Tower of goo

One day last week on this pathetic blog when I was too tired from my Amazonian sponge bath to write a proper entry, you met George. “Trailer George,” as his wife calls him. You could also call him cheap and lacking, as befits anyone who doesn’t live within walking distance of a Starbucks.

George bought a trailer (the kind that doesn’t move and smells of Loretta Lynn) for $84,000 in some hick BC mountain town, and asked us if he should upgrade. Trouble is, he likes living on fumes and besides the market for houses you can access with a can opener has apparently dropped off something fierce.

He  has a wife, too, which some metrosexual urban trash talkers here speculated might be his sister. Doesn’t sound like it, though. I received the following note last night, “from the wife of Trailer George.”

It was of course a unanimous decision to buy our mobile home. But it wasn’t completely so when we put it up on the market. When we moved into our home I saw us setting up camp for realistically a minimum of five years, but after we decided to try and sell our place I definitely became what my husband calls “house horny”. I started picturing our lives in something bigger, something where we owned the land. Something that we would never hopefully have to move out of….The problem that I’m having is that I love having low living expenses. I love being able to afford our life styles without stressing about cash and we both hate unnecessarily spending money.

My husband and I aren’t cheap…….not really anyways….just thrifty! My big fear is that if we stay in this mobile home for a long time, even if it gives us the chance to stash the cash, we will end up never being able to sell this place. It will just continue to decrease in value. What if we miss the chance to buy a home because we can’t sell this place? And then we are always stuck paying a pad rental? Am I partially brainwashed thinking that I am behind on times if we don’t own a house and the land it is on? — Trailer Wife

Well, TW, of course not. You’re just being human. Besides a woman can get damn tired of cleaning the house with a can of WD-40 and a soldering kit.

However, don’t diminish your good fortune. You’re living basically on gas money, eschewing debt and building up liquid wealth while most of the tormented HGTV aficionados who read this drivel float on a sea of borrowed money and have no idea how at risk they are. Frugal is good. Or “thrifty’, as you so quaintly put it in mountainese.

Second, nothing is passing you by. Real estate everywhere in BC is just entering a period of decline which will last years – as you can see already from the plunging trailer concrete pad futures market. Young couples like you will see affordability increase as prices drop. In fact your trailer might get revive in value when a few BMWs roll into town full of former corporate and litigation lawyers who lost their homes in West Vancouver and are willing to move in with goats. Give this some time.

We’ll leave the peaks and now travel to the pits – that ring of suburban nothingness surrounding Toronto, where six million people live, love and commute.

Hi Garth: We’ve heard all this “buy a house” talk from our friends, and we’re getting a little sick of it.  We don’t want to live in Pickering.  Or take on 600k of debt.  Yet. A situation for you to analyze, let’s call the subject ‘Alice’ for sake of anonymity. Alice is 30 years old. She makes $69k annually, and $47,000 combined in a TFSA, RRSP and cash, no debts and no real estate (but her boyfriend owns a shoe-box midtown condo bought for $225k, currently ‘valued’ at $310-325k; where Alice shares operating expenses)

Boyfriend is 29, Salary: $105k/annum. Boyfriend Savings: roughly $75k in a mix of low-mid risk out of favour companies, generally paying dividends.  About half sits in cash. Boyfriend Debt: none other than $165,000, 3-year mortgage at 2.75%, ending on January 1, 2014

So, what should Alice do?  Convince her boyfriend (me) to sell condo and move to the ‘almost burbs’?  Or move somewhere where real estate has tanked and buy a mansion with the proceeds? The options we’ve considered…

  • Stay put.  Easy-peasy.   If Alice gets pregnant, probably not going to raise a child in midtown in a tiny condo.
  • The current plan (that requires considerable bravery) is to sell the midtown condo and move into an apartment of roughly double the size at/near the west end of the bloor line for about $2,000/month.  We figure this is ‘the play’ since it will put us in an exceptionally strong cash position, and cashes out the ‘value’ in the condo. On a cash-flow basis, outgoings on the current condo are about $1400/month (including prop. taxes, maintenance, mortgage, etc. and deducting principal repayments).  Fees to ‘break’ mortgage, are only about $2,500. But netting-almost $75,000 tax-free out of thin (condo) air is particularly appealing.
  • Rent out my ‘shoebox’ condo and rent a bigger condo in the same neighborhood, for about $2000/month.

Any advice greatly appreciated.  Are we considering the right things here? — Tom

First, marry Alice. If you won’t do that, then don’t buy a property with her. And don’t have a kid if you won’t marry, because then you’ll be buying a house for sure. Do you have commitment problems? I’m thinkin’.

Second, sell the shoebox. You’ve made an unconscionable profit on it, so why not harvest that? This experience will not be repeated for years to come with a T.O. condo, since this is a wobbling tower of goo about to keel and coat the entire market. Get out now before another fifty thousand units come barreling down the pipe. And why does this involve being brave? Do you also have confidence issues?

Third, don’t even think about renting out the shoebox and retaining it. You’ll lose windfall capital (see the point above), and also be in negative cash flow considering rent will about equal your carrying costs but pay you zero on the equity. Loser idea.

Fourth, have you considered a trailer? A few years in the mountains living with people who eat things that still move might be the perfect solution to your First World problems.

140 comments ↓

#1 TurnerNation on 08.27.12 at 9:32 pm

Bandit’s picture?

#2 HH on 08.27.12 at 9:35 pm

FIRST

#3 Randy on 08.27.12 at 9:36 pm

I would love to live in a trailer park…

#4 Grim Reaper/Crypt Speculator on 08.27.12 at 9:37 pm

Fuuurrrssstttt.

ahahahhahha

#5 Claudius Emperor on 08.27.12 at 9:39 pm

I can easily see 50-60 drop in GTA and Van City…

The bigest question is what would happen to the stock market, will there be QEn…?
Which way would it go – printing of money to support growth, no printing (causing crash) or just enough printing to support the status quo? Or combination of periods of printing/no-printing to rip off all amateour investors?

should I keep some cash just in case (assuming rest is in dividend paying stocks)?

#6 Realtors , Bankers and Mortgage brokers in an all out PANIC! on 08.27.12 at 9:39 pm

Look at these scum running scared realtors who hate the free and open markets. Blogger spread the word around the internet about Garth. Together with garth we can spread the truth of the current housing crash in Canada. It’s going to be a nasty crash realtors a nasty crash.

Toronto Real Estate Board launches 11th-hour constitutional challenge in competition case

http://www.thestar.com/business/article/1247876–toronto-real-estate-board-launches-11th-hour-constitutional-challenge-in-competition-case

#7 Claudius Emperor on 08.27.12 at 9:41 pm

unfortunately ETF’s investing in land don’t pay dividends…

#8 T.O. Bubble Boy on 08.27.12 at 9:42 pm

$174k combined income, $122k in liquid assets, somewhere around $150k in home equity.

Net Worth of $275k and $310k-$325k in a condo means that the condo is worth well over 100% of their net worth.

If you want to live by the magic Garth “rule of 90”, that definitely means selling the place and at least quadrupling that net worth before buying a house in the GTA (average house in the 416 is $700k-$800k).

Maybe move to somewhere cheaper?

Garth – that “rule of 90” is rather harsh for anyone under 50…. how many 30-yr-olds in the GTA could own a property that is 60% or less of their net worth?

Then they shouldn’t, if they care about risk. — Garth

#9 Claudius Emperor on 08.27.12 at 9:45 pm

It is amazing how little information on real estate is available in canada. Just compare mls.com and mls.ca.

the questions is : is that intentional? (catching fish in muddy water is easier)

#10 Canadian Watchdog on 08.27.12 at 9:48 pm

#161 Can it be?

“People pulling listings off mls and going exclusive… Thoughts?”

That’s just MLS’s new high-frequency random listing generator.

#1 Realtors , Bankers and Mortgage brokers in an all out PANIC!

Because TREB wants control of data so they can rig listings like above.

#11 T.O. Bubble Boy on 08.27.12 at 9:53 pm

Noticed this on CNBC today… the Top 1% in the U.S. are a heck of a lot richer than here in Canada:
http://www.cnbc.com/id/48800646

$8.4M in assets! No wonder the Romney-types go to the trouble of setting up offshore holding companies and other tax-avoidance schemes.

#12 librarykaren on 08.27.12 at 9:53 pm

Garth, I have an idea for a new income stream for you. I’m thinking you should get ordained…you know, one of those online churches where they mail you a certificate. Your ad could read “For those who just want a small ceremony, with a financial plan in one hand and a marriage certificate in the other.”

#13 45north on 08.27.12 at 10:07 pm

Loretta Lyne: my heroine:

http://www.youtube.com/watch?v=6ROGf-HynYY

#14 unhappy househunter on 08.27.12 at 10:12 pm

pimco monthly income fund 14.14% YTD

#15 donald trump on 08.27.12 at 10:12 pm

bottom line O,Gartho if interest don,t go up people will still keep buy and pumping the prices up that the way it is in toronto busiest city in canada

#16 young & foolish on 08.27.12 at 10:20 pm

Hmmm …. I wonder …. is there any RE worth holding on to at all?

#17 Canadian on 08.27.12 at 10:22 pm

Garth,
Some of your funniest lines ever, here.
…..Loretta Lynn…..can openers…..pad futures…..your reverse play on peaks to pits……

And then leaving humour aside and calling him out to marry Alice……priceless.

#18 Canadian on 08.27.12 at 10:23 pm

……And a classic picture to go with it all :-)

#19 Calgary Car Guy on 08.27.12 at 10:25 pm

Hey Tom! If you don’t want to commit DON’T! Trust your instincts. If she is truly the right one for you there should be no question in your mind. Believe in true love and look for it. Getting married is the biggest financial decision you will ever make but the years of life lost married to the wrong person are far more important. Trust your feelings Luke…-uhh..Tom.

#20 Grim Reaper/Crypt Speculator on 08.27.12 at 10:52 pm

Corpse-erations errr Corporations collectively have approx $500 Million in cash?

So what?

Q: So..what are they gonna do ?

Invest in……???______??????? I don’t think so.

Rumour is major Stock market cash out ..SOON…..by the big players ……. that will have many parties stranded with worthless paper. Can you spell Phazebuck?

In the bank??????( see above….more worthless paper )

Invest in after market brass….if you catch moi’s drift.

#21 Balance sheet recession on 08.27.12 at 11:00 pm

Has the US been following Japan since the early 2000’s? Will Canada be in the same boat?

#22 LG on 08.27.12 at 11:03 pm

You’re really starting to enjoy this, aren’t you?

After reading this blog for the past two years and now seeing the echoes of your words in the media, I admire your constraint.

And trailers in my neck of the woods (Yellowknife) are pretty good low end real estate (even though the snobbery of ‘stick built’ persists).

#23 Burnaby Renter on 08.27.12 at 11:04 pm

Hilarious! One of your best posts yet. Keep up the great work.

#24 Dorf on 08.27.12 at 11:22 pm

In addition to the cost of maintaining a property, its a lot of work and has to be kept up. You are married to yardwork.

#25 Saskatoon-Living on 08.27.12 at 11:35 pm

Love this line from the trailer park wife: “My husband and I aren’t cheap…….not really anyways….just thrifty!” And I guess mountainese for being thrifty at a restaurant is “Ooops, I forgot my wallet……….again.” Looking forward to the S’toon post Garth!!!!

#26 DM in C on 08.27.12 at 11:53 pm

So Calgary is Canada’s most affordable housing market now.

Huh. So why am I considering moving to K/W for the same six figure salary and house prices $100k less.

Oh yeah. It’s not -30 for seven months of the year.

#27 DM in C on 08.27.12 at 11:53 pm

Forgot the link.

http://www.calgaryherald.com/business/Calgary+housing+market+among+Canada+most+affordable/7149520/story.html#Comments

#28 Crash Calaway on 08.28.12 at 12:02 am

What do Beauty Queens and Tornadoes have in common?
They both end up in trailer parks!

Ya can’t win George

#29 Rob on 08.28.12 at 12:18 am

Very funny, Garth, but I wouldn’t suggest quitting the day job for stand-up comedy quite yet! :)

#30 Sockeyemoon on 08.28.12 at 12:26 am

I did a little research.

They say the reason real estate is so high in Hong Kong (and so maybe Vancouver) is real estate is an equity investment!

…really?

http://articles.marketwatch.com/2012-08-26/commentary/33402814_1_property-market-hong-kong-affordability

#31 Spiltbongwater on 08.28.12 at 12:33 am

If those letters are real, then lets see pics of Trailer Wife and Alice.

#32 wes coast on 08.28.12 at 12:43 am

Thrifty wives are the hottest. Nothing better than a woman who can keep the household spending in check. Leaves a lot of room for happiness. Go figure. The ads all said granite and stainless leads to happiness.

Keep the trailer. Save as much money as you can. As your cash position grows and prices fall eventually you’ll just know its the the right time to jump in the market. Could take years but who cares. Low expenses = lots of time to do what couples should be doing. (Use your imagination; hint it doesn’t include searching house porn on MLS)

#33 Tony on 08.28.12 at 1:02 am

Re: #16 young & foolish on 08.27.12 at 10:20 pm

Basically no but some parts of America might have hit bottom. Problem is it’ll likely flat line for the next couple of decades. Some parts of Texas might be worth buying now.

#34 Nostradamus Le Mad Vlad on 08.28.12 at 1:04 am


“Tower of goo, as befits anyone who doesn’t live within walking distance of a Starbucks.” — Speaking incoherently of Starbucks, see first link below (3:16 clip) on fast food.

Hmmm. Likes living on fumes or smells from Loretta Lynn, accessing the home with a can opener (the kind that doesn’t move) in some hick BC mountain town. Surely you’re not speaking about BPOE?!

“. . . when a few BMWs roll into town full of former corporate and litigation lawyers who lost their homes in West Vancouver and are willing to move in with goats. Give this some time.” — It is doubtful whether the goats would be able to handle the incessant paperwork generated by lawyers, but if the goats are willing, they can take up residence in WestVan while the lawyers yodel and dance on the mountains!
*
#145 John in Mtl on 08.27.12 at 5:09 pm, #125 Ronaldo on 08.27.12 at 2:55 pm and #20 Grim Reaper/Crypt Speculator — “Rumour is major Stock market cash out ..SOON . . .” — “Something’s going on…” — All of you are correct. A link from a few days ago said China is about to introduce a gold-backed currency, which will (among other things) provide stability for some countries, and eventually end the petro-dollar.

Iraq tried (unsuccessfully) to break free and team up with the Euro, and Iran is currently doing the same but with China and Russia. TPTB don’t like Iran (or Libya) having central banks for the people with gold-backed currencies.

This link — Charts indicating an impending sharp decline gives a little more info.
*
Secret Spenders hide debts; Greece The locals couldn’t care less, and stranger things have happened; Dubai Supercars graveyard. How the mighty have fallen; Iceland Doing well; Elite outta cash? Islands up for sale; Russia after US tech; Ball and Chain on UK economy; Unilever says poverty is returning to Europe; Food Stamp Usage vs. food stamp cost; 15 Sq. Mile Block respnsible for SKorea’s GDP; Asset Allocation New rules; Stunned Apparently, England is in better shape than Italy; Guessing Game How much is the McMansion in the window? Chart of the Day.

FB – Nyet; LinkedIn – Oui and FB — US$5 / share? FB — US$5 / share? Canada Lumber profits up; Nokia Replacing Samsung? Robots and Drones but no workers; It Takes Money to make money; Split in private equity funding; Ross Perot Back by popular demand; John Mauldin Oz almost outta time.
*
3:16 clip Fast food myths and phobias; Pizza The toppings are alive! ‘Quakes The swarm in SoCal continues; 8:22 clip Super solar storms in Dec. Where are you, Chaos? Aliens and UFOs in Mayan artifacts, and Jupiter calling; Marmite or Vegemite down under. Good as a drink or with peanut butter; Prohibition It’s back again; Peak Oil On the backburner for a decade or two? Red Sky at Night or red is the new black; A Hitchhiker’s Guide to Drivers; 9:52 clip Psychic Energy. It exists, but has to be used properly, otherwise unintended consequences (such as The Exorcist) occurs; What’s really in food; Vegetarian? Not a chance. I’ll be enjoying life in the other worlds by then; US Vets being rounded up and people disappearing.

#35 Grim Reaper/Crypt Speculator on 08.28.12 at 1:10 am

OK…..

Pre-sale Line-up starts tomorrow 5 am sharp

Mullets get 10% off !

https://www.google.ca/search?q=white+trash+trailers&hl=en&client=firefox-a&hs=pbu&rls=org.mozilla:en-US:official&prmd=imvns&tbm=isch&tbo=u&source=univ&sa=X&ei=GFI8UNCiDcKdiQKa_4HIBg&ved=0CCYQsAQ&biw=1015&bih=617

#36 Tony on 08.28.12 at 1:14 am

Re: #20 Grim Reaper/Crypt Speculator on 08.27.12 at 10:52 pm

I see October 19th 1987 X 2 right around the corner. The rule of thumb has been to always sell exactly one month before election day in America.

#37 Dodged-A-Bullit-In-Alberta on 08.28.12 at 1:16 am

Greetings: Please delete these “First” Arseholes!!!!

#38 Aussie Roy on 08.28.12 at 1:36 am

Aussie Headlines

Remember the housing recovery?, the calls of “we are at the bottom”?.

It’s over

New home sales plunged in July, ending three months of gains and pointing to more weakness in the real estate sector.

The Housing Industry Association new home sales report showed a 5.6 per cent fall in July, following a rise of 2.8 per cent in June. New home sales were positive in April and May, as well.

“Consistently weak consumer – and business – confidence is weighing very heavily on new housing investment, far more so than is the case for retail expenditure,” HIA chief economist Harley Dale said today.

http://www.smh.com.au/business/property/gloom-returns-to-market-for-new-homes-20120828-24xf8.html

Melbourne – the Aussie BPOE, in the kingdom of “It’s different here”.

An emerging oversupply of new apartment stock and lack of investor interest has seen Melbourne’s unit market weaken for the third consecutive quarter with the median unit price slumping 1.2per cent in the three months to the end of June.

The June quarter median unit price of $392,862 is 1.7per cent lower than it was at the start of 2012 and 4.8per cent lower than the peak of $412,469 recorded over the December quarter 2009.

http://theage.domain.com.au/real-estate-news/melbournes-unit-market-slumps-20120825-24ti3.html

#39 Aussie Roy on 08.28.12 at 1:43 am

Aussie Headlines

There is always a shortage in a bubbled market until there isn’t.

A shortage? Get real. There is no Australian housing shortage. Indeed, all the evidence contradicts it.

The weakest part of the “housing shortage crisis” argument is the way the industry comes up with its figures. It compares how many houses have been built with how many “should have” been built. They call this latter figure “underlying demand”, which some media sources accept as gospel but which is, in fact, a piece of self-serving speculation.

The reality is that the number of houses built is dictated by consumer demand. When a first-home buyer secures a block of land and puts in a building application, a new dwelling gets built. If 1,000 new homes are built in a given area, it’s because consumers have directly demanded that number. It’s ridiculous to claim that 2,000 “should have” been built. Where’s the demand for the extra 1,000?

The final nail in the coffin of the shortage argument is this simple question: if the building industry genuinely believes there is unsatisfied demand for new houses, why don’t builders construct more houses? That’s their function in society, isn’t it? Stop whingeing and start building.

http://www.propertyobserver.com.au/residential/australia-s-so-called-housing-shortage-is-a-lie-constructed-by-vested-interests-terry-ryder/2012082756255

The last call for any greater fools left

Ahead of an expected pick-up in residential sales activity in the established housing market in spring, developers and builders are offering a range of incentives to encourage new home buyers.

Incentives include cash handouts, new cars, free house upsizings and zero deposit home loans.

http://www.propertyobserver.com.au/land/new-cars-$10000-cheques-and-free-home-size-upgrades-six-spring-incentives-from-house-and-land-developers-and-builders

#40 Debtfree on 08.28.12 at 2:02 am

There is an exception to every rule . Even in a place as small as B.C. Location location location is everything . Things are getting interesting in my neck of the woods .Imagine some guy is hoping to put in another 13 billion . I don’t think I would trade my digs for yours in lunenberg . No sockeye eh.

#41 T.C. on 08.28.12 at 2:02 am

Does the wife of trailer George have a thrifty sister?

Does she like frog jigging?

#42 Aaron - Melbourne on 08.28.12 at 2:32 am

@ Trailer Wife

Food Vans are the new hotness here in Melbourne. Hipsters love the things because they check their tweets or facebook about its latest location and exotic flavours. Cycling there on their fixies in skinny jeans they empty pockets of $20’s for empty calories.

I’m thinking it might be a good thing to convert the trailer to a food van and serve the niche BC hipsters a steady diet of “thrifty” squirrel on a stick slathered in poutine, confit recession raccoon, peanut butter and maple syrup smeared pine cones and fresh mountain water collected from the 44gal barrel catching run-off from the toilet block.

You could name it “Billy Hill’s Road Kills BBQ & Grill”.

#43 cynically on 08.28.12 at 3:02 am

#20 – You are not being generous enough with Cdn. businesses in your $500 million figure. Corps in Canada hold over $500 Billion – that’s million with a B

#44 Aaron - Melbourne on 08.28.12 at 3:06 am

Another Aussie commentator has turned coat

http://www.propertyobserver.com.au/residential/australia-s-so-called-housing-shortage-is-a-lie-constructed-by-vested-interests-terry-ryder/2012082756255

#45 Jay Currie on 08.28.12 at 3:15 am

I love “thrifty”. You don’t need to live in a trailer to do it either. Buy used, go to garage sales, haunt Craigslist, don’t buy at all – live in cash. Sell your car. (BCAA figures that running a car is about $8000/year. Bus, bike and a hefty cab budget? Call it $3000 max. $5000 after tax dollars to your account.) Eat in. Actually cook rather than heat up processed junk.

Sell stuff you don’t need. Sew.

The fact is that a lot of the things made in Europe and North America back in the 1950’s were well made and last pretty much forever. At a church sale or a garage sale you can get wonderful, pretty much mint, things for less than the tax you’d pay on their modern, plastic, replacements.

That leaves cash left over for good coffee, decent wine and a dollar or two in the bank.

#46 Buy? Curious? on 08.28.12 at 5:11 am

Garth, a great little piece tonight. However there one little intangible element left out of your theory as to becoming liquid. You CAN’T trust people who rent! Why would invest time in someone trying to build a relationship when you know they’ll just pick up a leave the moment there’s a whiff of opportunity somewhere else. Would you lend them your box set of Mad Men or Sex in the City around the tail end of the month? You’d never see again. They also have no investment in the surrounding area. Like I said, they’re going to move away at the first sign of trouble. On our street, do you know how many people rent? None and we live on the best street in the world. When I go to parties and I find out the person I’m speaking to rents, the conversation is over, “Buh bye.” Bill Clinton has rented all his adult life and would you leave him alone with your Mrs? Rest my case.

#47 Freedom First on 08.28.12 at 5:20 am

After reading the e-mails to Garth that he has been posting on his blog recently including today, I have come up with a personal observation, as there is a number of them I can relate to.

My observation: If you are : renting, (includes a trailer pad with an owned trailer), debt free with great cash flow and a good income, also hold a really nicely sized liquid net worth that is growing, and love where you live and the lifestyle you have, you will probably have people in your life that are: pissed off with jealousy and anger over your having no mortgage and a large cash flow with net worth to boot, low overhead, no car commute, and that you don’t want a house unless it is near free, or are not house horny, think that you are losers and look down at you as being ignorant low life losers, or just plain angry with you because they think you are judging them as foolish people buying over priced RE who have made a horrific financial mistake. If what I am writing you is the truth, you are doing everything right:)…….I have found the secret is, I just plain don’t give a shit what they think. THAT, makes them madder than anything!
I learned from Garth,house broke people, or the unstoppable house horny, will argue against sanity, and continually fight mental health at all costs when it comes to their insistence on becoming RE crash victims. What seems to enrage them even further is when I take a 6-8 week winter vacation paid for with cash, and have no financial worries. I like: cash, cash flow, income streams, liquidity, minimum of 8 diversified assets. and no debt. Rrrsp’s properly thought out for all tax purposes, TFSA’s invested as Garth says, and certain unsheltered invesments, as Garth talks about, and 5-15% PM’s max, are all good. Oh, and if you are worrying about money in any way, that is totally unnecessary for anyone. Please, ignore the [email protected], the MIL, FIL, parents or any peers or co-workers who want you to break the financial principles Garth has lined out for you……and free of charge too. Don’t forget to say…”Thank you Garth”……I admire Garth for doing his blog, as pathetic as it is, as I personally, would hate to argue with the insanity of the people who argue with him. Thank God he has the sense of humor he has to address the insanity of financial ignorance with such witty, off the wall, and unique to this blog, his own creative style of the writing of said humor with a vast house horny soft RE market porno vocabulary, which is very pleasing to read. Thank you Garth.

#48 JessicaJ on 08.28.12 at 6:31 am

From Buy? Curious?: “… When I go to parties and I find out the person I’m speaking to rents, the conversation is over, “Buh bye.” Bill Clinton has rented all his adult life and would you leave him alone with your Mrs? Rest my case.”

Stay away from the booze!

#49 John on 08.28.12 at 6:54 am

Balance sheet recession wrote:

“Has the US been following Japan since the early 2000′s? Will Canada be in the same boat?”
——-

I don’t think your idea makes much sense. Japan was able to limp along because the rest of the world was involved in de-regulation, derivatives, “globalization”, selling t-bills to China, currency manipulation, fake wars, and identifying slave labor pools.

You can’t do that as easily today. The power structure would have to get ugly, and that’s another structure.

So US and Canada don’t get to pull a “Japan”. It’s not as simple as screwing with balance sheets anymore. I’d say we’ve kind of blown the gasket on that one…wouldn’t you.

“New strategies” will be required.

#50 TurnerNation on 08.28.12 at 7:15 am

This plain-speakin’ weblog is offerin’ advice on breedin’, banjo tunin’, and portfolio balancin’ (the correct ratio of beer vs. liquor in your porch fridge).

#51 Jim Lahey, Sunnyvale Trailer Park Supervisor on 08.28.12 at 7:31 am

“Fourth, have you considered a trailer? ”

Hear, hear Garth. I knew it was only a matter of time until you recommended trailers as a low cost alternative to homes and renting. I know this is as a result of the grand time you had at the FASTPGFBDCParty. You felt the love at Sunnyvale. Ricky, Julian, Bubbles and the rest of the misfits are counting the days until the SASTPGFBDCParty. We are trying to line up some debates for you but everyone is backing off after they heard about your thorough destruction of Carney and Ron Paul last year. Perhaps Flaherty might man up…

#52 Can it be? on 08.28.12 at 7:59 am

Buy curious? Seriously? Wow

#53 Herb on 08.28.12 at 8:04 am

#46 Buy?Curious?

let me give you the other side of your coin. For 23 years we owned a house on the second toniest street in the second toniest part of Ottawa. A sense of entitlement and the fortress mentality reigned supreme, neighbourhood relations were polite but devoid of substance, and the word “community” was a cover for self-interest. When we told our daughter of a substantial unsolicited offer to buy, she said “A…holes to the left of us, a…holes to the right of us, and a…holes behind us. Why wouldn’t you sell?”

We did, and rent a house in an untony part of the city. There is a neighbourhood pot-luck every two weeks, and we, although only tenants, are fully integrated and accepted. I also have 30 years experience as a “landlord”, and have encountered great tenants and lousy ones, just as I found among fellow landlords. It’s a matter of people, not stereotypes, so easy on the broad brush.

#54 NotAGreaterFool on 08.28.12 at 8:09 am

Garth – When do you show up in Toronto?

October. — Garth

#55 VT on 08.28.12 at 8:17 am

Those greater fools with massive mortgages are helping to pad the wallets of those of us with diversified holdings, including shares in our big banks. Can’t think of anything sweeter this week than watching announcement after announcement of juicy profits and dividend increases in my financial holdings. I’m richer than I think. Really :)

BMO profit soars 37%, boosts dividend for first time in 5 years
http://www.theglobeandmail.com/globe-investor/bmo-profit-soars-37-boosts-dividend-for-first-time-in-5-years/article4504618/

Scotiabank profit hits $2.05-billion; hikes payout
http://www.theglobeandmail.com/globe-investor/scotiabank-profit-hits-205-billion-hikes-payout/article4504624/

#56 T.O. Bubble Boy on 08.28.12 at 8:21 am

Garth – that “rule of 90″ is rather harsh for anyone under 50…. how many 30-yr-olds in the GTA could own a property that is 60% or less of their net worth?

Then they shouldn’t, if they care about risk. — Garth

So, if I put 2 Garth positions together:
1) Many high-end neighbourhoods in Toronto should have less of a decline, because people actually have money.
2) Owning RE above the “rule of 90” is risky, meaning that a 40-yr-old buying a $800,000 house in Toronto should have at least $1.6M in assets before buying.

Combining those two factoids, either the vast majority of Torontonians have “uncomfortable” amounts of RE, or every one of the 2.5M people living in the core are a part of Canada’s Top 1%. Since (by definition) there are only 275,000 people in this group, Toronto is clearly off the deep end.

http://rabble.ca/blogs/bloggers/progressive-economics-forum/2011/10/wealth-and-income-top-1-cent

Even the top 10%, with approx $148k in annual income and $1.1M in assets (circa 2005, per that link) shouldn’t be buying houses anywhere in Toronto.

Conclusion: most people carry substantial to extreme real estate risk, which makes this a dangerous asset class. Maybe somebody should start a blog about this. Call it “Greater Fool” or somethin’. — Garth

#57 Herb on 08.28.12 at 8:24 am

Neandercons south and north of the border in a nutshell:

… hangers, haters, hawks, birthers, libertarians, creationists, nativists, evangelists and flat-earthers…

– Andrew Cohen, at http://www.ottawacitizen.com/news/Moderate+Romney+gone+good/7151941/story.html#ixzz24qJZ9lSY

#58 The American on 08.28.12 at 8:28 am

At #46: Buy? Curious?, you said, “You CAN’T trust people who rent! Why would invest time in someone trying to build a relationship when you know they’ll just pick up a leave the moment there’s a whiff of opportunity somewhere else. Would you lend them your box set of Mad Men or Sex in the City around the tail end of the month? You’d never see again.?”

I think your little “theory” is a major stretch (or, as we say in the U.S. it is “bullshit”), and it clearly says more about you as an individual than it does speak about the reality of being a renter. You just proved yourself to be elitist and discriminatory against those who rent.

Are you REALLY saying you think people should not invest time in building a relationship with a renter because a renter has a greater flexibility to leave when he/she chooses? Maybe you should consider the fact a renter should be suspicious of a home owner because a home owner in Canada now has everything to lose. Your logic is a flawed as BPOE’s. Hmmmmmmm, I do see a direct correlation between the two of you….

#59 gladiator on 08.28.12 at 8:41 am

TW, dear, you don’t own the land – the land owns you while you pay property taxes on it.
To understand what I mean, stop paying taxes on the property and see what happens.
You are property of TPTB and that is not “the guvmint”. Think higher ;)

#60 eaglebay - Parksville on 08.28.12 at 8:46 am

#25 Saskatoon-Living on 08.27.12 at 11:35 pm
“And I guess mountainese for being thrifty at a restaurant is “Ooops, I forgot my wallet……….again.” Looking forward to the S’toon post Garth!!!!”
______________

Most people in BC live in the mountains.
Have they built a real road to Saskatoon yet?
If it wasn’t for the “river” the place would be a dump.

#61 eaglebay - Parksville on 08.28.12 at 9:32 am

46 Buy? Curious? on 08.28.12 at 5:11 am

Ownership illusion. You’re renting from the mortgage company, the city, the utility companies and so on. Try selling, which you’ll have to do eventually, and see what happens.
Best streets in the best neighborhoods are most boring.
You want to live and have fun? Go to a modular home park where you’ll probably know your neighbors and have a larger living area.
I bought a “fancy” house. My mistake. My neighbors are uppity, fussy, complainers, boring and brainless.

#62 Reality Bytes on 08.28.12 at 9:33 am

Boom goes the dynamite!

You’re the bomb Garth, but what is this obsession you have with marriage. It’s an outmoded religious concept straight out of the bronze age.

Common law covers all the mutual obligations and benefits of cohabitation. Love is love, now it they can just get rid of the gender bias.

#63 2centsCdn on 08.28.12 at 9:40 am

#46 Buy Curious
Please don’t take this personally … but you’re a [email protected] idiot.

#64 T.O. Bubble Boy on 08.28.12 at 9:59 am

Even the top 10%, with approx $148k in annual income and $1.1M in assets (circa 2005, per that link) shouldn’t be buying houses anywhere in Toronto.

Conclusion: most people carry substantial to extreme real estate risk, which makes this a dangerous asset class. Maybe somebody should start a blog about this. Call it “Greater Fool” or somethin’. — Garth

Yes — I know that I’m stating the obvious here given where I’m posting this… however, I’m starting to question the statements that certain high-end neighbourhoods in Toronto will be “safer” vs. other parts of the GTA.

Basically, the numbers just don’t add up… only the Top 1% (say about 100k families in all of CANADA, and maybe only 25k or fewer families in Toronto) can actually afford a house in the 416, yet hundreds of thousands of families “own” these highly priced homes.

Either a whole lot of Torontonians are in over their heads, or “safer” just means a 40% haircut vs. a 50% haircut — not a small (sub -10%) decline like you’ve mentioned in the past for neighbourhoods like Leaside, Lawrence Park, Forest Hill, Rosedale, Bloor West, etc. etc.

#65 Canadian Watchdog on 08.28.12 at 10:12 am

Canadian corporations earned $71.9 billion in operating profits in Q2, down 4.9% from the previous quarter.

Not to mention the largest corporate bond maturities set for 2013-2015, which why corporations are sitting on $500+ billion in cash.

#66 westcanguy on 08.28.12 at 10:13 am

“Most people in BC live in the mountains.
Have they built a real road to Saskatoon yet?
If it wasn’t for the “river” the place would be a dump.”

I’m thinking most people in BC live in the lower mainland and while you can see the mountains, they don’t live in the mountains. Why so sensitive? Sure, if there wasn’t a river in Saskatoon, the place would be a dump. Same thing goes for those who do live in the mountains. If it weren’t for the mountains, most of those towns and cities along hwys 3, 5 and 97 would also be dumps and yes, I’ve traveled them all when I worked out there and lived in Vernon. Every area of the country has something unique and special about it, even if some of the people living there aren’t.

#67 Stickler on 08.28.12 at 10:20 am

@#46 Buy? Curious? on 08.28.12 at 5:11 am

” When I go to parties and I find out the person I’m speaking to rents, the conversation is over, “Buh bye.” ”

>> You are either funny (because you are joking), or a terrible person (if you are serious). I’m not sure which it is, and if I should invite you to my next party.

#68 Grim Reaper/Crypt Speculator on 08.28.12 at 10:24 am

Error..in post #20

Meant to say Corporations have $500 BILLION in cash (not $500 million).

Should add the only thing I can foresee is mergers which will further monopolize markets and cut jobs….the vultures with cash are simply waiting to buy cheap or bankrupt.

In other words, don’t hold your breath for any growth/expansion….we are in Mexican Stand-off mode

#69 thinker on 08.28.12 at 10:26 am

Garth – 29 years old making 105k? Do we really need to worry about housing??????????

How about we find out more what this guy is doing to make that cash? What if that job is lost.

They are in a very strong financial position.

#70 Jim on 08.28.12 at 10:53 am

#69 thinker

$105k is not a huge salary in Toronto. eHealth Ontario pays their tech support idiots above that amount; yes, people who answer phones. With pension and benefits. White collar types in Toronto can make $105k as a project manager easily, for instance. He could also be a young lawyer (associate), accountant, financial analyst, etc.

#71 Kim on 08.28.12 at 10:56 am

Nostradamus Le Mad Vlad #34

“Iceland Doing well’

Yes Iceland allowed the free and open markets to punish those who were foolish and the economy suffered a sharp correction and now starting a new economic boom. The US /Canada and the other so called free markets continues the fascist economic model and thus will suffer a long long downturn at the expense of the working class. Keep the good work up Nostradamus Le Mad Vlad . Why does the US and Canada hate the free markets and democracy?

#72 Derek R on 08.28.12 at 11:09 am

#39 Aussie Roy on 08.28.12 at 1:43 am wrote:
A shortage? Get real. There is no Australian housing shortage. Indeed, all the evidence contradicts it.

Absolutely. And talking about evidence, here’s
an article from June 2012 discussing a report by one young researcher who used water meter records to discover just how many empty houses there are in Australia.

His conclusion? There are a lot.

#73 dm in c on 08.28.12 at 11:46 am

Bi-curious = troll. He’s just trying to get y’all going. And succeeding.

#74 Bill Gable on 08.28.12 at 11:58 am

@#46 Buy? Curious? on 08.28.12 at 5:11 am

” When I go to parties and I find out the person I’m speaking to rents, the conversation is over, “Buh bye.” ”

>>> You are an IDIOT. Have you even read ANYTHING Mr. Turner has written and managed to have it enter your pea brain.
The stupidest and perhaps most ignorant comment yet this summer, and we have had some beauties.

You are going to get your pants handed to you – and all of us people that SOLD you suckers these overpriced chipboard palaces are going to laugh our Lee jeans off.

Man, still no shortage of morons, Mr. Turner. Wow, what a dolt.

#75 Ronaldo on 08.28.12 at 12:07 pm

#163 Devore – from yesterdays post.

”#126 Ronaldo

When people start lining up in -40 degrees to buy 1 oz of gold at $840/oz as they did in Feb. 1980 and everyone is setting up shop to buy gold and silver, and gas stations are offering gas for $1.00/gal if you pay in silver coins, and all the talk in the media is about gold and silver, then, I would have some concern.”

Devore- #163 from yesterday.

”You have heard of the Internet, yes? No one needs to line up to buy anything.”

Firstly, Devore, I was referring to what was taking place back in 1979. Were you even around back then?And yes I have heard of the internet. In fact I have been a user since its launching in the mid to late 80’s. And no, your wrong about people not having to line up anymore to buy anything. We’ve seen it many times with Condo Pre-sales havn’t we? So, maybe I should have phrased it more like this. ”When I see block long lineups of people getting paid to line up to buy gold in minus 40 degrees at the BNS in Toronto, we will know its getting bubbly”. Does that make you feel more warm and fuzzy?

#76 John on 08.28.12 at 12:08 pm

Grim Reaper Crypt Speculator wrote:

“Should add the only thing I can foresee is mergers which will further monopolize markets and cut jobs….the vultures with cash are simply waiting to buy cheap or bankrupt.

In other words, don’t hold your breath for any growth/expansion….we are in Mexican Stand-off mode”
———
Yep. The bubble continues to expand in many places. In Chile a prominent German mutual fund liquidated five office towers ( including the most expensive commercial real estate in the country). They’ve left the country. I’m sure they’d come back in after the bubble bursts. Who knows? Maybe even the same buildings.

It’s about power. These are just entities in the game doing what a “renter on the sidelines” is doing. Just as cash is king for the renter who didn’t get punk’d by th Goldman Sachs et al credit hook, cash is king for the bigger players in the system. But they “own” everything in a cheap labor or services economy.

It’s good to remember that cash is only king in a fraudulent, on-going derivatives world with outsourced manufacturing.

Cash is NOT king in an economy that is pushing for production, innovation, proper education, community, and investment in the citizens. What’s king in that economy is production, innovation, proper education, community, and investment in the citizens.

Many years ago in Steve Martin’s first big movie called “The Jerk”, Steve ( who was born in a poor black family) set out to see the world with a big old suitcase. As he got towards the end of the driveway he stepped in horseshit and learned his first lesson ( according to his black father): “Son, you’ve got to know the difference between shit and shinola”.

This is kinda similiar. It isn’t rocket science. At all.

#77 Old Man on 08.28.12 at 12:09 pm

One’s salary income has no meaning in the real world, as know lots of people making over 100K who can’t write out a check for 10K if it mean’t life or death. It is a matter of too much debt; no savings; taxation; and spending like there will be no tomorrow.

I knew two brothers that owned a couple of funeral homes for years, and needed a deposit cheque for 25K in regards to a business deal. That cheque bounced like a rubber ball in heat, yet their financial statement indicated they had a net worth of $4 million, but could not come up with $25,000 a week later.

#78 Mixed Bag on 08.28.12 at 12:27 pm

A post or two ago, Garth commented that cars will also be cheaper, along with houses. This intrigued me, as we need to get a family-mobile for our growing family. I’ve rather enjoyed the lower costs of running the household with only one car for the past year, but will have to take the plunge and purchase a second, larger vehicle. Will automobile prices decline at the same pace as housing, or sooner?

#79 Snowboid on 08.28.12 at 12:35 pm

#46 Buy? Curious? on 08.28.12 at 5:11 am…

You are correct, we can’t be trusted!

After attending a few open houses this past weekend, it appears we may not be waiting long for the prices we are after – then we can finally buy and be trusted. Condos are in a death spiral, SFHs are slowly getting dragged down as well. In the meantime, we will continue as untrustworthy renters.

Our oldest son once again accused us of being vultures, as we sit on our deck watching RE decay all around us. And we live on the best block in the world (or at least downtown Kelowna). On top of that we fly south each winter.

Reminds me of a joke from the Bye Bye Buzzard event at Boyce Arboretum a couple of years ago.

Seems the turkey vulture tried to board a Southwest flight with two dead racoons. The agent at the gate stopped the poor buzzard “Sorry sir, only one carrion allowed per passenger!”

#80 Angel on 08.28.12 at 12:42 pm

A good plan would be to get married, have a kid and then get divorced on paper but not for real, so that you can income split by him giving her child support. I’m sure Revenue Canada won’t mind.

#81 Randy on 08.28.12 at 12:43 pm

Just a reminder as to why you can’t make any monies by saving your money !!

“Furthermore, by suppressing interest rates, the Fed has crucified those on fixed income. Also recall that Fed fueled the housing bubble in the first place by holding interest rates too low, too long, in its open market operations.”

Carney parrots the U.S. lead…

http://globaleconomicanalysis.blogspot.ca/2012/08/fed-profit-center-for-taxpayers.html#tmu4r3OULt8krRrD.99
http://globaleconomicanalysis.blogspot.ca/2012/08/fed-profit-center-for-taxpayers.html

#82 Bast on 08.28.12 at 12:45 pm

#46 – Buy? Curious?
Brad Lamb, is that you, in wolf’s clothing?

#83 calgary_rip_off on 08.28.12 at 12:50 pm

Garth your blog is all well and dandy but doesnt address the reality of the buying vs. renting equation. There comes a point where after around 5-7 years of renting you end up wasting money. Are renters really happy subsidizing these people who with luck just happened to buy properties before the boom in Calgary? If your rent is the same as a mortgage, why waste your time and money even talking with a landlord? I think it beneath me to even talk with one of these people. Most of the people walking around, say 99.5% of the general population are total idiots. And this is primarily why I bought. These landlords can take their sense of entitlement and stick it in their rear. At the same time, make sure that the property you buy doesnt have problems. Likely the scum you are buying from likes to disguise the little problems only to later be found by you the mortgage owner later, after he has made $200K or more off you for doing nothing other than buying before the boom made possible by the oil industry which in the late 80’s screwed the electric car so they could have their easy money and sit on their ass office jobs in Calgary. So it isnt really just about making money or getting ahead, it is about what and who you want to deal with. And although I own a mortgage I still think houses in Calgary are a RIP OFF though not likely to come down as the oil sheisters have a monopoly on the world despite the fact that Nikolas Tesla not only demonstrated that electricity could be broadcast like radio but also had a fully developed electric car. The world is a corrupt place with crooked a holes in high places. This is one of the better reasons to buy a place, to minimize having to deal with people such as landlords . For those that want an easier time buying in, unless there are massive deaths of baby boomers the prices arent going to fluctuate much here in Calgary so unless you want to continue subsidizing the landlord a holes, if the price is affordable, get something decent.

#84 Ronaldo on 08.28.12 at 12:54 pm

A good article on High Frequency Trading

http://www.smh.com.au/money/investing/share-wars-how-the-robots-are-robbing-you-20120825-24t4t.html

#85 Tony on 08.28.12 at 1:22 pm

Wow, I literally just laughed out loud at #5 comment. TO market dropping 50%. Come on guys…

#86 yound & foolish on 08.28.12 at 1:43 pm

T.O. Bubble Boy …

Many people living in those old TO hoods have bought their houses years ago, plenty already paid for. So, the question is should they sell and reap their equity gains now, then rush those to their nearest investment adviser’s office for “diversification”. With paid dividends, they could now rent their old house from the new owners at exorbitant rents. But at least their new, and diversified equity holdings, are a safer place to park their money. Of course, having a paid for house in an older neighbourhood for years, probably means you have been investing in other assets, and now your 90 rule may be applicable.

Obviously not everyone is going to rush out and sell tomorrow. Especially if their house is not above 30% of their equity, or if they are holding on to rental properties who are prepared to house folks who decide to sell or wait out the market correction.

#87 Victor on 08.28.12 at 1:47 pm

Our love affair with debt keeps Canada’s banks on top

http://business.financialpost.com/2012/08/28/our-love-affair-with-debt-keeps-canadas-banks-on-top/

One reason the banks are having an easy time compared to many of their international peers is because of the resilience of the Canadian economy, which has managed to avoid much of the turmoil buffeting other regions.

Another reason is the domestic consumer’s appetite for debt, especially mortgages. Despite lacklustre borrowing by businesses and volatile capital markets revenue, the Canadian banks have managed to meet or exceed Street expectations over the year, and that’s happened largely on the strength of consumer loan volumes, primarily mortgages.

#88 Old Man on 08.28.12 at 1:50 pm

The City of Toronto will be filled with Power of Sales in the coming years, especially in the 416 area, and want to explain the horror of this all – not a pretty picture. It begins with a mortgage or fire insurance going into arrears, and the mortgagee will attempt to sail for a bit, and if all else fails he calls the lawyer to execute a Power of Sale needing a copy of the Mortgage and Fire Insurance.

More debt for a future redemption against the home owner, and all hits the Office of the Sheriff who does his thing. There will be a time up with a phone call to the Lawyer with a date and specific time for vacant possession; this is no fun, and dangerous. The Sheriff arrives down the street; sometimes two of them; the locksmith pulls up; and all await for the bossman who acts as an agent for the principal lender.

The Sheriff and his deputy must guarantee vacant possession, so all go inside, and the locksmith is busy changing all the home locks. The Sheriff and his deputy must walk not only the entire property, but every room, but things can go wrong with a man having a gun inside, or a young teen locking her ass in a bathroom, as to take a person’s home away is a very emotional experience.

I have been an agent on many an occassion, and can stop a proceeding, as am the bossman which have done a couple of times with all walking away under my order, because need some time for further discussion with the borrower; it was my call alone, as won’t nobody shot, or a teen girl crying her eyes out. There needs to be a better way.

#89 Cautious on 08.28.12 at 2:04 pm

Re 84 – an excellent presentation on how algorithms affect our world, including HFT.

http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html

#90 Toronto_CA on 08.28.12 at 2:06 pm

“#85 Tony on 08.28.12 at 1:22 pm
Wow, I literally just laughed out loud at #5 comment. TO market dropping 50%. Come on guys…”

I wonder if people in Phoenix, Miami or Vegas said the same thing in 2006?

#91 Old Man on 08.28.12 at 2:13 pm

#83 Garth explains the reality well of buying vs renting equation, and it is so simple. A horny couple bought a condo in 416 for $500,000 at the top of the market, and in a few years might be worth $300,000, for a capital loss of $200,000; not to mention the closing costs if they need to bail out, but they are underwater for at least a decade to break even, or will walk away and declare bankruptcy with CMHC holding the bag; what a mess, but if they had rented who would have won the race?

#92 Victoria Tea Party on 08.28.12 at 2:18 pm

SITTING ON THE DOUGH, THE ONLY WAY TO GO!?

Canada’s corporate sector is sitting on its hundreds of billions, Mr. Flaherty, to protect its shareholders from this long-grinding economic whatever-it-is that keeps inflicting low interest rates, no pay hikes, higher prices, asset declines, and the heebie-jeebies!

I certainly hope so! To bolster that PoV,

…IN TODAY’S FINANCIAL POST, A GLOOM-SPECKER…

Richard Duncan is a former economist with the World Bank. The banksters might like to take notice, here as well.

This is what Mr. Duncan says about Canada’s future economic prospects, SUBJECT TO the fiscal/monetary/military variations throughout the rest of the world over time.

“…In Richard Duncan’s pessimistic view, Canada gets points for its safe banking system and vast natural resource wealth, but…just like the rest…we will be sucked into the giant vortex when the U.S. finally implodes under the weight of trillions and trillions of debt that is no longer affordable.

…Duncan…Like many conservatives…argues that things went wrong when the U.S. government abandoned the gold standard in the late 1960s, paving the way for an explosion in credit creation and inflation.

But he’s not calling for a return to a gold-based currency…that would put an end to the economy and civilization as we know it…

(He, instead)…calls for massive government investment in new technology…to generate profit that would ultimately revive the battered economy.

But the way he sees it, the next few decades will almost certainly be particularly bleak for everyone.”

TIPTOE THROUGH THE TULIPS

Meanwhile, the stock market is still OK to go “into”, says LGen. Sir Garth of Mountain Trailer Pads.

I say tread very carefully. There are STILL times when it’s good to just sit tight and do nothing. Like now. Just like our corporate masters.

BTW, in this same FP issue, another article says a significant part of Canada’s corporate sector, banks, look good because of Canadians’ continuing infatuation with debt accumulation.

In this case, does massive and possibly uncollectable debt handed out to brain-dead consumers, by your dividend providers, make bank share purchases a wise move by small investors, now?

As long as banks keep sitting on their accumulating zillions, then it’s OK, I guess.

Also, a September market washout and the subsequent “buying opportunity” could bolster some portfolios, and make bank sticks cheapers, but what about the “after that?”

How to square this circle is WHY all those so-called heavy thinkers (economists) are grinding their ball- bearings.

I know, buy some ball-bearings!

#93 IM in C on 08.28.12 at 2:24 pm

@72 Derek R
In 2008 I moved to Calgary , and in the process of renting , took out renters insurance on the apartment. The insurance agnet , in filling out the application, gave me a look and said,”do you live in the apartment”? My response was -Well Yes!!. Seeing my incredulity, she explained what vacating a property was. Seems that they get calls all day long about getting vacated prperty insurance, and hang ups when they quote the rates. Seems people, rather then take a bath on selling their property, will sometimes vacate it, and have a prperty management firm look after it. The cost to carry a vacated house is Approximately 10k all in. So a home owner, who was mortage free, didn;t need the cash, can let the property sit a long time, in the expectation of future capital gains. As I do my nightly jog through my mid city suburban neighborhood, I enjoy playing spot the vacant house.

#94 jess on 08.28.12 at 2:30 pm

Private Finance Initiatives

UK water industry last year paid £1.6 billion in dividends to shareholders – while receiving tax credits worth £200 million.

http://taxjustice.blogspot.ca/

FT: over 90 UK PFI projects moved offshore
Posted by: Nick Shaxson in: Thoughts Following my blogging on the UK’s Private Finance Initiative, the Financial Times has weighed in with some useful updates and details:

More than 90 private finance initiative projects have been moved into offshore tax havens, according to a report by the European Services Strategy Unit, a think-tank highly critical of the PFI and which maintains a database of the projects.

UK MPs accusing PFI firms in the current inquiry of “ripping off the taxpayer” and calling the whole, tax-dodging business “a racket.”

“Ian Swales, a Liberal Democrat member of the committee, said so many deals had moved offshore “the working assumption should be that they will end up offshore.”

This is what’s increasingly happening in our globalised world. The working assumption in many sectors – particularly private equity – must be that the business is moved offshore.

=========

BBC exposes tax scam in UK Private Finance Initiative

BBC Radio 4 has just run a brilliant programme looking at Britain’s Private Finance Initiative, which seeks to fund public projects with private capital (and get some of the costs off the government’s books in the process.) It’s been excoriated for inefficiency and abuse many times – and it’s currently being investigated by the UK’s National Audit Office for the umpteenth time.

Here’s what PFI does, in a nutshell. A company builds, say, a hospital, and contracts to provide a range of specified services (though inside that latter part, scams abound). Private investors stump up money, under a deal that they are to be repaid through earnings from the hospital – principally, at the end of the day, taxpayers’ money through the National Health Service funding of hospitals…read more
http://treasureislands.org/bbc-exposes-tax-scam-in-uk-private-finance-initiative/

#95 pat jones on 08.28.12 at 2:35 pm

As always Garth, the humor & laughter you provide is much appreciated. You always make my day.

#96 Suede on 08.28.12 at 2:39 pm

#65 Canadian Watchdog on 08.28.12 at 10:12 am
Canadian corporations earned $71.9 billion in operating profits in Q2, down 4.9% from the previous quarter.

Not to mention the largest corporate bond maturities set for 2013-2015, which why corporations are sitting on $500+ billion in cash.

—————————

When the corporations pay back their bondholders with their sizable cash coffers, wouldn’t they then have the opportunity to issue another round of debt with their 5-10 year maturities and begin their cycle of spending once again: New projects, infrastructure, R&D, acquisitions, etc…

So bondholders will be paid back and either the Corp’s continue to accumulate cash every quarter as they have been doing in record amounts over the last little while, or they leverage that with more debt and have even more of a war chest to spend in the business battlefield.

I fail to see how this is a bad thing – if that is what your point was?

#97 cynically on 08.28.12 at 2:44 pm

#46 B. C.- You must live on Robson St., perhaps next to the vanished Starbucks or chic boutiques. Also Bill says the same thing about you but he pointed out he was smart enough to get 8 years rent free in a huge, famous mansion while you were probably paying off your huge mortgage on your smaller mansion. One for the renters.

#98 DDLama on 08.28.12 at 2:48 pm

Trailer Wife – two options: 1) buy a piece of land and move the trailer onto the property. Eventually build a house on the property, then sell the trailer. 2) rent the trailer to someone else and buy a house. Good luck

#99 CalgaryRocks on 08.28.12 at 2:54 pm

#26 DM in C on 08.27.12 at 11:53 pm
So Calgary is Canada’s most affordable housing market now.

Huh. So why am I considering moving to K/W for the same six figure salary and house prices $100k less.

Oh yeah. It’s not -30 for seven months of the year.

There are probably 2 positions in K/W that pay six figure whereas in Calgary anyone with half a brain can get that.

Also, seriously, K/W, I’d rather live in Montreal or even Toronto. I don’t do well in villages.

#100 Silver on 08.28.12 at 3:04 pm

Just got back in town from dedmonton…

Nephew had pre-approved mortgage for the last 4 months for $280,000.00.

found a place 2 weeks ago for $215,000.00. 10% down.

paid for inspections la la la la la and etc.

Agent was a long term business friend, and well established in real estate. 30 years in commercial and residential land assemblies. and was surprised himself

Went to close on Friday…. bank went no go… ,

broker was a no go also…

Kid just got saved. Has no credit history, no long term job history. I.E. less than 2 years real solid employment.

That they even considered him….

And the other half would like a Vancouver tour T…

to wear at work…

any possibility???

Silver

#101 truth hammer on 08.28.12 at 3:08 pm

Bank profits top estimates…….increase dividend….equities beat the crap out of holding pref’s……but then again ….everyone knows this. Like real estate ownership there is a time to hold and a time to fold…..you don’t want to hold real estate on spec when the market is not going up…..but conversely…you don’t want to hold fixed income when equity prices are going up.

http://in.reuters.com/article/2012/08/28/canada-banks-idINL2E8JS1II20120828

#102 syfon on 08.28.12 at 3:12 pm

Quiet on gold and silvet front today.
Just waiting for poor sucker who bought silver at 43$ on parabolic
Johnny come late move last year to make money.
Will continue

#103 Devore on 08.28.12 at 3:14 pm

Vancouver rockstar realtor Ian Watt declares downtown Vancouver condo market flat, and recommends pricing well below comparables instead of chasing market down. Missing irony gene required to become a successful realtor.

http://www.youtube.com/watch?v=Anf9cP6CDhA

#104 Tony on 08.28.12 at 3:20 pm

#90 Toronto_CA

Comparing Toronto to Arizona/Vegas is apples and bananas.

Next.

#105 Derek R on 08.28.12 at 3:37 pm

#93 IM in C on 08.28.12 at 2:24 pm wrote:
As I do my nightly jog through my mid city suburban neighborhood, I enjoy playing spot the vacant house.

Interesting! I guess that water meter method could probably be used in Canada too but, like you, I enjoy walking around my Calgary neighbourhood spotting empty houses. There are definitely more than people might expect.

#106 Elchavo on 08.28.12 at 3:44 pm

@85 Tony

Hahaha yeah me too!! 75% crash in Toronto !! Delusional and ignorant Toronto…

#107 the 2.2% of canadians that no one mentions on 08.28.12 at 3:47 pm

that would be us …the farmers large and small.

Just thought i would add a little entertainment to lighten up the living problems you city folk deal with .

http://www.youtube.com/watch?v=48H7zOQrX3U

#108 Devore on 08.28.12 at 3:49 pm

#47 Freedom First

I have found the secret is, I just plain don’t give a shit what they think. THAT, makes them madder than anything!

More importantly, it makes you happier! But shhh! don’t give away the secret.

At some point in their lives, sooner or later, most people stop caring what others think. That is commonly called confidence. Then, and ONLY then, can they be truly happy. You can focus on the things that are important to you, and give the finger to all the BS spewed by everyone else.

As a bonus, you will have lots of extra time saved by not sticking your nose in other people’s business, which is how unhappy, insecure people keep themselves busy and distracted from their own misery.

#109 Elchavo on 08.28.12 at 3:53 pm

“In Toronto, he said, a quarter of the condo stock is sitting empty — a situation similar to the one in south Florida some five years ago, just before the condo market there collapsed. It’s now possible today to buy a condo in Miami’s once-hot condo market for as little as $50,000.”

http://www.huffingtonpost.ca/2012/05/09/canada-condo-bubble-boom-ghost-towns_n_1500959.html

And torontonians laugh at the mere idea of a price decline. And they truly believe that it’s different there. And condos are “excellent investments”. And overbuilding, or oversupply means absolutely nothing for them. They’re funny people… funny dumb people.

#110 Phoenix Bound on 08.28.12 at 4:10 pm

#93 Much easier to spot in az – bank foreclosure notices are nailed on the front door

#111 Old Man on 08.28.12 at 4:11 pm

I want to add a bit of joy in this room, as was holding a mortgage on a home that was owned by a Greek that owned a restaurant on the Danforth. He could never pay on time, so we made a deal, and said call me with your post-dated cheques, as want no NSF, as got one, and said guy lets get our act together. This was so funny as called me monthly, and said no deposit on the first but do such on the 3rd, or was on the 4th, or give me the 7th. All cheques cleared the bank, because we had a meeting of the minds to work together for a common good, as he had a wife with kids. The lesson is if there is a problem work it out, and sit back and laugh about it all – he was honest with me, and all was well.

#112 Devore on 08.28.12 at 4:16 pm

#75 Ronaldo

Why so angry? There is no electronic market for pre-sale condos. Hence, people line up for them when there is high demand. When there isn’t, you call up your realtor, and he emails you a list of the available units. No lining up required.

But there are many sources to buy gold, even actual physical gold, online. So I say again, no one will be lining up to buy gold, certainly not even remotely close to the experience in 70s. If that’s what you are waiting for, you’ll be disappointed.

And I’m already warm and fuzzy, don’t need validation from anonymous internet blog posters.

#113 Devore on 08.28.12 at 4:18 pm

#105 Derek R

Someone did this a while back in BC using data from BC Hydro. They discovered a large proportion of condos in Coal Harbour were essentially vacant. We don’t meter water, to my knowledge.

The information is there, I think BC Hydro would provide anonymized data to researchers.

#114 AprilNewwest on 08.28.12 at 4:50 pm

#103
I’d say $399 for a one b/r in Vanc is at least 35/40% to much.

#115 Investx on 08.28.12 at 4:51 pm

90 Toronto_CA on 08.28.12 at 2:06 pm
“#85 Tony:
Wow, I literally just laughed out loud at #5 comment. TO market dropping 50%. Come on guys…”

I wonder if people in Phoenix, Miami or Vegas said the same thing in 2006?
——————————————————-

Is the comparison equal? Have Toronto prices over-inflated as much as they did in those cities?

#116 penpal on 08.28.12 at 4:54 pm

@ 99 Calgary Rocks

Regarding K-W, you have no idea of what you are talking about.

There are over 500 professor / teaching / management positions at the University of Waterloo alone that make north of 100K / yr.

There are over 400 positions in the Regional / Local government that pay in excess of 100K / yr without overtime!

There are over 100 Police / Fire positions that pay 100K / yr or more in the K-W Region as BASE SALARY (not including overtime).

In addition, 25% of all hi-tech start-ups IN CANADA start in K-W. These churn out lots of millionaires (Rim, Open Text, etc.) and have hi remuneration levels.

In addition, I am in Calgary every 6 months or so and lived there many years ago, so I have a pretty good idea of what Calgary is about economically.

You live in a city almost as boring as K-W, true, but you have no large metro area that is 50 miles away to visit if you want, like Toronto. The weather sucks badly 8 months of the year with minus 30 weather in winter.

Your food and other necessities are at least 15 to 20% more expensive than K-W.

Don’t pass opinions on something you obviously have little experience with.

If you ‘love’ Calgary to live in, great, but facts are facts – you live in pretty much a traffic infested and expensive shithole and regardless of your income, you have to put up with your fellow deluded Calgarians.

‘Nuff said.

#117 penpal on 08.28.12 at 5:03 pm

@ # 99 Calgary Rocks

The positions I listed are but a few examples to be found in K-W.

The population of the area (including Cambridge – which collectively with K-W approximates the land area of Calgary) is 500,000. Hardly a village.

Calgary has 1,090, 936 inhabitants as of 2011 census. Hardly a “big” city.

Wake up fella – Calgary is NOT the centre of the universe – it is seldom mentioned in ANY of the int’l press I read daily. It isn’t even the centre of your province for god’s sake!

#118 penpal on 08.28.12 at 5:08 pm

@ # 113 Devore

If you don’t meter water usage, how does one quantify what to charge the customer for it?

I’m not sure that is correct.

#119 Toronto_CA on 08.28.12 at 5:12 pm

#115 Investx on 08.28.12 at 4:51 pm

According to relatively recent analysis by the Economist, Canadian house prices are overvalued by 32 per cent relative to income, and by 76 per cent relative to rents, obviously GTA and Vancouver must skew the national average: (50% is somewhere in the middle of those two, right?)

http://www.economist.com/node/21551486

Also, what is wrong with this woman:

“I’m just feel like I’m living in North Korea right now,” said Lori Michaud, who teaches full-day kindergarten at Elmcrest Public School in Mississauga,

http://www.theglobeandmail.com/news/politics/teachers-urge-ontario-to-negotiate-dont-legislate-at-queens-park-rally/article4505493/

I haven’t expressed my distaste of government waste in a while, but for a kindergarten teacher to compare herself to living in North Korea is beyond ludicrous. This woman shouldn’t be allowed near children until she goes to North Korea and lives there for a few years. I honestly am not sure that anyone can defend her statement; what a sound bite for the union bashers.

#120 deja view? on 08.28.12 at 5:37 pm

I took your 60% net worth advice and moved into a Westy, ok, after they turned me down for a trailer loan.
Very happy.
Am now literally rolling in the peas.
If things keep going my way, I won’t have to spend any more time in the psych ward!

#121 Canadian Watchdog on 08.28.12 at 6:04 pm

#96 Suede

“When the corporations pay back their bondholders with their sizable cash coffers, wouldn’t they then have the opportunity to issue another round of debt with their 5-10 year maturities and begin their cycle of spending once again: New projects, infrastructure, R&D, acquisitions, etc…”

They could roll over their debt, but the question is: who will boost demand over the next decade? Households are tapped out, the government is on the brink and corporations themselves are cutting jobs and wages, which is partly the reason why consumption is falling.

We have a perilous situation now where everyone in the room is naively looking at each other wondering who will be next to spend the billions needed to boost consumption, while it is this standoff and lack of action that is causing the economy to falter—a grand nash-equilibrium call it.

#122 unexpected contractor on 08.28.12 at 6:07 pm

I’d live in this trailer! Pretty awesome. http://sustain.ca/

#123 John on 08.28.12 at 6:19 pm

Tony wrote:

#90 Toronto_CA

“Comparing Toronto to Arizona/Vegas is apples and bananas.

Next.”
——-

Yep. Apples and bananas are different alright. If you dig, this is the emotional argument you’ll find.

Try asking for HOW it’s different. You’ll get vague this and that, pre-cooked brain dead ideas formated by the environment.

Here’s the “Tony thinking”: “Oxygen exists because I need to breathe”.

Try not starting with a vested interest in the conclusion you’d like to hear, because this has the effect of unplugging a guy from reality.

An 800,000 dollar home in Toronto is a global casino chip. Figure out how the system works and what’s possible…and especially what’s not possible.

A 50% haircut on the international casino chips held by Canadians in Toronto is truly conservative.

Do you understand how the bubble inflated? Clearly not, or you wouldn’t be “laughing outloud” at somone suggesting a 50% drop in housing prices. 70% is possible with what’s going on right now.

Why?

A potential for serious global deflation. Look at the concept. If you don’t know what it means, “nexting” it makes you look dumb.

#124 Investx on 08.28.12 at 6:21 pm

119 Toronto_CA:
#115 Investx on 08.28.12 at 4:51 pm

According to relatively recent analysis by the Economist, Canadian house prices are overvalued by 32 per cent relative to income, and by 76 per cent relative to rents, obviously GTA and Vancouver must skew the national average: (50% is somewhere in the middle of those two, right?)
———————————————-
Thanks, but we’d need actual Toronto figure and then compare them to the aforemntioned US cities.

#125 Hoof - Hearted on 08.28.12 at 6:26 pm

#113 Devore on 08.28.12 at 4:18 pm

#105 Derek R

Someone did this a while back in BC using data from BC Hydro. They discovered a large proportion of condos in Coal Harbour were essentially vacant. We don’t meter water, to my knowledge.

The information is there, I think BC Hydro would provide anonymized data to researchers.
==================================

Even simpler….when it gets dark…simply go to high density areas and look up.

Any lights on ?

I find on average more than 50% are pitch dark…and its even higher elsewhere.

#126 Smoking Man on 08.28.12 at 6:58 pm

Un real. Killing time waiting to get the shuttle back to air port. My wife on her 15 pino gresio white wine. Max bets wins 10 bucks a her 3rd shot. Wins 18 k. not even realizing what she’s betting. The force is all I got to say

#127 Hoof - Hearted on 08.28.12 at 7:00 pm

$500 BILLION cash?

What the management will do is pillage a large chunk of this for their bonuses etc…they know what is going on, as well as cash out their stocks and stock options .

Banks ? = Emperor has no clothes…..

In the US many of them are heavily invested in the stock market as a means to prop up their value. Many are leveraged so high…the whole thing unravels with a single digit drop.

Its simply who blinks first

Party is over…brace yourselves.

#128 DM in C on 08.28.12 at 7:15 pm

Penpal;

Thanks for the rebuttal. You said it much better than I could.

I imagine Calgary Rocks as one of the trucknut F150 driving backwards cap wearing homeboys flying past me on crowchild doing 120 cause he needs to get to the tailgate party first.

#129 Smoking Man on 08.28.12 at 7:20 pm

416 RE going one way and that’s up. How do I know the little crazy voice in my head. That said wify will kill it

Now if she could only recover the 150k she blew last year. It only paper

#130 live within your means on 08.28.12 at 7:21 pm

#118 penpal on 08.28.12 at 5:08 pm
@ # 113 Devore

If you don’t meter water usage, how does one quantify what to charge the customer for it?

I’m not sure that is correct.

I know in Laval, Mtl & on the South shore they don’t meter water usage. If you have a pool, they charge you $60. extra on your taxes. I think there’s a standard amount built into everyone’s home taxes. I’m amazed at how much water is wasted. A BIL lets the water run for 5 minutes till it gets really cold just to put less than a cup in the cat’s water dish.

#131 Maria on 08.28.12 at 7:36 pm

Garth,

Do you plan to speak in Montreal?

Thanks

#132 CrowdedElevatorfartz on 08.28.12 at 7:48 pm

#46 Buy,Curious
Your writing style is VERY similar to BPOE….Me thinks you have chosen a new monicker to avoid the wrath of smelly elevators?
Hmmmmm, seems like a vast majority of other people feel the same way about your “renters are losers” rant.
May I suggest a new name for you Bi-curious /
Perhaps ‘Pumpkin Head” would be more apropo, since a pumpkin is the only thing that would hold your ego AND its the way you hillbillies procreate….. by “pumping kin”…….

#133 DondWest on 08.28.12 at 7:57 pm

I remember a time when I was a kid and the abandoned house was a source of folklore. Abandoned houses were rare, you would be lucky to come across just one in a neighbourhood. Today, almost every 4th or 5th house is abandoned. Today, the neighbours don’t seem to think much of an abandoned house. I would go on to say abandoned houses go unoticed.

Never seen so much surplus property; yet prices have never been so much higher. Just one more example of countless times I’ve seen supply and demand not function accordingly. I’m starting to think supply and demand capitalist theory is a myth.

#134 Canadian Watchdog on 08.28.12 at 8:03 pm

RTRS: Bank of Canada to buy back up to C$500 mln of bonds.

Welcome to Japanada.

#135 Stupesing in Cabbagetown on 08.28.12 at 8:42 pm

#46 Buy Curious – that entry had to be tongue-in-cheek. After all, he ends with “Bill Clinton has rented all his adult life…” Bill Clinton made it to the top job in USA: hardly what one would classify as a failure.

Great post Garth. Very, very funny.

#136 Dan from Richmond Hill on 08.28.12 at 8:45 pm

#133 Canadian Watchdog

What does that mean?

#137 Derek R on 08.28.12 at 9:31 pm

#132 DondWest on 08.28.12 at 7:57 pm wrote:
Never seen so much surplus property; yet prices have never been so much higher. Just one more example of countless times I’ve seen supply and demand not function accordingly. I’m starting to think supply and demand capitalist theory is a myth.

Not a myth, DDW but the surplus property and high prices are signs that income tax is too high and property tax is too low. If the former was reduced and the latter was increased people would soon sell off any housing that they didn’t need for themselves or for renting out to tenants.

#138 penpal on 08.28.12 at 9:58 pm

@ # 127 DM in C

Your description of Calgary Rocks was a great one and made me laugh.
Hope you make the right decision for your own circumstances – best of luck!

#139 buy curious = boring (at best) on 08.28.12 at 11:17 pm

hey BC must be nice to look through the world with such simplistic lenses and make such sweeping judgments about renters and owners.

I like Herb’s daughter’s comments about “a…holes to the left of us, a…holes to the right….” etc. Sounds like you’re one of them buddy.

#140 piazzi on 08.29.12 at 1:15 pm

Garth,

what are your thoughts about a US REIT ETF or a select collection of US REITS a way to diversify the REITS component of a portfolio?