Contrarians

OK, let’s recap. The Greeks didn’t blow up. Spanish banks got bailed. The G20 is writing cheques. The Fed’s stimulating again. Stock markets recovered. Corporate profits are solid. Volatility’s falling. And you can hold that order of Depends.

The last few days have given yet more confirmation of what I told you last August. No US recession. Nobody will default. Steady, glacial growth. No re-run of 2008. Stocks are cheap (the S&P’s about 20% behind corporate earnings), and yet people are scared. This is a human moment. Big emotions. Little logic.

Here’s what this blog said before the Greek thingy:

Volatility, as measured by the VIX, was running at 79 during the 2008-9 financial crisis, and right now is at a languid 21 (now it’s 18). Interest rate increases are on hold, with the certainty hikes will be slow and measured, protecting the yield on preferred shares. Real estate investment trusts continue to churn out steady returns based on commercial rents. And investors today have a rainbow of choices – from secure bonds which pay more every time inflation rises to principal-protected notes producing hedge-fund-type growth with a 100% guarantee. Meanwhile exchange-traded funds (ETFs) have wiped away much of the volatility of owning individual stocks, while retaining full growth potential.

Risk is sorely misunderstood.

For most of us (especially women), the greatest risk is not losing money in an asset which temporarily loses value. Instead, it’s running out of money. This is where the majority of people are headed.

Most days I write about real estate, because that’s where house-horny, credit-fueled Canadians have chosen to stuff most of their net worth. Inflated prices, indebted families and a moribund economy make this a dangerous asset. The fact 70% of families have property accelerates the risk, because (as in the States where home ownership topped at almost 69%) when sentiment turns negative, everyone joins in.

If real estate equity represents a reasonable amount of your net worth (90 less your age), you can probably survive the next few years. If most of what you have is in a house, you should change that while you still can. Fact it, I can’t remember a time when being a contrarian made more sense than it does right now. Pretty much all of your friends, co-workers and tedious relatives have it wrong. They fear markets, love houses, trust nobody (except Mike Holmes and tubey Sandra), invest nothing and think they’re doing great. Look around, and run.

On what day was there the least risk to investors in the past decade? Yup. March 9th, 2009 – the afternoon that markets hit bottom, and millions of panic-stricken investors dumped billions of dollars in stocks, mutual funds or ETFs. When was the moment of greatest risk to homeowners in Vancouver? Yup. That day in March – three months ago – when the price of a SFH euphorically topped the $1.2 million mark.

Always be a contrarian. It’s because most people are almost always idiots. This blog’s a great example. My little contribution to anthropology. When a market falls, everybody sees risk. When stuff goes up, it’s safe. Recency is rampant. We think what has just happened will go on continuously. It’s the reason anybody would be dumb enough to say, “it’s different this time.”

Contrarians don’t watch HGTV and are unswayed by people with nice hair who tell you things convincingly.

Contrarians see opportunity where others sniff danger. Fear attracts them.

Contrarians buy low, then sell high. They’ve learned how to take profits – one of life’s hardest skills.

Contrarians know human behaviour, not a balance sheet, is where to look. Technical analysis is their map.

Contrarians are buying financial assets and dumping houses. They’re betting on America, even Europe. Eschewing bonds. Paying off personal debt and borrowing to invest. Redefining ‘safe’ at a time when it actually means the opposite.

I will return to this theme in coming weeks, and amplify it. Most people will ignore me. Many will mock. I cannot thank them enough.

210 comments ↓

#1 Smoking Man on 06.19.12 at 8:57 pm

Your early tonight just sitting here getting my next scathing rant vs Harpo, F and C, my train of thought gone after reading you.

Fisrt he he he

#2 drv on 06.19.12 at 8:57 pm

Hey Garth great post. But what’s with the professional tone of your writing these past few days. Has one of your Amazons tuned you up ;)

#3 MarcFromOttawa on 06.19.12 at 9:02 pm

I remember that woman from a couple of years ago.

She’s probably a public servant now.

#4 arcs55 on 06.19.12 at 9:04 pm

Excellent article! I just graduated, renting, and can see all of the REIT’s, ETF’s and Commodities that are pretty juicy right now. I just wish I had some money to invest instead of debt to pay off.

#5 TurnerNation on 06.19.12 at 9:06 pm

The summer equities rally is upon us! Forget houses.
Had a laugh today. Financial Post Newspapers (symbol FP) is yielding 15% dividend. Newspapers…kind of like horse and buggy.

And, from yesterday’s linked Toronto Life article:

“”Last summer, he linked to a market commentary by George O’Neill, a broker in the Beach, after O’Neill predicted a price rise in the area. “Sadly, many souls are being led astray by realtors like this one in Toronto,” Turner snarked. Within hours, O’Neill’s site was flooded with Turner acolytes deriding his predictions””.

Err, we prefer to be called Blog Dogs. And we’re liable to turn any piece of Internet turf into a steaming, soaking, hole filled mess!

#6 pathcontrolmonk on 06.19.12 at 9:06 pm

Stop Harper indeed, but what happened to the scantily clad macromastic blondes?

#7 Pr on 06.19.12 at 9:08 pm

…No US recession. Nobody will default. Steady, glacial growth. No re-run of 2008…
Very sure, most thing will hold on, its, … election year!

#8 Expat on 06.19.12 at 9:10 pm

I hear what you are saying on housing, but to be a bit contrarian, or maybe just obstinate, here is a link to a contrary opinion of contrarians.

http://www.thestreet.com/story/11580061/1/cramers-mad-money-recap-beware-treacherous-contrarians.html?cm_ven=RSSFeed

#9 Don't read his post on 06.19.12 at 9:12 pm

Primo

#10 TaxHaven on 06.19.12 at 9:12 pm

What do you mean “no U.S. recession”??

Who needs an officially-declared recession when your kids can’t find careers? When your debt load is multiples of that your parents endured? When a dollar doesn’t even buy a candy bar?

Add up the truly unemployed, the underemployed, the perma-students, the basement dwellers, the already-emigrated, the disability collectors, the welfare collectors, the taxi-driving PhDs, the career store clerks and the burger-flipping home”owners”

…and then think back to the (debt-free and growing)standard of living we enjoyed thirty or forty years ago…

…and things are manifestly NOT OK. For more and more of the people, the recessions never really end, do they?

Is anyone here old enough to take the l-o-n-g view…?

#11 LilyFlor on 06.19.12 at 9:12 pm

Best post yet!

#12 ShockednAwed on 06.19.12 at 9:13 pm

Here in Penticton there seems to be little real estate activity other than price reductions.

#13 Smoking Man on 06.19.12 at 9:13 pm

Canada is communist.

Fat dwarf F and slick C are full of crap, we get lectured always how Canadians are not productive. Perhaps they should look in their own back yard.

Anyone every try and get a boat licence the numbers for a new boat, bought in the USA. saved 36%

web site of transport Canada says 5 days to process, what a load. june 6m I send by courier my application NB . its been twelve days and they tell me when I call its not in the system.

Ok losser can I talk to someone. Nope, Can I email someone, nope we don’t have email, ok how about a fax. No can do we don’t have one.

Ok ass I wil get on the next flight and deliver the app in person.

Sorry sir the only way is mail. and by the way as the dog is wagging his tail how did you find out about us.

I say the web. They get a boner so excite. Retards

So we have a licensing office of transport Canada that can only receive application my mail/

How fkd is that.

So I Google the minister of transport send an email then call. I talk to his secretary and she’s laughing, we get about 20 calls a day on this, nothing we can do its service canada.

Why are 100 people not fired.

Why

Communism here.

#14 gladiator on 06.19.12 at 9:18 pm

I’m sorry, Garth, but the real questions are:

“Does Greece have enough strength to get out of the hole and pay its debt back?”
“Does Spain have the capability to pay the bailout money back?”
“Does the populace of (at least) North America have the buying power to buy enough stuff to SUSTAIN corporate profits at their current levels?”
“Can the Fed keep stimulating ad infinitum with quantitative easing?”
“Are stocks REALLY cheap given that they are not far from the highest level they’ve ever been?”

The (one) answer to all these questions, unfortunately, is “No”. With all due respect, but I need to know what kind of air you are breathing – I want some of that.

#15 [email protected] on 06.19.12 at 9:18 pm

I’m not sure about the Europe thing is that even resolved for the foreseeable future?

#16 Aaron - Melbourne on 06.19.12 at 9:20 pm

“Always be a contrarian. It’s because most people are almost always idiots. This blog’s a great example. My little contribution to anthropology.” – Garth

*****************************
This is why I visit daily. Its cheaper than the zoo and twice as fun.

#17 @crazyfasteddy on 06.19.12 at 9:22 pm

Contrarian? They get their limbs ripped off too. Any of you “contrarians” feel like buying Greek bonds?? Helluva deal on 10 years with 27% yield…yeah.

#18 Joe Bloggs on 06.19.12 at 9:25 pm

“…Contrarians … are betting on America, even Europe. Eschewing bonds” – sorry Garth, but those are not cotrarians. They are idiots. You are getting confused again.

#19 Soylent Green is People on 06.19.12 at 9:29 pm

Brigette DePape is a Canadian activist who came to national attention on June 3, 2011. Brigette was a recipient of the Loran Award,[1] a scholarship for young Canadians with Character, Service, and Leadership.
While a participant of the Canadian Senate Page Program, she stood in protest during the throne speech of the Government of Canada in the Senate, silently holding up a sign that said, “Stop Harper!” This action lead to her prompt dismissal because of the non-partisan nature of the page occupation and her disruption of Canada’s Governor General in parliament.[2][3] DePape’s protest featured as the front cover illustration for a book on Contempt of Parliament published in Ireland in January 2012. [4] In a subsequent interview, DePape said, “Harper’s agenda is disastrous for this country and for my generation.” [5]

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

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#20 Singarti on 06.19.12 at 9:29 pm

After reading this blog for the last couple of days I just had to post. Besides happily renting at his point in my life, we have raised our kids in four different provinces while following job opportunities. (and contrary to popular belief kids do turn out normal even with moving)
What I found most disturbing was the missed lesson by some. We earn a modest wage, live a modest life and have modest savings. I covet nothing. Especially someone’s McMansion. We have been dirt poor and bankrupt and would not wish that on anyone. Hopefully housing has a soft landing otherwise it could look like a boulder thrown into a pond instead of a pebble. The waves could take a lot of people under. I’ve read this blog since the beginning and it put into words what I have learned the hard way over the last 20 years. Smarten up people.
Garth, I not only heard, I listened. Thank you.

p.s. May I have your thoughts on the Saskatchewan Pension Plan?

#21 Marco from Van on 06.19.12 at 9:31 pm

Garth,

You’re my financial compass – thank you.

I learned a long time ago that those who seek the maximum will always fail. Those who go for the “chunk in the middle” will make a lot of money as they rinse and repeat.

Technical analysis taught me to identify trends, momentum, volatility, upper and lower supports and other great tools to identify who and how money is being moved in and out of markets.

Today was a great example of institutional money flowing back in after risk lowered and confidence returned.

I sold a bunch of shares yesterday (which I bought last week). I sold and took profit 16% below today’s market top but was about 6% up on my position.

A colleague laughed at me as I did not hit the top, justifying why he doesn’t “play the market”. He still lives in his mortgage trap, I just took 6% in less than 4 days. I rinse and repeat, he sits and prays (well no, he sits and gloats, we’re in Vanocouver after all).

I’m going to Hawaii for 2 weeks (paid in debt free cash), he goes on a 2 week vacation paid for by HELOC.

I have no debt and my investments pay for my rent 2.5 times over, am liquid and mobile, he is a paper millionaire with a debt load that takes a new HELOC every year to finance (8 years in the running and he’s bragging about how easy it is).

I don’t know weather to laugh or cry…

I’m one of those listening to you…

#22 NAM not HAM on 06.19.12 at 9:34 pm

So you think it’s a good time to buy stocks again?

I don’t buy stocks. — Garth

#23 Steven Rowlandson on 06.19.12 at 9:36 pm

Nothing is settled or solved Garth. Have wages gone up to compensate for 30 to 50 years of real estate inflation? Generally NO! Have governments repented and stopped borrowing money and started paying down debt? Generally NO! Have banks and governments done the right thing and stopped manipulating markets?
NO! Have governments stopped trying to interfere with the internal affairs of other countries and abstain from making trouble? NO! All that has happened is the spreading of BS about austerity, negotiations about debt that debtor governments will not pay and a whole lot of other garbage to get peoples mind off the problems caused by politicians ,banksters and politically correct special interests. If any thing the problems will get worse not better because nobody incharge will do the right thing and quit screwing everything up with their idiotic policies. May be we need something like the dark ages to happen to show people the consequences of the social and economic progress the powers that be instituted since the 18th century. I think the world will find out the hard way and being an optimist and an apologist for the system is not going to change the outcome.

#24 earlymidlifecrisis on 06.19.12 at 9:42 pm

Best pic in a long time!

#25 Not 1st on 06.19.12 at 9:49 pm

Nobody defaulted?? Garth, are you serious?

The Eurozone has had multiple defaults in the past few years, they just don’t call them that because the ECB prints up more imaginary fiat currency to cover the debts. They have many more coming.

The U.S. does the same every day borrowing to cover its interest payments to foreign treasury holders and having the fed run the printing press.

Its like taking out a loan to pay your mortgage, or would you advocate that strategy for underwater home owners? ITS EXACTLY THE SAME CONCEPT.

#26 JohnL on 06.19.12 at 9:53 pm

ahh yes we continue with our balance sheet recession and will try to emulate Japan. Without the assistance of the rest of the OECD expanding, it will continue to succeed till it doesn’t.
Weimar started printing and all was great, unemployment plummeted….. till it didn’t. What rhymes with that???

#27 Canadian Watchdog on 06.19.12 at 9:54 pm

Here’s those trades I suggested in early March Garth.

Example with 10K trading RIoCan and HIF.
http://postimage.org/image/szlrp7ytz/

Gambling. — Garth

#28 Devore on 06.19.12 at 10:04 pm

#8 Expat

First of all, Cramer is a loon with a terrible investment record, at least in post his hedge fund days. His show is borderline passable for entertainment.

Second, he’s floated a strawman here. A contrarian is not someone who zags instead if zigging just for the sake of zagging. Just because a stock or a sector is down relative to others, does not make it a contrarian move to buy it.

Third, Cramer is a momentum investor, and his recommendations and track record reflect it. He gets creamed every time the market moves against him, because he neither sees it coming, nor is he hedged against it.

#29 Montrealer on 06.19.12 at 10:05 pm

do you do hourly consultations? lets say we have an amount too small for fee based but would like a portfolio distribution to invest (etf, reits, etv)?

Let me call the hotel. — Garth

#30 Housing_Bubble on 06.19.12 at 10:07 pm

Garth Turner is a Sage!!!!

#31 randman on 06.19.12 at 10:16 pm

YES Garth…always be a contarian..

Can you say …gold?

R

Being a contrarian was taking profits last year when I told ya to. — Garth

#32 John S on 06.19.12 at 10:18 pm

Think you spoke too early, Garth.

Wait for the market carnage along with PMs, IF Bernanke does not announce QE in any form tomorrow.

‘Carnage’? You must lead a cloistered life. — Garth

#33 Debtfree on 06.19.12 at 10:19 pm

Garth you missed the Chinese are topping up the IMF .

#34 [email protected] on 06.19.12 at 10:21 pm

NAM not HAM In case you havent figured it out Garth invests in RE

#35 Living in AB on 06.19.12 at 10:25 pm

Contrarians rock on, except when their wives don’t let them.

#36 45north on 06.19.12 at 10:33 pm

Marco: A colleague laughed at me – he sits and gloats, we’re in Vancouver after all

Ben Rabidoux says that the drop in Vancouver housing will be severe – Canadian banks will be hit hard.

your colleague – I think it’s now too late to sell and pay off the mortgage and HELOC.

I’m afraid the long foretold drop in the Canadian housing market is right in front of us.

Anyone saying Canadian banks will be hit hard by a housing correction displays their ignorance. — Garth

#37 Rural Rick on 06.19.12 at 10:35 pm

Smoking Man. Careful who you piss off. Clerks who are harassed have been know to put a file in the next box over. Worked there saw it happen.

#38 Lily Joe on 06.19.12 at 10:39 pm

I’m with Marco from Van ~ I too am going to Hawaii with debt free cash, have an average house, young family & happy affordable lifestyle. It feels awesome!

#39 Inglorious Investor on 06.19.12 at 10:46 pm

If contrarianism becomes popular enough, it will become consensus. In which case, the stupid thing to do could become the smart thing to do.

Maybe what investors really need today is Radical Contrarianism.

For example:
• Buy shares of bankrupt companies.
• Don’t invest your extra cash. Eat it.
• Pay your bank interest on your savings. Make sure the rate far exceeds inflation.
• Buy gold bullion. Then leave it on your porch.
• Trust politicians to do the right thing.
• Print stock charts on transparencies and hold them up to the night sky. When the stock pattern matches a certain constellation, buy that stock. (Actually, this method may be just as effective as traditional technical analysis.)
• Seek out companies convicted of accounting fraud.
• Look for ways to pay more tax.
• Trust the financial press.
• Engender a bidding war for your home, but insist on payment in macaque monkeys.
• Buy contaminated land as far away from civilization as possible.
• Invest everything you have in a single, shady, junior mining company in Russia.
• Put all your eggs in one basket. Literally. But don’t refrigerate them.
• Trust Wall Street.

This approach is sure to get results.

#40 OlderbutWiser on 06.19.12 at 10:46 pm

“The Greeks didn’t blow up. Spanish banks got bailed. The G20 is writing cheques. The Fed’s stimulating again. Stock markets recovered.”

Wow, talk about make believe. If wishes were bailouts the European banks would be full. The Greeks are still in debt up the ying yang. Nothing has been resolved there yet. They can’t even make a government. The Greek saga is not over by a long shot. Spanish banks did not get bailed out yet. The ESF is not even enacted yet. What about debt subordination – the market has already given some indication of its feelings in that regard. I see Europe as an enormous grenade with the pin aready pulled. There will be knock on effects in NA markets if they drop the ball. My view is that there is no way on God’s green earth that Germany will accept a reduction in their standard of living that is needed to put the pin back in.

The risk is just as great that Europe does something stupid as there is in the Canadian real estate market.

Although I would love to hear more about your thoughts on investments outside of RE, your comment that “I don’t buy shares” is interesting. Do you mean that you don’t buy individual stocks rather than staying out of stocks completely? If that is the case, then I am interested in why – I know that you can read a F/S.

#41 citizen of convenience on 06.19.12 at 10:50 pm

US is in recession, so yes there won’t be another one until this ends. US is running on printed USD supply. Canada on the other hand is running on debt guaranteed by natural resources.
OECD said that many Canadians are hungry before, now they say don’t be another Arab country where there is no industry but selling things from underground.
http://www.theglobeandmail.com/report-on-business/economy/growth/canada-needs-to-jump-start-productivity-oecd/article4253814/

Gold is good in long term, the least risky and worry free investment. Nobody can guess short term fluctuations as in US they officially print fake gold as certificates without any physical backup.

Europe surely won’t disappear, because unlike US they still produce something and unlike Canada, they don’t rely on resources to sell. Still, strong Europe won’t save North America.

#42 Josef on 06.19.12 at 10:52 pm

Just had to share this http://www.lfpress.com/news/london/2012/06/19/19894021.html

#43 Gypsy Kid on 06.19.12 at 10:55 pm

marco, its not just your friend…lot of people are living off their heloc. they think they ‘re being clever doing this. paying for kids education and activities with heloc, leasing luxury cars, etc…sad. really.

#44 45north on 06.19.12 at 10:55 pm

Anyone saying Canadian banks will be hit hard by a housing correction displays their ignorance.

well sorry, Ben Rabidoux said that the drop would have “implications” – I extrapolated that to say the banks would be hit hard. Yes I know the present default rate is only 0.5% and that CMHC would cover the banks losses. What I mean is that BC society will be hit hard – for example Marco’s colleague.

#45 Jaydee on 06.19.12 at 10:58 pm

Proud to be a Contrarian! Made a few extra paycheques on my investments this week too :)

#46 fiendish Thingy on 06.19.12 at 11:01 pm

One of your best photos ever!
Garth, I hope when you revisit this topic, you’ll give a primer on Technical Analysis for us unenlightened ones.

#47 Bandiguile on 06.19.12 at 11:07 pm

VIX is a lagging indicator. It shows what happened in the past and is no indication of what’s going to happen in the future.

If you want a real contrarian opinion, here is what’s coming:

1. Global recession (no engine of growth anywhere / end of the myth of the “US recovery”)
2. Growing insolvency of the Western banking and financial system and henceforth partially recognized as such
3. Growing frailty of key financial assets such as sovereign debts, real estate and CDSs underpinning the world’s major banks’ balance sheets
4. Fall off in international trade
5. Geopolitical tensions (in particular in the Middle East) approaching the point of a regional explosion
6. Lasting global geopolitical blockage at the UN
7. Rapid collapse of the whole of the Western asset-backed retirement system
8. Growing political divisions within the world’s “monolithic” powers (USA, China, Russia)
9. Lack of “miracle” solutions as in 2008 /2009, because of the growing impotence of many of the major Western central banks (Fed, BoE, BoJ) and States’ indebtedness
10. Credibility in freefall for all countries having to assume the double load of public and excessive private debt
11. Inability to control/slow down the advance of mass and long-term unemployment
12. Failure of monetarist and financial stimulus policies such as “pure” austerity policies
13. Quasi-systematic ineffectiveness henceforth of the alternative or recent international closed groups, G20, G8, Rio+20, WTO,… on all the key topics of what is no longer in fact a world agenda absent any consensus: economy, finances, environment, conflict resolution, fight against poverty…

This if from GEAB, the guys that consistently get things right since 2006, including the GFC of 2008.

Here is the full article: GEAB N°66 is available! Red alert / Global systemic crisis – September-October 2012: When the trumpets of Jericho ring out seven times for the world before the crisis

‘The trumpets of Jericho’? And you believe this crap? — Garth

#48 City Slicker on 06.19.12 at 11:09 pm

This doesn’t sound like the US is recovering:

“Job Openings in U.S. Decrease by Most in Almost Four Years”

http://www.bloomberg.com/news/2012-06-19/job-openings-in-u-s-fell-to-3-42-million-in-april-labor-says.html

3.42 million job openings. Yes, real disaster. Lol. — Garth

#49 Scott in Gibsons on 06.19.12 at 11:23 pm

Cole’s notes on Global Financial Markets

-Major banks around the world are insolvent because of stupid loans they made that will never be paid back.

-AS LONG AS THE BANKS ARE BEING BAILED OUT, MARKETS WILL HOLD OR GO UP.

-IF GOVERNMENTS STOP BAILING OUT THE BANKS, MARKETS WILL PUNISH INVESTORS UNTIL BANKS GET THEIR WAY.

Simple!

No major NA bank is insolvent. — Garth

#50 Bandiguile on 06.19.12 at 11:25 pm

“‘The trumpets of Jericho’? And you believe this crap? — Garth”

They predicted pretty much everything accurately since 2006, including the financial crisis, and more recently the euro crisis and its current outcome. They are highly respected and don’t feel the need to constantly flip flop on their opinions… They actually regularly go back to their predictions and compare them with what happens in reality. How about you?

I prefer the Pipes of Harley. — Garth

#51 Ontarian in Cowtown on 06.19.12 at 11:42 pm

This post was right on the money, as usual. Is there something about the 70% number that really can’t be passed (e.g. there just aren’t enough people who want to buy houses left)? If homeownership rate was 99%, I can’t imagine the economics working so well (who would be buying, economies work on moving money around).

#52 Dave on 06.19.12 at 11:42 pm

No US recession? Everything is rosie?
Then why does the Fed need to stimulate?
Am I missing something?

#53 Bandiguile on 06.19.12 at 11:45 pm

“I prefer the Pipes of Harley. — Garth”

You’re a great “pipeau” player.

#54 TnT on 06.20.12 at 12:12 am

Help!… I sold my house, sitting on a ton of cash ($300k) while I rent. I want to buy a house when rent is more than owning so maybe 5 years or so… I have a good chunk in BTG771 fixed income.. I need to know where to balance the rest… I’m 42 and have kids going to university so it can’t be crazy risky but I want more than inflation with medium risk… All suggestions are welcomed.

PS.. Garth, I can’t find Money Road at any local bookstore and all my local libraries have it out for weeks… I’ll pick it up online but are there any updates for today’s market?

#55 meslippery on 06.20.12 at 12:13 am

#47 Jobs in the 80s my wife had one.
a few pennies shy of $10.00 per hour.
Gas was 50 or 60 cents, houses less than $200,000.00
Now gas is? Houses? Pay now $10.25 per hour.
Her job was low skill factory.
So it went up 35 cents in32 years .

#56 Observor on 06.20.12 at 12:17 am

TAXES and a Contrarian View

Most people are in favor of lower taxes.

In fact income taxes and corporate tax rates have declined a lot in the past 15 years or so. But some are never satisfied.

A few nutbars posted here in the past few days that there should be NO income taxes.

Grown up mature people realise that:
1. There will always be income taxes and there is nothing you can do about it

2. A certain amount of tax is neeed by the government and there would be anarchy with zero government

3. Government is never ever going to shrink to some level that was appropriate in 1800 or so. (And was it small even then?, really with all the wars)

4. Having a huge tax bill is not such a bad thing when it comes along with a huge income.

Warren Buffett may pay a lower tax rate than his secretary, but he still pays million in personal taxes each year (on investment income outside of Berkshire Hathaway).

#57 Tim on 06.20.12 at 12:25 am

You speak as though you are calling a market bottom…Ask the Italians how things are going… Or ask the Spaniards, even they know this little infusion of money they received will not change things substantially. Corporate profits will likely decline in the next quarter due to general weakness in the European economy. The stock market’s rise is likely due to the decisions in Wisconsin to go after the bloated unions.

#58 ACP on 06.20.12 at 12:28 am

#2 drv on 06.19.12 at 8:57 pm
Hey Garth great post. But what’s with the professional tone of your writing these past few days. Has one of your Amazons tuned you up ;)

10 bucks says the professional sounding blog entries are bits and bites from the new book.

#59 Of_Montreal on 06.20.12 at 12:29 am

Would the contrarian house dumping extend to rental properties with decent cap rates, or is that just foolish?

#60 Tim on 06.20.12 at 12:29 am

Re #19 Soylent Green is People

Yes, and the sad thing is that even at her young age, she is more informed than the dimwits who voted for Harper.

#61 Carpe Diem on 06.20.12 at 12:29 am

#13Smoking Man

I am a IT management consultant for a Service (Service Canada, Service , Service .

The objective is to transform government interactions with Citizen with one number, email, fax or whatever. It is also to automate and streamline business processes.

But this shit takes time. It does. At my client, I see professional folks (mostly boomers) serious on fixing things before they retire. They do however require Gen-X consultants like me to make it happen.

Some dude wanting to import a boat is not a priority. 20 calls a day versus 10000. What do you want to implement first?

#62 ACP on 06.20.12 at 12:31 am

#42 Gypsy Kid on 06.19.12 at 10:55 pm
“… leasing luxury cars, etc…sad. really.”

You notice that, too, every second person drives a BMW or a Mercedes? I don’t even consider them “nice” cars anymore, they’re as common as a Civic or a Corolla.

#63 Mark on 06.20.12 at 12:40 am

So they solved the problems in Europe eh? Wow. Great news. Just like Garth predicted, no recession headed our way. Seems to me they “solve” the problem in Europe every couple of months. Why is that Garth? Why didn’t all of the previous meetings and agreements work out?

Stateside Garth sees growth, but misses the fact that it’s propelled by ever increasing amounts of debt. Seems sustainable, right Garth?

More easing on the way, wicked! With interest rates at zero it’s obvious the real structural problem with the economy is money is too tight.

Garth told all of us “Goldbugs” to sell at $1900. Too stupid to listen to him we were. Of course, if we actually had been listening, Garth would have had us sell long before $1900. He likely would have discouraged us from buying in the first place.

Garth, you are right on real estate, wrong on the economy. Nothing has been fixed. The problem is debt, and that is being piled higher and higher.

#64 Mr Buyer on 06.20.12 at 12:46 am

If real estate equity represents a reasonable amount of your net worth (90 less your age), you can probably survive the next few years.
………………………………………………………….
Hopefully that statement is not suggesting that we are approaching a dip in real estate values that will play itself out over the next few years. There is an infinitely small likelihood of that happening and for the fevered buyer that stumbled upon this comment I will clarify by stating that it absolutely will not happen. This is a bubble and these prices will collapse along with the bubble as all bubbles do and there will be no return to these lofty prices in the absence of 50 or 60 dollar an hour minimum wage jobs.

#65 Mr Buyer on 06.20.12 at 12:48 am

Can’t flip it and can’t afford it. It is done, free money or not.

#66 D from the P-town on 06.20.12 at 12:50 am

A little confused Garth. Perhaps you can expand on the U.S. recovery. As a contrarian, I would avoid the U.S. at all costs. It is a declining nation both economically and politically.

#67 Gunboat Denier on 06.20.12 at 12:52 am

Mmmm….tubey Sandra….gotta love curvy girls….. yum-yum…..

OK back to blog…Garth – how ’bout some tips on PPNs?

#68 rentin on 06.20.12 at 12:53 am

Don’t follow the money, lead it.

Garth – How about some comments on where the stock market is headed?

If the RE market is cooked, which I believe it is, talk about something else.

Granite and SS is getting old.

#69 Nostradamus Le Mad Vlad on 06.20.12 at 12:53 am


“Contrarians are buying financial assets and dumping houses. The Fed’s stimulating again. (QE5 or Dr. Ruth’s Sex Show?) This is a human moment. Big emotions. It’s because most people are almost always idiots. Little logic.” — Last two words are dead on.

Most sheeple wouldn’t be able to figure out how to strike a match against a box in order to make it burn. Pity them, for they know not what they do (or don’t do).
*
#10 TaxHaven — “Is anyone here old enough to take the l-o-n-g view…?
— and —
#7 Pr — “. . . its, … election year!”

Yep, and there’s a lotta shit to go under the barge yet, different things in different parts of the world, all having some impact or other. Good posts.

#12 ShockednAwed — Did you see CHBC-TV’s Five o’clock news? They had an article on all the “For Lease” signs on stores in Penticton. Seems like the recession is starting to bite.
*
US$ shortage? Germany Did anyone know that Germany was baled out first by the ECB? Seven mln. adults on the brink; Inflation falls Wot about food prices? Tesco’s forty mln. pound bill; Advice from Advisors RBS dumped a whack of ’em; Rich tax dodgers or EI cheats Difference? None, and Dole (or EI) People are probably getting ticked off at doing nothing; Boots used to have a store here, but left a long time ago; John Mauldin and James Kunstler Doomers or realists? Imminent Reflections on GD2, yet to arrive; US$13K for beauty cream In Japan; Traveling Perks; Greece It’s not all about money; Eleven Metals we use every day; Where’s My Pension? Empty Airports in EZone; Ten Companies that are possibly going broke.

The Elite How to steal an election (fairly easy); JPM Bailing themselves out; Biggest Myths taking economies apart; Coffee How bitter is it? A Single Retirement; Britain’s Elite Students; Portugal Honor among thieves; Nukes cost a fair bit; Pathetic State pension funds; Global Recovery? Psycho Killers or nutbars (chart is colorful); Impossible? Nothing is impossible; Italy out?
*
Work and Cancer Avoid working if possible! John or Jack Daniels? Hmmm; Great Shot! Unfortunately, not in the right space; Squirrels and the fiscal crisis. It may have the right idea; Voyager One Farewell, my lovely; Any Color You Like Lady sees more; Ex-criminals who re-arranged their lives; 14 Foods Covered in pesticides; ObL Not quite dead yet, sir; Ecuador Anyone remember Julian Assange? China develops daft science; I Am Curious — Electric blue clouds over the poles; M 5.2 Oregon, M 6 Alaska and M 5.5 Melbourne Busy ‘quake day.

#70 B.Anchor on 06.20.12 at 1:00 am

The GTA remains all about interest rates. Mortgages need to be paid in cash. Demand is a price dependant concept. You still need the lower price properties selling for realistic number (eg price at 85% leverage is serviceable from ordinary wages), to prop up the next level of market and so on. People who can pay cash for housing in the 1-2m range are insufficient in number to move the whole market, outside smallish suburbs as noted. Below is how many times over you pay for your house based on GTA median house prices and incomes. This ignores fixed (and rising) holding costs such as property taxes, maintenance, and insurances. Price is 550k for house, 15% cash deposit, term is 25 years. Guess what, 6.8% is closer to average than 3.8% is for interest rates. Long term low rates will only likely persist with problematic demand and employment. The issue for buyers since ’10 is how little principal is reduced in the early years of a loan, so even if it takes 3 more years for rates to rise, it is still going to kill affordability for the over leveraged, which in recent times is the majority. Above 7%, you are buying your house twice over, in after tax money, before all other costs. If rates rise even the GTA will be hit hard.

Int Rate Total %House Incr Cost %Income
3.80% $725 131.78% $0.00 37.17%
4.80% $804 146.13% $78.90 41.22%
5.80% $887 161.18% $161.70 45.46%
6.80% $974 177.00% $248.70 49.92%

#71 from kits on 06.20.12 at 1:12 am

some big perdictions garth….data is showing US is in a recession just not technically but last 3 months show clear signs.

greece already has defaulted….question is will they default to a larger extend, will spain, and will germany back them up?

#72 DondWest on 06.20.12 at 1:35 am

#50 Ontarian in Cowtown

That’s exactly the problem and I’m starting to see it first hand this summer. Canada now stands as the only nation to see this illogical housing bubble to it’s very end – we have simply run out of greater fools.

People who argue for increasing home ownership well past 75% are of the same well intentioned fools who advocate for full employment. Sadly, we need unemployment to keep the wheel turning; sadly we also need renters to keep real estate turning.

Right now, people selling their homes are left scratching their heads. Their homes may have been listed for a year, but they can’t bring themselves to lower the price because they have no measurement. While the open houses may be turning up empty; people selling homes are not exactly getting any low ball offers either. Why? Because there’s simply NOBODY LEFT.

#73 Robert Dudek on 06.20.12 at 1:41 am

Calling for a crash right now WOULD be the contrarian view.

#74 FTP - First Time Poster on 06.20.12 at 1:51 am

While I respect your insight on RE Garth, I have to kindly disagree with your take on the EU, Greece and especially the US. I’ve been following both your blog and David Rosenberg’s commentary for years.

While you have RE nailed, he has economics nailed and gets paid well for it. His two most recent articles:

He’s been right for a long time and is worth paying as much attention to for his take on the economy as you are for your take on Real Estate.

#75 TRT on 06.20.12 at 2:09 am

Wonder what would happen if consumers broke up the Oligopoly/Collusion in Canadian business. Airlines, Cell Phone/Media/Internet companies, Gas Stations, etc.

Gas in Bellingham USA 41 cents/L lower than Surrey BC… a record!!

Sheep will be sheep…like follow by having a car free day to protest high gas prices…the fools!

It’s simple. Boycott one company in each industry for a set period of time. Maybe, Westjet-Rogers-Chevron etc. See what happens after one month.

#76 TRT on 06.20.12 at 2:10 am

I didn’t include banks in the above in fear of the post getting deleted.

#77 Listened to Garth and bought a house in the US on 06.20.12 at 2:29 am

Garth, from a value investor point of view, wouldn’t you want to enter the stock market when the ^VIX is at approximately 30 or higher? Right now at 18 its telling you the market is complacent and overbought.

In my opinion the retail/ main street value investor currently should be stock piling his money waiting for that VIX indicator to go 30 or higher before purchasing a stock or ETF. Unless the person investing has done their analysis, which means the have a margin of safety and their target price has been reached for that ETF or stock, then they should buy. (Warren Buffet stuff)

Garth, don’t you feel in general the market is currently too high as Robert Schiller has indicated and that the retail investor before purchasing needs the ^VIX to go much higher from here to get assured value from the stock they purchase from Mr. Market. Unless of course you’re a day trader and not an investor, which means investing becomes a crap shoot.

I agree with much of your discussion above, but disagree with this statement “ Stocks are cheap (the S&P’s about 20% behind corporate earnings), and yet people are scared.” The VIX is not showing the fear (scared) factor at all, its showing that people are not afraid and are jumping right into the stock market. Be fearful when others are greedy and greedy when others are fearful! They’re greedy right now, maybe its the institutional investors, but they’re greedy. They are waiting for the sheering of the sheep the retail investors to start buying before the next big institutional selling to start. I think this recent bull market advance can be attributed to Greece, not imploding and the hope of QE3 or some sort of TWIST continuing.

I feel stocks are not cheap at all and I don’t think institutional investors are that fearful if the VIX is this low, but I will grant your argument that the VIX does currently show a stable advancing bull market, with a low VIX reading of 18% or under. Quite a bit of stock market sentiment can be attributed to another QE or TWIST continuing.

I wouldn’t buy at this juncture and neither should any retail investor, wait for the VIX to go much higher, then prices will be lower, they will, as an investor learn to be patient. This is not yet the time to buy. This is the time to be very patient only buy with a Margin of Safety, and target price in a industry and business that you know as well as the CEO of that business. Otherwise prepared to be sheared.

#78 Bogdan on 06.20.12 at 2:40 am

This is what happens when you get 100 wrong and one right. Nobody listens when you’re right.

#79 Aussie Roy on 06.20.12 at 2:47 am

Aussie Headlines

Off-the-plan first home buyers ‘can’t get loans’

They say most first home buyers hoping to take advantage of the $15,000 grant and stamp duty incentives will not qualify for bank loans for an off-the-plan apartment and this has been confirmed by mortgage brokers.

But the chief at one of the biggest sellers of off-the-plan apartments in Sydney was sounding even louder alarm bells.

CBRE’s managing director, David Milton, said he saw very few first home buyers purchasing off the plan – and, worse, banks frowned upon it.

http://theage.domain.com.au/first-home-buyers/offtheplan-first-home-buyers-cant-get-loans-20120615-20f9v.html

How vested interests still push “We have a shortage”, as the glut continues to grow.

There are 90,700 vacant houses in Melbourne – 5.9 per cent of the total – according to Earthsharing Australia’s 5th annual Speculative Vacancies Report.

“Our lazy land use makes a mockery of the drive for affordable housing,” researcher Philip Soos said today.

“The Earthsharing survey measures actual activity based on water consumption.

“First home buyers and renters are being deceived. In an affordability crisis, they deserve better information on which to make the biggest financial decision of their lives.

“Reporting artificially-lowered vacancy rates hoodwinks renters into accepting rent increases, prompts over-investment in property, and cows government into adopting policies agreeable to the real estate industry.

“Our survey tells a different story. Australia has one of the most generous residential property taxation regimes in the world. Capital appreciation has dwarfed rental income for years. Withholding properties from the market is a rational investor strategy.

The National Housing Supply Council claims a 228,000 housing shortage nationwide. We say, there is nearly half that locked up here in Melbourne.

http://www.prosper.org.au/2012/06/20/speculative-vacancies-in-melbourne-report-2012/

#80 Humpty Dumpty on 06.20.12 at 2:53 am

It’s because most people are almost always idiots. This blog’s a great example.

I may be one of those, however Mr Rickards sees things unfolding alittle different than you G…

http://event.onlineseminarsolutions.com/view/presentation/flash/EventConsoleNG.html?uimode=nextgeneration&eventid=453831&

You may want to read his book.

#81 futureexpatriate on 06.20.12 at 3:18 am

Contrarians often watch HGTV and laugh their asses off.

They just don’t buy what is being sold.

#82 Jay Currie on 06.20.12 at 3:32 am

Yes, be a contrarian. But don’t assume that the Greek deal is done; it isn’t and the lights are going out (literally). Nor is Spain out of the woods by a very long shot. Whether the Euro survives in present form is a big question mark.

That said, the US is restructuring fairly well having taken the housing hit early. There are job openings and there is a printing press. (And only a few more months of the Big 0.)

Canada is in for a housing correction. Here in Victoria it is well underway, up Island is worse, Vancouver is just picking up speed. Toronto, being at the center of the universe, will be a few months late, as usual, getting the message.

But a housing correction in itself is likely overall good news as it unwinds some of the loonier leveraging. What is not such good news is the possibility of a further drop in oil prices. May not happen, but a point or two off global GDP and $65 a barrel oil is not out of the question. A lot of the more productive end of the Canadian economy is tied up in oil.

The other item of some concern is the apparent inability of either Quebec or Ontario to restrain their urge to splurge. Various people have pointed out that the Ontario deficit in absolute terms is roughly the same as the California deficit. However there are 5 or 6 times the number of actual Californians to pay it off. Unlike the feds, who could print if they thought Canada needed liquidity, Ontario and Quebec don’t have that option.

Best case, Canada has a soft landing with a couple of bumps; more likely case we see a few quarters of contraction and a 15-40% decline in housing prices (60% for recreational property and the crapier burbs.) Worst case is exactly the same but, instead of taking a couple of years it happens in a couple of quarters. The economics would be the same but the psychological effects would be a lot nastier.

(And, as for contrarian – I bought a house in Kits in 1982 with a 19% short term mortgage – did quite well, my ex-wife made out like a bandit.)

#83 Buy? Curious? on 06.20.12 at 4:17 am

I agree with Garth about selling the house, reaping the tax-free windfall and becoming liquid but only for the older age group, 65+. Private nursing costs, prescriptions, taxis to and from places because your doctor took away your license are all going to cost money. Sell now! Enjoy your twilight years. Get a hobby or join a club or choir.

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

#84 daystar on 06.20.12 at 4:30 am

Interesting piece on MSN.

http://money.ca.msn.com/investing/news/breaking-news/canada-home-price-boom-to-grind-to-a-halt

This is a RE blog isn’t it? Someone has to keep it on topic. :)

#85 Darryl on 06.20.12 at 4:49 am

#37Rural Rick on 06.19.12 at 10:35 pm
“Smoking Man. Careful who you piss off. Clerks who are harassed have been know to put a file in the next box over. Worked there saw it happen.”

That would probably mean that SMs file is seven or eight boxes down.

You know..

#86 GTA Girl on 06.20.12 at 5:14 am

The picture has an enormous effect on me personally.

Took me many years to get back to my own inner “Brigette DePape”. And stand up for what’s right, good and fair. And not follow the herd.

Thank you for posting it Garth.

#87 Aussie Roy on 06.20.12 at 5:38 am

Aussie Update

Myths v Reality

Growing population always supports house prices?
Lowering interest rates always stops house price falls?

We have all heard the above statements quoted as if they were absolute truths. Lets take a look at the recent Australian reality.

ABS figures released today showing 305,000 new Australians arrived during the last 12 months, making Australia one of the fastest growing countries in the world.

Australians have enjoyed a 1.25% interest rate decrease over the past 12 months.

So the house market must be going gang-busters, right?.

No.

Dwelling starts tumbled 12.6 per cent in the first three months of the year, following a 6.9 per cent drop in the final quarter of 2011, according to the Australian Bureau of Statistics. Analysts had tipped a 2.3 per cent fall.

On an annual basis new home starts tumbled 24.5 per cent, the ABS said.

The RBA cut interest rates twice in November and December, by 25 basis points both times, to perk up the patchy domestic economy.

The housing sector, however, has continued to weaken, with home prices sliding 2.2 per cent since January, or 5.5 per cent in the year to May, according to RP Data.

The RBA continued cutting interest rates this year and has cut the cash rate altogether four times since last November for a total of 125 basis points

http://www.theage.com.au/business/housing-starts-plunge-despite-rate-cuts-20120620-20n7u.html

#88 Taipan on 06.20.12 at 6:24 am

Hey Garth. I do enjoy your blog. We could really enjoy several bottles of red.

Most of your stuff I agree with, but you need to expand your mind a bit.

Go and do some research my friend. What happens when countries turn the printing presses on? It isn’t new.

You are too smart and we are not there just yet, but for goodness sake don’t allow yourself to be painted into a corner.

You’ve worked in the political level, you recognise that they will do anything they can to keep their jobs, but most of em, don’t understand economics 101 let alone 404. Many of them have flawed perceptions of the great depression (Bernanke) and they are scratching their heads why things aren’t working.

We both know these housing prices were blown up by too much credit. You and I both understand how you can tweak levers, terms, availability, and interest rates.

The next level is just print money and throw it at the people.

And that is where we are now.

Never ever in the worlds history has the printing of money ever resulted in anything except the eventual collapse of the currency.

Personally I do agree, that Canada and Australia will fare better than most. But that is a relative term.

Control Alt Del – the great reset. Over the next few years, that is what we are facing. The smart money is positioning themselves to be on the right side of that.

Your smart enough to do it garth, you’ve seen what these characters do, but will you position yourself in the right place.

You’re a politician. Always have been always will be. The Canadian housing bubble is obvious – will you get your head across the massive printing of currencies across the world which has only ever led to one conclusion.

You need to understand that and slowly and carefully take your readers to safety.

I don’t need your help on that issue – I’m already there and no it doesn’t involve guns or canned food.

The great reset is a great myth. The best possible preparation for the future is the accumulation of liquid wealth. There is no seminal event in the offing, and time spent fretting over it is time wasted. — Garth

#89 David B on 06.20.12 at 6:31 am

Fact, simple fact really, there is now more money than ever on the face of planet, there are more mining resources than ever being mined allowing more money to be made ….. with now over 7 billion people on the planet there is demand like never before …. for those who start thinking outside the box … the world is indeed their oyster!

#90 John on 06.20.12 at 6:34 am

Well. Things are evolving. The blackjack tables are staying open “indefinitely”, and the players need a boost. Contrarians ( the real kind) could be called “doomers” or “gold bugs” because chaos attracts wingnuts. Worked well. But time marches on. As does the storyline.

Some wingnuts need pieces of reality to rationalize wingnuttery…and the trumpets of Jericho sound. However, if I smell smoke and actually see flames, even a wingnut’s sounding the alarm is going to get my attention.

In 1993 a guy overpays for a semi in a ho-hum area (Leaside). 150,000 or so. Now he’s “paid it off” and needs to believe a 450,000 “net worth” due to his steady investing hand.

Let’s talk to the 19 year old born in 1993. What are his odds at the casino table as he crosses the floor looking around in just 4-5 years. The brain dead consumer and his “semi” now have about 600,000 ( in the fake scenario of “net worth growth). Assuming such an unlikely scenario, and imagining a million lottery winners like Lucky Leaside, what could happen?

Sorry, let me put down my trumpet of Jericho. What was that?

Maybe the guy getting “a few extra paychecks” due to “investing” in the deflating ponzi will pat himself on the back with the “smart moves” backed by snappy rear view analysis.

But it defies common sense and is off topic. The issue is the reap estate bubble. Once again. Trumpets of Jericho won’t do…but at least they were trying to analyze the real dynamics ( albeit for poor fear-based motives).

The way it’s going, Europe’s current format collapsing is the only way to move the discussion forward. Which is kind of ridiculous.

Meantime? Trumpets, Harley pipes and Leaside wonders with no plan and no real net worth…looking for pie in the sky. Avoiding the obvious.

Maybe the all that pie in the sky is a fleet of UFO’s.

#91 Don't read his post on 06.20.12 at 6:42 am

If you want more doom and gloom just listen to the World Financial Report. Those guys think they are cool cause they told is to buy gold at $250. And still every week they pump the crap out of gold, silver, and diamonds.
If I had my own show I’d pump the crap out of uranium, only cause I own a bunch of UEX.

Point is anyone who tells you to put your money in one asset is just trying to make a killing on their investment.
Someone like Garth is telling us to diversify properly.

#92 neo on 06.20.12 at 6:49 am

The VIX is no longer an accurate measure of market risk. True risk is measured by the bond market and it isn’t sharing your optimism at all. Not quite sure why you continue to say risk is misunderstood but choose to ignore where yields are all over the world.

People everywhere, as you demonstrate, are putting themselves at risk by worrying about macroeconomic risk. Dumb move. – Garth

#93 neo on 06.20.12 at 6:58 am

3.42 million job openings. Yes, real disaster. Lol. — Garth

Conservatively speaking there are about 8 million people unemployed and of those the majority of them are not mobile enough because of still being underwater on their mortgage to move to places that have said job openings. Not only that but about 2 million of them are tied to real estate returning to previous levels that just aren’t going to happen so they need to be re-trained for those “job openings” instead of collecting government assistance and food stamps. Many of those people aren’t even counted as unemployed now because their benefits ran out. The structural problems in the U.S. economy are a disaster and an economy growing at 1.X% isn’t really growing at all when a $1.5 trillion dollar a year deficit adds about 1% to your GDP and that money is mostly going to support those 46 million people on food stamps and other government programs NOT the real economy to spur growth.

Don’t bet against America. You will lose. — Garth

#94 pbrasseur on 06.20.12 at 7:19 am

Being a contrarian right now means buying stocks.

If you’ve never done it then probably you should’nt do it on your own.

But even if you are a professional investor you should read this classic:

http://www.set.in.th/ben_graham_the_intelligent_investor.pdf

#95 The real Kip on 06.20.12 at 7:19 am

“Many will mock. I cannot thank them enough.”

You’re welcome.

#96 The real Kip on 06.20.12 at 7:27 am

“OK, let’s recap. The Greeks didn’t blow up. Spanish banks got bailed. The G20 is writing cheques. The Fed’s stimulating again.”

The Greek economy is not large enough tompay the interest on their debt. The Spanish banks did not pull nearly enough to bail them out. If G-20 writes cheques it will be with more borrowed printed money, ditto for the US Fed.

How does borrowing or printing more money solve a debt crisis? It’s what you criticize Canadians for doing all the time.

Individuals are not countries. There is no debt crisis when obligations can be serviced, which is exactly what will happen. — Garth

#97 bigrider on 06.20.12 at 7:41 am

Its an old one from our friend George O’neill, real estate broker in the beaches Toronto, criticizing our host and his viewpoints but so far at least, this house pusher has been right.

http://www.realtor.ca/propertyDetails.aspx?propertyId=11961030&PidKey=205348506

#98 Stoopid on 06.20.12 at 7:59 am

YES Garth…always be a contarian..

Can you say …gold?

R

Being a contrarian was taking profits last year when I told ya to. — Garth

For the nay sayers when did you say Buy 2008?

Yes, in two books. — Garth

#99 Gypsy Kid on 06.20.12 at 8:24 am

ACP, so true. BMW and Mercedes are common as any other cars now…i guess you have to get the 500 series or higher, or E or higher to be luxury.
On the one hand, I applaud that good things in life are so accessible to many, but if they’re just “borrowing” money to keep up with the Joneses, then that’s pathetic.
Really, be a “Contrarian”. Do what’s right for you and your circumstances and not fall prey to the “mob” pressure. Smoking Man is right in that kids/adults cant think anymore for themselves. They watch stupid TV shows and want to be just like the “stars”. We cant all be “RICH AND FAMOUS”. They’re lifestyles will always be that of the top .0001%. Sometimes it is fun to live outside your means…but if this is our way of life all the time, boy we are all screwed. and the future generations…

#100 It's ridiculous on 06.20.12 at 8:26 am

So many people in society have no clue.
So many people on this blog have no clue.
So many people on this blog suck to Garth.

People!!! Be your own!!!

That’s what I said. Contrarian. This blog is starting to scare me again. — Garth

#101 stickler on 06.20.12 at 9:00 am

Counter to your view:

– the S&P 500 is only undervalued if you assume historic earnings growth. There is not much more cutting that corps. can do to maintain their high margins…and world growth is stymied.

– REITs are at a 52 week high, and near an all time high

– Investment grade Govt bonds are paying artificially low rates, and in many cases offer negative real rates of return.

– Much uncertainty still surrounds Europe, including Italy and Spain, and for those that don’t know -> Italy has a larger economy then Canada, and Spain is right behind Canada.

– India’s GDP is ~= to Canada’s as well…and will likely get downgraded to junk status.

When a few headlines can take the markets down (including ETFs) several % in a day or 2 (erasing 6 months of appreciation or a years worth of dividends) people have good reason to be cautious

…and the current low trading volume suggests many feel the same.

So don’t invest. Tell us that worked out when you retire. — Garth

#102 jess on 06.20.12 at 9:03 am

“suicide by economic crisis”

http://www.nypost.com/p/news/local/fall_of_wall_street_titan_ycL1kNjADrPmJfqsDXT46J/0

http://www.huffingtonpost.com/2012/06/19/charles-hopper-lehman-brothers-suicide_n_1608791.html?utm_hp_ref=business

#103 drew peacock on 06.20.12 at 9:10 am

Cdn real estate is set to drop, do people really think canada is that much different from us or europe. We too have toooooo much debt. Think bubble. Calgary north west real estate offers the best value, especially montgomery.

Montgomery is awesome!!

Montgomery triangle is awesome!!

#104 theviegasgroup.com on 06.20.12 at 9:13 am

Garth with all due respect, your calls on housing are great, but you can’t twist every data point in your favour.
Greek is NOT out of the woods, what requires Greece (or any PIIGS country) to survive requires 1) Restructuring of debt/debt forgiveness or 2) Money printing, what do you think the ECB will eventually do?

Spanish banks have not been bailed out. There has only been an empty announcement by the EU without any details. How will the funding take place? Via LTRO? The ESM? The ESM isn’t operational yet. How can Spanish banks be recapitalized by guarantees by other PIIGS countries? Eventually Spanish banks will be bailed out by the only way; money printing.

The Fed is stimulating again? Really? How? Via price controls (interest rate manipulation) and money printing. 13Trillion in stimulus for a mere 2% growth? Not a lot of bang for your buck there.

Why would anyone buy bank preferred shares when Canada is entering a major housing crisis? The collateral damage in housing will include banks and the CMHC…investors will be able to pick up bank shares for half the price in the next few years. Cash is king in a deflationary environment.

Either equities rally on stimulus or in the absence of money printing puts the S&P at triple digits again. Can’t have it both ways.

Spanish

See what I mean? It’s hopeless having this discussion. — Garth

#105 dd on 06.20.12 at 9:15 am

Nobody will default,

Wrong. Countries have defaulted.

Please keep up to date on the news if you are going to brag about your so call solid predictions.

I’m sorry. Did you own many Greek junk bonds? I should be more sensitive. — Garth

#106 Reality Bytes on 06.20.12 at 9:17 am

Hyperbole Garth, pure and unadulterated

“Volatility, as measured by the VIX, was running at 79 during the 2008-9 financial crisis, and right now is at a languid 21 (now it’s 18).”

Check what the VIX was between June-Aug 2008 before TSHTF… It’s not a leading indicator and useless for making your point.

All the other evidence you list is subjective and subject to rapid change as well.

While I happen to agree with your thesis, it seems you’re getting more bombastic of late… lots of spin on iffy facts… Or maybe I’ve just been reading this silly blog for too long.

Good thing I mainly come here for the humour and chicks.

#107 Basil Fawlty on 06.20.12 at 9:18 am

Individuals are not countries. There is no debt crisis when obligations can be serviced, which is exactly what will happen. — Garth
The debt is being serviced through bailouts of money printed out of thin air. This is a debt crisis. How on earth can a debt crisis be solved by extending more debt to countries unable to service existing debt?

‘Money out of thin air’ is a fav fallacy of the metalheads. Currency is backed by the power to tax and represents a portion of sovereign net worth which is monetized by a society. If too much it issued. the market adjusts its value. So far the market says US dollars are worth more than gold. — Garth

#108 Inglorious Investor on 06.20.12 at 9:20 am

So markets are waiting on word from on high about
a) what market manipulating/ price fixing machinations they will announce, and
b) their view on just how great the depression will be in the months ahead.

Something has gone seriously wrong when one bearded book worm becomes the pivot point for a bull or bear market. Even if it’s just media hype and The Bernanke is really just the beard behind the curtain, it’s still insane.

Want to be a bona fide contrarian? Forget about speculating all together, and commit yourself to becoming a real, productive member of society.

Try to figure out how you can create actual wealth rather than seeking the fastest, easiest way to take it from someone else.

#109 Mike P on 06.20.12 at 9:23 am

hey Garth,
great post again, enjoyed. Mostly b/c I generally agree that the masses are almost always wrong on most things, haha

#110 fancy_pants on 06.20.12 at 9:25 am

your example perhaps implies you are spending more time viewing the rearview mirror to much in determining where things are going. it’s like flipping a coin and then explaining i told you so when you picked it right.

I’m not a doomer but red flags are everywhere. Fear only pops it’s head every so often when greed has had it’s fill. then it cycles all over again.

patience, it’s coming.

#111 Observor on 06.20.12 at 9:26 am

VIX has NOTHING to do with value investing

Number 76 says:

Garth, from a value investor point of view, wouldn’t you want to enter the stock market when the ^VIX is at approximately 30 or higher? Right now at 18 its telling you the market is complacent and overbought.

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

Laugh out loud, value investors studiously ignore VIX aand purist ignore price charts of all kind. To the extent they use price charts its to look for value in so-called falling knives.

Buffett NEVER talks about VIX

Buffett “caught a falling knife” in the 70’s paying $11 million for a stake in the Washington Post company. The stocks was down and falling hard and kept falling.

But soon it soared and eventually went over $1 billion for his stake and paid tens and tens of millions in dividends.

VIX seekers are traders and not investors and certainly not value investors.

I have made 14.7% this year in stocks and have compounded money for 24 years at an average 11% without even bothering to look into what VIX is. I don’t care what it is.

#112 B on 06.20.12 at 9:29 am

My wife and I are both 27, professionals, no debt (not even a car payment), no house, no kids, net worth ~25K, and disciplined to the point of being no fun at parties.

Do you recommend borrowing to invest right now? If so, how much? Would like to buy low, but worried volatility will wipe out the 3-6 month safety net.

You don’t have enough to leverage or speculate. Get a second job. — Garth

#113 Rex on 06.20.12 at 9:34 am

Garth,
You surely fully understand what is going on in this financial system with your background. Yet, you push this agenda despite the fact that the system is beyond repair with it’s current debt situation. You talk about real estate troubles with potential price drops and ignore one simple fact that the US is falling behind to the tune of $1.5 trillion every year.
You know better. Sad.

Yup, I know it all. And being paralyzed in your own finances because you worry about Fed monetary policy is beyond logic. — Garth

#114 stickler on 06.20.12 at 9:59 am

Counter to your view:

– the S&P 500 is only undervalued if you assume historic earnings growth. There is not much more cutting that corps. can do to maintain their high margins…and world growth is stymied.

– REITs are at a 52 week high, and near an all time high

– Investment grade Govt bonds are paying artificially low rates, and in many cases offer negative real rates of return.

– Much uncertainty still surrounds Europe, including Italy and Spain, and for those that don’t know -> Italy has a larger economy then Canada, and Spain is right behind Canada.

– India’s GDP is ~= to Canada’s as well…and will likely get downgraded to junk status.

When a few headlines can take the markets down (including ETFs) several % in a day or 2 (erasing 6 months of appreciation or a years worth of dividends) people have good reason to be cautious

…and the current low trading volume suggests many feel the same.
—————————————–
So don’t invest. Tell us that worked out when you retire. — Garth

>> I did not say never ever invest…sheesh.

#115 Herb on 06.20.12 at 10:03 am

Countering the Conservative Spin on the Euro Crisis –

http://www.ottawacitizen.com/opinion/columnists/blame%2BEuro%2Bwelfare%2Bstate/6808433/story.html

Reading this, you have to wonder why anything coming from a Conservative should be believed, since it’s probably produced by the PMO War Room for political purposes.

#116 Basil Fawlty on 06.20.12 at 10:08 am

‘Money out of thin air’ is a fav fallacy of the metalheads. Currency is backed by the power to tax and represents a portion of sovereign net worth which is monetized by a society. If too much it issued. the market adjusts its value. So far the market says US dollars are worth more than gold. — Garth
Are you serious? If the market says the $US is worth more than gold, why is gold up over 500% in terms of dollars in the last 11 years?
In addition, when you say the “market adjusts its value”, this is inflation and it reduces living standards, while misallocating capital. This has nothing to do with the people you slag as “metalheads”.

Capital flocks to US$ now, not to PM. That should be obvious even to you. — Garth

#117 Exile on Main St. on 06.20.12 at 10:22 am

Garth – I love you dearly and you’re getting me through bad times here in Vancouver (rental home of 14 years sold; we’re now evicted and rents are INSANE for a family of 4). Developing a very bad hate-on for my home town and would move in a heartbeat if self-employed business were portable. I keep needing to send fellow Vancouverites to your blog and it would be wonderful if you had archives sorted by topic. Anyway, thanks again for being the voice of sanity for so long.

#118 MoneyMyHoney on 06.20.12 at 10:30 am

“The Greeks…. Spanish banks…… The G20.. cheques… The Fed’s stimulating….” -Garth
Apart from the above, Chinese simulation, Indian controlled simulation, Japanese simulation etc. all happening in parallel.

If the economy need a constant supply of govt. subsidized Viagra to perform, that in itself shows e-dysfunction. Come May 2013, the simulated economies will go flaccid (Yes, I am adamant on the date – no mirage here).

People who decide to get out now are not being emotional. They are just being wise, just like the homeowners who sold off in the past 6 months.

As I said, you misunderstand risk. You will undoubtedly wait until growth resumes, and pay more. Good luck with that. — Garth

#119 bigrider on 06.20.12 at 10:34 am

As bearish as I have been on RE in Toronto, I’m afraid it’s RE, RE ,RE to infinity until financial markets turn a corner.

There is simply to much distrust and disgust at the performance of financial portfolios since the turn of the century in this horrid secular bear market we have been in, to think otherwise.

Rear view mirror investing is the only consistent methodology employed by the masses.

Like our house pimping realtor friend O’Neill in the T.O beaches has reapetedly stated ” people going to sell their houses to invest in the stock markets..I don’t think so”

Is this not, exactly, the point of my post? Conventional thinkers – which includes most people – are at risk they do not even perceive. — Garth

#120 Mixed Bag on 06.20.12 at 10:43 am

#13 Smoking Man

“So I Google the minister of transport send an email then call. I talk to his secretary and she’s laughing, we get about 20 calls a day on this, nothing we can do its service canada.”

So who runs Service Canada?

#121 cramar on 06.20.12 at 10:57 am

In reading this pathetic blog over the last few weeks, I’ve seen that GT believes that the U.S. economy will recovery albeit maybe slowly. NO crash is coming. Don’t bet against the U.S. But even if the U.S. recovers, RE in Canada has peaked and will still come crashing down in some areas.

Others believe that the world economy, including the U.S. is absolutely doomed. For example Paul Farrell, says the crash will be greater than 2000 & 2008 COMBINED!

http://www.marketwatch.com/story/20-rules-that-can-save-you-from-the-doomsday-cycle-2012-06-19

What do you think will happen to Canadian RE under Farrell’s view?

My point is that if Garth is right, Canadian house-hornie debt junkies are toast. If Farrell is right, the house-horney debt junkies are BURNT TOAST!

Either way, Canadian million dollar crack shacks will cease to exist, and those holding massive mortgages will fall. Getting liquid is a way to prepare.

#122 Mark on 06.20.12 at 11:00 am

Don’t bet against America. You will lose. — Garth

Garth you keep saying this. I don’t quite understand why the infatuation with America, the world’s most indebted nation. If interest rates even move up a few points, that “growth” you keep mentioning is finished.

Why are there poor people in the world? Why don’t they just print money and buy things. That seems to be the US strategy, and according to you, it’s foolish to bet against it.

How is the US$ worth more than gold? Maybe in the last few months things haven’t fared well for precious metals, but over the last 100 years, gold beats the dollar hands down.

In 1913 you could have buried $20 or one ounce of gold, equal value. Dig them up today, one is worth a crappy fast food dinner for two, the other is worth $1600.

So buy gold and bury it. I live in the real world, and love liquidity. — Garth

#123 arctodus on 06.20.12 at 11:01 am

This blog is an amusing read with morning coffee.

So many people (Garth included) thinking they are so correct based upon their own internal logic and whatever outside info sources they frequent.

Almost all are incorrect in the longer term….almost all can claim correctness in the short term by simply cherry picking their data points..or the news of the day.

What exactly does “do not bet against america…you will lose mean exactly?”

American is in hard decline as is all of the western world…..it will not stop…..BUT

That is not to say that the antichrist (a singularly bizaare concept if ever there was one) will rise up tomorrow in central Des Moines and start the apocalypse.

Collapse takes time, usually in a stairstep faltering, halting but never really ending fashion…..we are seeing the rise of totalitarianism….and the drones will fly in increasing numbers….the people on the whole will slide into poverty…..but we will not see a sudden blossoming of mushroom clouds all over the eastern seaboard.

Why is it so hard for people to see this?

Things are getting worse and this trend will not stop for the overall human enterprise….. individuals experience will vary wildly based upon decisions and luck of the draw.

Oh yeah…canadian real estate “overall” is toast…..

#124 John on 06.20.12 at 11:02 am

You know what? You’re goddamned right: “Don’t bet against America, you will lose”.

Consider the real meaning of this statement. Because it is true. It’s most certainly not a “financial” question in the way it might be broadly understood.

Eventually, when society begins to organize around worthy pursuits ( even culture, community, and the “higher values”), it’s going to return to nature. Nature is based on value. No system is perfect by a longshot. But you need to have some form of systemic value as a currency.

What is the message of the Canadian real estate bubble? It is that value proposition in motion.

Inglorious Investor says it well:

“Try to figure out how you can create actual wealth rather than seeking the fastest, easiest way to take it from someone else.”
——–
When the discussion recognizes value as a dynamic and admits what the bubble is telling us, we start to move foward.

For now? Understandable denial and a “backturn” on value. Something is missing in the discussion right now…more than just being off topic.

It is this: Events are showing us that not offering value ISN’T OPTIONAL.

Responsibility is never optional. Accepted or not, it is 100% ours. That number doesn’t change. Learning and performance is another thing. I’d say that’s evolution. Opportunity.

#125 bill on 06.20.12 at 11:15 am

”So we have a licensing office of transport Canada that can only receive application my mail”

it cuts down on the amount of ‘postal events’ at government offices I guess…

just go for a cruise and if anyone asks in an official capacity ,tell them your application : ” is speeding along the proper channels as we speak officer….”

#126 Tony on 06.20.12 at 11:16 am

As commodities plunge and the draws on oil come out on the low side 19 times out of 20 at 10:30am every Wednesday even the feeble minded will start to get a clue that the world is headed in a depression probably much worst than the 1930’s. Wall Street’s smoke seven mirrors will at some point in time fall apart in the biggest crash ever on record.

#127 disciple on 06.20.12 at 11:20 am

There are contrarians, and then there are shills and actors. Concerning the young lady in the photo, Brian Carrol says:

In 2008, Brigette DePape toured the Ottawa, Winnipeg and Saskatoon Fringes. She started in Ottawa.
Baton twirling? In a Bring Your Own Venue (BYOV)? In a town where nobody knows her? (OK, almost nobody.) Where she has no track record? At 18? Eighteen??? In the premiere of a brand new, untried show?
And check out the inspiring title of the show: “She Rules with Iron Stix: An Exploration into the Curious World of Baton Twirling”. Makes you want to run out…
and do your laundry.

As they say in North Winnipeg: the little lady’s got chutzpah!
I knew about Brigette DePape. Five years of acting experience with a Winnipeg children’s theatre company, Fantasy Theatre, in more than 10 productions. Plus two of her own scripts performed at the Winnipeg Fringe, to middling reviews that praised her acting over her writing. I put her on my long list of shows to see, and a time slot opened up.

By the time they closed the doors, there were only a few empty seats. Dead-pan delivery, tightly timed. Witty script. The audience responded in all the right places. Laughed heartily at the right times. Applauded and cheered DePape beyond her expectations when she took her bows.
Instant success! (That took only 9 years to accomplish.)

So how did this unknown waif get all those bums in seats? I learned the story afterwards.
Following her opening show with fewer than two handfuls of people in the audience, DePape headed to the beer tent. Outside the tent, she set fire to the ends of her baton. And twirled. And twirled. Tossed the flaming baton high in the air. A crowd gathered (but not too closely). And applauded. And cheered.
Somebody had a video camera. They put the video on YouTube.
http://www.progressivebloggers.ca/2011/06/brigette-marcelle-canadian-heroine-update-name-is-actually-brigette-depape/

#128 Mister Obvious on 06.20.12 at 11:21 am

#118 bigrider

“Like our house pimping realtor friend O’Neill in the T.O beaches has reapetedly stated ” people going to sell their houses to invest in the stock markets..I don’t think so” “
———————

I did, and have never looked back.

#129 Boomer on 06.20.12 at 11:22 am

#19 Mixes bag
Service Canada is under the portfolio of the Minister for Human Resorces, Skills Development. Minister Finley, now that should make SM real happy!

#130 Not 1st on 06.20.12 at 11:22 am

Garth, talk to some boomers on the park bench someday and see what risk they are looking for in their golden years. The talking heads on CNBC admit daily that money on the sidelines is going into bonds, not equities, despite their best efforts to create a bear rally mirage earlier this year which has now collapsed with the DOW off 1000 points.

The millions of baby boomers are not going back into the stock market after the ride they took in the last 5 years. Yield be damned, they are looking for wealth preservation, even if it matches inflation.

(a) Most boomers don’t have enough capital because they subscribe to fear theories, as do you. (b) I do not engage in, nor advice, direct equity investing. — Garth

#131 Tony on 06.20.12 at 11:23 am

Re: #120 cramar on 06.20.12 at 10:57 am

There seems to be an ingrained human trait to hope for the best. This clouds the average person’s thought process to reason things out. This is the reason most people make the wrong decisions. First try to gain the knowledge to be able to make the correct decisions then let the “other” people throw up their hands and hope for the best.

#132 fancy_pants on 06.20.12 at 11:23 am

#13 Smoking Man on 06.19.12 at 9:13 pm

1 word: unions

many years ago unions were formed to aid the little working guy from the large and powerful employers against difficult conditions and abuse. n

ow they really only exists to feed itself and protect those not worthy of protecting. Rights have fallen from one extrmem to the other.

Public sector unions promote laziness – can’t get rid of the chaff. You can apply the thirds rule to gov’t and crown corporations: about 1/3 of the gov’t is useless chaff, another 1/3 put in just enough effort to earn a paycheck (per very lax contracts) and the final 1/3 would probably be worthy to keep as employees without a union.

#133 Canadian Watchdog on 06.20.12 at 11:44 am

You’re losing it on this post Garth. Printing money will only deteriorate job creation and destroy economic conditions further. http://postimage.org/image/6r1nui9dt/

It’s just plain math you can’t defy.

Actually the opposite is true. — Garth

#134 Average Joe on 06.20.12 at 11:50 am

Greeks want to stay in euro zone and dont want the austerity measures.

(we would do the same)

So they voted for the party that promised to -stay in the euro- and -greatly reduce the austerity-.

They will ask for renegociation of last year’s deal.
It wont work.

Germany (the population, not the politicians) will kick them out of the euro zone. They had enough. The cup is full.

How long this show can go on ?

#135 Buy? Curious? on 06.20.12 at 12:10 pm

Is that the best protester we’ve got? “You get an “A” for arts and crafts but an “F’ on presentation!” Garth, you’re hovering low on the Lame-O-Metre with the pictures.

#136 Public Officials on 06.20.12 at 12:11 pm

#3 MarcFromOttawa

“I remember that woman from a couple of years ago. She’s probably a public servant now.”

There are no longer public servants.

There are public officials.

#137 Mark on 06.20.12 at 12:16 pm

So buy gold and bury it. I live in the real world, and love liquidity. — Garth

In the “real world” there’s a price to pay for interest rates below the rate of inflation and endless borrowing to consume. Gold and silver will be among the assets that help cushion the blow.

#138 Fabrega on 06.20.12 at 12:18 pm

13# Smoking Man

Ahhhhh…governments. Do not get me started. What are they for?

#139 GregW, Oakvillle on 06.20.12 at 12:24 pm

Hi Garth, FYI, Someone may be interested?

Read this in a mag’s Energy Trends section. With a Link to a battery company. Excerpt: “The Li-water battery demonstrated greater than 1300 Wh/Kg, representing the highest specific energy in the history of batteries.
Also in development are rechargeable and primary Li-air batteries, which holds promise to rival the energy density of gasoline…”
http://www.polyplus.com

The web site seens to indicate they are biulding a small production line for these batteries.

(Now, That would be something if true, as I looked up the energy density of gasoline and found it seem to be in the 12,000-13,000 Wh/Kg range.
That’s 10x more than the Li-water battery they claming to have now. I guess stating your product ‘holds promise to rival the energy density of gasoline’ is relative.)

#140 FullofFear on 06.20.12 at 12:31 pm

Garth, by buying ETF’s you’re following the market and therefore following the crowd. Then you call yourself a contrarian. It’s seems like you’re arguing from both sides.

There are 1,500 ETFs. They form just one part of a diversified portfolio. — Garth

#141 Marnic on 06.20.12 at 12:35 pm

Don’t bet against America. You will lose. — Garth

On what basis do you give out this advice?

#142 Derek R on 06.20.12 at 12:38 pm

#55 Observor on 06.20.12 at 12:17 am wrote some sensible things about taxes.

While I agree with what Observer said, I would add that having the right sort of taxes is important. It’s actually better for most people to pay income tax than sales tax because it costs less to collect it and it is a little more difficult for people to evade, so tax cheats find it more difficult to pass on their share of the tax bill to honest taxpayers. So most people would be better off if income tax was increased and sales tax reduced.

However there’s an even better tax than income tax. That’s property tax. It’s difficult to cheat on and extremely cheap to collect. If property tax were increased and sales tax and income tax reduced proportionately the majority of us would much better off.

#143 City Slicker on 06.20.12 at 12:38 pm

#47 City Slicker on 06.19.12 at 11:09 pm This doesn’t sound like the US is recovering:

“Job Openings in U.S. Decrease by Most in Almost Four Years”

http://www.bloomberg.com/news/2012-06-19/job-openings-in-u-s-fell-to-3-42-million-in-april-labor-says.html

3.42 million job openings. Yes, real disaster. Lol. — Garth
———————————————————-
The point is its a stark indicator the effects of the steroid stimulus as wearing off, and things are going back to 2008. And this on the heels of a disasterous May jobs report that fell short by half of the expected job growth.
Many don’t seem to understand the QE programs have artifically inflated the economic “recovery”, and now must be continued to keep things a float, otherwise everything behind collapses.
Jim Sinclairs simple formula of QE to infinity is playing out.

#144 stickler on 06.20.12 at 12:43 pm

Maybe its better to phrase it like this:

Don’t bet against American multinational companies. You will lose.

America as a country is in decline, as is most of the developed world…now even the developing world is backing off a bit.

#145 jess on 06.20.12 at 12:49 pm

smoking man
perhaps because you were handled by an outsourced call center that speaks only in scripts

#146 Stoopid on 06.20.12 at 12:49 pm

Don’t bet against America. You will lose. — Garth

I’m of the opinion…. Don’t invest in America. You will lose.

None the less time will tell.

Who are the largest employers in the US?

It depends wheather you mean by revenue or by number of workers. The largest employers in the U.S by revenue are:

1. Walmart 2. Exxon Mobil 3. General Motors 4. Chevron 5. ConocoPhilips 6. GE 7. Ford 8. Citigroup 9. Bank of America 10. AIG 11. Chase 12. Berkshire Hathaway 13. Verizon 14. HP 15. IBM

***These are the largest PRIVATE employers in the U.S. The largest employers in the U.S. are the various levels of government: federal, state, county, city, etc… (despite the fact that we call ourselves a capitalistic, free-market economy).

http://wiki.answers.com/Q/Who_are_the_largest_employers_in_the_US

America is Greece… On Steroids

By Bob Bauman JD, Offshore and Asset Protection Editor
Take a moment to consider this number: $16,084,425,792,391
At the last count, this is the level of the U.S. national debt. And if that number scares you… it should.
The fiscal and debt situation of the United States today is nothing less than Greece on steroids – with an added dose of political hallucinogens inducing insane denial.
It’s the same insanity that sent international markets up this week on the news that a paltry 30% of Greek voters supported a political party that advocates the country paying its bills and living within its means.
But let’s put this news in its horrific perspective:
In spite of the fact the Greek election results have allayed fears of the country’s imminent exit from the euro zone, swathes of political analysts still believe the move is a mere momentary respite, and that the European Union dream could yet turn to nightmare.
More…

http://www.jsmineset.com/

#147 Just Park It on 06.20.12 at 12:54 pm

Okay, Garth see’s the glass 1/2 full … unlike me who see’s the glass 1/2 empty.

I was watching the British News and one of opposition members noted that Italy which was required to loan Spain 20% of the needed bailout cash. With a 3% return on the loan, the Italians must go to the bond market and get the very money at 7% to loan it at 3%. Enough said!

The entire world now wants to inflate there way out of debt, at what point do creditors finally say – BS – we’re not loaning to countries that will easily reneg – hell, lets all reneg on our CC / mortgages / car loans, it’s the new in thing – default.

Garth, I love your blog – but wonder why you have such a calm sense about the world’s economy going forward without any serious hiccup…

#148 Investx on 06.20.12 at 1:03 pm

54 – meslippery:
Jobs in the 80s my wife had one.
a few pennies shy of $10.00 per hour.
Gas was 50 or 60 cents, houses less than $200,000.00
Now gas is? Houses? Pay now $10.25 per hour.
Her job was low skill factory.
So it went up 35 cents in32 years .
……………………………………………………………

This is such a sobering look at how employment and the economy has evolved. Thanks for sharing.

#149 Not 1st on 06.20.12 at 1:08 pm

#132 Average Joe on 06.20.12 at 11:50 am

“Greeks want to stay in euro zone and dont want the austerity measures.

(we would do the same)”

This is false. Our govt leaders are so much more realistic than any in the world and are happy to fall on their sword for the betterment of the nation.

– In the early 90s, Mulroney brought in a VAT. It was wildly unpopular and he paid the price for it but he knew revenues need to be increased and consumption, not income should be the source. Every country should have a VAT.

– In the mid 90s, the Liberal gov’t told canadians that we needed to tighten our belts after a run in with the IMF. It hurt, but it was done at the right time and we came out of it fast.

Maybe in RE we are delusional, but we have bit the bullet in the past when we needed to. I see nothing from the EU or good ol U.S.A that they are prepared to do the same.

#150 City Slicker on 06.20.12 at 1:14 pm

Results of the Fed meeting:

•FED SAYS IT IS PREPARED TO TAKE FURTHER ACTION `AS APPROPRIATE
•FED TWIST EXTENSION TO SWAP $267 BLN OF TREASURIES BY END 2012
•FED TO SELL OR REDEEM `EQUAL AMOUNT’ DEBT DUE 3 YEARS OR LESS
•FED TO BUY TREASURIES DUE IN 6 TO 30 YEARS AT `CURRENT PACE’
•FED SAYS EMPLOYMENT GROWTH `HAS SLOWED’
•FED SAYS INFLATION HAS DECLINED, REFLECTING OIL
Market not happy.

Sorry folks, more QE is what it comes down too. The ponzi scheme continues. And QE to infinity.

#151 Investx on 06.20.12 at 1:18 pm

3.42 million job openings. Yes, real disaster. Lol. — Garth
…………………………………………………………….

Percentage. How does it work?

#152 neo on 06.20.12 at 1:27 pm

Don’t bet against America. You will lose. — Garth

Do you even know what that means anymore Garth or is that just a natural reflex response whenever someone questions the veracity of this recovery. Yes, the U.S. has been through worse in their history. However, that doesn’t make what is going on NOW a recovery. You seem to not understand being able to get out of a situation and still being IN the situation. And this situation they are in they are only half way through.

The US will be fine. Anyone shorting it will eventually be a trader’s lunch. — Garth

#153 Nuke on 06.20.12 at 1:29 pm

I was strolling back from lunch downtown TO last fall when I saw a gathering of Occupy Toronto. I stopped and listened to this highly articulate, intelligent and energetic young women speaking to the group. It was Brigette DePape and it made me feel good that some of our youth are still fighting for what’s important. She just sounded authentic and concerned about the hand that Canada’s youth have been dealt.

As a granddad with 65 being not far away, hearing her gave me hope, not because the future is secure but that there are leaders like DePape with the backbone to carry the burden we piled on this generation.

#154 neo on 06.20.12 at 1:37 pm

People everywhere, as you demonstrate, are putting themselves at risk by worrying about macroeconomic risk. Dumb move. – Garth

So the Bond Market is “dumb money” Garth. The bond market dwarfs the equity markets and those “elite” that get thrown around on this site have much bigger stake in the bond market than the equity market. Macroeconomic risk is being reflected in the bond market and CDS market Garth and is being ignored in the equity markets for some time.

You like to talk about emotion. Look at the equity markets today. Faded lower on lack of more money printing liquidity to grease their low volume exchanges. Yet spike on rumours out of Germany about direct bond purchases that are nothing but a dog chasing its tail approach. Nothing over-emotional there? Totally pragmatic and rational? Totally premised on fundamentals? The market right now has the emotional roller coaster and temperament of a 12 year old girl at a Justin Bieber concert.

#155 Derek R on 06.20.12 at 1:39 pm

#95 The real Kip on 06.20.12 at 7:27 am asked:
How does borrowing or printing more money solve a debt crisis?

If the debt has to be paid in gold or turnips, neither borrowing nor printing helps.

If the debt has to be paid in money, borrowing money just kicks the can down the road.

But printing money solves the problem if the lenders want money and you give them the printed money to cancel the debt.

#156 OlderbutWiser on 06.20.12 at 1:42 pm

I do not engage in, nor advice, direct equity investing. — Garth

Care to expand on why not? Perhaps you could give us readers some idea of exactly what you do invest in. We don’t need numbers, broad categories would suffice.

I invest directly in large, multinational blue-chips that have a long term history of paying dividends. However, I NEVER invest without reviewing at least 10 years of the company’s F/S (okay so I am an accountant and can actually read these things lol). One reason why I never fell for Nortel or the dot com fiasco is that these companies never actually made bottom line profits (at least not enough to cover interest and capex). I guess I am more of a dividend growth investor and I have a long-term horizon. My portfolio is probably 50/30/20 Canadian/US/ROW with all of my current contributions going to US/ROW. The Canadian market is just too small although the only banks that I invest in with gusto are the Canadian banks – great dividend payers as well. If the Canadian banks go belly up then the world will have come to an end.

I am optimistic about the future and I tend to agree with you that the US will find its way out of the mess it is in – it is too large of a power house and yes, it can print its own money. This is also one of the reasons why I buy as much USD as I can whenever the C$ rises above par.

I look forward to more articles detailing investments outside of RE.

#157 Investx on 06.20.12 at 1:42 pm

Record low interest rates to remain into 2014, CIBC says

http://www.thestar.com/business/article/1214209–record-low-interest-rates-to-remain-into-2014-cibc-says?bn=1

Why aren’t bond market forces pushing up rates?

#158 Bobo on 06.20.12 at 1:44 pm

Agreed, except there’s one problem: The consensus view is that Canadian housing is doomed. Economists, your friends and your strange uncle will all tell you that, at best, home prices are in for a modest correction. So, the real contrarian bet in Canadian housing is long, not short.

#159 Gta fun on 06.20.12 at 2:04 pm

Just my thoughts. Realtor advised me today to low bid… Just make an offer… Ask for whatever you want… Change this change that…. People need offers. Things are sitting on the market. There are a huge number of listings in oakville for example… But only one or two luxury sales per month… Eek. I see soooo many people who have purchased homes before selling theirs. They are in tough spots now. There are no shortage of lots to build on. More and more people that I personally know are living on debt… Heloc or credit cards. Vacations… Cars… Yes everyone and their uncle drives a highs end vehicle. Speaking from first hand experience these cars are not what they used to be it terms of quality. A friend has decided that if they don’t get asking for their home… They won’t sell… That will leave them with two homes and a tonne of debt.ll crying daily over how little money they have.. Crazy times…. Interesting times.

#160 timbo on 06.20.12 at 2:10 pm

http://www.fxstreet.com/news/forex-news/article.aspx?storyid=e6b3a19b-ce0d-4b37-9511-6f6d4de7449e

“The Federal Reserve decided Wednesday to keep the target range for the federal funds rate at 0-0.25%, while extending its Operation Twist, a program aimed to lower long-term interest rates by selling shorter-term bonds and using the funds to buy longer-term bonds. ”

Oil and commodities welcome to the cliff edge………..

http://www.newswire.ca/en/story/996123/continued-global-issues-and-slowing-domestic-spending-should-hold-canadian-economic-growth-to-2-1-per-cent-cibc-forecast

“Troubled global economies and tapped out domestic consumers will see the Canadian economy grow at 2.1 per cent this year and next, finds the latest economic forecast from CIBC World Markets Inc. ”

Now that is growth! sputter,cough……….

#161 OlderbutWiser on 06.20.12 at 2:11 pm

I guess I should clarify my portfolio a bit – I do have investments in Canadian commercial REIT’s and Canadian Energy Trusts as well as directly held bonds in both US and Canadian investment grade corporates. My portfolio is well diversified but I own no preferred share investments. I do own some Mutual Funds which is how I initially started investing many, many years ago. Surprisingly, these have been the worse performers in my portfolio and I would never purchase another. I have no ETF’s.

I should also mention that although I work full-time I spend at least 1 -2 hours per day keeping myself on top of Canadian, US and International market news. I do this since I am continuously investing every cent I have in the markets and I hope to retire in 6 – 8 years. This reading is much more interesting than anything on TV.

I am always open to learning and would like to hear how others (including Garth) are working towards funding their retirements.

#162 MRT on 06.20.12 at 2:12 pm

That being said I think my wife is the contrarian in the family…

By the way I live in Orleans, 24 km away from Parliament Hill… Cheezy suburbia :-) My townhouse has doubled in value since 2001 when I bought it two months after 9/11 !!!

Not sure it will triple however…

#163 ANONYMOUS on 06.20.12 at 2:20 pm

Garth, this is a VERY SERIOUS QUESTION that I need your help with:

– I have a house that I renting for $1,280 per month (plus Utilities) here in the Waterloo area. There are local nearby houses selling for only $450,000 and I can buy them if I put $50,000 down.

– Since I’m paying $15,000 per year on rent, don’t you think that it would be better for me to simply dive in and buy a house now rather than wasting all that money each month on rent with nothing to show for it? I have looked around and $450,000 is a BARGAIN for the Waterloo area for a 3-bedroom.

What’s your advice?

Sure, waste it on interest and property taxes. Good choice. — Garth

#164 bigrider on 06.20.12 at 2:23 pm

Garths reply to Bigrider #119. ” Is this not ,exactly the point of my post….most people are at risk they don’t even perceive”

This is true, I fully expected you to make a reply almost verbatim to the one you did (surprise) and I for one hope for you to be vindicated soon.

#165 truth hammer on 06.20.12 at 2:52 pm

And……the BOC announcing that there will be low interest rates in Canada until AT LEAST 2014…..so let the buying begin and hyperinflation to remain hyperbolic.

Daily fretting about which party is elected in Greece has nothing to do with the macro economy…..even the crony communists have found that capitalism is way better and greedy human nature will continue to drive the world.

The only people who are protesting capitalism are the spoiled, the decadent, the coddled and the entiltled………..only those who already have so much that they forget how much they have will take to the streets in an attempt to give away what they can’t understand.

But man…is there is real differance between reality and perception……..media propaganda says ‘everythings fine’ but I just got back from a drive downtown Vandump and you could shoot a cannon down Robson/Hastings/Granville/Howe Street…….it reminded me of the 60’s during the recession of ’63- ’73….no one….ghostly. More specifically no tourists……..barely a one. Where is the honest reporting? Is the truth to upsetting? Will it stop the sheeple from spending the kids allowance on hockey tickets and beer?

Last week I had to take a ferry to Vancrappo Island and noted that the boats were devoid of traffic AND tourists….at a time that is supposed to be high season…….car decks empty caverns…….and the media is reporting ‘alls well?’

The ‘market’ is driven by perception…….the government is pumping suasion like a junkie flushes fresh heroin into his disease. Unemployment numbers are totally bogus………even idiots can see this on Mainstreet.

Investing in this market is strictly for the young with lots of time on their hands…this will prove to be the ‘you bought it for what?’ times for a generation with twenty years on their hands.

The ZIRP has been a rape and devastation to the over 50 crowd. The nonsense of avergae wealth stats improving is hokum………propaganda based on speculation and the concept that hyper inflation is forever….and good…..

Civil servants are retiring in droves with fat paycheques for life while the ROC will retire in poverty and debt.

‘Things’ are not good…they are not improving…..all such talk is naive naval gazing and re-watching CBC baffle gab until the little grey cells have all gone to sleep. The propaganda machine is running full tits.

But petroleum, gold, commodities…..over time with depreciation of currencies and inflating ‘inflato-bucks’ budgets……..time is on your side…….’safe bets’ are dumb money’….in the current environment. The cycle for low pump oil will coincide with the US election……oil co’s are splilling profits and stocks in the dumps? No makkee sense keemosabbee. ….politics…not reality……ready for a surge in oil equities. Does anyone not understand that Wall Street will not rally under an Obama administration….nor corporate hiring improve? You don’t ship ammunition to the enemy fools…so buy while the ‘market’ is depressed….against the perception of gloom.

Contrarian doesn’t refer to some dumbster who stands in The Chamber and screws herself for life out of any future job offers………find her on LinkedIn cordoned off like a diseased whore, I wager. Kids don’t make good decisions…..I’m surprised she didn’t wave a feather and flash some kind of student gang sign while rapping her rant against ‘HARPER’…or whatever the current CBC ad hominem has dreamed up.

The BoC did not announce that. — Garth

#166 Greatest Fool on 06.20.12 at 2:53 pm

You often tell us how badly screwed we are financially. I agree completely. But how can it be that individuals are so badly screwed, yet the economy will continue to perform? I wish I shared your optimism that the macro can diverge from the micro, but I don’t. Those impressive corporate earnings will go down the tubes when Joe and Jane Debt-Junky suddenly find out they can’t borrow and spend anther penny, and their house is worth 30% less than they thought.

The economy could falter or it could flatline. That’s not the point. People can build wealth regardless. — Garth

#167 Richard Licker on 06.20.12 at 2:54 pm

Mr . Peacock
Glendale SW Calgary much better than Montgomery.
Majority SFHs, quiet, easy route out of town to get to Banff, new LRT minutes away, downtown minutes to drive to, tons of new bike routes coming.

#168 2centCdn on 06.20.12 at 2:55 pm

It’s comingggggg …… when the media gets a good bite on this …..and the “RE industry machine” runs out of ways to mislead, confuse and manipulate the data ……. the house of cards will exponentially collapse. Fundamentals and reality always eventually get their turn at bat … and they’re long over due.

http://finance.sympatico.ca/home/contentposting_reuters/canada_home_price_boom_to_grind_to_a_halt/6d0fd717

#169 No change in rate on 06.20.12 at 3:01 pm

“OTTAWA—The CIBC says Canadians may enjoy historically low interest rates into 2014.

The private sector bank released its new outlook for the global and Canadian economies, and all indicators point to weakening conditions and rising risks.

The bank says Canada’s economy will barely keep its head above water with growth rates of 2.1 per cent this year and next year, after growing 2.4 in 2011 and over three per cent in 2010.

The main reason, the bank says, is that the global economy will continue to slow, down to three per cent this year, the slowest pace of expansion since the recession.

As well, Canadian consumers are tapped out and governments are spending less.

With this backdrop the Bank of Canada will find it difficult to raise interest rates, says the CIBC, predicting it may wait until U.S. growth picks up sometime in 2014.”

#170 A in Vancouver on 06.20.12 at 3:05 pm

Hello, Garth,
Will cash become useless paper?

The price of RE in Vancouver is still on the peak, however, many realtors say that now is the best time to buy.
I am still waiting. I have cash, but worrying that cash will become paper.
Thank you for your reply in advance.

Joke, right? — Garth

#171 Fubar on 06.20.12 at 3:05 pm

I know everyone (incl. CREA) is saying the Calgary market is gaining momentum but I’m just not seeing it. I’m seeing lots of homes under the 500k market sitting for months and getting numerous price reductions. Yet the media is still saying we had record sales and an increase in prices from last year. Maybe it was the record luxury market that pushed those numbers higher. Any chance you’ll do a spotlight on Calgary, Garth?

#172 jess on 06.20.12 at 3:09 pm

PPP’s
Private prison companies look to Canada as industry faces lawsuits

http://www.youtube.com/watch?v=VW4K9DKgRhI
http://www.youtube.com/watch?v=Ce3uXbZqKW8

…”GEO Group indeed has had an equally awful record, but it’s not just from Walnut Grove. Their treatment of other children, such as in Texas at their Coke County prison who horrible. Their horrible treatment of low-level immigrant detainees at Reeves County Texas led them to burn the prison down twice.

MTC has had riots regular as rain, endless escapes and the worst one was less than two years ago at Kingman, Arizona, resulting in a nationwide crime spree including murders, kidnappings, robberies, hijackings and a shootout with police. The taxpayer will have to pay millions to pay the costs incurred there. There’s a video on You Tube of their Eagle Mountain prison riot where two helpless inmates are carved, cleavered, speared and bludgeoned to death on camera. Look up “Eagle Mountain – Private Prison Riot Gone Bad.”

…”He and other former inmates describe an environment of violence inside the youth prison as so pervasive it became entertainment.

“It’d be like setting up a fight deal like you would with two dogs,” Henderson said. “I did witness twice while I was at Walnut Grove, they actually bet on it. It was payday for the guards.”

The Southern Poverty Law Center and the ACLU National Prison Project have filed a class-action lawsuit on behalf of 13 inmates against the prison operator, GEO Group, the prison administration and state officials. The complaint describes rampant contraband brought in by guards, sex between female guards and male inmates, inadequate medical care, prisoners held inhumanely in isolation, guards brutalizing inmates and inmate-on-inmate violence that was so brutal it led to brain damage…”

http://www.npr.org/2011/03/25/134850972/town-relies-on-troubled-youth-prison-for-profits

http://www.npr.org/2011/03/25/134852256/what-is-geo-groupv

#173 P Letcher on 06.20.12 at 3:13 pm

#60 Carpe Diem
I am a IT management consultant for a Service (Service Canada, Service , Service .

What does it take to become a Service Canada “Consultant”? (a IT management consultant)
Good grammar perhaps???

#174 yeg_guy on 06.20.12 at 3:31 pm

It’s all roses here in the ‘chuk. ;-)

http://edmontonrealestateblog.com/2012/06/edmonton-named-best-deal-in-real-estate-by-money-sense-magazine.html#comments

#175 $$$BPOE#1 on 06.20.12 at 3:39 pm

Another tragic story of renting. Over and over I have told renters of these pitfalls. No one can force you out of your home when your part of the Winners Circle. An Owner. In essence you gain immortality through ownership.
***************************************
Exile on Main St. on 06.20.12 at 10:22 am
Garth – I love you dearly and you’re getting me through bad times here in Vancouver (rental home of 14 years sold; we’re now evicted and rents are INSANE for a family of 4). Developing a very bad hate-on for my home town and would move in a heartbeat if self-employed business were portable. I keep needing to send fellow Vancouverites to your blog and it would be wonderful if you had archives sorted by topic. Anyway, thanks again for being the voice of sanity for so long.
.

#176 jess on 06.20.12 at 3:46 pm

EDMONTON — Alberta bosses who don’t pay their employees will have their names posted online for all to see, the province announced Tuesday.

http://employment.alberta.ca/SFW/esjudgments-search.asp

Human Services Minister Dave Hancock said roughly 1,700 employers owe 3,500 Alberta workers more than $14-million in unpaid earnings. Their names are now listed in a searchable online database.

“These numbers are disturbing,” Hancock said. “These claims represent money that was properly earned by Albertans, but never received
The worst offender is SSEC Canada Inc., which has 129 complaints against it and owes workers a total of $3.5 million.

The company is the Canadian subsidiary of Chinese state-owned oil giant Sinopec, which also faces charges under Alberta’s Occupational Health and Safety Act for the 2009 deaths of two Chinese men working on an Canadian Natural Resources project in Alberta’s oilsands…(fpost)

#177 Amazing on 06.20.12 at 3:47 pm

High emotions again on the blog today… seems like a lot of anger being vented at Garth the last little bit… more fun readings for those of you in love of toronto.
http://themashcanada.blogspot.ca/2012/06/657-soudan-avenue-davisville-village.html

#178 Tom from Mississauga on 06.20.12 at 3:54 pm

#39 Inglorious Investor

Please post more often!

#179 Blacksheep on 06.20.12 at 3:54 pm

Observor # 55,

” There will always be income taxes and there is nothing you can do about it.”

Derek R # 140,

“So most people would be better off if income tax was increased and sales tax reduced.
However there’s an even better tax than income tax. That’s property tax. It’s difficult to cheat on and extremely cheap to collect.”

“If property tax were increased and sales tax and income tax reduced proportionately the majority of us would much better off.”
——————————————————–
Your not very good at this. Let me help. Here is some info from the pros:

Intelligence analysts must profile potential targets in order to determine which ones it would be most beneficial to target. In order to figure this out, analysts must determine the vulnerabilities of these groups and what they would be susceptible to. The analysts also determine the attitudes of the targets toward the current situation, their complaints, ethnic origin, frustrations, languages, problems, tensions, attitudes, motivations, and perceptions, and so on. Once the appropriate target(s) have been determined, the PSYOP can be created.

http://en.wikipedia.org/wiki/Psychological_Operations_(United_States)

take care,
Blacksheep

#180 EdmontonJim on 06.20.12 at 3:59 pm

I wonder if the following contrarian move would work. Depends on the market I guess:

Hire a longsuffering RE agent, and put a blanket offer on the market for X$. Base X on the amount of debt you can personally stomach, or the amount of equity you would like in RE, in any case – be firm.

Basically it’s like walking into a competitive market and shouting “I’ve got $500,000 dollars! Who wants it?”

If its really a buyer’s market, you could see a different kind of bidding war.

I’ve seen it work with almost every type of commodity and service, why not houses? I think I’ll try it next time I buy a house. I’ll use a RE agent who owes me personally.

#181 Westernman on 06.20.12 at 4:43 pm

Observer @ # 55,
Another tax-loving Canadian, huh? Care to pay mine, Mr. Big Government?
No? That’s just what I thought – all talk – no action.

#182 Tony on 06.20.12 at 4:46 pm

Re: #136 Mark on 06.20.12 at 12:16 pm

Remember all the talk years ago about hyperinflation? Well years later now the opposite happened, we have deflation. Printing money won’t solve anything and will have a diminished effect each time countries go that route. It will come to a point where printing money does nothing and countries will abandon it. Long term gold will fall and silver will get trounced.

#183 stickler on 06.20.12 at 5:09 pm

@ #161 ANONYMOUS

“- I have a house that I renting for $1,280 per month (plus Utilities) here in the Waterloo area. There are local nearby houses selling for only $450,000”

…Friend…you need to lean math. $1,280/month vs $450K…you would be well advised NOT to buy.

#184 Observor on 06.20.12 at 5:11 pm

Westernman’s Taxes

At 179 hea saks me to pay his taxes…

Will it take more than I have under my couch cushions?

In any event send me all of your income and yes, i will gladly pay all of your income taxes. (Please include your GST credit as income)

#185 stickler on 06.20.12 at 5:14 pm

#164 Greatest Fool on 06.20.12 at 2:53 pm

You often tell us how badly screwed we are financially. I agree completely. But how can it be that individuals are so badly screwed, yet the economy will continue to perform? I wish I shared your optimism that the macro can diverge from the micro, but I don’t. Those impressive corporate earnings will go down the tubes when Joe and Jane Debt-Junky suddenly find out they can’t borrow and spend anther penny, and their house is worth 30% less than they thought.

The economy could falter or it could flatline. That’s not the point. People can build wealth regardless. — Garth
—————-
agree…just because governments are running high debts, and corps will be shedding jobs does not mean people will not buy certain items. Find companies that supply those items and you are cool…they are called consumer staples. No matter how crappy things get, I will still buy toilet paper….dig?

#186 brainsail on 06.20.12 at 5:14 pm

#172 yeg_guy

“Despite the apparent focus on oil and gas, Edmonton’s economy is one of the most diverse in Canada. It boasts major employers such as IBM, Telus and General Electric, as well as a growing biotech sector.”

I think total BS. I did a quick Google and there are 200 IBM employees there. What city in the world with a population of 1M doesn’t have at least 200 IBM employees?

#187 Exile on Main St. on 06.20.12 at 5:19 pm

@$$$BPOE#1:
Another tragic story of renting. Over and over I have told renters of these pitfalls. No one can force you out of your home when your part of the Winners Circle. An Owner. In essence you gain immortality through ownership.
***************************************

Except that we will eventually find another place and will be fine (thankfully not *everyone* is gouging here), and the poor person who paid 1.4 M for this house is soon going to be dealing with the substandard plumbing and antique wiring in a 100 year old house. No granite, no stainless, no in suite laundry, and they will have to manage 3 suites. No, at this point I’m glad I’m not them. Winners circle? Not so much. I will say however that it is precisely the kind of attitude expressed in this post that is turning this town into the most repugnant, superficial, materialistic hell-hole on the continent.

#188 Not 1st on 06.20.12 at 5:22 pm

The US will be fine. Anyone shorting it will eventually be a trader’s lunch. — Garth

The only player in the U.S. economy now is the Federal Reserve. The Fed has a balance sheet debt of almost 3 trillion. The U.S. govt has its own debt of 16 trillion. 20 trillion on the books, plus 10s of trillions in unfunded liabilities. Yup, lets see them print and tax their way out of that one.

Garth, I think you are dreaming its 1980 again. This is your chance to reset your call on the U.S. cause you are going to be laid bare in the next few quarters. Watch for the next rounds of corporate earnings as they miss by wide margins, then watch the U.S. drive straight into a brick wall in December when they have to choose between austerity or adding another few trillion to the balance sheet.

#189 American Werewolf in BC on 06.20.12 at 5:26 pm

In any case, Garth is right about something: liquidity is what you will want going forward. In the land of the debt-saddled blind, having a few bucks at your disposal will make you king.

In contrast, I really can’t have certainty in the eventual recovery of the US: its economy is fatally flawed, like the human condition itself. Though they have been deleveraging and Obama has sold the austerity shit pie with a conning smile to the adoring masses, what if disparity, globalism and entrenched corporate powers have really produced the end game–what if the masses will simply never be able to produce enough to sustain the debt required to continue consuming?

In other words, will the masses in the US (and elsewhere) enable to economy to move forward by continuing the past roles as debt slaves? And if so, is this really a future we want to applaud and immerse ourselves in, being that the majority posting here will be debt slaves as well?

On the otherhand, what if the US does recover? What if this economic rebuke of the economic model is temporary, and production/consumption continues infinitely with no thought for the environment or even human decency? Can this earth support continued growth, fueled by burning coal and slashing carbon sinks (to create more pasture for methane producing food-cows, fattened on petroleum-fertilized corn)?

Its lose/lose. Stay liquid if only to afford a bike and booze, and get a few kicks in before the shit-house comes down (for you or your grand-kids).

Its started to look a tiny bit bleak

#190 Blue Monster Lover of Meats and Vegetables on 06.20.12 at 5:26 pm

Don’t bet against America. You will lose. — Garth
—–
When America returns I’ll take my bet against it off, until then we seem to have a political flavor of Eur-merica. And how can you say that and be so sure that Obama has a second term locked up? That’s the farthest thing from what America was. The direction of a second Obama term will make France look hawkish!

#191 Exile on Main St. on 06.20.12 at 5:30 pm

Forgot to mention that my landlord cashed out because he’s quite sure the bottom is going to drop out of the market. He’s a great guy and did the right thing for himself.

#192 brainsail on 06.20.12 at 5:38 pm

OOPS! I was wrong there maybe 1000 IBM employees in Edmonton.

#193 cramar on 06.20.12 at 5:41 pm

#161 ANONYMOUS on 06.20.12 at 2:20 pm
Garth, this is a VERY SERIOUS QUESTION that I need your help with:

– I have a house that I renting for $1,280 per month (plus Utilities) here in the Waterloo area. There are local nearby houses selling for only $450,000 and I can buy them if I put $50,000 down.

– Since I’m paying $15,000 per year on rent, don’t you think that it would be better for me to simply dive in and buy a house now rather than wasting all that money each month on rent with nothing to show for it? I have looked around and $450,000 is a BARGAIN for the Waterloo area for a 3-bedroom.

What’s your advice?

Sure, waste it on interest and property taxes. Good choice. — Garth

————

There are really nice 3-bedroom houses for $350k in the K-W area. But if you are concerned with paying rent and have nothing to show for it, how will you feel if you do buy that $450k pad, and in future it is worth $350k? I have a feeling that there are a lot of RIM employees with $450k houses.

#194 Mark on 06.20.12 at 5:47 pm

#180 Tony –

Deflation? Where? Housing? Not yet. Grocery store? No way. Gas station? Nope. We may never get hyperinflation, but don’t for a second believe we have deflation. We don’t. US$ lost 98% of it’s value since the creation of the Federal Reserve.

#195 Smoking Man on 06.20.12 at 5:49 pm

Unbelievable !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

So while I am on the phone with the boat people, wife BBM’s me and says the boat licence has arrived by mail, but the guy on the phone is telling me it’s not in the DB and you can expect it in 3 weeks.

WOW can’t wait for C and F to give us a lecture on productivity.

Maybe my email to the minister of transport did something who knows.

#196 Lorne on 06.20.12 at 5:50 pm

#163 truth hammer on 06.20.12 at 2:52 pm
And……the BOC announcing that there will be low interest rates in Canada until AT LEAST 2014…..so let the buying begin and hyperinflation to remain hyperbolic.

……….
That was CIBC that made that “announcement”…..not that they would have anything to gain by people continuing to take out low interest loans! Me thinks you need to take the word “Truth” out of your name….and just go with “Hammer”….as you continue to pound untruths into the unsuspecting.

#197 timbo on 06.20.12 at 5:53 pm

http://www.testosteronepit.com/home/2012/6/20/oil-price-differentials-caught-between-sands-and-pipelines.html

“It’s a double-whammy differential: Canadian oil is heavy, which discounts its price; and the system to move it to suitable refineries is clogged up, creating another discount. Neither of those situations is going to change any time soon, and that means oil-sands projects may soon be on the chopping block.

The oil sands is one of the costliest oil regions in the world to develop; and with WCS prices so low, the economics behind many new oil-sands projects have become pretty weak. New oil-sands mines require a price of around US$80 per barrel to break even. If an upgrader is part of the plans, that break-even price rises to almost US$100. In-situ projects, which use wells and underground steam injection to extract oil from the sands in place, usually carry a break-even price near US$60 per barrel.”

Alberta has to worry now………….

#198 Westernman on 06.20.12 at 6:00 pm

Observer @ # 182,
I think you misunderstand… you don’t get added income, just more taxes – you should love this concept… after all, you are Canadian aren’t you?

#199 jess on 06.20.12 at 6:01 pm

aiding and abetting
….clients could owe the U.S. Treasury as much as $712.5 million in refunds over wrongly claimed tax credits.

http://www.bloomberg.com/news/2012-06-19/irs-resists-whistleblowers-despite-wide-u-s-tax-gap.html

The European Commission is considering setting up a single European tax identification number for EU citizens and companies in order to improve tax collection rates, according to an internal document seen by EurActiv.

The proposal is part of a report that the Commission will put forward next week ahead of the European Summit on 28-29 June.

==

We cannot ask citizens to accept the burden of increased taxes and cuts in public services if we do not do our utmost to clamp down on activities and practices that robs member states of legitimate income,” the Commissioner said

#200 Ross Thomas on 06.20.12 at 6:14 pm

“‘Money out of thin air’ is a fav fallacy of the metalheads. Currency is backed by the power to tax and represents a portion of sovereign net worth which is monetized by a society. If too much it issued. the market adjusts its value. So far the market says US dollars are worth more than gold. — Garth”

Rightly said. Have you seen Steve Keen’s notion of money/credit representing the intangible asset that is a banking license? I think that’s a good explanation from an accounting perspective, but ultimately I think it’s simpler to think of money and credit as just tokens representing promises we’ve made to each other that need to become backed by as much real production as possible if inflation (i.e., a loss of confidence in the value of money) is to be minimized.

You should get wonky more often.

#201 dd on 06.20.12 at 6:30 pm

#104dd on 06.20.12 at 9:15 am
Nobody will default,

Wrong. Countries have defaulted.

Please keep up to date on the news if you are going to brag about your so call solid predictions.

I’m sorry. Did you own many Greek junk bonds? I should be more sensitive. — Garth
———————————————————-
Next Spanish Bonds,
After that Italian Bonds
After that … .

#202 NAM not HAM on 06.20.12 at 6:48 pm

#168 A in Vancouver on 06.20.12 at 3:05 pm

“Many realtors say now is the best time to buy”
_______________________________

Of course they say that. As a salesman, would you want to sell a home now for 1mil or later for $600k? Btw, buy RIM, it’s a great time.

#203 ozy - shame on us on 06.20.12 at 7:14 pm

shame on us, talking heads pro-cons intellectual delights, while hard working immigrants and younger kanatian generation has No Future.
Pack your stuff fellas and leave neo-collonial kanata, the exploatation is most severe here, (houses unaffordability, and overall crappy GTA standard of living, working, renting). Don’t waste your life.
I will cash hopefully 1 million – in 10 y and leave too.
Asta la vista b-a-b-y!

#204 jess on 06.20.12 at 7:40 pm

HOODS

….”Rich avoid taxes on 5000 homes by buying through offshore companies
The super-rich have avoided paying millions of pounds in tax on 5000 homes by buying them through offshore companies, it was claimed.

One block of eight town houses in London was all sold to offshore companies with a loss of more than £10m to the taxman, it was claimed.
Estimates by government officials show that about 5,000 British homes are believed to be registered in a way that allow their owners to avoid stamp duty and inheritance tax.

The multi-million pound homes are mainly in London and about 500 of the homes, worth a total of £1.6bn, were bought in the last year.

One exclusive street recently renovated was almost entirely bought using the loophole, it was claimed.

The statistics were obtained by the Independent newspaper via the investigative website Exaro.

http://www.telegraph.co.uk/property/propertynews/9319712/Rich-avoid-taxes-on-5000-homes-by-buying-through-offshore-companies.html

#205 Fabrega on 06.20.12 at 9:04 pm

# 161 ANONYMOUS

That is why we are all screwed.

#206 Freedom85 on 06.21.12 at 11:07 am

The government is moving into full turtle mode. They are deperately trying to save the last vestige of taxpayer wealth. The home equity position. They know house prices are about to fall and they are making their move to give themselves political fallback saying they tried all the while hoping nobody notices the fact they blew the bubble in the first place.

Effectively, we’re all to blame as we also drank the kool-aid that was offered. Time to move into turtle mode everyone. Sell anything that you don’t need and hunker down. The next 5 years are going to be ugly.

#207 Elizabeth on 06.21.12 at 2:43 pm

If you have the time, please look at this You Tube clip (from a couple of years ago). British comedians explaining sub-prime crisis. For a bit of comic relief…

http://www.youtube.com/watch?v=mzJmTCYmo9g

#208 Elizabeth on 06.21.12 at 2:47 pm

Oops, here is part 1 of part 2 already posted. Well, you can’t trust me, I live in Vancouver! :)

http://www.youtube.com/watch?v=lWDdcD-1xoo&feature=related

#209 OSFI "Guidelines" on 06.21.12 at 2:59 pm

Garth:

I checked out the .pdf link you posted.

Are these new OSFI “guildlines”…enforceable? Or, are they merely “suggestions”?

The regulator is the regulator. — Garth

#210 Realtors and mortgage brokers in a PANIC! on 06.21.12 at 6:36 pm

More news: OSFI creams the cash-back mortgage

BOOOOM more free market rules which the criminal realtors and mortgage brokers hate as the housing crash will force them to find a real job but they are useless with their current skills. Smokingman you know what is happening the rug is being pulled from under Canada and the housing crash will bankrupt the “middle class” Those who sold and in cash will buy two house for the current one house JUST LIKE THE US. The fake economy is going to come crsahing down. This was the plan.