Like most Canadians, Alfred’s a wuss. “I need something safe,” he says, which is a line I hear way too much from people who have yet to see their 35th birthday. “I’m a renter today and I’m investing my money with the purpose of buying a house in the next (2?, 3?, 5?) years. It does me no good if my portfolio loses money!”
Of course, lost on Al is the fact when he feels the time to buy has arrived, he’ll think nothing of putting all his money in a single asset (a fine way to embrace risk), then leverage it up with a wad of debt (the perfect way to enhance that risk). If he’s typical of most people reading this blog, he’ll also look at his investment portfolio every day and have a cow if it goes down 4.5% for six weeks. But when he buys real estate, he’ll never have it routinely appraised, and only worry about the valuation when he wants to sell.
In short, he knows little about the risk he fears. But I digress. Al needs info.
“Like, I’m sure, many of your other readers, would like to request that you write an entry regarding the “NEXT STEP”… i.e. we’ve heeded your advice today, but what about tomorrow?
a) when to sell our portfolio assets (REITS, preferreds, etc), and
b) when to buy a house using those proceeds
“I need something safe… yet you’ve eshewed pocketing them in orange guy shorts.
“Please write about the inherit risks and interest rate sensitivity with REITs and preferreds… when should you sell so you don’t end up with a capital loss? I hope you don’t take the cop-out and say “hire a money manager”… because I am sure your readers would love to hear your feedback to get an overall end-game plan.”
Well, Al, this is a big topic and will take a few posts to cover. ‘When to buy real estate’ will be an ongoing point of discussion, kinda useless to raise for a year or so. But settle in for a long rent if you live in Toronto or Calgary, and a little less in Vancouver or Victoria. Prices will be lower going forward, but the initial correction will merely be foreplay. The juicy part comes later.
The main thrust of your question: where to put the house money for a few years? Because people mentally compartmentalize their assets, most get it wrong. For example parents funding RESPs for babies are so protective they stick cash into GICs when this can safely be invested in growth assets for 15 or 20 years. They condemn their kids to penny-pinching in college when they should rightfully be driving Boxsters. Shame.
Ditto for house money. While people are waiting to dump this wealth into an inflated asset certain to fall in value while using debt destined to get more expensive, they fret about losing a single dollar. They stick this for years into savings vehicles which generate taxable interest and yield one-half of the inflation rate. In short, they blow it. Because they fear risk — and yet their actions guarantee the purchasing power of money is reduced.
Of course, dumping house money into individual equities, even ones paying fat dividends, or mutual funds with cancerous MERs, are lousy options. Markets are volatile and will remain that way, so ETFs are a far superior alternative – but can fluctuate too much in the short term.
So what are better choices? Yes, Timorous Al, preferreds and REITs are good candidates, since they throw off way more yield than the orange guy could ever muster, with more stability and predictability than stocks.
Preferred shares in quality companies, like banks and insurers, have a track record of riding through intense events like last autumn’s faux American debt crisis, when equity markets were heaving and lurching by 400 points a day. Even in the 2008 crash (which will not be repeated in our lifetimes), preferreds were slammed like everything else, but to a lesser degree and with a great recovery rate – and continued to spin off dividends without losing a beat. These are shares with the characteristics of bonds, which pay tax-smart dividends instead of interest and currently hand over about 5%. Of course you need to know what kind to buy and exactly what a gently rising prime rate would mean to the capital value of preferreds. I will address this shortly.
As for REITs – real estate investment trusts – it’s key to understand they will not be slammed along with residential properties. REITs invest in income-producing assets like shopping malls, office towers and slabs of rental apartments, then pass the cash to unit-holders in the form of distributions. Publicly-traded REITS (the only ones to buy) can also rise or fall in value according to investor demand – which seems to be insatiable.
Not hard to understand why. The REIT index of the TSX has just delivered a 5.8% increase at the same time the market as a whole lost 5%. That return also beat the 4.6% investors got from ten-year Government of Canada bond positions. Over the last six months the REIT performance (capital price appreciation plus yield) has been 11.6%, while the overall value of REITs has been climbing now ever since the 2008-9 GFC.
Can it continue? Valuations are high, but Bay Street thinks so. RBC analyst Neil Downey, no slouch, figures overall growth in 2012 for the sector should be 8%, thanks to sustained low interest rates, ample credit, low cap rates and the thirst everyone (especially the pitiful Boomers) has for income. Downey says REITs that should outperform include (with yields), Calloway (5.4%), Dundee (5.7%), Extendicare (11.1%), Granite (5.6%), H&R (4.6%) and Morguard (5.7%).
Are their risks? Of course. All traded assets fluctuate in value, however those based on real cash flow, with lots of liquidity, and supported by the irrepressible demand for yield, seem like good choices for a portion of the house money.
But nothing’s guaranteed. You have to know which ones to buy, at what levels, what to be on the lookout for, and when to harvest profits. You can take the time to learn, to monitor, rebalance, and hope you got it right. Or, you can stuff the orange shorts.
Simple choice, Al. Wuss or man?
180 comments ↓
DELETED
oh cummow things are great re is taking a break before she blows up to the top …… first
There once was a man called FURST…
Whose comments were the Worst…
“FURST” he would bellow
But Garth’s belly was Yellow
“Because he won’t F’ing ban him!” I cursed…
Garth,
What do you think about this last Rosenberg analysis?:
http://business.financialpost.com/2012/07/17/will-canadas-housing-boom-end-with-a-whimper-or-a-bang/
Lousy article. – Garth
Fuuuuuuurstt!!! Oh yeah baby!!!
I won’t say it.
http://youtu.be/ciG-Xs7mBwU
Great read, thanks.
The problem is: interest rates will stay low for decades to come. So do not rush to sell.
So REITs look good because they’ve gone up strongly in the recent past, and forecasters say they will continue to do so. This seems like a …familiar… description. Sounds too good to be true?
No, they also have yield and stability. As I wrote. — Garth
uno! this is what happens when you don’t reply.
first
time to buy stocks fellas, surely more qe3 its comming
double up
One note: Extendicare is no longer a REIT (converted non-trust corporation a couple of weeks ago).
The yield is awesome now – and fully qualifies as a dividend for tax benefit as well!
Too many red dots in the lower mainland; and growing daily. This thing may be going faster then most here think.
Great post Garth! Per usual. I am always amazed that people who are smart enough to learn how to make a living, be it a “professional, tradesman, technical field, business man…..etc……will spend so much time learning their craft, and yet…….with their accumulated wealth/funds/net worth…….spend little or no time investigating/learning, how to properly handle their finances. Instead, relying on the: media, co-workers, parents, neighbors, siblings, all forms of group think/herd thinking, and mass hysteria. This, when there is your blog, Garth, plus, a massive source of information for free, at ones fingertips. It is mind blowing, especially when one sees firsthand what is and has happened world wide, and ignores it……let alone the history of mankind, and all of the
past bubbles/financial meltdowns in history. Having read your blog for a long time since before I began posting, plus reviewing your archives Garth, I can honestly say if someone took the time to read your blogs….even ignoring the comments, which I also thoroughly enjoy, they would know how to manage their finances as well as anybody.
i can do poems to,if i could type faster.DOS!
Garth, couple points;
1.) insurers? Have you heard of Manulife? dividend went boom after 2008
2.) REITs that contain condos, office towers and shopping malls are going to get hit. Condo glut will ripple through and a little company called Amazon is rendering the mall obsolete. Companies already doing more work from home and telecommuting so no need for a lot of office space.
(1) Manulife cut its common dividend, not the preferred. (2) REITs don’t buy condos. Are you always this sloppy? — Garth
i did twice.AGING!
Alfred, so you don’t have a nervous breakdown, get an Investment advisor (fee based) – and let a pro handle this very turbulent environment.
If you try it yourself – you will be very unhappy if you drop the ball. Trust me – you will be able to sleep at night. Got it?
In addition to reits and preferreds I would add pipelines as a great option for good cash flow with not much volatility. I made great money on the pipelines I put in my TFSA a few years ago.
Anyone have thoughts on Bank Preferred ETFs? Are they any better than buying individual Preferreds?
You cannot compare investing to buying a home. One has a margin call, the other one doesn’t. You can’t live in your REIT stocks, however you can use the money to your pay rent and if you have anything left over, you might see some growth. Better trade
1. Buy RE, leverage it 20X.
2. Borrow as much as you can in HELOC
3. Invest in the Garth Model Portfolio
4. Write off the HELOC interest of your income
This way you live and have cash invested all leveraged to some stupid house with the bank funding everything. You could actually throw in a life insurance policy and avoid more taxes, but that’s what people charge for.
Good Luck
Is that a pic of wife Dorothy getting ready for the London Olympics?
No, just an Amazon preparing preparing my ride. — Garth
“You can take the time to learn, to monitor, rebalance, and hope you got it right. Or, you can stuff the orange shorts.”
That’s exactly why people put their money in the orange guy’s shorts… When you have $50k to invest (small downpayment), there is no way you’ll get help to invest it (not interesting for advisors).
Better be 100% guaranteed you won’t loose a dime than risk loosing 20% because you don’t know what you are doing…
It’s easy to say “learn it” but much harder to actually understand all this at once (REITs, preferred, which ones, when to sell, when to rebalance, etc).
Here is an interesting quote by a hedge fund manager; he has been doing pretty good this last five years, it sums up that risk feeling gnawing at you regarding macro risk even when you are doing ok with your investments decisions:
“felt like we were playing a great hand of cards in the basement of a condemned building filled with explosives during an earthquake.” – Seth Klarman
Garth what do you think of XTR? ETF, 5%+ payout and it seems a broad enough mix. Safe but not too safe?
So CISCO CEO Chambers is selling his Calif. house for $14.8 million! At least it seems like it is worth $15 million with 6 acres and 8,280 sq. ft., compared to Tor/Van properties.
http://www.businessinsider.com/cisco-ceo-john-chambers-15-million-los-altos-home-on-market-2012-7
Compared to this TO “apartment,” you can almost buy two of Chamber’s properties!
I wonder what you get for $10k maintenance fee? Wall to wall Amazons, a chef, nannies, and personal chaffer with Bentley? But, oh that view of the CN tower! That has to be worth more than 6 acres of prime California anytime.
http://www.realtor.ca/propertyDetails.aspx?propertyId=11481607&PidKey=-1660587649
Great advice Garth. For those who are concerned about REITs I hold a number of American REITs that have options available. I then set up a collar against possible declines by purchasing put options to protect my positions and then I sell a long (or far out in time) covered call which pays for the protective put.
Anyone can establish winning income investments if they just take the time to learn a few simple strategies like I did. By the way, for the naysayers out there, I have been investing on my own since the early 1970’s after brokers lost most of my life insurance savings from my husband dying young. I started when there were no such things as REITs and ETFs, so anyone can learn how to invest wisely. Thanks Garth for another great article.
Teddi Knight
No, just an Amazon preparing preparing my ride. — Garth
I didn’t know you like Russian-made trucks.
Or Amazons ?
Other way round. — Garth
In the case of REITS consider also their exchange tradedd convertible debenture offerings. Reduced yield vs. the income trust unit, but the flipside is downside protection along with price appreciation potential.
I didn’t post it because it was juvenile. Of course a recession is two quarters of negative growth — which has not happened in the US. Now you are really embarrassing yourself. — Garth
Garth the last recession “offcially” started December 2007. There was NOT two consecutive negative GDP. GDP was over 3% in Q3 and Q4 of 2007. But lets not let the facts get in the way right Garth? And why don’t you explain to everyone what exactly occured in June 2009 to mark the end of that recession? As a matter of fact we didn’t get actually get two consecutive negative GDP readings UNTIL Q1 and Q2 of 2009 just before the “official” recession ended. Not quite as black and white now is it Garth. Now when you actually look that information up and find that to be the case…now what? You’re not going post this either and call me juvenile because I ended up being correct?
You need a GF. — Garth
@ T.O. Bubble Boy: it seems that Extendicare is now a corporation as of July 1st… http://www.extendicare.com/investors/unit_dist_income_tax.aspx#2012 conversion
Not sure if that changes the tax treatment of the dividends? Or if there is any real impact to this change.
(that’s what I mean in my previous post when I say there is way too much to learn in order to be confident in investing without help)
Oh…I was worried….
It looked like the Soft Porn police arrested Garth…..and here I had bail $$$ all set up.(either that or a condo sale assignment papers)
Difficult mortgage, debt payments ahead if interest rate hiked
Published Tuesday, Jul. 17 2012, 12:16 PM EDT
Nearly half of respondents in a national survey said they would have difficulty keeping up with mortgage or debt payments following a significant increase in interest rates.
Of the 1,000 Canadians randomly sampled by Harris Decima via telephone, 48 per cent of them said a significant interest rake hike would pose a challenge to them.
Of that group, 29 per cent said they would have difficulty making payments if rates went up by two percentage points.
An additional 29 per cent of those worried about interest rate hikes said an increase of three or four percentage points would pose a problem.
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/difficult-mortgage-debt-payments-ahead-if-interest-rate-hiked/article4422585/
Stocks are for the Long Run…..Jeremy Siegel
Look for stocks with dividend growth. ie BCE, FTS, RCI.B to name a few.
Reinvest those dividends read about Anne Scheiber amazing story.
What to make SH!TLOADS OF MONEY, here’s the charts to back up what I say.
Garth says to buy banks. Okay, maybe, but here is a 2 year chart of Royal Bank, it started off at $52.25, and 2 years later it is STILL at $52.25 (yeah, yeah, plus some dividends).
http://stockcharts.com/h-sc/ui?s=RY.TO&p=D&yr=2&mn=0&dy=0&id=p28852778315
—-
If you want to earn more, invest in XRE.TO , it is a real estate trust, and over 2 years it has gone from $11.25 to $17.25, or 1.53 times initial investment.
http://stockcharts.com/h-sc/ui?s=XRE.TO&p=D&yr=2&mn=0&dy=0&id=p19459885462
——
Now if you REALLY WANT TO MAKE MONEY, invest in APPLE (AAPL) , over 2 years it has gone from $250 to $600, or 2.4 times initial investment
http://stockcharts.com/h-sc/ui?s=AAPL&p=D&yr=2&mn=0&dy=0&id=p44825051723
so do like Tom Hank’s character in ‘Forest Gump’ did; invest in a fruit company named ‘APPLE’.
I did not recommend bank common stock. Who left the barn door open? — Garth
Chart: Historic Canadian Crises Timeline 1800-2010 http://postimage.org/image/h7f74fdzd/
Hence the purple spot after the blue.
Garth : My comment # 216 07/16/12.
The more I think about it, the more the bell rings louder for a conspiracy. But to what end ?
“Even in the 2008 crash (which will not be repeated in our lifetimes)”.
There you have it folks, a firm guarantee from Garth predicting no further market crashes. Now empty your bank accounts and invest in the stock market. You will win…guaranteed.
I said no 2008. And no stocks. I regret your disability. — Garth
REIT money trees! They never decline! Never go down! Won’t in our lifetimes!
Just right for Canadians…something for nothing, with NO risk!
Garth, when you say “Even in the 2008 crash (which will not be repeated in our lifetimes)” and assuming “our lifetime” means at least 3-5 more years, what has changed in the US to prevent another financial anytime soon?
#17 Not 1st on 07.17.12 at 10:08 pm
Garth, couple points;
1.) insurers? Have you heard of Manulife? dividend went boom after 2008
2.) REITs that contain condos, office towers and shopping malls are going to get hit. Condo glut will ripple through and a little company called Amazon is rendering the mall obsolete. Companies already doing more work from home and telecommuting so no need for a lot of office space.
(1) Manulife cut its common dividend, not the preferred. (2) REITs don’t buy condos. Are you always this sloppy? — Garth
Way too much commercial construction has gone on along with residential. REIT’s will take a hit. Spanish banks have cancelled preferred share dividends. Screwed people right over, but it’s different in Canada – can never happen here!
The Russians developed the best and most versatile commercial and military trucks. Why? Because Siberia has very little in a paved road network. Don’t count them out, and with babes that strong the West should be worried.
Another terrific post with good information. Thank you.
I saw this in Investment News today: 10 worst financial panics in US history: http://tinyurl.com/6u3dng6 . Amazing how many of these panics followed land/real estate speculation booms.
You’re right Garth, tons of REIT’s out there for people to throw their money into. It’s mind boggling that people would throw it into a depreciating asset like RE. But all the idiots believe renting is throwing it away, so let them buy houses at the peak.
Warren Buffet is a very perceptive man. One contrarian point he makes is that high beta, or volatility, does not equal high risk. The way to asses risk is the likelihood of profit in an investment over the period of time you expect to hold it.
Where Garth is wrong is the idea that balance is important. Balance is inefficient. Margin of safety. Diversification. Adhere to these two points and you will beat the market.
Hi Garth,
What are your thoughts around the following article regarding insurers in Canada?
http://www.theglobeandmail.com/report-on-business/rob-magazine/top-1000/big-insurance-worries-about-the-future/article4267962/
–
“Alfred’s a wuss.” — Isn’t Alfred Batman’s butler? Now moonlighting as an investor or RE wannabe? Not another one.
“. . . will merely be foreplay. The juicy part comes later.” — Like this?
“The REIT index of the TSX has just delivered a 5.8% increase at the same time the market as a whole lost 5%.” — One of the reasons the rich get richer is because they know how to chop and change investments, always getting close to the most bang for their buck. The rest just bitch, whine and complain, instead of doing research and educating themselves, or paying someone to do it for them.
*
Screwed Pensions Not only here in NAmerica, UK as well;
US – China Ten ways China is beating the US; Not me Shifting blame is done quite consistently by thieves; Money Laundering The higher one flies . . .; Spin Doctors When one is PM, (s)he can afford to hire more flunkeys to hide the truth; North vs. South An ongoing battle; Housing Terrible weather takes terrible toll; 3:34 clip If there were no money . . .; Rich Customers GS built a bank for them; We’re Richer Than We Think! Says so right here; Spending Cuts Damned if you do, damned if you don’t; Fiscal Penalty for being female; Job or Micro-Job? That is the question; Countries still love US debt; Bernanke and Schumer Who is telling the truth and who is fibbing? GS Cutting costs while doing oDg’s work; Gold Mining Stocks Good for TFSAs?
Wealthy Skip France Hollande’s new tax backfires as Wealthy Spaniards leave Spain; Govt.’s role in price inflation; Skid Row UK headed in that direction; Further trouble in Germany? Inflation falling; Christie’s Art House Mega rich foreigners boost higher profits; QE3 Bulls say yes; 230% Upside? Peabody Energy; Drought First corn, now meat; China’s shadow banking system; Creativity = Innovation; California’s pension shortfall; Onemorething Singapore needs you! Nine People Once rich and famous, now homeless; Hyperinflation US and UK biggest risks; American Diaspora New movie? Not quite.
*
Mayans Archeologists discover dam built by Mayans; Nuke Disasters Do TPTB use them as a tool to reorganize their world? Syria Not nice; Olympics How could anyone enjoy, or endure, two weeks of games with so many guns around them? Stomach Churning Jet plunges 20K feet before getting back to normal.
Now if you REALLY WANT TO MAKE MONEY, invest in APPLE (AAPL) , over 2 years it has gone from $250 to $600, or 2.4 times initial investment
———–
I use to frequent an Apple financial blog. There were (maybe still are) several people on there who bought AAPL stock way back when just for retirement purposes. Most had all their retirement eggs in the one basket, owning nothing else. I think one guy bought when it was around $5, somewhere in the multiple thousands of shares. Nice. But as the disclaimer says, “Past performance does not necessarily predict future results.”
What about mREITs? I’ve had pretty good luck so far. They seem to operate somewhat like a bank. The yields are pretty suspicious though.
Even in the 2008 crash (which will not be repeated in our lifetimes),
We aren’t all 39 like you .
A big Vee crash market wide and instant recovery based on the credit crisis, probably not but there will be others. And has been since then.
BP June 2010, any uranium since March 14, 2011. RY November, 2011.
Pick your disaster Garth. The masses will flee. That is when I enter.
Hey Beach Girl you OK ? on holidays ?
REIT’s are good. Dividend Paying stocks are good. preferred’s are good. Convertibles are good. Even Bonds in the right environment (not necessarily just now) are good.
Garth’s advice is good. Heed it.
Nobody has a working Crystal Ball that I know. Time to buy a home is when you can afford one, and not panic should the thing go down in value. Mine probably has, but the dam tax assessment says the “value” has increased every single year.
I don’t give a rat’s sas, i paid for it. Now it is MiNE!
NOT the Bank’s.
I’m not moving until they wheel me out feet first.
Then you might a heck of a buy from some idiot relative.
I digress. Buy when you indeed, can afford a house. They are NOT a home, merely a house. People will think slightly less of you AFTER you buy one these days. You might think much less of yourself, as well.
Being in debt is quite stupid, but if you must, at least be smart about it.
Buy well within your means, supported by ONE income not two. Terms, think 15-20 yrs MAX. kill the car payments, and credit card debt before you buy one.
Can’t do that you say? Keep renting, loser.
“REITs invest in income-producing assets like shopping malls, office towers and slabs of rental apartments, then pass the cash to unit-holders in the form of distributions. ”
———-
REIT’s are not safe long-term bets. The reason for this is that they require some sort of stablity in the commercial real estate sector.
Apart from investigating the reality behind REIT’s
( looking into potential sustained drop in rent-rolls in a chronically recessive economy), it’s a good idea to take a look at the big picture.
There has never before been the amount and quality of information that we have right now. People owe it to themselves to go out and get it.
The post contained a lot of analysis, but the relevance of this is a problem.
There’s confusion out there, but simple common sense clears that up. Commercial real estate’s in trouble…and the housing boom cheap money came from dervatives in a crooked debt-maxed system. It is what it is.
If people don’t want to look at the real issues, a good start is to throw REIT’s into doubt. And hope that common sense and “keep it simple” emerges.
Here’s an REIT article. But why look at one opinion? Read 30. Experts aren’t necessary. Being open to hear what’s actually going on is.
None of it is that hard to understand. It’s just about wanting to know.
http://online.wsj.com/article/SB10001424052702303459004577364110318098188.html?KEYWORDS=reit
No mention of precious metals?
Anybody, have thoughts on where gold &/or silver go from here? Garth?
Great read, but it is a different ball game for those of us who live abroad as non-residents.
Hi Garth,
Do you not believe that yielding securities such as REITs, pipelines and some prefs are also in a bubble? There has been a massive shift of assets in to these areas.
#24Montrealer on 07.17.12 at 10:43 pm
Exactly my sentiment.
Is it really worth the hassle to rebalance a 20K investment (REITs, Preferred stocks, etc) in a TFSA with all the transaction fees involved for instance?
Will the return offset the cost of managing the investment yourself?
I am honestly tempted to take the wuss approach on this one…
Best,
HD
To clarify my point:
On a short term investment – 2,3, or 5 years.
Best,
HD
Garth, you’re right again! It’s all about calculated risks. Money isn’t going to grow in the bowels of bank products. It applies to everything, business, sports, etc.
http://www.youtube.com/watch?v=zExrVyTX_aw
Aussie Headlines
The Australian Dollar declined in value versus the U.S. Dollar as Chinese real estate prices show signs of economic slowing. From a sample of 70 Chinese cities surveyed, prices for new residential apartments decreased in 57 cities. Moreover, 58 cities also experienced declining prices for existing residential apartments. The data fell in line with recent CPI figures which increased by 2.2 percent in June, the slowest rate of increase in 29 months.
Declining real estate prices might suggest that credit demand may also be slowing.
http://finance.yahoo.com/news/australian-dollar-declined-chinese-real-030200351.html
Stupid law to go
Under a little known clause in Victoria’s tax compliance regime, the State Revenue Office has extraordinary powers to charge renters for outstanding land tax owed by property owners.
The clause, which has existed for decades to prevent tax avoidance, potentially leaves tenants facing bills for thousands of dollars even if they have only lived in the property for a short time.
In one recent case, debt collectors for the State Revenue Office demanded almost $40,000 from a Hawthorn couple because their landlord had failed to pay land tax for six years.
http://theage.domain.com.au/real-estate-news/victorian-tenants-protected-on-land-tax-bills-20120716-2257b.html
Please, please buy now, I’ll tell you why.
HOME ownership in Melbourne is a disappearing dream for many as escalating land and construction prices and failed planning policies consign people to the rental market, a new report released today has found.
Clearly this author doesn’t realise that prices are falling, there is no shortage. So there is no rush to buy but nothing like a little fear to stir up the greaterfools.
More “prices only ever go up”, so buy now.
You would think most people could see through this nonsense by now.
http://www.theage.com.au/victoria/median-income-barely-enough-to-buy-house-20120717-228jm.html
If you bought straight up banks/insurers/utils preferreds back after 2008 crisis, you’d get capital gains of +30%, in about 3 years after.
And that’s not counting the 6-7% dividends you’d be getting. If you go further and make use of the low interest rates and borrowed to buy these shares, well, I don’t know. Is it better then real estate investment?
Garth,
A lot of people on this blog obviously did not get your message and this must be quite frustrating for you, you have my sympathies.
While I realize that what you actually said is that REIT’s and preferred shares are investments that have high regular yields when compared to other investments AND that they, like anything else, DO have their own set of risks, here is my concern.
Many of us would like an investment that does not need to be babysat as we don’t want to be constantly worrying about losing money. We want something that is indeed guaranteed to pay interest, like a GIC. Unfortunately, GIC’s, as you said, barely cover the cost of inflation and the interest income is taxed as … well interest income (ie. not subject to the dividend tax credit or taxed as a capital gain etc..).
When I look at how “well” our mutual funds have done over the last few years, I think that if I have invested that money in a GIC, I would have all of my principal AND 2 or 3 percent more. This as opposed to not having all of my principal and having to hold on to this damned thing or risk actually realizing my losses (which I find totally ridiculous as a position to be in .. it’s like being a hostage).
I am also sick and tired of mutual fund managers giving me excuses as to why my money is not working for me … either it’s the Greeks, or it’s the Spanish, or it’s the Italians or whatever. Shit happens and will always happen so I wish they would stop making excuses and get off their butts and start making some dough for a change.
If preferreds and REIT’s are so great, why aren’t some of these mutual fund managers using these to make money ? I doubt these things are a panacea for investments. And please don’t tell me that mutual fund managers are not as smart as you are because I am sure that a lot of these larger mutual fund companies have good people working for them. I don’t buy this idea of having the strategy that no one else has because in this day and age, there are no secrets.
Although you don’t seem to like them, I still think that GLWB’s are a safe investment for a portion of one’s savings (not all). They guarantee a 5% “bonus” for 15 years, you never lose your principal AND if the fund goes up, you are entitled to a “reset” every three years. In addition, when maturity time hits and you begin to claim the benefit, the payment is for life as opposed to when the money runs out. While I realize that in terms of a return it is not the best one could accomplish over a long period of time (I factored the management fees into that 5% bonus so it is more of a 3% bonus really), it IS a more guaranteed type of investment where you will not lose your nest egg and it offers a definite payout at retirement. I see this as a secure base upon which to build a retirement fund. For people without a pension coming to them, it is certainly something to think about. Of course, you have to commit to such a vehicle because if you decide you want to take the money out before maturity then the rubber gloves come out and you are gutted for every last cent .. therefore you have to be sure you do it right. It is, however, a nice hybrid between a guaranteed annuity and a mutual fund that promises growth.
It may be wimpy and safe but GLWB’s and GIC’s will at least guarantee your principal and give you a bit of a return and until the market shows me something else that is as risk free as these, I am starting to think that when my house is sold, this is where my money is going, at least for the short term.
HHHW
If you’re looking for a TFSA savings account you can do a lot better than the Orange Guy.
http://tfsa2011.wordpress.com/2011/02/05/30/
A couple paying 3% with no minimum term.
TFSAs are not for savings. — Garth
@ #31 Montrealer on 07.17.12 at 10:54 pm
@ T.O. Bubble Boy: it seems that Extendicare is now a corporation as of July 1st… http://www.extendicare.com/investors/unit_dist_income_tax.aspx#2012 conversion
Not sure if that changes the tax treatment of the dividends? Or if there is any real impact to this change.
———-
I would recommend double-checking with extendicare… I had already owned them prior to July 1st (one of my TFSA holdings), so I hadn’t researched this to confirm. However, I did read 1 article about the Distribution expecting to stay the same (.07 per month), but that it would be classified as an eligible dividend after July 1.
I will try to dig this up.
It was actually on that page you linked to:
“It is anticipated that all dividends declared and paid on the Common Shares of Extendicare Inc. will be designated as “eligible dividends” for Canadian federal income tax purposes, and will qualify for the enhanced dividend tax credit. However, there may be limitations on the ability of Extendicare to designate all or any portion of any dividends as “eligible dividends” and, accordingly, no assurance can be given as to the extent to which any dividends will be designated as “eligible dividends”.”
The other comment on that page mentioned that for Jan-June, 70% of the Distribution is expected to be as eligible dividends.
From the Redpin.com
Listings up 32% w/w in toronto
You need a GF. — Garth
You needed to know the facts. Now you do, so when they arbitrarily assign another recession retroactively in some past date to avoid the one they never left in the first place you won’t be waiting for two consecutive negative GDP’s and be behind the curve again. We’ve had debates in the past where you have pointed out an error I made and I’ve come back in the next post and accepted it. Not sure why you have to be so stubborn about being wrong this time. Well, at anytime. Queue another sarcastic retort in 3…2…1….
#13T.O. Bubble Boy on 07.17.12 at 10:02 pm
“One note: Extendicare is no longer a REIT…”
*Agreed. A totally secure investment.
If I remember correctly, this US based corporation’s Canadian ‘operations’ are almost 100% CMHC insured.
Excellent investment. And totally secured!
And, Boardwalk….CMHC insured, baby!!
Nice. Tax-payer insured. No risk.
I thought the feds were changing mortgage rules to limit HELOCs at 60% of the value of the house.
Now it seems they’re changing it from 85% down to 80%. Did I miss something?
Yes, you missed a post on it here. — Garth
“BOE Policy Makers Say They May Reassess Rate-Cut Case: Economy
Bank of England policy makers may reconsider the case for an interest-rate cut after assessing the impact of new lending and liquidity measures as Europe’s debt crisis keeps pressure on them to do more to stoke growth.
“
You cannot compare investing to buying a home. One has a margin call, the other one doesn’t.
There’s only margin calls on investments if you use leverage AND the investments decline enough. With a little leverage, they’d have to decline a LOT, and vice versa.
No margin calls on real estate? Don’t kid yourself. Unless your mortgage term matches your amortization, you’re going to have to renew in the future, and there’s no law saying your current mortgage holder has to renew you — in fact, many subprime borrowers were told they wouldn’t be renewed during the ABCP crunch. If your house value falls enough, your current creditor MAY renew you, but you’ll have no negotiating power on rates, and will end up paying posted or close to it. Even if your house value DOESN’T fall, you’ll be paying more per month if rates rise.
Understand a balloon mortgage. The entire borrowed amount is due when the term is up. You may be able to refinance. The terms may be favourable. Or maybe not. You might not call it a margin call, but you should be losing just as much sleep over it.
Thany you to ANONYMOUS, for the most useful “Investing using a rearview mirror” seminar.
[…] assuming “our lifetime” means at least 3-5 more years, what has changed in the US to prevent another financial [crisis] anytime soon?
Asset prices?
#51 meslippery on 07.18.12 at 1:05 am
Hey Beach Girl you OK ? on holidays ?
____
Thanks for your concern. My whole life is a holiday.
Been busy, still look in everyday.
My idiot youngest son is making too much money. He phoned to brag he was buying a house. I said why would you imprison yourself for 25 years at your age. Yes, you are impressing me. But this kind of talk doesn’t.
He listens to Mama. He won’t buy, nor will he ink himself up, because then he is out of the will.
Yes, I play the 2 idiots of each other. Kinda fun. They caused me enough torment, actually they didn’t cause Mama is one mean coyote. Not cougar, past that stage. Entering into a whole new realm.
Anyway the Inn is fun with a bunch of new crazies. A totally inked up tattoo artist I cringe looking at this creature, but he is entertaining. Wouldn’t want to see that naked at 50.
A professional male cheerleader, he let me know he swings both ways. Not shit Sherlock. Makes it easier on Friday nights, I guess. 2 Hydro men, and 1 handsome man who seems to do not much of anything but swim. And the other buddy, who wants to marry me. He really wants to marry my portfolio.
And the Flame is still here, a bit more attentive than in the past. He must have looked in the mirror. He said if you ever settle down, will the traveling circus still be part of your life.
I never mentioned settling down, I will do that when I am cold and dead. But who knows, I might be going to a warmer climate, and I do not mean Florida.
Garth, what do you think about the Smith Manoeuvre ?
It doesn’t work. — Garth
Garth,
Now that Toronto is basically a warzone for gangs, will this affect real estate prices in the city?
Massive shootout on Monday and another “popping” last night on the soccerfield.
The GTA is bigger than eight provinces, with 6 million people. Zero impact except in the hoods involved. — Garth
Interesting read as usual Garth.
Canadian REITs with strong and growing FFO (funds from operations) are not that hard to find. Look at names such as Northern Property (NPR.UN) that essentially is a monopoly up north and only pays out <50% of its FFO as an example. Set it up in a TFSA and presto – tax-free income.
Additionally, although we may not be at that point yet Garth as you are still trying to convince of the utility of preferred shares, readers should educate themselves of the plethora of types (ie – perpetual, reset, conversion options etc.)
You may also consider a quick tutorial on saving and budgeting, as ridiculous as it sounds. Even the simple notion of setting a defined savings rate and transferring the money out of your spending control could be of help to those who struggle. I recognize that this may infringe on your current financial advisory/asset management business but, consider it a public service.
“TFSAs are not for savings. — Garth”
Garth speaks the truth here. Calling them “Tax Free SAVINGS ACCOUNT” did no one a favour except ING or PC Bank. To the many sheeple out there, the name itself implies that you should treat it like a normal savings account rather than invest with it.
In the US, the equivalent is a Roth-IR, named after William Roth (a senator who sponsored it). It’s name doesn’t make people think that they should use it to stuff money into a savings account.
The TFSA should have been called TFIA “Tax Free INVESTMENT Account” and Canada would be a lot better off down the road.
I would love to see some stats on how many TFSAs are holding liquid savings instead of ETFs, low MER index funds, blue chip stocks, or anything with long term growth potential, versus the equivalent Roth IRA in the States.
I already got into today’s blog topic with Garth a few days ago in the comments, so no need to rehash my opinion.
Hey there Toronto_CA. Thanks for letting me steal your name.
House Horny Housewife wrote:
“I am also sick and tired of mutual fund managers giving me excuses as to why my money is not working for me … either it’s the Greeks, or it’s the Spanish, or it’s the Italians or whatever. Shit happens and will always happen so I wish they would stop making excuses and get off their butts and start making some dough for a change.”
——
I haven’t lived in Canada since the 90’s and the “update” this blog is providing is pretty strong. Check out the fantasy ( above) this person is living in. And it’s just one flavor of many. I had to re-read the post because of how “out there” it all is. About a 99% chance it’s real.
In “The Star” this morning Goldman Sachs Syndicate
( Mark Carney as spokesman) is reporting that the economy is “worse than expected”. And CNN is pumping Syria as hard as they can. For a couple of hours they reported that the “Defense Minister”‘was killed via a car bomb. I think it’s been downgraded to “defense official”.
Traditional methods for dealing with impossible economic situations are always tempting. Most of, if not all of it, is outside the control of the ordinary citizen.
The “can control-can’t control” module doesn’t get properly installed into judgment capability without a willingness to look at reality. Different for each person, with unique timing.
Looks like plane loads of HAM will not be coming over to save the day for Vancouver’s plummeting home market as China’s economy hits the skids . . . all those specers and house horny newbies are going to get their a__ handed to them shortly . . .
“Some of China’s biggest companies, from tech giants to airlines and retailers, are warning of unexpectedly sharp drops in profit of up to 80 per cent, adding to pressure on Beijing to reverse a painful economic slump.
On Wednesday, Air China Ltd., one of three main government-owned airlines, warned first-half profit will fall by at least half from a year earlier. State-owned ZTE Corp., one of the world’s biggest producers of telecommunications equipment, is projecting a decline of up to 80 per cent . . . Leaders are trying to pull China out of its deepest slowdown since the 2008 crisis.
Beijing has cut interest rates twice since the start of June and is pumping money into the economy through spending on building low-cost housing and other public works. It is trying to use targeted measures instead of flooding the economy with money after a binge of spending and bank lending that helped China rebound quickly from the 2008 crisis fueled inflation and a wasteful building boom.
“We have seen more profit warnings than expected in the first half and there might be more than there were in 2008,” said Mao Sheng, a strategist for Huawei Securities in the western city of Chengdu.
Some 233 companies with shares traded on mainland China’s two exchanges expect to report losses for the first half, while another 449 expect lower profits compared with a year earlier, the official Xinhua News Agency reported Wednesday.
Growth in retail sales has declined steadily, a setback for government efforts to reduce reliance on exports and investment by creating consumer-driven growth.
In the auto industry, Dongfeng Motor Co. Ltd., the local partner of Nissan Motor Corp., warned last week its first-half profit will be down 60 to 70 per cent.
http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/chinese-companies-warn-profits-plunging-as-slowdown-spreads/article4424639/
“U.S. Federal Reserve chief warned of another recession yesterday and provided no hints of a plan for a third round of quantitative easing (QE)”
>> Translation the US economy can’t stand on it’s own and needs divine intervention.
“Investor worries about the Eurozone debt crisis have taken a back seat for the time being as the focus is now on corporate earnings season.”
>>Translation the Eurozone issues are not resolved and are going to be around a long time. Short term focus is shifting to corporate earnings.
Corp Earnings…
“BEIJING, China – Some of China’s biggest companies, from tech giants to airlines and retailers, are warning of unexpectedly sharp drops in profit of up to 80 per cent”
“quick glance at the state of the 65 companies of the S&P 500 that have reported so far… just when you thought there was no more fat to cut, staff to lay-off, or Capex to cut, 73% of companies reporting have surprised positively on EPS while 65% have surprised negatively on Revenues.”
>>Translation don’t expect interest rates to rise any time soon. Sounds good for bank preferred, Utilities, REITs and large dividend paying equity ETFs no?
I think the main fear is a sudden news event re Europe (or something else) that takes the markets down 10% – 20%…because no matter how great something is when TSHTF everything tanks.
My 2 cents.
Your blog today GT highlights precisely Canadian thinking.
1) financial investments are just a stepping stone to the ultimate, holiest , goal of buying a house
2) risk exists only with ‘paper’ assets not with ‘lumbar and bricks’
3) diversification very necessary when it comes to financial assets and NEVER leverage those but go ahead and plow it all on four walls and a roof in one spot WITH leverage.
4) No one as of yet has invented a green and red neon sign that can value a house by the second for all to see unlike financial investments therefore leaving all blissfully unaware of where rsik really is.
Unlike you GT, I believe this primitive, uneducated immigrant thinking will never change
Gee…..I wonder if with everyone piling into REIT’s and Pref’s at the same time will have any effect on pricing any time soon? Could a direct capital loss kick in the arse be in the offering ?
We’ve been through this before………is ‘safety’ the biggest trap out there? Will energy and resources never recover? Is the world doomed for all time?
If history is any guide…..the biggest gains are to be had within the ranks of the downtrodden. National/Soveriegn and Industry/Hedge funds are piling in while ‘things’ are cheap……is that why they’re called ‘the smart money?”
If inflation on consumables is above 20% p/a…..and ‘safe returns’ are paying 5%……..is there any cause for concern over the long term health of ones wealth?
70% of people have houses. 8% have preferreds and REITs. Refine your worry. — Garth
July 1-14
$593,672 = Detached
$430,128 = Semi-Detached
$372,802 = Townhouse
$328,729 = Condo
June 1-30
$634,652 = Detached
$461,312 = Semi-Detached
$382,491 = Townhouse
$342,044 = Condo
http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_mid_month_0712.htm
http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_market_watch_0612.htm
All credit to “adamtheman” on the RF forums.
6.5% average decrease from June, but the RE spin is growth from July 2011. Listings are up 14.4% from last year. Waiting for Watchdog’s report now.
And please don’t tell me that mutual fund managers are not as smart as you are because I am sure that a lot of these larger mutual fund companies have good people working for them. I don’t buy this idea of having the strategy that no one else has because in this day and age, there are no secrets.
Problems with mutual funds:
1) High fees. If your fund is taking 2% off the top in expenses and fees, it has to beat the market by 2% just for you to get the market’s return, or 1.5%+ just for you to get the market’s return net of an index fund’s fees.
2) Closet indexing. Fund managers have regret, too. If they lag the benchmark by 5%, the sheeple will withdraw funds, and there go the management fees. So they can’t take risks — the kind you need to take to outperform.
3) Investment mandates. If they say they’re 100% Canadian Equities, investors don’t expect them to be 20% in cash, even if that’s the manager’s gut instinct. Funds come in, they have to invest them, whether there’s bargains or not.
4) You! You pull your money out at the bottom, so they have to sell stocks when they’re cheap, and you flood money into the fund when it’s hot, so it has to buy stocks in its sector when they’re expensive.
Maybe if you bought the fund companies’ stock instead of their product, you’d get a cut of those fat management fees instead of having to pay them.
http://business.financialpost.com/2012/07/16/riocan-allied-properties-team-up-to-develop-mixed-use-properties/
Garth, the finacial post wrote up this article about the joint venture between Rio-Can and Allide property’s.
What’s your take on this article???
Would these company’s be a good option to hold a REIT ?
Great post by the way….
Hope to see more of them!
@#83 bigrider
“No one as of yet has invented a green and red neon sign that can value a house by the second for all to see unlike financial investments”
>>GREAT idea…im going to build one and hang it under my mail box!
So much for the rush of buyers trying to beat the CMHC rule changes on July 9th:
http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_mid_month_0712.htm
Mid-Month July numbers for the GTA show that sales are down in the 416 compared to 2011, and prices were only up 2.3% vs. 2011 (increases had been +5%-10% in most months of 2012).
2 interesting stats:
1) Average prices for detached homes and also for condos in the 416 are flat (up 0%) over 2011 — oops!
2) Condo re-sale volumes in the 416 area are down -10% vs. 2011.
It is irrational to think a huge number of people would rush to actually complete transactions in a week or two, especially when 2% of Canadians know what a federal budget is. — Garth
I think that REIT’s valuations are quite high now and they ought to be affected by a RE correction and its effects on the consumers and the canadian economy. Using a contrarian / value approach would you not rather look into depressed international REITs or high-dividend large caps like Total S.A. or AT&T ?
There is no evidence major Cdn REITs will be affected by a correction in residential real estate. What you buy depends on short-term or long-term bias, and whether you want yield or capital gains. — Garth
garth
should i stick with cpd, cdz and xre instead of buying individual companies. yields are a bit less than what you stated but i don’t have to track individual companies
thx
I can’t believe the arrogance of some of these rookie Victoria agents who represent people selling multiple rental properties with years of equity built up but are waiting for the “right price” and won’t lower their price.
Pretty funny since the market peaked a year ago when the “right price” could have been easily met. Stupidity breeds stupidity as they say when an agent doesn’t want a sale to make money, he just wants to pacify a client to show he has a large pile of listings stagnating to create a facade that he’s “in demand”.
#35 Anonymous said:
“Now if you REALLY WANT TO MAKE MONEY, invest in APPLE (AAPL) , over 2 years it has gone from $250 to $600, or 2.4 times initial investment”
If you had a time machine then YES, go back in time and buy AAPL at $250. Past performance is not an indicator of future success.
@Freedom First
“… I am always amazed that people who are smart enough to learn how to make a living…will spend so much time learning their craft, and yet…….with their accumulated wealth/funds/net worth…….spend little or no time investigating/learning, how to properly handle their finances. Instead, relying on the: media, co-workers, parents, neighbors, siblings, all forms of group think/herd thinking, and mass hysteria. This, when there is your blog, Garth, plus, a massive source of information for free, at ones fingertips…”
Garth’s blog IS MEDIA, what is at one’s fingertips IS MEDIA. Books about financial stuff ARE MEDIA, are group/herd thinking. the massive source of information IS MEDIA.
so what do you want to say ?
my opinion is you need a professional advice in this domain too; free lunch doesn’t exist.
#61 VanLarry on 07.18.12 at 4:31 am
——————————————
You have to ask yourself what’s going to be the better investment over the next 5-10 years.
Canadian real estate most likely doesn’t make the top of the list.
Furst, I just want to say that I really enjoy your poems, and your “Furst!” comments make me chukle. This is a great blog (been a daily reader since 2009, Garth you saved me from RE!!) with a great variety of readers, and an awesome comment section. I love this blog! And Furst, don’t stop with your poems. And for those who find the pics/comments silly or offensive or both, well… the life section of the toronto star might be the right place for you. Now gettaoutta here!
94th !!!!!!!!!!! Yeah baby!! YEAH !!!!
I love this blog!
Heard this from a co-worker today who just told me her “younger” friends just bought a new place last night. “They signed the paper work and now are running the numbers with interest rates and such. I told them, just don’t bother and hope for the best. All that stuff is confusing.”
Very few people run the numbers when buying a home. Priorities are location, looks, amenities, price and then maybe they will look at the numbers.
I had troubles not laughing and then not crying.
Screwed…
In my opinion – personal investing with your down payment is all about your comfort zone. I have my 25% down payment in the Orange Guys shorts collecting 1.35%. Call me a wuss, that’s fine. Rather be a wuss with my down payment ready to go than an idiot who “gambled it” for a “chance” to make an extra 3.65% ROI (still pay taxes on that too). There’s value in sleeping soundly at night. Look at the whole picture here. Sure you pay taxes on your 1.35% and inflation is close to 2% BUT house prices will fall your down payment is guaranteed and the delta between falling house prices and your guaranteed down payment gets better and better which each passing year. Keep the down payment secured in my opinion and save the ETF’s, Preferred shares and all other investment risks for retirement growth.
Explain how buying preferred shares in the bank and receiving tax-smart dividends is ‘gambling’ compared with giving your money to the same bank for less than inflation and twice the taxes. Wuss. — Garth
Now pushing damned hard towards three-score and five years, I can say this about investments vs real estate.
In my adult life here in Victoria, BC, I have owned and lived in six houses, including the present one. Built three and half of them myself (bought one half finished). The first built in the early 70’s, cost $18K including the lot, houses, appliances, and curtains. The last cost $450K-ish.
We have made significant profit on all of them. If we sold the current one, we’d make $250K-ish profit. The profits of course, have always gone into the next house, and we’ve been mortgage free for many years.
During those years, there have been at least two real estate ‘corrections’ in Victoria.
In 40ish years of contributing to RRSPs (mutual funds, GIC’s, etc) have made approximately bugger all (maybe averaged a few points better than prime). The execption was in the 80’s when CSB’s were paying 18% for a while. There has been a lot of advice and help from financial planners who supposedly knew what they were doing.
We are living quite comfortably in our retirement; most of that is thanks to buying houses, and riding the roller coaster of fluctuating prices.
Sounds like you chose investments poorly. Guess who’s responsible for that? — Garth
Given the way things have begun to unfold in Vancouver, and the GVRD in general, any predictions around how things will look by the end of this year? I just made a bet with a realtor friend of mine that by December 2012 we’ll be at least 15% lower than we were in December 2011. Assuming he’s still able to buy me dinner by the end of the year, do the blog dogs think I’ll be eating steak…or crow…
Toronto_CA on 07.18.12 at 10:20 am July 1-14
$593,672 = Detached
$430,128 = Semi-Detached
$372,802 = Townhouse
$328,729 = Condo
June 1-30
$634,652 = Detached
$461,312 = Semi-Detached
$382,491 = Townhouse
$342,044 = Condo
http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_mid_month_0712.htm
http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_market_watch_0612.htm
All credit to “adamtheman” on the RF forums.
6.5% average decrease from June, but the RE spin is growth from July 2011. Listings are up 14.4% from last year. Waiting for Watchdog’s report now.
———————————————————-
OUCH…. those who bought just last month are underwater and lost 10’s of thousands of dollars. Those loses will just get worse each and every month. Good job Toronto_CA and yes we are waiting for WATCHDOG
#74 Beach Girl on 07.18.12 at 8:49 am
You’re so funny & smart.
Explain how buying preferred shares in the bank and receiving tax-smart dividends is ‘gambling’ compared with giving your money to the same bank for less than inflation and twice the taxes. Wuss. — Garth
*************
If buying those same preferred shares in the bank and receiving tax-smart dividends is guaranteed to be equal or more in value when ready to use it for your down payment than yes I concede to your argument.
You want guaranteed? Don’t get married, have a kid, start a business or buy a house. — Garth
With this guy’s track record, it may be okay to be a wuss right now:
http://finance.yahoo.com/blogs/breakout/america-heading-towards-collapse-worse-2008-europe-says-155504860.html
Bob Truman | July 16, 2012 at 11:42 pm
Here’s Garth describing his loyal followers today: “malcontents, iconoclasts, anarchists, voyeurs, basement-dwellers and the occasional nazi who frequent this pathetic blog.” He must be proud that he can attract such a following.
It includes Bob. — Garth
Heard this from a co-worker today who just told me her “younger” friends just bought a new place last night. “They signed the paper work and now are running the numbers with interest rates and such. I told them, just don’t bother and hope for the best. All that stuff is confusing.”
Very few people run the numbers when buying a home. Priorities are location, looks, amenities, price and then maybe they will look at the numbers.
I had troubles not laughing and then not crying.
Screwed…
=============
I sold and now renting
One factor you have to calculate is TIME
(especially if you have a family)
– It takes me 10 minutes to get to work walk to work
– no cost of transit
– parking (150/mth)
– reduce 1 car (insurance / maintenance 2000/yr)
– Gas which use to cost me about 40 bucks a week or 160/mnth
– House maintenance, I see people spending their entire weekends mowing the lawn, trimming, painting and etc. As a renter all I’m concern with is spending time with my kid teaching him tennis, going on hikes, picnics with friend etc
Bank of Canada warns of household debt increase
Read more: http://www.vancouversun.com/business/Bank+Canada+warns+household+debt+increase/6952406/story.html#ixzz20zchP5iq
Household debt getting worst, just wait til the value of their house becomes “SUBSTAINABLE”. And their personal balance sheets gets wipe by the mortgage debt. (what do you think the banks will do it that situation)
eg
a) put 5 % on a million dollar house. (50,000)
Now 950,000 mortgage
b) prices go down by 10% (900,000)
your net worth is now -50,000
c) Now the banks will say you have no assets to cover for your debt. Even if they take over you house, they can not get their money back. s
d) Will the banks call and foreclose repo your assets?
Here’s another way to look at it:
I put money in the organge guy’s shorts specifically earmarked for a downpayment. I get 2% say.
House prices drop by 15% (for arguments sake) and I then buy.
“MY” real return on that money is 17% of which only 2% is taxable.
Just a thought.
BTW – I have money in the shorts as well as REITS etc.
Gee,
If you’re going to use Apple as an example, let’s pull out our crystal ball and say buy RIM. Sheesh.
I didn’t. — Garth
The REIT index VNQ went from 85 in 2007, to 21 in 2009. To me that’s as risky as stock.
Everything was hit in 2008-9, then recovered. So invest in GICs. Good luck. — Garth
I did my homework.
June 21st, 2012 Garth said:
You were also told that OSFI, the bank regulator, would enact new guidelines. That happened as part of a 1-2-3 series of punches yesterday. Home equity lines are tightened even further – right down to 65% of a home’s value (from 80%). If you want to go higher, then banks will be forced to give you an amortized mortgage on top of the line. Cash-back mortgages are kaput. So property virgins can no longer get 100% financing for that new condo, and the banks who gave out these bribes are forced into responsibility.
Not sure if it’s true that Alfred will never worry about the value of his house. If that were the case, then the housing wealth effect would not exist.
Anyhow, not sure if this will work, but, in favour of prolonging the wealth effect, the data below is meant to be the average selling prices for the last couple months normalized to estimated 2008 MPAC assesments. Obvious commercial properties excluded.
YYYYMMM: 201204 201205 201206 201207
Blake-Jones all 1.50 1.49 1.49 na
Broadview North all 1.34 1.36 1.40 na
Crescent Town all 1.54 1.50 1.44 1.31
Danforth Village all 1.45 1.39 1.40 1.41
East End-Danforth all 1.47 1.38 1.41 1.46
East York all 1.33 1.64 1.39 1.42
Greenwood-Coxwell all 1.53 1.58 1.52 1.92
North Riverdale all 1.54 1.41 1.39 1.29
O’Connor Parkview all 1.42 1.30 1.32 1.32
Playter-Estates all 1.58 1.16 1.43 na
South Riverdale all 1.54 1.65 1.45 1.48
The Beaches all 1.38 1.32 1.38 1.46
Woodbine Corridor all 1.33 1.40 1.24 1.29
Woodbine-Lumsden all 1.42 1.58 1.34 na
all districts Att/Row/Townhouse 1.32 1.54 1.58 na
all districts Detached 1.46 1.41 1.42 1.44
all districts Semi-Detached 1.45 1.48 1.38 1.47
all districts all 1.46 1.44 1.41 1.45
I’m not sure if that table will be legible. Lots of caveats, of course; some properties are probably mis-assigned, etc. Some houses are double-counted. Areas with more renovations will get an artificial bump as MPAC assesments lag. I’m reminded of something I’ve heard used before when presenting useless garbage data: “Well, some data is better than no data, which is what we had before”.
All highrise properties are (intentionally) excluded.
Background: Playter Estates, North Riverdale, North Broadview, and (parts of) the Beaches are the expensive neighbourhoods. Blake-Jones and Crescent Town are the less expensive neighbourhoods.
Parkview is, imho, one of the best “value for your money” neighbourhoods in the region, provided you don’t need walking access to the subway. Even a 10%-point price increase wouldn’t change that.
I have no consistent explanation for why some neighbourhoods such as Greenwood-Coxwell have seen such high appreciation whereas other such as The Beaches have not.
Key take-aways:
1) There’s nothing in the data to suggest that more expensive areas will see a smaller price correction than less expensive areas (the “Leaside hypothesis”).
2) No obvious price softening yet (no surprise, of course).
I don’t have all the 201207 data yet, so regard that one with extra skepticism.
Today’s RE specials in Toronto: skinny houses over $700,000!
17 ft wide detached = $782k
http://www.realtor.ca/PropertyDetails.aspx?PropertyID=12217902&PidKey=-753113601
16 ft wide semi-detached = $705k
http://www.realtor.ca/PropertyDetails.aspx?PropertyID=12217651&PidKey=1555268576
They should check your Body Mass Index before letting you buy one of these… to make sure you can fit in the door.
How Garth feels on this blog:
http://www.youtube.com/watch?v=3Xu_6VIZd08
Tnt-don’t you see the potential for difference between falling house prices and your down payment to close quicker with tax advantageous dividends than that of a heavily taxed ‘high’ yield account.
Re: Even in the 2008 crash (which will not be repeated in our lifetimes)
The next crash of around 30 percent down over 3 business days should be just after the U.S. election followed by an endless bear market with the indexes losing around 50 to 80 percent from todays’ values. The 2008 crash was like what happened to the Titanic just the tip of the iceberg.
Is this the same devastating systemic global financial collapse of Titanic proportions you indicated would come last year? Or a new one? I’m confused now. — Garth
41 Apocalypse 2010:
Spanish banks have cancelled preferred share dividends. Screwed people right over, but it’s different in Canada – can never happen here!
———————————————————
Very interesting.
Hopefully it is different here! (Fingers crossed.)
What a dumb comparison. — Garth
tax bubble?
apple cash?
IRS Ends Deals That Let Companies Avoid Repatriation Tax
=========
According to an investigation by the PBS and ProPublica,
“Mitt Romney’s biggest donor Sheldon Adleson, who made his fortune running casinos in Chinese Macau and did business with known Chinese gang members and two of Paul Ryan’s biggest donors are Swiss Banks.
==========
Latter-day Saints reject all forms of gambling as a pernicious evil to society. The First Presidency has stated:
“The Church has been and now is unalterably opposed to gambling in any form whatever. It is opposed to any game of chance, occupation, or so-called business, which takes money from the person who may be possessed of it without giving value received in return. It is opposed to all practices the tendency of which is to encourage the spirit of reckless speculation, and particularly to that which tends to degrade or weaken the high moral standard which the members of the Church, and our community at large, have always maintained. We therefore advise and urge all members of the Church to refrain from participation in any activity which is contrary to the view herein set forth.”[1
http://www.lightplanet.com/mormons/basic/doctrines/gambling_eom.htm
=
the DISCLOSE Act Republicans in the Senate killed it. Again.
Senate Majority Leader Harry Reid: “Perhaps Republicans want to shield the handful of billionaires willing to contribute nine figures to sway a close presidential election.” The election, he said, may be bought by “17 angry, old, white men.”
The fast food retailer has quietly released this snippet. While the Olympics tax haven story has by and large been ignored by the mainstream media, following an effective online campaign by Ethical Consumer and 38 Degrees McDonalds are now claiming they will not utilise the Olympic ‘Tax Bubble’.
http://www.businessweek.com/printer/articles/285960?type=bloomberg
You want guaranteed? Don’t get married, have a kid, start a business or buy a house. — Garth
Mr. Turner, that one deserves to be framed and hung on everyone’s wall!
I am a frugal guy. I feel fortunate that I don’t feel the need to keep up to the Jones nor look to materialism to fill a void in my life. One of my biggest expenses is my monthly management fees from my portfolio, roughly $1000/month. But in my opinion it’s money well spent and one area where cheaping out is false economy.
Love a picture. Oh, Russia, my Motherland =)
BTW they have even worse prices in Moscow than we do here in Vancouver.
Thank you for this blog. Enjoyable read everyday!
53 John
REIT’s are not safe long-term bets. The reason for this is that they require some sort of stablity in the commercial real estate sector.
…
Here’s an REIT article.
http://online.wsj.com/article/SB10001424052702303459004577364110318098188.html?KEYWORDS=reit
.
—————————————————————
What does this US article about private REITS in the US going public have to do with Garth’s post?
Garth recommended investing in public REITS:
“Publicly-traded REITS (the only ones to buy)”.
We have a big reading comprehension problem today. — Garth
62 House Horny Housewife:
If preferreds and REIT’s are so great, why aren’t some of these mutual fund managers using these to make money ? I doubt these things are a panacea for investments. And please don’t tell me that mutual fund managers are not as smart as you are because I am sure that a lot of these larger mutual fund companies have good people working for them. I don’t buy this idea of having the strategy that no one else has because in this day and age, there are no secrets.
—————————————————————
Great question.
Garth?
Of course there are funds that utilize these. — Garth
I seldom comment as I’m a dummy re investments – I leave it to those more knowledgeable than I. My DH gets upset when we incur losses but did with a MF co. who charged high MER fees. We didn’t bail out at the time. I get po’d with him as he takes no interest in our investments & I’ve had the responsibility of doing our taxes for the last 27 yrs. Last yr. I finally had a CA do our taxes due to capital gains losses over the years. He saved us some money.
On a lighter note – DH is on vac. & finally ripped up the 30 yr carpet in the master bedroom – washed the walls, ceilings, etc. Two more rooms to do & we’ll have a carpet free home. He still has to put plywood down over the ‘mouse shit board’ & then hardwood. Thankfully DH is very knowledgeable about mechanical, electrical, plumbing, flooring, etc. He & his 2 bros learned from their Dad. All 3 bros. work in some form of IT.
Contrary to the wise man’s suggestion to buy Reits may I suggest that as a becking alternative physical gold and silver (hoard it because the price of both will go a lot higher going forward) and a combination of well managed precious metals funds. Forget the investment du jour a la ETF.One will run the risk of the real stuff not being there at all. I have been a gold bug since 2000 when gold was at $ 240/ounce and silver $ 8/ounce. When buying Reits think about currency debasement which likely will get worse not better. Only protection is gold/silver and their respective stocks.
You sound like a smart guy. Did you sell at $1,900 an ounce? — Garth
In my view all debt should be private debt .
#114 X
Tnt-don’t you see the potential for difference between falling house prices and your down payment to close quicker with tax advantageous dividends than that of a heavily taxed ‘high’ yield account.
**********
I’m a “wuss” when it comes to my down payment. Imagine my family’s disappointment when I tell them we still need to rent because I took a chance and listened to a guy on the Internet to try and get an additional 3.65 % on our down payment. I’m just talking about the down payment here. I do have an equal amount of money outside of my down payment balanced between Preferred shares, US/CDN/Intl equities, REIT’s and Bond ETFs (Investment, TFSA and RRSP accounts).
You’re still a wuss. — Garth
http://www.realtor.ca/propertyDetails.aspx?propertyId=11694384&PidKey=-1105572301
HAM & Champagne in Burnaby BC.
That Tudor/Bavarian decor is interesting, but who cares since the house will most likely be torn down and built with more HAM.
Hey Garth
Can you start a new blog were we post our portfolio for constructive critiquing?
My portfolio
Individual Margin
Canadian dividend equity 20% iShares S&P/TSX Cdn Div Aristocrats (CDZ)
Canadian dividend equity 20% iShares DJ Canada Select Dividend (XDV)
Preferred shares 20% iShares S&P/TSX Preferred Stock (XPF)
Real estate investment trusts 40% BMO Equal Weight REITs (ZRE)
TFSA
Canadian Preferred 14% iShares Canadian Preferred Stock (CPD) ETF
US equity 18% Vanguard Total Stock Market (VTI)
International equity 18% Vanguard Total International Stock (VXUS)
Canadian equity 32% iShares S&P/TSX Capped Composite (XIC)
Real estate investment trusts 18% BMO Equal Weight REITs (ZRE)
RRSP
Bonds 75% Beutel Goodman Income D (BTG771)
Canadian Preferred 10% iShares Canadian Preferred Stock (CPD)
Real estate investment trusts 15% BMO Equal Weight REITs (ZRE)
Nope. — Garth
Numbers say:
1. Bank of Canada says no interest rate hikes until at least 2014….so do the Bond yields.
2. When rates rises, they will be very minimal…look at the record low bond yields.
3. Low end of the RE market wll hold up well.. low int rates + population growth.
Rates are irrelevant. The correction is on. — Garth
#54 MetroVanObserver, reply. The only known cure for “gold fever” is a good “correction”. It tastes really bad but it works. Its a commodity. Remember natural gas a few years ago?
Investx wrote:
“What does this US article about private REITS in the US going public have to do with Garth’s post?
Garth recommended investing in public REITS:
“Publicly-traded REITS (the only ones to buy)”.
——-
We have a big reading comprehension problem today. — Garth”
Again, and again and again. REIT’s are not the issue. The big picture is.
Where is the cheap money coming from? Where does the fake “equity” go. A ponzi is a ponzi.
That said…go look up 30 articles on the subject if you think it’s relevant. That’s a fail too, because you’re not talking about the real deal. You’re being suckered because you want to be. How is this different than the greater fool.
Think for yourself. Post. If you leave out step 1., what you say won’t work well.
Comprehension problem? I am certain this isn’t the case. It’s a relevance problem. The thing is, this is evident. So what’s actually happening here.
Really. Some people can see this you know. It’s not hidden.
Fail. Face plant fail.
Sincere Thanks for this advice.
Inspired by this blog I stated buying dividend paying shares for my kids’ RESP in December. Inspired by that success I dumped the mutual funds that were in my RRSP (I’ve made 0 gains over 10 years) and started making similar investments. Dumping the Dummy Mutual Funds Salesmen and investing in dividend paying shares is starting to pay off!
#76 Bumbaclout on 07.18.12 at 9:01 am
Garth,
Now that Toronto is basically a warzone for gangs, will this affect real estate prices in the city?
Massive shootout on Monday and another “popping” last night on the soccerfield.
—
If all it takes is a nut with a gun to fix RE prices I would have taken care of this bitch long ago. But alas, it’s not that easy.
Rates are irrelevant. The correction is on. — Garth
-please visit Calgary and see for yourself how wrong you are.
Garth,
I say take a life insurance claim out on a senior who is 75 and in good health, like my mother. Make the monthly payments… Say $1500 a month. I’m guaranteed a substantial payout… TAX FREE… When she goes to heaven.
Might get it earlier, or later… But one nice retirement. Think of it like inheritance, but without the estate tax. $300,000 sounds about right.
Good Trades
A MILLION-POUND tax scheme marketed by PwC has been shut after a Court of Appeal hearing.
The scheme, which dates back to 2002/2003, was used by about 200 people who now have to pay back the full capital gains tax as well as interest
Read more: http://www.accountancyage.com/aa/news/2192192/court-blows-pwcmarketed-tax-scheme-out-of-the-water#ixzz20zwlbLYF
===============
what ! Egregious!
energy manipulation – http://www.latimes.com/business/la-fi-hiltzik-20120718,0,1949782.column?page=2
Brad in Calgary on 07.18.12 at 12:36 pm
Bob Truman | July 16, 2012 at 11:42 pm
Here’s Garth describing his loyal followers today: “malcontents, iconoclasts, anarchists, voyeurs, basement-dwellers and the occasional nazi who frequent this pathetic blog.” He must be proud that he can attract such a following.
It includes Bob. — Garth
………………………………………………………………………..
What, no delusional on the list. I’m shattered.
Wonder whats happened to BPOE?.
#83 bigrider
2) risk exists only with ‘paper’ assets not with ‘lumbar and bricks’
– — –
Your typo is funny because it works both ways.
‘lumber’ being a construction alternative to bricks
‘lumbar’ being the back breaking labour of assembling the bricks
A beautiful girl came to the door, looking for the tattoo artist. I said have a swim first, you can’t have a new tattoo and swim. The pool is 88 degrees.
She said, that is the last thing I want to do. I said Oh. Turns out she is a diver at Wonderland in her 4th year of Uni, going to be a teacher. She dives off the Mountain and that shitty lagoon. At least there is a bar at that end of that park. Not a tree in sight. Rather kill myself.
Sounds like you’re already working on it. — Garth
Aar trees now days, really a luxury?
http://mashable.com/2012/07/18/google-maps-income-inequality
http://www.treehugger.com/economics/how-spot-income-inequality-space-look-trees.html
Interesting…
I truly dont understand how you think RE can crash but REITs will be fine?
from the USA to the Netherlands, REITs are insolvent everywhere, could you explain why Canada is different?
http://boombustblog.com/blog/item/6122-what-happens-when-a-reit-trading-over-$15-a-share-is-shown-to-have-a-portfolio-full-of-underwater-properties
http://boombustblog.com/blog/item/5961-the-first-major-real-estate-collapse-in-europe?-ive-the-eu-equivalent-of-ggp-the-largest-real-estate-failure-in-us-history
http://boombustblog.com/blog/item/5977-an-overview-of-a-us-reit-headed-towards-distress
Did I tell you to buy American or Dutch REITs? This blog is in emotional meltdown. — Garth
http://money.ca.msn.com/investing/news/breaking-news/bank-of-canadas-carney-defends-maverick-rate-hike-view
Something to fear. We won’t find our Harper government bragging about our gross public debt at 109% but rates need to be hiked to attract borrowers. At some point rates will creep up. How high…
Garth, I like your idea with REIT’s and would consider them a safe investment until rates start to climb. Once rates begin their ascent, REIT’s will flatline or fall. Its in part due to higher valuations but moreso, the effects higher rates will have on growth in the REIT sector and it will be reflected in values I would think. The question of course, is when rates will climb and I believe it has everything to do with the rates that are required to attract lenders.
With loose policy from the U.S. fed, its easy to borrow as we know but this will all change with higher rates from the U.S. we expect… unless Canada gets a bond rating downgrade in the meantime. If the federal government gets a bond rating downgrade due to our gross public debt at 109% and climbing with RE a questionmark concern, rates could take a modest climb.
#62 HHHW – good luck finding those GLWB products. They are ceasing to exist: http://www.advisor.ca/news/insurers-pare-product-shelves-84872
“For the first time, Canadians richer than Americans”
http://www.usnews.com/news/articles/2012/07/18/for-the-first-time-canadians-now-richer-than-americans
What’s even funnier are the comments. Much more so than the article.
no demand
http://www.cbc.ca/news/business/story/2012/07/18/boc-rate.html
Carney also predicted weakness in Canada’s manufacturing sector will likely continue “for some time,” because the country exports so much to low-growth economies.
Carney said 85 per cent of our exports go those countries, especially the U.S., and the outlook for those is to continue to grow slowly for an extended period
#28 Uki
Or maybe Russian Amazons?
http://www.youtube.com/watch?v=0TQPPGl-W8c
# 119 Davey boy
Geez, $1000 a month for portfolio management services and you are happy.
Well, at say $100 an hour for the advisor , I hope you are getting a dedicated 10 hours a month face to face with said advisor and his attention to your portfolio.
He said ‘management services’ not ‘advice.’ — Garth
–
“I’m confused now. — Garth” — Such as here?
#139 Aussie Roy — “Wonder whats happened to BPOE?” — Mikey the Realtor, BPOE and a few others are shacked up, renting a lovely 2 bdrm., 2 bthrm. den and deck 34th floor condo in the far reaches of Mars!
*
Eleven Intl. agreements The petro-dollar is toast; 0:31 clip JPM sets forth its cashless society ad; Idle cash piles up; Game Changer for Gold New regulation favors gold; Spain raises sales tax. Great way to bring back bartering; US Losing Jobs, not gaining them, and Backdoor Austerity; 2012 There’s only a few months left; The US Fed is not the world’s savior; Hedge Fund industry is kaput; Compton Bankrupt by Sept.? California RE Affordable or twisted? US citizens joining disability outpaces finding jobs; HSBC’s criminal clients, and HSBC sorry (my ass); Mitt Romney Why doesn’t he outsource himself, preferably to a different universe? The USSR collapsed Why not the USSA?
*
Troublemakers Govts. are supposed to be secular, not religious; Loaded Drones with laser guided missiles; Justice? “But with good behavior and lenient release policy he will be eligible for parole in 2614! Basically, this citizen steals a maximum of a million from all these banks and gets a millennium in jail. The banks steal 100 trillion from the citizens and get bonuses. And they say there is no justice in the United States!” wrh.com; Alt. Media blows whistle on bribes from big pharma; Egypt Strikes and no co-operation with US led firms; Strike for O’limpiks; Texas Republican Party A political party which makes sense? CIA takes over Ethiopian govt. gonzo; GW Supported by big oil, so carbon taxes can be administered; UK Preparing for war, not the Owelympiks.
For some time I believed that real estate is a poor investment, and was expecting a boost for a good 10 years now. I have to change my opinion and say that real estate investment in the past decade was better than anything else. My savings, even with some investment earnings (yes, I got on average 5% before taxes) can’t match gains in real estate. I doubt that in such a large city as Toronto, and with government giving away (savers’) money, and 250,000 people coming to Canada each year (mostly to GTA) will see major real estate correction. Garth, don’t be so confined in your beliefs. Open your eyes, and see the reality. Yes, you were wrong for long time, please at least admit it. Don’t lead all those people who want stabilization and family house into crime ridden rentals.
You sounded unbalanced until the last line. Then you got worse. — Garth
Ни одна девушка, но очень большой пусковой установки. Иди, товарищ … Вы знаете, вы хотите один!
http://tinyurl.com/bp2l3zh
#143 Kevsta, you have not been reading this blog for long otherwise you would not make such a dumb comment. The REITs Garth is talking about are publicy traded and own Apartment Buildings, Malls, Office Space, commercial space etc NOT single family homes, get it! RE downturn or slow melt or crash in the RE market, whatever you want to call it does not, will not, adversely effect REITS. Higher interest rates in the future may effect the value but you still get the income. Read, learn, understand and then comment. Sorry for the rant Garth but I don’t know how many times you can go over the same concepts without just going ape sh*t. You are very restrained, more so than I would be. Anyone who is over the age of 60 will remember giving their kids a cuff behind the ears when they insisted on being stupid! Too bad, not allowed now. Gotta go, my hand is getting twitchy! Rant off.
http://business.financialpost.com/2012/07/18/canadians-debt-burden-to-get-worse-bank-of-canada-warns/
OTTAWA — Canadian households will see their debt burden worsen further in coming months even after the government stepped in to tighten mortgage rules, the Bank of Canada said on Wednesday, pointing to signs of “overbuilding” in the housing market.
The warning came as the central bank downgraded all of its quarterly economic growth forecasts until the second quarter of 2013 to reflect weaker-than-expected domestic demand. On Tuesday, the bank held its benchmark interest rate at 1% but signaled it may need to raise rates.
#117 Jess
the 2012 U.S. presidential election may end up being bought by ‘ 17 angry, old white men ‘.
excellent quote. while I agree with Garth that Obama will win this one, the fact that such a small group of people of such influence in American politics is alarming, disturbing, and sad.
sorry, meant to say ‘ the fact that a small group of people HAVE such influence…….
#146 DM in C on 07.18.12 at 6:07 pm
“For the first time, Canadians richer than Americans”
http://www.usnews.com/news/articles/2012/07/18/for-the-first-time-canadians-now-richer-than-americans
What’s even funnier are the comments. Much more so than the article.
……………………………………………………………
They have no idea about Canada. No Real Estate bubble. Just got my medical insurance bill for the coming fiscal year here in Japan. It is $4,000 plus 30% whenever I use the system. Forget private health care or user fee based government health care (it is not cheaper and you are at the mercy of private companies, in the case of a privatized system, determining your eligibility).
Bank of Canada’s Carney defends maverick rate-hike view
Reuters – 6 hours ago
OTTAWA (Reuters) – Canada cannot “cut and paste” monetary policy from elsewhere and, unlike its struggling peers, will need higher interest rates as the economy inches closer to its speed limit, Bank of Canada Governor Mark Carney said on Wednesday.
Carney is in a lonely position as the only central bank chief in the major advanced economies who is talking of raising rates while everyone else is moving in the opposite direction.
But he was quick to defend that stance in a news conference even though the quarterly report he was releasing downgraded growth forecasts for Canada, the United States and the global economy.
“We make monetary policy for conditions in Canada. Monetary policy is extremely accommodative, financial conditions are extremely accommodative,” Carney told reporters.
“We’re in a situation where there’s a very small amount of excess capacity in this economy. Rates are at 1 percent. They’re very low … Global monetary policy is not a cut and paste.”
Carney was the first in the Group of Seven industrialized nations to hike rates after the global financial crisis but has kept the bank’s benchmark rate frozen at 1.0 percent since September 2010.
Now, with the economy running at just half a percent below its production capacity – the speed at which it can grow without fueling inflation – he is preparing to tighten the screws again.
“This projection includes a gradual reduction in monetary stimulus over the projection horizon, consistent with achieving the inflation target,” the bank said in its Monetary Policy Report.
http://ca.news.yahoo.com/bank-canada-warns-household-debt-cuts-growth-view-143327656–sector.html
Garth, judging by the comment most people do not understand investing in equities and therefor can only invest in something that they can visualize, like a house/condo.
And they really have no understanding of risk/reward
The level of financial ignorance is appalling! we spend more time paying attention to American Idol or Katie/Tom divorce than we do our own bottom line.
Keep up the good work, slowly some readers might get it.
At #146: DM in C, remember that the morons who typically post in response to these kinds of “news” articles (not all) are right-wingers who think The U.S. would have been better off with McCain and Palin running the ship. Yahoo is owned by a conservative idiot, Ruprecht Murdoch, who would love nothing more than to continue to publish ignorant articles that divide a country. These right-wingers don’t have the education or understanding that our economy is a result of eight years of gross overspending and failed domestic and global plicies on taxes and wars that most Americans were never in favor. Additionally, remember the popular vote did NOT go to bush in either election. AKA Florida first term, Ohio the second. Canada has adopted a bush-like character, helping to create the mother of all real estate bubbles. This article fails to mention this “richness” of Canadians is purely on paper, 80%+ due to real estate asset values, and it is DECLINING by the day as the real estate market melts/crashes there.
Th commenters are too stupid and self-centered to understand the fundamentals of economics; therefore, they will blame the President, forgetting it was bush spending, tax cuts to the wealthy, incintivization to companies to send more of our jobs oversees, and deregulation of the banks that have put us in this bind. President Obama inherited the biggest shit storm on the planet, and he needs to be given more than three years to improve upon this mess. Americans are generally impatient and will use ANYTHING as a means to speak their political platforms, idiotic yahoo “news” included.
BTW, I hate using an iPad. Sorry for the misspellings in my prior post.
116 Investx on 07.18.12 at 1:31 pm
41 Apocalypse 2010:
Spanish banks have cancelled preferred share dividends. Screwed people right over, but it’s different in Canada – can never happen here!
———————————————————
Very interesting.
Hopefully it is different here! (Fingers crossed.)
What a dumb comparison. — Garth
———————————-
Why? Are Canadian banks and their preferreds that “different over here”?
From Spain? I need a scotch. — Garth
fear factor … it must be from the drudge report
By Aviva Shen on Jul 18, 2012 at 9:26 am
A ThinkProgress study of the the Drudge Report reveals the popular internet aggregator has linked 184 times to InfoWars and World Net Daily, two sites that promote the internet’s worst conspiracy theories, since June 2011. By directing millions of visitors to these websites, Drudge is providing critical financial and reputational support to publications that argue 9/11 was an inside job, FEMA is building concentration camps and President Obama was not born in the United States.
http://thinkprogress.org/media/2012/07/18/532051/report-drudge-linked-to-conspiracy-websites-184-times-in-the-last-year/?mobile=nc
#78Toronto_CA on 07.18.12 at 9:06 am
TFSA = Turner Free Savings Account.
Or, as H calls it: Turner-free Savings Account. :-|
#96 I love this blog
Thanks, my fellow poetry lover. I will continue my quest to entertain. My poems will live forever!!!
#3 Bo Xilai
You will learn to love my poetry. Learn from me and not the person your blog handle is named after. He ended up in jail, no?
#151 I’m worried about you, Garth on 07.18.12 at 7:45 pm
===============================
Listen..I like this Garth guy…quite impressed .
I’m riding shotgun and covering his back……..and IMHO we need him into the next Millenium…maybe longer.
PS Just my 2 shekels worth.
And, for te record, Obama has the next election in he bag. “News” will be reported daily to pit the two candidates against one another to the public, making it seem like a competition. It isn’t. At all. Polls will report the two neck and neck. It isn’t. At all. We all love a good fight, and the media will do anything to make it appear so – it keeps viewers tuning in. Americans have become more disenchanted with right-wing politics over the past three years. Yahoo commenters are tea baggers who will remain ignorant by choice.
After the election is over and Obama obtains a second term, the shit is going to hit the fan. He will no longer have to pander to both sides to ensure another victory. This will be his second term in which most American Presidents do what ever the hell they want. They cannot serve three terms, so the “nut cutting” is almost always done in the second term. Nothing much to lose, except for your party’s respect, aka bush.
If buying those same preferred shares in the bank and receiving tax-smart dividends is guaranteed to be equal or more in value when ready to use it for your down payment than yes I concede to your argument.
…
You want guaranteed? Don’t get married, have a kid, start a business or buy a house. — Garth
———————–
Replying with sarcasm to a reasonable explanation and challenge.
Shocker.
Where’s the sarcasm? — Garth
#86 Ralph Cramdown on 07.18.12 at 10:22 am
AGF.B.TO is yielding 9.6%…
#73 Ralph Cramdown – what has changed in the US to prevent another financial [crisis] anytime soon?
The Bernanke Put. Google it.
“2% of Canadians know what a federal budget is. — Garth
70% of people have houses. 8% have preferreds and REITs. Refine your worry. — Garth”
I question the source of 25% of this weblog’s statistics.
But you can take these numbers to the bank:
2% of all blog dogs post from prison.
3% from the washroom.
6% at a public library
2.5% from the PM’s office.
“Sounds like you’re already working on it. — Garth”
I swear I nearly busted a rib.
where is the new posting?
Bob Truman | July 16, 2012 at 11:42 pm
Here’s Garth describing his loyal followers today: “malcontents, iconoclasts, anarchists, voyeurs, basement-dwellers and the occasional nazi who frequent this pathetic blog.” He must be proud that he can attract such a following.
He has other names for the rest of us, but this is a family blog.
Bob has a man crush on me. Should see his emails. — Garth
#160 The American
I thought some of the comments attached to that article that compared Obama to Trudeau were scary.
Here’s the thing:
Keeping money in savings accounts is a guaranteed loss. No matter what the interest rate is.
That said, most people lose money in investments also. I know very few people who have made money investing in stocks, and no one who invested in mutual funds. Well, actually I do know one person who may have invested in MFs near the bottom in ’09. If she stayed in, I’m sure she is way ahead today. But she is the exception, not the rule, and she knows nothing about investing. Just lucky.
A study published by Bob Precther showed that even those who invested in the best performing funds over the last 20 years or so (if I remember correctly) did not make money. Sure, high fees are one reason, but the main reason is: most people buy high and sell low.
There are two emotions in the markets for retail investors: fear and fear. Fear of missing out. And fear of losing money. Both make you buy at the wrong time.
A couple of weeks ago I had a chat with a guy who was a top-performing stock broker at Dean Witter in The World Trade Center in the ’90s before DW merged with Morgan Stanley. Most of his clients were the well-heeled from New York and Connecticut. He told me, “In the end, they all lose.” I asked why (though I thought I already knew the answer). He said, “Greed.” When I said that most people buy high and sell low, he nodded.
There are a few main reasons why a lot of people have made money in real estate (investment properties, that is):
1) It does not take a lot of know-how to be successful
2) People generally don’t try to time the market
3) They use lots of leverage (the key to making real money)
4) RE is less volatile than “paper” and very illiquid compared to paper. RE has no ticker, so people don’t think about prices every day.
5) They usually are invested for the long haul, or at least much longer than in paper
6) Inflation and tax rules work for you.
(In fact, I’m willing to be that most people who have successfully invested in RE don’t fully understand why they made money.)
In other words, people tend to invest in RE more like the way one should invest; the way guys like Benjamin Graham and Warren Buffet tell you to invest.
You can make lots of money in stocks and bonds, to be sure. It’s just that most people don’t.
Re: #17 Not 1st on 07.17.12 at 10:08 pm
Manulife has large exposure to U.S. banking shares so in the near future when U.S. bank shares double dip for around a 90 to 95 percent drop from today’s values Manulife will trade down to around 3 dollars a share.
@#124- Live within your means-
Can I borrow your husband? I don’t have one and my carpets are 40 years old.
Garth, so Canadian REITS *are* different then?
#153 Boomer21
you are correct, I have not been reading this blog for that long, however with respect I see your comment as a bit dumber than mine.
a) somehow, and for the first time in history, only the value of retail property is going to drop?
b) in this property crash, nothing else in the economy will suffer? malls wont see downturns? businesses wont close? oh, well, nothing to worry about then eh? lol.
and why do you assume that the REITs in other countries don’t have commercial properties? lol again.
your rant just reads like pure denial to me.
Garth, sorry if you have been over this many times before, if you could point me to the most relevant posts on the subject I would be grateful.
lastly I would like to point out *I* am not in “emotional meltdown” about anything, as a reasonably successful amateur day / swing trader in Forex and Futures I’m not really the emotional type, we (my group of associates) are investigating shorting some of these very things along with some of the Canadian banks.
I’ll send you a link to the research when its finished if you’re interested.
#176 Warren Buffett is a fraud. He is an actor, like his relative, Martin Landau.
Jon Stewart provides an adroit (and hilarious) report on the LIBOR scandal.
http://www.thecomedynetwork.ca/Shows/TheDailyShow?videoPackage=120247
#180 disciple on 07.19.12 at 10:20 am
I liked Martin Landau as:
• Leonard in North By Northwest (one of my all-time favourite films)
• Rufio in Cleopatra
• Bela Lugosi in Ed Wood
• Dr. Alvin Kurtzweil in The X Files
But I would never take investment advice from him.