.

I have 1.1 million that is professionally managed. I pay 1% per year management fees. In the last few months of stock market volatility it is down roughly 25K, not bad, while continuing to pay monthly dividends. It made up of all the components Garth talks about regularly about. The list of those is exhausting, reits, preferreds, etc. I’m 50 and in for the long haul so slight fluctuations don’t bother me.

I’m careful with my money, don’t eat out often, no expensive toys, I really enjoy the simple things in life like nice walks in nature, cycling, laying on the beach ( when it’s not raining in Vancouver). But to try and manage investments yourself without a professional advisor is false economy in my opinion.

#139 Dupcheck on 06.15.12 at 1:13 pm

Hi Garth,

Nice write up. May you do a RE write up about London ON.

Keep up the good work.

#140 Observor on 06.15.12 at 1:17 pm

TRAVEL PLANS

Thanks to John at 129, Odessa Ukraine is on my travel wish list.

John makes excellent points about noticing how people are dressed and quality of life in different cities.

Going to school in the 60’s and 70’s I came to understand that Russia (actually USSR which then included Ukraine) was a complete wasteland where people barely had enough to eat and had to line up for everything. It was all collective / communist and I actually though people had to ask before they left the house.

My point is I was given a VERY North American centric education whereby Europe and Austrailia were poor cousins to Canada and the U.S. and the rest of the world was bascially primitive.

For many years I refused to believe that true western style development was happening in China. It happened in front of my eyes and I totally missed it because it did not fit with my world view.

Nothing beats travel to change your world view.

There’s an idea, sell the house and travel!

#141 DondWest on 06.15.12 at 1:37 pm

Smoking Man is asking the following question, where are all the young entrepreneurs? My response, it’s not 1965 anymore. If Smoking Man were to morph into a young person today, he would soon discover getting a reasonable business loan on anything is close to impossible.

There’s has been more than enough comments on the subject matter; the banks are not handing out loans to entrepreneurs to start small businesses. However, the banks seem more than willing to hand out an unbelievable amount of money to buy an overvalued house.

So how could a young person get a business financed today? The only way to do it would be to buy a pile of overinflated valued houses, rent them all out to mitigate risk, and then take out HELOCs at paltry low interest rates. This is incredibly convoluted and unnatural way of financing when it would have been more proper to just get the loan directly from the bank.

To briefly summarize the dangers of such a financing plan, you’re exposed to extreme asset risk, you have liquidity problems, regional risk, the financing plan is inflexible, you have to start an unrelated business (real estate) in order to finance the business you may wish to get into, etc.

Overall, much too convoluted, getting a business financed via spaghetti works is bound to failure. It’s a lot like the Eurozone, if one of the dominoes fall all of my dominoes will fall. Getting a business financed by “virtue of the house” at low interest is good until one of the houses fails or the tenants decide to no longer show up.

So what’s the solution around this? Sadly, we’ll have very few young entrepreneurs because the best solution is to become a bank yourself – and this takes time. By the time you’ve accumulated enough capital gains by reading up book after book on investing you’ll be in your middle ages. Unfortunately that may mean spending a lot of time working for a slug much stupider than you.

Canadian corporations are indeed allergic to risk, I couldn’t agree more. . . Why just today, despite being once again the top producer for the company and having perfect attendance (often working 50 hour weeks), I was once again denied a promotion for a position I’ve seen incompetents crash and burn a total of five times this past year. It’s frustrating being constantly passed up for a position only to see the people they chose over you fail miserably, but at least the reasons I’m being denied has produced memorable posters to decorate my walls. Here’s one such epic reason:

“You’re considered a risk taker and loose cannon. This behaviour cannot be tolerated. We’re an established corporation with our reputation to uphold. Our job as human resource professionals is to eliminate risk and probable liabilities within the company.”

Almost as good as the last time I was rejected (also pasted on the wall):

“You seem to have issues with authority. . .”

#142 disciple on 06.15.12 at 1:37 pm

Smoking Man… All I got to say about your latest get-rich-quick nonsense is those who can, do, those who can’t, well, they suffer us their ruminations on blogs… Your latest take on improving your pimping business is not a keeper. Algorithms my a$$, I suspect what you supply to high net worth clients ain’t no calculus “curves”.

Anyway, this little device may put your local pizza joint out of business? http://tinyurl.com/6nuqjsa

#143 Don on 06.15.12 at 1:43 pm

Guy in the orange shorts on 06.15.12 at 12:16 am

Victoria..

Basically, it is referred to as the the land of the “Newly Wed and Nearly Dead”.

It serves no useful purpose, it is the Winnipeg of BC re hood ornament for Confederation …and the “Quebec of BC” re: freeloaders.

Hopefully, the tectonic plates will collide in such a way that it(and the rest of Vancouver Island) floats out sea..and sinks…cause it really ruins a good ocean view for rest of BC.

History will show that Vancouver Island is equivalent of Australia to Britain, send the lower class riff -raff there.
++++++++++++++++++++

I too wish the island would float away so we don’t have to deal with the mindless Vancouverites who are obviously so inept in believing real estate will go up forever. I have never visited a city so full of themselves other than Victoria, but Vancouver is so so unprepared for reality. Full of gangs and yuppies dressed like children with little intent on maturing. Vancouver is built on gravel loam for the most part – have fun with that in an earth quake ass wipe.

#144 squished18 on 06.15.12 at 1:55 pm

#127 – Suede

Thanks for the reply. However, you’re failing to factor in risk of capital loss (or gain, for that matter). Over the last year, the price of BMO.PR.O has fallen about a dollar. So the actual return including the dividend was about $0.625, which gives you an actual yield of about 2.3%. Far from the 6% we were hoping for.

Please also remember that Garth is advocating a return to the normalization of interest rates. So when rates go up, what do you think happens to your nice 6% dividend yield on BMO?

Not so conservative in my books…

#145 John on 06.15.12 at 1:57 pm

#103 Gmaz

Either you are a realtor or someone trying to sell their home as the housing situation in Mississauga/GTA continue to get worse. My bro and SIL can not find a buyer for almost two months and nothing in the area is selling. Realtors advised is to drop the price in hope to get more interest. Seems like a smart move before others see the housing market for what it is and that is falling prices and sales.

#146 Bill Gable on 06.15.12 at 2:19 pm

#142

A new low in xenophobic, ignorant comments.

Old age is a privilege denied to many.

Your comments have no place in my lexicon and you betray an envy that makes me sick.

Ever been through an earthquake?

Many of my neighbours were killed in Mexico, during a large earthquake – when our building collapsed – and so I was particularly upset about your stupid, and rude diatribe.

FAIL.

#147 Investx on 06.15.12 at 2:36 pm

12 Gypsy Kid:
Why do people think renting is wasting money?
you live there…thats not a waste.
——————————————————–

It’s a waste if the mortgage payments are comparable to cost to rent. You could be building equity in a house meanwhile.

#148 Regan on 06.15.12 at 2:52 pm

In response to the question of young people and business, here in Toronto at least there are entrepreneurs busting out at the seams making apps, SAAS applications, new technologies and businesses. The luckiest one have the skills in-house and don’t need to hire out (gee, thanks education! It’s ridiculous to say education hurts your business drive!) because guess what – banks don’t lend money to young people unless it’s to buy a %#$#^ house. Getting a business loan is next to impossible. I’m not young, I’ve been in business for years and I tried for a business loan – they could only offer me a tiny loan based on my home equity. I could yank out more from my HELOC to renovate my kitchen with purple fur if I felt like it than to back a basic business plan.
So, for those who want to know, that’s why smart entrepreneurs (in tech anyway) leave for the U.S. where they will actually get some funding to grow. The misallocation of investment funds is just one of so many problems that come from an economy skewed to pumping real estate.

#149 a prairie dawg on 06.15.12 at 2:52 pm

Might as well just go for the record now.

http://business.financialpost.com/2012/06/15/household-debt-continued-to-grow-in-first-quarter/

#150 45north on 06.15.12 at 2:52 pm

Suggestion: Could you explain why 2008 will not happen again?

because years are numbered consecutively

#151 Gmaz on 06.15.12 at 3:05 pm

#144 @John.
I am absolutely not a realtor or selling my home.
My family are buyers and REALLY need a nice and well priced house, like pronto.
I just subscribed to ToSold like some other commenter advise me to and I scratch my head at the resulting sales and it freaks me out. The prices are still going up.
Check MLS and note what is listed for $750K and above.
These are just standard 4 bedroom resale homes AND they are selling. If you don’t believe me, subscribe to TOSold.ca yourself.
I don’t like it at all. I’m all for someone making a tidy profit on these homes but I have lived in Mississauga for 35 years and I remember what these homes were originally worth.
Also, check out the Churchill Meadows neighbourhood, tons of listings 900K-1.5 million….. at 9th line and Britannia. For someone in Mississauga, that is like “the Boonies.”

#152 Al on 06.15.12 at 3:09 pm

#4 – TnT – Don’t know why CP24 keeps using that same jerk all the time – must have a realtionship with the host !

#153 Harlee on 06.15.12 at 3:10 pm

#129 john
I was very interested in your post as my maternal grandfather came from a town north of Odessa. I was only three when he died (and I only have one brief memory of him laughing) but he told my uncles just how tough life was for him there in the late 19th /early 20th century. The Cossacks,or whatever Russian soldiers there were at the time, would come on horses and beat him and the other farmer peasants with whips. He escaped in 1911 and made his way to Saskatoon where a cousin of his was living in a small house at the time. Later my grandfather managed to own his own farm and land. He died in 1959 ,two years after building his retirement house in the city.Two of my uncles went to Odessa and area around 1973 and found it very interesting.One night they stayed with some farm relatives in a yurt. Of course, back then it was still part of the USSR but they had a guide to help them. Now that Ukraine has opened up so much it is much easier to travel to and in.
In Norway, nice shoes are considered important so when I visited my distant cousins in Trondheim I made sure I wore my best dress shoes. Same thing when we went to the parade in Oslo. There’s a lot of young people in Norway but they’re usually dressed pretty nice – no faded or “grunge” jeans. At least that was my impression.
Thanks again for a detailed post on your travels.

#154 disciple on 06.15.12 at 3:21 pm

DELETED

#155 syd on 06.15.12 at 3:30 pm

CTV – BS – prices rising with steady decline – lol

http://www.ctv.ca/CTVNews/TopStories/20120615/canadian-real-estate-sales-down-120615/

#156 Steven Rowlandson on 06.15.12 at 3:32 pm

The government thinks we are all on the average made of money.

http://finance.sympatico.ca/home/contentposting_reuters/canadian_net_worth_now_193500_per_person/cdcd9011

#157 disciple on 06.15.12 at 3:36 pm

Is the Canada Pension Plan Investment Board (CPPIB) regulated by OSFI? If not, why not? Private pensions are regulated, are they not? I see a lot of Hsg (MBS housing trusts) in the portfolio. Potential disaster?

#158 Aussie Roy on 06.15.12 at 3:41 pm

Investx on 06.15.12 at 2:36 pm
12 Gypsy Kid:
Why do people think renting is wasting money?
you live there…thats not a waste.
——————————————————–

It’s a waste if the mortgage payments are comparable to cost to rent. You could be building equity in a house meanwhile.

……………………………………………………………………………

“Building equity”, because everyone knows house prices only ever go up – LOL.

“Building equity”, I suppose it also applys to building NEGATIVE equity?.

#159 DondWest on 06.15.12 at 3:46 pm

#147 Regan

Yep Regan, true enough, I’m age 30 and buying a house is the only game in town.

I can’t exactly barter up my wages. I can’t get a business loan. Getting an education so I can look “more sexy” to the HR drones and get that promotion for an extra two dollars an hour? LOL! There’s no ROI there, just more work.

I suppose I could try to write an app online where everyone expects stuff for free and see how that turns out. . . I would also have to compete against billions of Indians, Chinese and Americans. . .

Sadly, “playing house” is the only risk a young man is allowed to play, so many do. . .

The problem with Garth’s message, and why perhaps it falls on death ears to many young people, is what exactly do they have the frak to lose? I can understand a 50 something boomer dropping all his retirement savings down on a 1 million Toronto semi, but the young who bought houses were poor before they bought houses, and if Garth is correct they’ll still be poor after they bought houses. Unless Garth expects our baby boomer employers to give us a raise soon, *laughs*, I’m a tad confused what’s the risk involved when you already had nothing to begin with.

#160 Alex N Calgary on 06.15.12 at 4:02 pm

Hanging out at the real estate focused law firm today. The girls were all laughing as one of the people on the mortgage listed their occupation as “home manager”. They giggled as the discussion turned into, how does one receive such an education? know how to vacuum, do dishes and even laundry? BAM you have a degree in Home Managment :D

Nice girl next to me got a big fruit basket from a client who rammed a 2Million dollar house through in just 2 days till posession, I said “probably 2500sqft” they agreed, we’re doomed!

#161 Suede on 06.15.12 at 4:08 pm

#143 Squished

When rates go up, the prices of existing preferreds and bonds goes down, you are correct. However, the thought is that when rates start increasing gradually, sure one force will have the price of the preffereds fall slightly, but there’s another force on the buy side from people wishing to park their capital in such an instrument such as the boomers planning to retire, downsize and earn a steady return.

Straight Perpetuals pay their yield for a long time, so unless you need to be in-and-out of the market, and plan to have this security as part of a much larger portfolio, it’s not advised to put 100% of you capital into this.

You’re correct in identifying the risk. To counter the risk, you build other components in the portfolio to mitigate such an event.

Otherwise, there’s many REIT’s out there that pay 6% like Boardwalk and Dundee but of course that comes with individual risk and must be mitigated as well if you’re only pulling up a 1 year chart.

Recency is a big problem. Pull up 5 to 10 year weekly or monthly charts. If you’re going to check these equities and securities daily then you’re gonna have a panic attack watching them fluctuate. A preferred that moves a dollar in a year is chump change compared to what single equities can move and junior energy and gold stocks.

Compare preferreds with interest rate changes over the last 5-10 years. Some have been in existence for almost that long. Rates went down, then up, then down where we stand. Usually they hover in and around $25 and when they’re called back in, the bank pays just above that.

If you’re serious about investing, talk to a financial advisor that doesn’t try to sell you an income fund, mutual fund, GIC, term deposit and who’s fee you can write off on your tax return.

#162 John on 06.15.12 at 4:13 pm

Davey Boy wrote:

“I have 1.1 million that is professionally managed. I pay 1% per year management fees. In the last few months of stock market volatility it is down roughly 25K, not bad, while continuing to pay monthly dividends.”

What is your opinion on the legitimate and identifiable risks that your “wealth” is exposed to during the next 24 months. Not other people’s opinion. Not a “professional financial consultant”. Not what you guess. Not what friends, work mates or family says. Not the obviously false “information” of mainstream media. Not from the university, magazines, movies, TV shows or a religious leader.

The issue isn’t about managing 1.1 million. That’s absurd. You’d have to be brain dead to waste your time in the casino playing the game. It’s much better to leave that to people who want to do that ( for whatever reason).

The point is…what are the risks? Do you really think that a commissioned salesperson can or will advise you beyond game playing? Where are you getting this idea from.

Your position sounds very irresponsible. Understandable due to dog training, but c’mon. What is going on in your world.

The “professionals” will just say…”sorry”. Nothing more. Thinking for yourself is your job. Why not get educated? In one month you’ll know. And the “professionals” will deny everything you say.

Everything. That’s something you CAN take to the bank.

(a) Fee-based advisors are not commissioned salespeople, (b) do you have $1.1 million liquid? No, then why are you giving advice — Garth

#163 gokou3 on 06.15.12 at 4:14 pm

http://www.bcrea.bc.ca/docs/news-2012/2012-05.pdf

Greater Vancouver prices down 11.9% in May, YOY. Ya ya I know it’s “average price” and is subjected to the mix of homes sold. But we have been seeing reductions like this for a few months already.

If indeed comparable home prices have not dropped (as REBGV would argue for its BS benchmark), then basically one is saying that the cheap houses are being sold and the expensive ones have been sitting stale for a long time.

#164 Pr on 06.15.12 at 4:18 pm

It seems not a terrible lot has changed since the 1400s. Leonardo da Vinci then stated, “There are three classes of people: those who see. Those who see when they are shown. Those who do not see.”

#165 jess on 06.15.12 at 4:36 pm

you might like to read this one disciple

http://www.33rdsquare.com/2012/06/robotic-sewing-systems-could-decimate.html

#166 Canadian Watchdog on 06.15.12 at 4:37 pm

#156 Steven Rowlandson

It’s called inflation http://i46.tinypic.com/23rl91d.png

We may all be billionaires one day. http://postimage.org/image/nyqa0afoj/

#167 Derek R on 06.15.12 at 4:41 pm

#164 Pr on 06.15.12 at 4:18 pm wrote
It seems not a terrible lot has changed since the 1400s.

Smart man, that Signore da Vinci. Well worth listening to.

As for how much things have changed since the 1400s, I’d refer you to another quote by the much less well-known Jean-Baptiste Alphonse Karr, who said “plus ça change, plus c’est la même chose”.

#168 Canadian Watchdog on 06.15.12 at 4:42 pm

Potatoes have outperformed Vancouver and Toronto’s home prices. Up 47.1% from 2008. http://postimage.org/image/9z4o48nh7/

Canned tomato juice has outperformed Vancouver and Toronto’s home prices.Up 49.7% from 2008. http://postimage.org/image/9r3cjgoqf/

Roasted coffee has outperformed Vancouver and Toronto’s home prices. Up 63.5% from 2008. http://postimage.org/image/p5oi0ehnf/

Toothpaste has outperformed Vancouver/Toronto’s home prices, stocks, gold, bonds…Up 86.2% from 2008. http://postimage.org/image/7b39ui99f/

And many more…

Inflation 2%?

#169 Van grrl on 06.15.12 at 4:52 pm

#147 in response to Gypsy Kid:

“It’s a waste if the mortgage payments are comparable to cost to rent. You could be building equity in a house meanwhile.”

When was the last time mortgage payments were comparable to rent?? And where? Even so, it wouldn’t be a waste. You’d still have the roof over your head. Perhaps it would be an opportunity missed but the month-to-month shelter is still of value, and you don’t know that a renter isn’t putting savings elsewhere- with the money they aren’t ‘wasting’ on repairs, property taxes, buying more stuff to fill their house with, etc…

#170 Fat Bastard on 06.15.12 at 4:52 pm

“If you’re looking for wisdom in what the majority of people do, good luck. There’s a reason most are struggling. — Garth”

GOLDEN WORDS RIGHT THERE !!

#171 new_era on 06.15.12 at 4:58 pm

Alan Greenspan – speech on the supressing the housing bubble.
(“would we be able to do it. I doubt it!”

http://video.cnbc.com/gallery/?video=1029066462&play=1#eyJ2aWQiOiIxMDI5MDUzNjE5IiwiZW5jVmlkIjoiUHA1TktxYy9xNnJZNzM5VWNjd2hadz09IiwidlRhYiI6ImluZm8iLCJ2UGFnZSI6IiIsImdOYXYiOlsiwqBMYXRlc3QgVmlkZW8iXSwiZ1NlY3QiOiJBTEwiLCJnUGFnZSI6IjEiLCJzeW0iOiIiLCJzZWFyY2giOiIifQ==

#172 Leggendario on 06.15.12 at 5:05 pm

@ a prairie dawg

Damn that Android Autocorrect :) Lol

#173 Linda Pearson on 06.15.12 at 5:09 pm

#15045north on 06.15.12 at 2:52 pm
Suggestion: Could you explain why 2008 will not happen again?

because years are numbered consecutively

(belly laugh) Thanks, I needed that!

#174 jess on 06.15.12 at 5:10 pm

http://rru.worldbank.org/documents/CrisisResponse/Note7.pdf
Dynamic Provisioning 2009

By Jonathan Weil Jun 15, 2012 11:38 AM ET
http://www.bloomberg.com/news/2012-06-15/how-to-say-deceptive-accounting-in-spanish.html
====================
McCreevy quits bank post after ethics ruling
By Constant Brand – 08.10.2010 / 14:49 CET

#175 espressobob on 06.15.12 at 5:14 pm

when it comes to investing, I’m no Einstien. A 6% yield is dead easy with a good mix of stocks & ETF’s. What I don’t grasp is why people go in debt for hundreds of thousands of after tax dollars to buy a house? Where is Albert when you need him?

#176 NAM not HAM on 06.15.12 at 5:26 pm

(a) Fee-based advisors are not commissioned salespeople, (b) do you have $1.1 million liquid? No, then why are you giving advice — Garth

B) with 1.1 mil, I don’t think you’ll be wasting your time here. Most posters here are not big money makers. That’s why most People here rent.

There is no evidence most visitors rent or share your financial status. — Garth

#177 Investx on 06.15.12 at 5:27 pm

158 Aussie Roy:

Investx:
12 Gypsy Kid:
Why do people think renting is wasting money?
you live there…thats not a waste.
——————————————————–

It’s a waste if the mortgage payments are comparable to cost to rent. You could be building equity in a house meanwhile.

……………………………………………………………………………

“Building equity”, because everyone knows house prices only ever go up – LOL.

“Building equity”, I suppose it also applys to building NEGATIVE equity?.
……………………………………………………………………….

You can build equity just as you can in the stock markets which also “don’t ever go up”… and more likely in the scenario I stated – of comparable mortgage payments with a relatively large down payment not needing insurance. You’re less likely to be underwater.

This compares to NO chance to build equity in the property you’re renting.

Don’t paint all scenarios with the same brush.

#178 Observor on 06.15.12 at 5:27 pm

TYPES OF PEOPLE

There are only three types of people

There are those who can count, and those who can’t.

#179 Don on 06.15.12 at 5:45 pm

Re-
#152 Al on 06.15.12 at 3:09 pm
#4 – TnT – Don’t know why CP24 keeps using that same jerk all the time – must have a realtionship with the host !

That jerk you speak of pays a fee to be on the show!!

#180 Kurt on 06.15.12 at 5:51 pm

147 Investex:

12 Gypsy Kid:
Why do people think renting is wasting money?
you live there…thats not a waste.
——————————————————–

It’s a waste if the mortgage payments are comparable to cost to rent. You could be building equity in a house meanwhile.

———————————————-

Wrong. If the mortgage interest plus maintenance costs plus taxes plus the difference in utilities and insurance plus greater transactions costs for foreseeable moves minus reasonably expected appreciation on the property is comparable to rent, then you could be said to be wasting money on rent. Far too many people have got sucked in by not looking at the whole picture, and hence say the stupid things that gypsy kid has noticed. Note that if you take a short amortisation, the mortgage payment are bigger, but the interest (and hence the result of this calculation) remains the same.

#181 Market Bull on 06.15.12 at 5:54 pm

#168 Canadian Watchdog:

And my Boston Terrier has easily outperformed you intellect.

#182 Saskatoon Housing Bubble on 06.15.12 at 6:11 pm

Garth,
I got a bunch of graphs for you.

Household debt to income now stands at 154%
http://1.bp.blogspot.com/-IHVUQgkcJgU/T9umx7f4v2I/AAAAAAAADrs/1xPat9hA7qw/s1600/Household+debt+to+personal+disposable+income.jpg

Homeowner’s equity as a % of real estate is down from it’s 2007 high of 71% to settle in at 67% as of the first quarter of 2012. This even though the average house price in Canada has increased from just over $300,000 in 2007 to over $360,000 as of now. A sure sign of credit induced bubble.
http://3.bp.blogspot.com/-7-y8QBPkDKs/T9umsUoQiMI/AAAAAAAADrk/h3el7KOvgPs/s1600/Owner%2527s+equity+as+a+percentage+of+real+estate.jpg

Home owner equity, Canada and US 1990 -2012. Canada sits at 67%, the US is at 40%.
http://3.bp.blogspot.com/-qRIrVKR_sbw/T9uuWoMHZYI/AAAAAAAADsQ/alrAmlQxw8Q/s1600/Homeowner%2527s+equity+as+a+percentage+of+real+estate.jpg

Net worth as % of personal disposable income Canada and the US 1990 -2012.
http://4.bp.blogspot.com/-0vFg2xG7MGc/T9uso4DYmII/AAAAAAAADsI/zcN7m4k947c/s1600/Net+worth+as+a+percentage+of+personal+disposable+income.jpg
Some may say that we need to look at the debt to assets ratio and forget about the household debt to income ratio but the US said the same thing in late 90’s and mid 2000’s.

The problem with this thinking is that while assets go up and down, debt remains until it is paid off. As we all know Canadians have had less income and GDP growth but more debt growth than the Americans over the last 30 years.

http://4.bp.blogspot.com/-0R8onHIm7XM/T9uwYezi0rI/AAAAAAAADsg/S9KTM4J3ObE/s1600/Canada+and+US+GDP,+Household+Debt+and+Income+Growth,+Index+Base+1982+=100.jpg

#183 V on 06.15.12 at 6:19 pm

#140 observer
You said it
I have been all over the world and have noticed that the world is catching up.
Travel is so important
You see how the world really is without the filter

#184 John on 06.15.12 at 6:28 pm

(a) Fee-based advisors are not commissioned salespeople, (b) do you have $1.1 million liquid? No, then why are you giving advice — Garth
_________

Splitting hairs. Look what is going on in the world. The poster thinks his “1.1 million liquid” is the main event in his “financial” scenario. What I’m saying is clear. The real estate bubble is a mirror of the entire financial scenario, and he is not informed about what that is. He actually believes that the issue is to be “liquid”, protect yourself and invest the best that you can ( getting a better return…much more so…than leaving equity in an asset that is definitely going to go boom).

Naturally, this is GOOD ADVICE. It’s common sense. But it’s hardly the issue at hand given what’s happening right now.

Further, looking at the real scenario, dynamics, players and society would open the door to an unpleasant fact: Being liquid and investing is a false sense of security, but perhaps at a much bigger level than is represented both here and in many sources.

This is worth chewing on, because we’re in a paradigm shift. Things are going to change. Nobody can say exactly how, but the Canadian real estate bubble is a pretty damn big clue.

The debate will open up…whether anyone likes it or not.

Imagine the value judgment in these times when looking at “not having or having 1.1 million to invest”.

How’s that going to look a few years down the line when a kid currently in grade 10 enters the workforce. It’s not unreasonable to debate at a wider level…that’s where this bubble is taking us anyway. And not just Canada.

It’ll be interesting to see what happens here in Latin America after Sunday. Maybe in another month. Some questions down here….currently Chile is flush.

#185 Nostradamus Le Mad Vlad on 06.15.12 at 6:29 pm

#111 GTA REALTORS IN A PANIC. — “Canadians will borrow themselves bankrupt.” — Interesting sentence, and I guess that it is theoretically possible, with Reverse Mortgages, HELOCs, LOC and no heirs to inherit anything. Now the life insurance has gone!

#138 Davey Boy — Excellent post. It’s much simpler to pay a fee-based advisor 1% than try to figure things out oneself.

#141 DondWest — “My response, it’s not 1965 anymore.” — In those days, pretty much anyone could get a job anywhere and be paid a good day’s pay. Not any more. Your post is accurate, and why I’m very grateful and happy to be retired.

#186 Guy in the orange shorts on 06.15.12 at 6:41 pm

I figure Smoking Man is at least 95 years old.
That makes his mom….at least 107

#187 Gmaz on 06.15.12 at 6:46 pm

I enjoy all these comments but I really want to know where i can get some public data on things like new listings and prices of resale etc for mississauga area.

#188 NAM not HAM on 06.15.12 at 6:48 pm

Garth,

Looks like you are right about the stock market so far. I believe you said there will be a small market correction and the saw tooth higher. I’m still a little spooked by the EU not being able to get their act together.

#189 Mark Carney is an Idiot! on 06.15.12 at 6:48 pm

DondWest #159

You are right..no money has nothing to lose and will gamble with money they don’t have . If the market goes up or they have HELOC they can get their hands on they will be happy. If everything goes down the drain they will go bankrupt. Majority of Canadian home buyers will spend spend spend until they are bankrupt. Good job CON carney , CON Harper and the rest of the fascist CONservatives.

#190 Canadian Watchdog on 06.15.12 at 7:15 pm

#181 Market Bull

You’re right. People don’t eat or buy other goods with their money. They just buy homes. http://www.statcan.gc.ca/daily-quotidien/120425/dq120425a-eng.htm

Fool.

#191 Canadian Watchdog on 06.15.12 at 7:43 pm

Check out Buzz Buzz Home’s condo developer calender event sale blowing up. http://blog.buzzbuzzhome.com/the-residential-development-events-calendar

Don’t forget to click more!

#192 Nostradamus Le Mad Vlad on 06.15.12 at 7:46 pm


Full Proof Solution Change to a new currency and wipe all existing debts / deficits clean? Suicide by Wealth Headline poses a very interesting question; Jailed “Why have their been no arrests for Wall Street’s mortgage-backed securities fraud?” wrh.com; The Fourth Reich and Santa “The consensus in Washington, DC is that we should blame Germany for the coming World War, because that worked out for us the last two times!” — Official White Horse Souse” wrh.com; Max Keiser Greek citizens sold into slavery, Obomba doing the same with Americans; Brazillion Kingdoms Don’t ask; Spain, Greece, Italy and more Perpetual QE world; BP After ruining the GoM, they have announced that Venezuela now has the largest oil deposits; Kelowna Flightcraft Just inked a sweet deal with Westjet; IMF and Egypt Let the west bail Egypt out. After all, it was the west who invaded Egypt in the first place, and Fitch downgrades Egypt.
*
It’s Official US now a dictatorship; John Bolton, Certified Psychopathic Whackjob and Cartoon or Truth? Ukraine Soros likes color revolutions; 3:16 clip Drones — who is on the US hit list? Testy China – US at the WTO; Janet Napolitano’s Dream Act “DHS Secretary Janet Napolitano announced that “younger” illegal invaders will no longer be arrested but will instead be issued work visas that can be renewed every two years and into eternity.” Is Obomba buying himself a second term? 8:27 clip US addicted to war.

#193 Davey Boy on 06.15.12 at 8:27 pm

176

I spend time on this blog, which I don’t consider a waste of time, because I too was pressured by others when I moved to Vancouver to buy a place. I looked on the internet and found this site ( a year ago) and decided not to buy based on what I read here.
The reason I kept reading is it’s entertaining with the various posters like Smoking Man, Westernman etc.

In fact I start my day off reading this blog, maybe I should go buy a Range Rover, Maseratti so I can be like most Vancouverites that are financially well off, but spiritually starving.

#194 Devore on 06.15.12 at 8:36 pm

#177 Investx

This compares to NO chance to build equity in the property you’re renting.

Is there some law that you must build equity in real estate? Do you feel bad when you’re in a grocery store and realize you’re not building any equity in the farm the vegetables you’re buying came from?

Some people CHOOSE where they build their equity. Many do not choose real estate. You actually CAN build equity in the property you’re renting, as many are held by REITs. The house you live in is shelter, not an investment exercise. And if you call yourself an investor, as you deem to, you should realize the fallacy of “forced savings”.

The high cost of housing due to speculation, leverage, subsidies and moral hazard is taking a massive toll on the society, and will continue to do so. There is no upside here.

#195 Market Bull on 06.15.12 at 8:51 pm

#181 Market Bull: You are clearly out of ‘ammo. Mom still wants the laptop back… dawg.

#196 zeeman on 06.15.12 at 8:56 pm

at GMAZ:

i have been seeing your comments and I have no clue why you think mississauga prices are going up so fast…..I have been checking mississuaga prices and they are coming down compared to early part of the year…you speak of churchillmeadows, there are so many good houses with double car garage and approx 2800 sq feet for 600k….none of this million dollar homes you say the area is filled…..and it does not matter what the asking price….its the sold price that counts.

#197 X on 06.15.12 at 9:06 pm

Sweet! A new Canadian Record.

http://www.thestar.com/business/article/1211760–canada-s-household-debt-burden-rises-to-record-high

#198 a prairie dawg on 06.15.12 at 9:06 pm

TGIF…

“Everybody’s workin’ for the weekend”

(80’s flashback)

http://www.youtube.com/watch?v=ahvSgFHzJIc

#199 Canadian Watchdog on 06.15.12 at 9:25 pm

#195 Market Bull

I take it you’re addressing yourself out of lunacy, cause my ammo is restocking everyday. http://postimage.org/image/wqpdbkl7l/

http://www.buzzbuzzhome.com/castlemore-on-the-humber

You’ve been chasing nothing but added dollar volume that was never accounted for before. The market is already crashing.

#200 45north on 06.15.12 at 9:36 pm

Daystar: David Poidevin: We are 42 percent higher today in Canada than the U.S. was at the peak and we are 93 percent higher than the median price in the U.S. today, which is $195,000.”

Poidevin is from Vancouver where we are seeing the first cracks in the housing market. Toronto is the key however. As Toronto goes, so goes Canada.

#201 John Berkowitz on 06.16.12 at 4:14 am

One word about this article – brilliant!

I have read the montly report of the Real Estate Board of the Great Vancouver by myself and I was surprised that the director Eugene Klein is still calling the situation “stable”. People like him, the so called experts, are convincing me even more that Home Prices in Vancouver are going to hell. Garth I really respect you for your consistent opinion on the housing market and about your ability to say the truth.

I´m surprised that Teresa´s husband did the right move and now is willing to do the bad move. I can´t really see the logic of his decision…

#202 futureexpatriate on 06.16.12 at 8:20 am

Good call about Obama winning in November.

Americans aren’t voting in a guy so sheltered and rich he doesn’t know what to call a donut after 65 years on the planet.

#203 Boomer on 06.16.12 at 12:12 pm

Garth,

Predict Real Estate prices all you want. Interest rates too. Have your fun with polititians. But don’t tell us who will win elections in the US. You lose all credibility at that point.

I’d wager I have more political experience than you. — Garth

#204 TNT on 06.16.12 at 2:19 pm

Day Star, nice one.