The undoomed

When I look out my window I can tell if the Air Canada pilots are drinking Coke or Pepsi. Sometimes they nod. That’s what happens when you have a corner office with massive glass walls on the 54th floor.

Two weeks ago I changed my downtown Toronto location, and now take a long elevator ride up into a big red thing called Scotia Plaza, arguably one of the best office towers ever built in Canada, fully leased to blue-chippers. But Scotiabank doesn’t own it anymore, and herein lies a tale. Two, actually.

First, the real estate part. Scotia sold its 68-storey landmark, plus a neighbouring Art Deco 27-storey older bank tower and a few related buildings a few months ago for $1.266 billion. The buyers were two REITs, Dundee and H&R, who paid about the same per square foot as virgins are shelling out for slap-bang, concrete-&-rebar condos — $600 a foot. Only the REITs own the real estate, the dirt, the stones and (above all) the cash flow.

This is why every portfolio should have some REIT exposure. In an era of ultra cheap financing and strong corporate profits, these funds know exactly what they’re doing, adding irreplaceable properties that generate buckets of money. Investors in these have seen steady and relentless appreciation in the share values of REITs, as well as solid income distribution. Why would you not want to have some exposure to an asset class that is not correlated with the stock market and pays you to own it?

The other side of this trade, of course, was the bank.

Scotia signed a 13-year rental deal with the REITs, so it’ll remain the dominant tenant until 2025. In return, it gets the billion. In fact the first payment of about $600 million flowed to the bank in time to be counted in its latest quarterly earnings, announced Tuesday. In other words, the bank did what I tell you to do. It harvested significant capital gains in a decent market, so it can get liquid. Smart.

Besides that windfall, Scotia made more than a billion in profit in that 90-day period, up from last year by about 11%. At the same time another bank, BeeMo, was busy awing investors with its own revenues – ahead 37% from 2011, in part because of fewer bad loans. Both of the banks jacked up their dividends, which means part of those profits will flow directly to shareholders. The other big banks report later this week (Thursday is the big reveal), and will also likely sweeten the payments they make to investors.

What do the unexpectedly gross profits tell us?

Hmmm. Well, that those hairshirted, Depends-wearing doomers who skulk around this pathetic site telling us we’re a few gasps away from bank collapse, systemic failure and universal hemorrhoids are dingdongs. They make it up, then sell each other pieces of gold. I’ve said repeatedly there is zero evidence of a financial crisis brewing, despite the volatility, debt and change in the world. It just ain’t happening, dudes. Stop stockpiling that toilet paper, and use it.

The bank results also tell us the Bay Street guys have this record-consumer-debt thing pretty much figured out. Households may be impoverished from monthly payments, but the lenders are feeling no pain, despite record low interest rates and thin margins. There’s no financial stress, and now enough extra millions (at least at Scotia and BMO) to throw at stockholders.

And what happens if the housing market meltdown, now cheapening Vancouver, takes hold everywhere? How much hurt will the banks feel if prices decline nationally by 15% or 20%, then fall into a years-long funk? Probably none to little. Lower house values do not mean less mortgage debt. Nor does it presage a spike in defaults, since most Canadians would never dream of walking out on a loan which will pursue them forever. Home loans will be paid. So will credit card debt, car loans, HELOCs and unsecured lines.

Those who are really munched in a crunch are the borrowers, not the lenders. After all, CMHC stands behind all those hundreds of billions in high-risk, high-ratio mortgages, so a wave of defaults (as unlikely as it is) would hurt the taxpayers, not the bankers. And Bay Street has now had four years to get ready for any rerun of the GFC, learning the lessons of Bear Stearns and Lehman Brothers. Once again, do you think they’d be raising dividends if they had any problems with capitalization?

All this should lead you to two inevitable conclusions, as it does to me when I watch the flyboys ogle the stews. You should own income-producing REITs that possess big buildings full of rich banks. You should also own the banks. And the a boffo way to do that, with the least amount of volatility, is through preferred shares – stable, dependable assets that today churn out more than 5% in tax-efficient dividends.

Or, you can swap rocks that pay nothing, take a dump on a few blogs and moan.

Tough choice.

See me waving?

213 comments ↓

#1 TurnerNation on 08.28.12 at 9:15 pm

Scary pic!

#2 Rex on 08.28.12 at 9:22 pm

Great advice, sell all your real estate and put all of your money in REITs and bank shares. Bless those banks, they are the best thing that we can hope for.

Actually a better idea is to diversify so all your money is not in real estate. I did not recommend individual bank common shares, and REIT exposure could be capped at 10% of a balanced portfolio. Are you always this slow, or did we wake you? — Garth

#3 TurnerNation on 08.28.12 at 9:24 pm

Three house bidding wars in S. Toronto on the TO Solds email today.

One is junky, the other is so-so, and this one…this one…the irony. Should have bought on Money Road.

41 Turner Rd Sold: $1,125,000
Toronto, Ontario M6G3H7 Toronto C02 Wychwood List: $889,000
Orig Price: $889,000 Taxes: $8,113/2012 127 % List
SPIS: N Wychwood 114-16-N DOM: 6 Contract: 8/21/2012 Sold: 8/27/2012

#4 Not an expert on 08.28.12 at 9:27 pm

Second!

#5 WING on 08.28.12 at 9:29 pm

WOW, FIRST ONE HERE.

#6 Hoof - Hearted on 08.28.12 at 9:33 pm

When I look out my window I can tell if the Air Canada pilots are drinking Coke or Pepsi. Sometimes they nod. That’s what happens when you have a corner office with massive glass walls on the 54th floor.
==================================

Yeah but your building is only 30 stories high

WTF?

#7 mel in victoria on 08.28.12 at 9:35 pm

Sorry Garth ..no precious metals comments this time to possibly p1$$ you off…….instead..

RE must be really slowing down in ‘big smoke’ ( Vancouver) as Mike Campbell, brother of discredited former premier of our fine province ,Gordon Campbell, has just profiled on his site, ‘Money Talks’, his close buddy ‘Oz the Jock’, local RE legend,investor and advisor extraordinaire to blather on and on about why now………perhaps anytime ? could / should be the time to buy…

http://moneytalks.net/topics/personal-finance-and-real-estate/7461-research-generates-best-deal-in-any-kind-of-market.html

It’s all about credibility…Campbell’s as well as Jurock’s

http://harveyoberfeld.ca/blog/cknw-has-a-jurock-problem/

http://powellriverpersuader.blogspot.ca/2011/11/money-talks-hopefully-con-man-ozzie.html.

For those outside of B.C., CKNW is a low budget,backwater,politically correct, gay pride parade promoting AM radio station in Vancouver, financed 30-50% directly or indirectly by RE …and perhaps another 20% by the auto industry.. what a stable base to work from!! This station is gonna go south when the economy in B.C. craps out..

#8 WING on 08.28.12 at 9:37 pm

REITs have had an incredible run since the GFC, I think we should wait for a pull back.

#9 Paully on 08.28.12 at 9:41 pm

Is that you Hummer parked on the roof?

#10 Frustrated Kiwi on 08.28.12 at 9:46 pm

Nice to have an upbeat post after lots of housing-related woe, thanks. Completely agree with you on unproductive rocks. Some advice I once got, was don’t invest in something if you don’t understand how it makes money. That’s where I am on gold – I don’t understand how something we keep digging out of the ground and has some, but limited, commercial use should necessarily make money. Perhaps others here will explain it in simple sentences to me.

#11 donald trump on 08.28.12 at 9:46 pm

when will this re downturn happen????

#12 T on 08.28.12 at 9:46 pm

I see you!

#13 Derek R on 08.28.12 at 9:49 pm

#1 TurnerNation on 08.28.12 at 9:15 pm wrote
Scary pic!

Yup! And the Eiffel tower one is pretty worrying too.

#14 Scalgary on 08.28.12 at 9:50 pm

Garth,

Waiting to hear from you regarding Preferreds…

Cheers

#15 Larry from ON on 08.28.12 at 9:54 pm

Garth, ahead of your post on preferred shares (which I hope is coming soon and includes a comparison to common shares), can you comment on why you suggest preferred shares over common shares? I’m re-reading your suggestions of REITs, preferreds, and ETFs, and I’m trying to confirm if this is your suggested portfolio for stable, steady income with some exposure to equities for growth (balanced risk). Reason I ask is as someone under thirty with a longer term ahead for investing if I stick with more exposure to common shares of dividend payers that can see share price appreciation and dividend growth.

Any other loyal Garth followers, or any of the Vancouver city attendees, I’m open to your comments if this is how Garth explains it in person.

#16 Lost cash on 08.28.12 at 9:55 pm

How does someone go about buying bank prefered stock anyway?

#17 Canadian Watchdog on 08.28.12 at 9:58 pm

Scotia Balance Sheet

Securities Purchased Under Resale Agreements up $14.4B in Q3, +45.3%.
Derivatives Financial Instruments up $8.8B in Q3, +31%.

Anybody can make millions in a hyper-paper-ponzi scheme market Garth, so there’s no surprise here. The question is, as Howard Green of BNN curiously asked once: “How do you [the banks] report double digit profits when GDP is stuck where it is?

It’s called FRAUD.

Your slip is showing. — Garth

#18 John on 08.28.12 at 10:00 pm

“You should own income-producing REITs that possess big buildings full of rich banks. You should also own the banks.”

You’re betting against Canadians, thinking they could take forward the dog’s breakfast? You also presented these banking interests as Canadian, and they are not.

It’s fancy, but your argument will be picked away a bit at a time until nothing but cold hard reality is left standing. Of course it’s all just talk…events that unfold will talk louder.

It’s not good to bet against “the economy”, unless that very economy is not real and prejudices society in a truly grievous way…which the current economy does in many ways.

Would you take this advice to highschools and universities? Of course not. They are not allowed in to the tiny perfect world of digits you’re espousing.

I hear less and less about “gold as a hedge”. That’s nonsense now. The issue is about saying what’s going on.

You are betting against citizens. That is a fact. They were willing participants in a global game. How can you be so cynical as to put forward an image of a “Canadian” bank now…at this stage of the story.

Perhaps if that big red building was a rocket, it would have enough fuel to launch into orbit.

People are going to accept the fraud and wipeout? You don’t mind Goldman Sachs mopping up your neighbours? Are they getting what they “deserve”?

Blue chip? I know of someone close to me who tinkered with Manulife stock and made 500,000 in a day. That’s a fact. Back in 2010.

In any case, many recent posts here are beginning to debate the concepts in a more level-headed and serious way. So it should get interesting.

Consider commercial real estate as more than the international thieves you’re suggesting to side with. Cash flow will be a problem overall when combining all buildings…and it will be a global concern.

Your view on commercial real estate is incomplete…as is your take on “obedient” Canadians. Not everyone’s going to be pleased with the heist. A potentially deflationary scenario could really hurt employment. In such a situation many families wouldn’t be doing well.

#19 T.O. Bubble Boy on 08.28.12 at 10:05 pm

@ #15 Larry from ON:

Search through some of Garth’s older posts for portfolio-related suggestions.

For example:
http://www.greaterfool.ca/2010/11/26/how-to-invest-2/

@ #16 Lost cash:
You can buy preferreds with any trading account (they trade like common shares). Or, there are also ETFs that hold many different preferreds.

#20 T.O. Bubble Boy on 08.28.12 at 10:07 pm

Garth – what are your thoughts on U.S. Preferred Shares?

I recently added a few of these to my RRSP as a type of $USD income-producing investment.

Anything noteworthy on key differences between US Preferreds and Canadian Preferreds? (aside from the taxation differences)

#21 Bought at the top on 08.28.12 at 10:08 pm

Good point…….having been burned in this real estate mess…by my own foolish..I;m very gun shy.
Would you be worried about the cdn banks exposure to foreign banks.?
That whole contagion thing?

#22 Randman on 08.28.12 at 10:08 pm

Dear Smoking Man

5 words for you….

THIS BLOG IS NOT TWITTER!

Thank you

#23 WING on 08.28.12 at 10:11 pm

#16. all the bank preferred shares are listed on tsx. just go to google finance and type in bank’s name.

#24 Investx on 08.28.12 at 10:11 pm

Garth, any disadvantages in investing in ETF’s of preferred stock (such as XPF or FIE)?

#25 Realtor on 08.28.12 at 10:12 pm

#10
You don’t have to play dumb when you ask a question like that.. Buy lots of preffered shares, and get as much cash as you can, cash will be king! And you sir, will be royalty…

#26 TRT on 08.28.12 at 10:15 pm

If I owned banks, I would discreetly encourage more immigration while publicly downplaying it’s effects.

If my landlord was a REIT, I would encourage you to buy them.

If I was in the equities/bonds industry, I would tell people to sell RE and buy these.

Nothing wrong with that but disclaimers Garth? Just watching out for the gullible little guys/gals

Seventy per cent of us own houses, and eight per cent own stocks. I wouldn’t get too fussed. — Garth

#27 Grim Reaper/Crypt Speculator on 08.28.12 at 10:16 pm

#22 Randman on 08.28.12 at 10:08 pm

Dear Smoking Man

5 words for you….

THIS BLOG IS NOT TWITTER!

Thank you
============================

Correct…….Smoked Man is a TWIT

#28 Aaron - Melbourne on 08.28.12 at 10:16 pm

@ #10 Frustrated Kiwi on 08.28.12 at 9:46 pm
That’s where I am on gold – I don’t understand how something we keep digging out of the ground and has some, but limited, commercial use should necessarily make money. Perhaps others here will explain it in simple sentences to me.
*******************************************
Please familiarise yourself with these texts.

Debt: the first 5000 years. (2011) GRAEBER, David

Paper Promises. (2012) COGGAN, Phillip

#29 neo on 08.28.12 at 10:16 pm

Investors weren’t as impressed as you seem to be Garth. Scotia stock was slightly down today and has traded in a $10.00 range since 2007, ex. the GFC. None of the Big 5 did well today. While I agree with most of what you wrote. There is still too much systemic damage caused by the GFC that has yet to be resolved for our bank stocks to break out in any meaningful way. There is money to be made though.

Stocks don’t rise when the companies give profits to investors. Surely you know that. BTW I did not suggest buying bank common stock. — Garth

#30 Canadian Watchdog on 08.28.12 at 10:16 pm

Here’s your profits Garth. http://i50.tinypic.com/2hy9wjm.png

Because now every time bond yields rise, the banks have to run to the BOC’s repo window so they can dump bad assets in exchange for cash, and, to be purchased back at a later date, only again to be re-repoed again and again until their balance sheets blow up.

Practice what you preach. Nothing is different here.

#31 Saskatoon-Living on 08.28.12 at 10:17 pm

It’ll get ugly in S’toon and the rest of SK.

http://www.thestarphoenix.com/business/Buying+home+more+reach/7153762/story.html

#32 Renting and loving it on 08.28.12 at 10:22 pm

Love my bank preferreds Garth… Yesterday was BMO payday – it went straight into my “rent” account.

I’m just curious Garth how you’d counter someones argument about “yield to worst” should be taken into account or else you’re just chasing yield – which is not a good idea. I countered that in the meantime that the preferred is paying the existing dividend, its tax advantaged, which makes it even better. Between now and Feb 2014 (for one of them as an example), I am earning over 5%.

Just asking, because he thought I was nuts buying several thousand preferred shares. Perhaps he thinks giving money to the orange shorts guy is a better plan.

#33 Grim Reaper/Crypt Speculator on 08.28.12 at 10:23 pm

No wonder they got the building so cheap….they couldn’t even finish the top 20 stories of that wall…..

Talk about cutting corners by simply leaving them out.

PS what caliber is that gun mounted on the roof ?

#34 coastal on 08.28.12 at 10:27 pm

#7 Mel, I like my rock stocks, up over 100% so far this year. Ozzie is a notorious deceiver of the truth, just like the Campbell bros. I guess Ozzie’s house didn’t sell and he’s stuck.

#8 Wing, agreed, most REITS look very overvalued. A 5% dividend when it could correct 25% says be wary. Euros kicking the can down the road does not make for any ETF, stock etc being a safe bet.

#35 JSS on 08.28.12 at 10:53 pm

Anyone know anything about an ETF called ‘FIE’?

#36 Larry from ON on 08.28.12 at 10:58 pm

@ #19 T.O. Bubble Boy

Thanks for the link. Will read through again, but this definitely helps give the context of Garth’s suggestions.

#37 Elmer on 08.28.12 at 10:59 pm

Why would you not want to have some exposure to an asset class that is not correlated with the stock market

Were you high on fumes in 2008 when every REIT plunged by 50% or more? Dundee went from $32 a share in Sep 08 to under $10/share in December.

(a) Everything fell in the GFC. (b) If you didn’t sell, you took no loss, and still collected the income. (c) The rebound has been complete. (d) 2008 is not coming back. Trust me, there are better things to worry about than an asset which pays you to own it. — Garth

#38 Tim on 08.28.12 at 11:00 pm

Rio Can is up 22% since I bought it. I was actually thinking of taking something off the table…

#39 Falconer2012 on 08.28.12 at 11:03 pm

Way to double down on the piss poor advice. As if REIT’s have no correlation to the market. Hilarious- the biggest CND ETF of REIT’s has a beta of 0.65:
http://www.google.ca/finance?cid=696698

Guess what? That’s higher than…. gold at 0.18:
http://www.google.ca/finance?q=cgl&ei=KHY9UPCBD8GeiQLa6gE

The choice is not Canadian REITs/Banks or gold, as if this dichotomy of idiotic paths were the only two. Again, the impact of a housing slowdown is systemic.

As if the hubris of banks about to take a hit on a credit bubble is proof of their infallibility. They are still dependent on consumer credit, new mortgages, trading, and mutual fund fees which will all take a hit once housing busts.

As if REIT’s will not be holding large balances of residential real estate that will deplete in value drastically. Guess what? They have to mark that down their property value, so take a guess what happens to your invested principal?

Obviously a good portion of your readership will not listen to this terrible advice. For those that do, try to to widen your perspective beyond Canada’s borders and get out of your tunnel vision for narrow and poorly selected asset classes.

A housing bust will actually move more money into the banks, not take it away. And REITs don’t own houses. Other than that, yer on fire. — Garth

#40 Gunboat Denier on 08.28.12 at 11:03 pm

17 Watchdog – learn the diff between a balance sheet and an income statement

#41 Marshy on 08.28.12 at 11:06 pm

If you want to own the banks why not do so with both common and preferred shares? Shouldn’t a balanced portfolio include at least some common shares? It would seem to me that you could lessen the volatility owning the preferred shares, yet participate in the growth owning the common shares …. similar to the reasons for buying REITs.

Why not own all the banks through an ETF and minimize the volatility? — Garth

#42 syfon on 08.28.12 at 11:08 pm

If you like to be manipulated go ahead buy those etfs preferes or paper glds slvs.
Enjoy those great dividents until the music stops and you find out that your stock takes hair cut and you back to square one – Big 0
I will say this again
stock market is a 0 gain game for every winner there is a looser
Only service companies make money.

Why do I bother? — Garth

#43 Aussie Roy on 08.28.12 at 11:13 pm

Aussie Headlines

We have created the infographic below using data from the 2011 Census. We have compared it with the previous Census (2006), as well as with data from other sources.

This infographic gives a clear picture of the state of the Australian property market. It provides for some very interesting reading for both the seasoned property investor, and for those looking to invest for the first time.

http://www.debtconsolidation.com.au/state-of-the-australian-property-market

Saying that Australia has unusually high house prices, has a banking system vulnerable to external shocks, relies too much on a cyclical and temporary mining boom, or carries far too much household sector debt is not unAustralian, it is patriotic. And calling on policymakers to do something about our vulnerabilities is not negative behaviour, nor does it diminish our otherwise very obvious achievements, it is prudent.

http://www.smh.com.au/business/the-economy/being-a-bear-is-not-unaustralian-20120828-24x8t.html

#44 mel in victoria on 08.28.12 at 11:14 pm

#7 Mel, I like my rock stocks, up over 100% so far this year. Ozzie is a notorious deceiver of the truth, just like the Campbell bros. I guess Ozzie’s house didn’t sell and he’s stuck.

We’re a little overbought right now. Once we work that off we should have a nice move…

#45 Frustrated Kiwi on 08.28.12 at 11:19 pm

#28 Aaron – Melbourne
Thanks but (apart from not being the simple sentence I requested) I doubt those references explain why gold. In over simplified terms, if I own stocks then I own a piece of a company and as the company grows (as most do) so does my piece. I can understand why (a diversified portfolio) of stocks can make money. I still don’t see why gold. Why not silver, or palladium, or even tulips? None of those do anything to produce value either.

#46 Victor on 08.28.12 at 11:30 pm

#29 neo on 08.28.12 at 10:16 pm

Investors weren’t as impressed as you seem to be Garth. Scotia stock was slightly down today and has traded in a $10.00 range since 2007, ex. the GFC. None of the Big 5 did well today. While I agree with most of what you wrote. There is still too much systemic damage caused by the GFC that has yet to be resolved for our bank stocks to break out in any meaningful way. There is money to be made though.

Stocks don’t rise when the companies give profits to investors. Surely you know that. BTW I did not suggest buying bank common stock. — Garth

==========================

None of the big 5 did well today? How is it that I have more green than red on my screen today.

BMO +0.40%
RY +0.48%
TD +0.31%
CM -0.65%
BNS -0.08%

As for owning financials (for those enquiring), I see nothing wrong with owning bank common shares. At one point or another I’ve owned shares in each of the big 5 (and currently do). As Garth noted, if you’d prefer less volatility go for the preferreds; if you don’t know what you’re doing, just buy them all via an ETF and sit back and enjoy the dividends and long term growth.

#47 Skip Breakfast on 08.28.12 at 11:30 pm

Indeed, the current economic situation is in many ways better than what we have experienced in years.

Oops, actually the preceding sentence is a quote from the OECD only two months before the Great Financial Crisis of 2008…an economic downturn which we have yet to “recover” from.

Link, pls. — Garth

#48 Van guy on 08.28.12 at 11:36 pm

Garth,

Corporate profits down in the 2nd quarter. This could affect the stock market.

It could make good companies cheap, and reduce risk. This blog is truly pathetic tonight. — Garth.

#49 Van guy on 08.28.12 at 11:39 pm

#35 JSS on 08.28.12 at 10:53 pm

Anyone know anything about an ETF called ‘FIE’?
————————————–

Really stable the last few months. Great dividend yield at over 7%. Its a good time to buy it now as I just did again!

#50 neo on 08.28.12 at 11:41 pm

Stocks don’t rise when the companies give profits to investors. Surely you know that. BTW I did not suggest buying bank common stock. — Garth

Apparently stocks only rise when promised and given liquidity infusions from Central Banks. Surely you know that.

They’ve done well lately, sans stimulus. –Garth

#51 Onthesidelines on 08.28.12 at 11:48 pm

Agree on the REIT. Disclosure: I hold Dundee REIT. Not so certain on the banks. What’s their exposure to developers and builders? How will a drastic slowdown in consumer credit affect their biz?

Dividends is only a small part of the story. The Irish banks continued to pay hefty dividends ( in denial) right up to the very end intill they got bailed out. Didn’t mean they weren’t in trouble.

#52 neo on 08.28.12 at 11:50 pm

#46 Victor

Your standards must be pretty low if the best of the bunch got a measely 0.48% bump today. RBC has been trading in a $10.00 range since 2007 ex. the GFC as well. Dead bank walking Morgan Stanley was up 0.48% today too, so what. I guess you consider doing well in school is getting C’s.

#53 John on 08.28.12 at 11:54 pm

Stocks don’t rise when the companies give profits to investors. Surely you know that. BTW I did not suggest buying bank common stock. — Garth

Garth, what are you smoking? You are saying if dividends are increased stocks don’t go up, the yield goes up making the stock more attractive, driving the demand up, economics 101

Not to existing shareholders. Investing 101. — Garth

#54 neo on 08.28.12 at 11:56 pm

Stocks don’t rise when the companies give profits to investors. Surely you know that. BTW I did not suggest buying bank common stock. — Garth

Apparently stocks only rise when promised and given liquidity infusions from Central Banks. Surely you know that.

They’ve done well lately, sans stimulus. –Garth

Did you miss the part about “WHEN PROMISED”. This market only turned when stimulus was promised by the Fed and then by Draghi of the ECB. Before that it was in danger of hitting technical levels to the downside and triggering more selling. We both know the macro picture and 60% of companies missing the top line and 40% missing the EPS hasn’t been the catalyst. Both are eroding not stengthening.

#55 Van guy on 08.28.12 at 11:56 pm

“It could make good companies cheap, and reduce risk. This blog is truly pathetic tonight. — Garth.”

But you don’t buy stocks so that’s irrelevant. So you don’t only buy good companies, you buy good and bad all at once.

How many ‘bad’ companies are in XIU? — Garth

#56 Jon B on 08.29.12 at 12:01 am

Before the GFC, the banks seemed to be doing fine generating their usual billions. Now we’ve emerged from the GFC, the banks appear to be right on track with their billion dollar profits. So does this mean the big 5 evil banks are indestructible? What would it take to make a dent in these greed-oriented entities? I mean, if I’m going to invest in some bank ETFs I’d like to know if superman has a weakness.

#57 sluggo on 08.29.12 at 12:04 am

So Scotia acquires Dundee Wealth and the Dundee REIT gets the Scotia building after Goodman went balls deep in the ABCP soup. King is full of the sociopaths that inflated the real estate bubble or at least didn’t report the crime and profited from it and you move in to the hood? Why? The place is crawling with unacceptable behavior.

#58 ALE on 08.29.12 at 12:05 am

Garth: the greatest troll of them all!

#59 hey there.... on 08.29.12 at 12:10 am

Has anyone out there read maxkeiser.com ? Some interesting reading…..

#60 Victor on 08.29.12 at 12:24 am

#52 neo

Hope you don’t mind my cutting and pasting this week’s RBC cash dividend for you.

Aug 24, 2012
RY 1,150
Dividend 655.50 C

My cost basis is $50.23. And don’t worry…I’m more than capable of withstanding some volatility given I have no debt and an above average gross family income going into my diversified portfolio each month.

#61 Cassandra on 08.29.12 at 12:31 am

Canada has enjoyed one of the longest real estate booms in the western world, but the future’s not looking as rosy, according to a report released today by Scotia Economics.

#62 Investx on 08.29.12 at 12:44 am

49 Van guy:
#35 JSS on 08.28.12 at 10:53 pm

Anyone know anything about an ETF called ‘FIE’?
————————————–

Really stable the last few months. Great dividend yield at over 7%. Its a good time to buy it now as I just did again!
————————————————–

Are you buying these ETF’s through a discount broker?
Any brokerage you recommend?

#63 PermaBear on 08.29.12 at 12:48 am

GT, jumping off the Paris Needle, was it a soft landing?

#64 Mark on 08.29.12 at 12:48 am

Aren’t the banks selling off their buildings because they see no value in an asset class that is certain to fall in the coming years as theh sector goes into overcapacity?

They certainly don’t need the cash, that’s for sure.

#65 hey there.... on 08.29.12 at 12:53 am

hotsauce and humor…

#66 house burden on 08.29.12 at 1:21 am

Remember the dot.com crash. Bankers were telling people to refinance their houses and take a second mortgage so they can get into the stock rally.

With Helicopter Ben probably planning to do QE3 …. QE-N+1 to infinity and beyond. I can totally see a stock rally as the Greenback devalues itself. And Companies cash rich and making record profits.

I’m hoping China, Russia , South America and some oil country make good their speech earlier this year and de-base from the petro greenback dollar.

#67 AB Bust on 08.29.12 at 1:23 am

why not invest directly in the bank common stock? you have the potential of growth plus a juicy 4%+ dividend.

#68 Nostradamus Le Mad Vlad on 08.29.12 at 1:34 am


“What do the unexpectedly gross profits tell us? (We’re nuts for not investing.) . . . and universal hemorrhoids are dingdongs, take a dump on a few blogs and moan. This blog is truly pathetic tonight. Why do I bother? — Garth.”

Beats me, but I like the idea of mind-welding universal hemorrhoids with ding-dongs (are dingleballs and jinglenuts good replacement value?)
*
#71 Kim — “Why does the US and Canada hate the free markets and democracy?” — Hate is a strong word, but changes are afoot whether the west likes it or not. By subduing democracy, our elected leaders are able to play out the role of puppets, which is all they are, serving their masters. TPTB have chosen our leaders for some time now.

#126 Hoof – Hearted — “$500 BILLION cash?” — That’s my savings acct. Chequing acct. consists of CDS / Derivatives / junk bonds. Investment accts. are on the Dark Side Of The Sun! Let’s do lunch sometime!
*
Spain and bank withdrawals. Ooohhh, that hurt; Food Prices skyrocketing; Germany making big bucks off Greece. What would happen if Greece called in those billions of DMs in reparations after WW2? Obomba’s legacy And he’s running for re-election? Hah! Safety and security are myths; Shiller Housing returning to life; Post Labor Day stock slide? Japan and Spain; Lexmark Cutting jobs; Tax Cuts caused this?
*
Gun Control? Not necessarily a good thing; Exploding Meteor Sign of the times? Arab States Tryiing to use the IAEA to turn the tables on Israel’s nukes, and US – Iran US seems to be clearly interfering in other countries’ business again; 43:46 documentary Using GW as a way to control our lives; Antibiotics linked to weight gain, which is good for the weight loss industry; Shoddy workmanship? 0:39 clip Watching an Air France jet trying to land during Isaac.

#69 John on 08.29.12 at 1:52 am

Stocks don’t rise when the companies give profits to investors. Surely you know that. BTW I did not suggest buying bank common stock. — Garth

Garth, what are you smoking? You are saying if dividends are increased stocks don’t go up, the yield goes up making the stock more attractive, driving the demand up, economics 101

Not to existing shareholders. Investing 101. — Garth

Stock still goes up, logic 101

#70 Blue Monster Lover of Meats and Vegetables on 08.29.12 at 2:14 am

These sitting governmnets are all DOOMED.

God’s gonna cut ’em down.

The Ayn Rand Army is coming for them. With Johnny Cash!

http://www.youtube.com/watch?v=7auzYgVosJA&feature=related

#71 truth hammer on 08.29.12 at 2:15 am

Scumbag politico’s at their evil anti Canadian anti democratic best…….abusing an elderly dementia patient to rape Canadians of their democracy.

Is there no shame on the left?

http://fullcomment.nationalpost.com/2012/08/28/jonathan-kay-the-fairbairn-case-is-a-surreal-indictment-of-the-canadian-senate/

#72 Blue Monster Lover of Meats and Vegetables on 08.29.12 at 2:19 am

Junius and Herby,

The very fact that you two bozos hate Ayn Rand is proof that you’re both either Marxists and/or religious since those are the two groups that hate her. Never mind the fact that you’re both idiots who probably work for the government.

#73 Humpty Dumpty on 08.29.12 at 2:38 am

Jim Rogers must be an idoit according to you G…

http://www.examiner.com/article/libertarian-billionaire-warns-of-financial-armageddon-after-u-s-election

Thomas Jefferson had a few words also to say about your/their boasting….

“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale”

Yes G, the titanic would never sink and Rome could never fall….

#74 eagle eyes on 08.29.12 at 2:39 am

—-Canadians would never dream of walking out on a loan which will pursue them forever. Home loans will be paid. So will credit card debt, car loans, HELOCs and unsecured lines.——–

Garth, on one hand you say that unemployment will rise, and the average Canadian has no savings. Yet you are so sure that credit card debts and unsecured lines will be paid. I don`t disagree with you often, but with this I disagree. Consumer proposals and bankruptcies will increase instead. Even your honorable Canadian, with an average of $26,000 worth of non-mortgage debt, cannot pay when they have no jobs. This will affect the banks. With a slowdown in activity and a decrease in prices of RE, the mortgage business will follow. Existing mortgage defaults will be covered by CMHC for owners with less than 20% skin in the game. If prices drops more than 20%, non-CMHC backed mortgages will be affected (meaning banks will take the fall). It is a trickle up effect. No one or bank is immune.
What was the saying – That even the flutter of a butterfly’s wings can cause a hurricane on the otherside of the world.

#75 cynically on 08.29.12 at 2:50 am

#7 mel in victoria – You didn’t mention the third member of that great CKNW financial triumvirate, Michael Levy, who believes the “trickle down” theory works. All geniuses on Saturday mornings – Michael C., Ozzie J. and Michael L. God bless radio.

#76 T.C. on 08.29.12 at 3:06 am

No – no world wide financial meltdown, but still a lot of black swans have been taking flight recently. Any one of them could wander into the flight path and hit Mr. Market’s windshield.

If that happens, then we will find out what the current equivalent of the 2008 ABCP is, panic will set in, selling will result.

Then opportunity will come knocking.

#77 cynically on 08.29.12 at 3:13 am

#52 neo – RBC is a commercial bank but Morgan Stanley is an investment bank (stock broker} like the infamous Goldman Sachs, not entirely the same type of banking. Perhaps you meant JP Morgan Chase, the largest US commercial bank. This is where all the trouble began, when the investment and brokerage firms like GS, MS, Lehman Bros. etc. crawled into the commerial banks’ business through the eroding of the Fed’s power over all of the banks – the kind of banking the neocons want to see today even after the disaster culminating in 2008.

#78 Rob the Dividend Trader on 08.29.12 at 3:30 am

Those interested in learning about investing, two excellent blogs (besides mine:) ) are

http://www.dividendninja.com

http://www.thedividendguyblog.com

and especially those who have been listening to Garth’s advice regarding ETFs

a free ETF book, very very good

http://www.myuniversitymoney.com/etf-investing-low-maintenance-and-stellar-returns/

#79 Rob the Dividend Trader on 08.29.12 at 3:37 am

And slightly different another fantastic site

http://www.mrmoneymustache.com/

Why work when you can retire at 39 or so

the only books sites I don’t recomend is Derek Foster’s series on investing.

#80 Piccaso on 08.29.12 at 3:38 am

#24 Investx on 08.28.12 at 10:11 pm

ETF’s decay… you trade them, you don’t hold them

#81 aaci-home dog on 08.29.12 at 3:48 am

As usual, the tax farm slaves carry the burden…right, $M ?
What cap rate did the reits pay, Garth…6 -7% ?
Good post…enjoy the new digs.

#82 P & T S on 08.29.12 at 4:17 am

Garth – it used to be possible (in the late 1970’s) to buy doormats with these vertiginious sights on them – others included views (from the top of, looking down – ) the Empire State Building, your CP Tower, the London Post Office Tower, and others (but not the World Trade Centre).
We haven’t seen these for ages, maybe they are now a collector’s item? (maybe they would even class as a “Valuable Asset”!!)

Great read as usual. Waiting for Nostradamus le Mad Vlad to post his wonderful links collection!!

#83 Ayn Rand Army on 08.29.12 at 4:55 am

The Ayn Rand Army is coming to get you! And You know who you are.

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

#84 kevsta on 08.29.12 at 4:59 am

#47 Skipbreakfast & Garth

link pls

http://www.debtdeflation.com/blogs/2012/06/15/submission-to-the-senate-economics-committee-post-gfc-banking-inquiry/#_ENREF_6

Garth I heard an interview yesterday, and I’ve got to say I thought from your appearance, your voice would be somehow.. …. deeper

#85 groovin_123 on 08.29.12 at 5:24 am

Uhmmm. So Garth, how’s this insignificant little problem going to be solved? Besides a half-dozen generations of slaves, of course.

http://www.zerohedge.com/news/16oooooooooooobama

The problem is demographics. Home owners retire, dump real estate and seek income streams – our next bubble – think US T-Bills for example, preferrred bank shares trading well over their issue/strike price, income funds, REITS, all of it – just another bubble forming where the return at some point, does not equal the risk.

Japan has managed thus far with a Debt:GDP ratio of around 225%. (give or take you get the point). The aging native demographic owns the debt – when owners become sellers that picture will turn fugly but quick.

I don’t think the currency crisis “doomsdayers” are wrong, its just their timing is 10 years premature.

Like you’ve said all along…. it ain’t different here.

#86 Ayn Rand Army on 08.29.12 at 5:28 am

We’re taken’ stock, lock and barrel.

Ayn Rand Army aka AKA

#87 Ayn Rand Army on 08.29.12 at 5:29 am

ARA

#88 COW MAN on 08.29.12 at 6:26 am

# 35

FIE is paying out return of capital. Look up the distributions and see how they are being generated.

#89 John on 08.29.12 at 6:53 am

“So Scotia acquires Dundee Wealth and the Dundee REIT gets the Scotia building after Goodman went balls deep in the ABCP soup. King is full of the sociopaths that inflated the real estate bubble or at least didn’t report the crime and profited from it and you move in to the hood? Why? The place is crawling with unacceptable behavior.”
——–

First off. It’s not fair to label King as the owner of sociopathy. This is “cross-Canadian”. But many will say…”Wrong, a lot of guys knew about and then profited from inflating the bubble”. True, but we also all know that big box stores get competitive by abusing Chinese labor. And we inflate that scheme and profit from it through “every day low prices”. “But it’s not the same
thing”.

Yeah it is.

We justify our apathy through an identity play. Feeling powerless, much power is given to the wrong things. That’s an individual thing. At the same time, what are we going to do? Live in the forest? We live and eat from the system.

So. Second thing. If we accept a low self esteem ( lack of personal power), the idea of protecting yourself from harm and defeating or outsmarting “the outside” rises dramatically in priority.

Considering the priorities…now burned in culturally through learned helplessness…the advice of “get liquid and diversify” being spelled out with precision here is top level. It’s correct.

Example? Going for a vehicle that has “everything and the kitchen sink” means less exposure when the SHTF. That’s smart.

But it’s sociopathic without including me and others in the “power picture”.

So this whole thing is about human beings as dogs…which is part of our nature ( and an important part), plus the impact of suppressing our need for meaning and connection.

Dog + missing human need for meaning and connection= sociopathy.

And we’re all doing it.

#90 Stickler on 08.29.12 at 7:27 am

@49 Van guy:

>>A distribution yield is not the same as a dividend yield. It may distribute 7% back to you, but if the underlying assets do not generate 7% in the form of dividend or cap gains then you are getting your own money back…not that there is anything wrong with that. Just dont be fooled into thinking that you are getting 7%

#91 T.O. Bubble Boy on 08.29.12 at 7:48 am

@ #36 Larry from ON on 08.28.12 at 10:58 pm
@ #19 T.O. Bubble Boy

Thanks for the link. Will read through again, but this definitely helps give the context of Garth’s suggestions.

You could also buy Garth’s book and/or go all-in and ask a fee-based advisor (like our host) to manage your money.

The “pillars” of Garth’s investing approach:

1) Liquid — own things that you can sell in a few seconds online

2) Balanced — avoid correlating all of your assets

3) Tax-efficient — put the right type of investments in the right type of accounts (growth in TFSA, income in RRSP, CDN Dividend-producing investments like Preferreds in non-registered account)

4) Don’t own individual stocks, use ETFs instead to reduce volatility/risk. (but individual Preferreds from the Big Banks and individual Bonds do have advantages over fixed income ETFs — like you can just hold a Bond to maturity vs. an ETF you cannot). Individual REITs can also make sense, to allow you to pick companies that hold the right types of real estate.

5) RE less than {90 – your age} as a percentage of your net worth

A few other “sub-pillars”:

– Precious Metals have a place in your portfolio, but not more than 5%-10%

– RRSPs will eventually become ‘tax bombs’ (i.e. higher taxes will be coming in the future), so they should be used strategically… don’t put everything in there

– The obvious one: buy low, sell high (don’t invest on emotion)… take some profits and re-balance when an area of your portfolio grows beyond the allocated percentages.

#92 Buy? Curious? on 08.29.12 at 7:51 am

Holy cow! Offer a difference of opinion on here and all of sudden you become the guy offering out condoms at a pro-life rally. Yesterday I said you can’t really trust people who rent and how they are not worth investing too much time on them. And just like arguing with religious nutjobs, the first line of defence in their arguement is start calling people? How does that make me a troll or an idiot? I cited real life experiences. Take a cross section of the people you know. Losers, over the age of 25, have one thing in common. They rent. Why? It’s because they can’t commit or get things in order. Let me use another comparison. You those people who have never been married or in a long term relationship who are over 40, would you let your kids go trick or treating at their house? Or set them up with a recently divorced friend? Of course you wouldn’t. You know something is fishy about them, you can’t put your finger on it, but your instincts tell you not to trust them.

Now if you’ll excuse me, I’m off to a pro-choice meeting. Personally I don’t care what anyone does with their lives. I go there to meet chicks.

#93 Victor on 08.29.12 at 7:54 am

http://www.theglobeandmail.com/globe-investor/as-long-term-investments-the-big-5-banks-are-hard-to-beat/article4506573/

That leads us to today’s question: Which of the Big Five has delivered the highest return over the past 20 years? This is a period that encompassed economic slumps, market meltdowns, financial collapses, energy shocks, wars and – as mentioned – long periods with zilch in the way of dividend increases. In other words, we’re not looking at the banks through rose-coloured glasses here….

Bank of Montreal (BMO)
Annual price return: 8.14 per cent
Including dividends: 12.58 per cent
$10,000 would be worth: $107,100

Canadian Imperial Bank of Commerce (CM)
Annual price return: 8.51 per cent
Including dividends: 12.85 per cent
$10,000 would be worth: $112,380

Toronto-Dominion Bank (TD)
Annual price return: 11.05 per cent
Including dividends: 14.78 per cent
$10,000 would be worth: $157,926

Royal Bank of Canada (RY)
Annual price return: 10.96 per cent
Including dividends: 14.84 per cent
$10,000 would be worth: $159,381

Bank of Nova Scotia (BNS)
Annual price return: 11.52 per cent
Including dividends: 15.49 per cent
$10,000 would be worth: $178,619

How did the banks stack up versus the index? Glad you asked.

All of them handily beat the S&P/TSX composite, which had an annualized price return of 6.29 per cent over the same period.

#94 In GARTH Almighty not God we Trust on 08.29.12 at 8:06 am

“Why do I bother? — Garth”

Because you are the bearded mystic oracle, all knowing, all wise, financial prognosticator without equal, gifted and sagacious financial tea leaf reader, denouncer of parliamentarian peckerheads and peckerettes, NYT bestselling author, Harley riding, Amazon bathed prophet crying out in the HELOC infested wasteland of Canada. Remember too, as someone once said, “a prophet is without honour in his own household.” A prophet’s vision and message takes time for the masses to absorb. Patience Garth, patience.

#95 mark on 08.29.12 at 8:18 am

Garth,

would a preferred ETF like CPD be a good choice for the lazy and uninitiated?

CPD and XPF are both ETFs that track the preferred index, with similar fees (less than half a point). — Garth

#96 Can it be? on 08.29.12 at 8:42 am

Wow! What a blog this am…. I guess we are moving on to the markets from housing… Who knew this topic was even more sensitive…
@buy, curious… You are actually pretty funny. Thanks for the laugh.

#97 Can it be? on 08.29.12 at 8:43 am

Garth… Keep up the good work. I don’t pretend to understand the markets… We have someone who does that for us… But I’m trying to learn a little here. All information is appreciated.

#98 Herb on 08.29.12 at 8:54 am

#92 Buy? Curious?

s’alright, you’ve had your 15 minutes of blog infamy. Now go and find another line.

#99 Tom from Mississauga on 08.29.12 at 9:02 am

Agree with this post big time! H&R reit has sure been a good RRSP add. It’s raising its payout 12.5% by December too. Just keeps on giving! ZEB would be the Canadian bank ETF a person can get into. Myself I actually bought BNS at the end of May this year when people were giving it away. They are very well run, heck they just bought 270 branches in Mexico and didn’t have to disclose the price because it was so cheap! Now they have more cash to acquire more!

#100 neo on 08.29.12 at 9:08 am

#60 Victor

Congratulations. That wasn’t what I was addressing. The stock has traded sideways for the past 5 years and was basically flat yesterday. I know about the dividend and preferred shares. I was referring to common stock. I am not going to get into a pecker measuring contest with you but thanks for demonstating your insecurities.

#101 Stickler on 08.29.12 at 9:13 am

@#92 Buy? Curious? on 08.29.12 at 7:51 am

>>Maybe the people in your circle that rent are losers, so that means all people that rent are too!? Your world is obviously very small. Ignorant arrogance.

#102 neo on 08.29.12 at 9:13 am

#69John on 08.29.12 at 1:52 am
Stocks don’t rise when the companies give profits to investors. Surely you know that. BTW I did not suggest buying bank common stock. — Garth

Garth, what are you smoking? You are saying if dividends are increased stocks don’t go up, the yield goes up making the stock more attractive, driving the demand up, economics 101

Not to existing shareholders. Investing 101. — Garth

Stock still goes up, logic 101

“Existing investors” sure loved it when Cisco boosted they dividend by 75%. That moved their stock 6% the next day.

#103 neo on 08.29.12 at 9:16 am

#77cynically

Correct me if I am wrong. But didn’t all the TBTF investment banks morph into “traditional” banks post GFC so that they could sit at the trough of Central Bank liquidity.

#104 Canuck on 08.29.12 at 9:21 am

Avid reader, second time post! Curious about views and perspectives of other people on here about investing in a preferred share ETF compared to an individual company’s preferrred shares as in bank or utilities company.

Thank you

#105 Daisy Mae on 08.29.12 at 9:22 am

“See me waving?”

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

I do….I do! I really, really do!

#106 Van guy on 08.29.12 at 9:29 am

#62 Investx on 08.29.12 at 12:44 am
49 Van guy:
#35 JSS on 08.28.12 at 10:53 pm

Anyone know anything about an ETF called ‘FIE’?
————————————–

Really stable the last few months. Great dividend yield at over 7%. Its a good time to buy it now as I just did again!
————————————————–

Are you buying these ETF’s through a discount broker?
Any brokerage you recommend?

Seriously? Maybe Garth can answer this one

#107 eaglebay - Parksville on 08.29.12 at 10:01 am

#89 John on 08.29.12 at 6:53 am

Which planet are you from?
Ever heard of common sense?
You’re full of conspiratorial, mindless theories.
If you’re not careful, you’ll give yourself a heart attack.
Dumbo…

#108 syfon on 08.29.12 at 10:04 am

# 94
That was just too much for one day.
We do appreciate Garth, in our own ways.

#109 Toto_ben on 08.29.12 at 10:04 am

I have a feeling that Scotiabank owns a good portion of H&R and Dundee, this smells like a scheme of double dipping at a later date. Probably the Gov is in bed with this deal too.

#110 eaglebay - Parksville on 08.29.12 at 10:07 am

#92 Buy? Curious? on 08.29.12 at 7:51 am
“Now if you’ll excuse me, I’m off to a pro-choice meeting. Personally I don’t care what anyone does with their lives. I go there to meet chicks.”
_______________

Good luck with the chicks.
I don’t know too many chicks that will have anything to do with a boring, cheap “old maid”.
You can always try a blow up doll and talk her head off.

#111 Canadian Watchdog on 08.29.12 at 10:14 am

CMHC sees profit fall in core mortgage insurance business http://www.theglobeandmail.com/report-on-business/economy/housing/cmhc-sees-profit-fall-in-core-mortgage-insurance-business/article4507242/

And so it begins…

#112 Bruce Chase on 08.29.12 at 10:17 am

You say to own banks, I’ve bought some of these split share offerings, DF and PIC.A, they each own shares in the big banks etc. I’m wondering if these are good proxys for owning directly the bank shares or is there something risky and lurking under the surface of these split share offerings………..should I stock up on toilet paper………

#113 Spiltbongwater on 08.29.12 at 10:29 am

CPD 52 week low is $16.80, and 52 week high $17.60, with no dividend paid. How do you make any money with this? I prefer to swing trade HND, HOU etc in my TFSA as they go up and down 2% or more per day.

#114 Steven Rowlandson on 08.29.12 at 10:29 am

Garth gold and silver don’t pay much if any interest but they do have the possibility of capital appreciation and there is no realistic chance of gold or silver going to zero.

On the other hand paper can and does go to zero from time to time and the official currency is just backed by debt denominated in the official currency and not by gold or silver. In terms of gold or silver the value of the official currencies are at or near zero. Zero oz divided by 1 unit of fiat currency equals zero.

Just as real estate prices are financial gross indecency on the up side the current market prices for gold and silver are financial gross indecency on the downside. Market prices are make believe and a scam.

Relative to the supply of fiat, financial assets or the world economy the market fiat price of metals is near zero in defiance of the laws of mathematics…. It is like the so called powers that be are playing a fraudulant game of make believe and the sheeple are just going along with the scam. Greater fools indeed I’d say.

The world of finance and politics deserves to crash and burn for its sins.

#115 Mrs. Riveriew in Winnipeg on 08.29.12 at 10:36 am

What happens to the trading price of Pref Shares as interest rates rise?

Intuitively, I would think the trading price would be the inverse of prevailing interest rates.

#116 Penny Henny on 08.29.12 at 10:42 am

At Buy Curious.
change the 25 yr to 30yr.
and the rest is the truth.
Amen brother/sister/?

#117 Lost and Confused on 08.29.12 at 10:48 am

Hi Garth

I am 43, married, 3 kids – 19, 14, 10

No house, $180,000.00 in savings (all liquid), no debt.

I will be buying a home in the GTA when the markets turn.

With your rule of 90 – age for home ownership, what % of my $180,000.00 do I use for the down payment and I’m guessing the balance will be for retirement investing?

Thanks

#118 Skip Breakfast on 08.29.12 at 10:50 am

Re: link to the OECD quote. It’s cited by Australian economist Steve Keen in a recent university lecture. Keen is one of only a small handful of economists (some say only 12?) who saw the 2008 financial crisis well in advance.

http://www.youtube.com/watch?v=1pxuCNzI0JQ

#119 Van guy on 08.29.12 at 10:54 am

CPD and XPF are both ETFs that track the preferred index, with similar fees (less than half a point). — Garth

XPF looks pricey. But pays better than CPD.

#120 world view on 08.29.12 at 10:55 am

# 93 Victor,

I wish Garth would say …”Ah, yeah…Past performance is a good indicator of future returns”….

Garth: right about real estate.
I dont understand how bank shareholders will not take any hit. Remember GS got most of its assets back valued at book value because AIG insured their gamble and AIG was bailed out. But despite this, GS stock lost 50% of their value. Needless to say what happened to BAC, Citi, Wells etc.

#121 ZStraw on 08.29.12 at 10:57 am

Indeed, the current economic situation is in many ways better than what we have experienced in years.

Oops, actually the preceding sentence is a quote from the OECD only two months before the Great Financial Crisis of 2008…an economic downturn which we have yet to “recover” from.

Link, pls. — Garth

———————————-

http://books.google.ca/books?id=-KV9BtFLUigC&pg=PA7&lpg=PA7&dq=%22Indeed,+the+current+economic+situation+is+in+many+ways+better+than+what+we+have+experienced+in+years%22&source=bl&ots=qIA2locTkf&sig=KICDhit_ZyxxF8c_mhKevExXOUc&hl=en#v=onepage&q=%22Indeed%2C%20the%20current%20economic%20situation%20is%20in%20many%20ways%20better%20than%20what%20we%20have%20experienced%20in%20years%22&f=false

As I thought. That report was published in June, 2007, and referred to data collected in the first 90 days of that year. This was not (as you stated) a month before the wheels fell off in the autumn of 2008. Try to be precise. Otherwise you look like a manipulator. — Garth

#122 Steve on 08.29.12 at 11:06 am

Follow up on today’s REIT post – Noticed this story in the Financial Post on REITs this morning:
http://business.financialpost.com/2012/08/29/reits-coming-to-market-even-if-nobody-else-is/?utm_source=dlvr.it&utm_medium=twitter

Garth – are REITs generally overvalued at this point?

#123 Herb on 08.29.12 at 11:10 am

#72 Blue Monster,

naw, Dear Boy, I don’t hate Ayn Rand. I forced myself to plow through Fountainhead and Atlas in my college days in the early ’60s, and found thre lady irrelevant to my intellectual universe.

Do you know I love your blog handle? When I served in the Canadian brigade in Northern Germany, a staple of the British hard rations we ate in the field was canned “Meat and Vegetables”. Us irreverent Canadians dubbed that menu “Muck and [V]uck”. Your blog handle is so appropriate.

#124 Victor on 08.29.12 at 11:14 am

http://www.theglobeandmail.com/report-on-business/economy/housing/cmhc-sees-profit-fall-in-core-mortgage-insurance-business/article4507242/

Canada Mortgage and Housing Corporation saw profit from its core mortgage insurance business fall to $255-million in the latest quarter, down from $341-million a year earlier.

The decrease comes as the crown corporation’s losses on claims rose to $168-million for the three months ended in June, up from $144-million in the same period of 2011.

The lower profit also comes as Ottawa has taken steps that will curb CMHC’s growth, including enforcing a hard limit of $600-billion on the amount of insurance that it can have in force.

And the moves that Finance Minister Jim Flaherty made this summer to tighten the housing market, including reducing the maximum length of insured mortgages to 25 years from 30 years, will cause CMHC’s homeowner insurance volumes to be lower this year than previously expected, the mortgage insurer said in its second-quarter results, which were released Wednesday.

In total, including its securitization business and other activities, CMHC reported second-quarter profit of $335-million, down from $383-million a year ago.

========================

Banks make reaping their profits.

CMHC, on the other hands, begins to falter. Look out taxpayers…the sky is beginning to fall on those high ratio mortgages.

#125 Jim on 08.29.12 at 11:16 am

#72: “The very fact that you two bozos hate Ayn Rand is proof that you’re both either Marxists and/or religious since those are the two groups that hate her.”

That’s an unsound argument if I have ever seen one.

I’m a card carrying libertarian party member. I despise Ayn Rand. So much for your premise.

Why? Because she is a terrible writer and a fourth tier philosopher at best. I have no clue as to why she became famous, other than the ethnic gravy train. There are some excellent libertarian philosophers out there who are grounded in the humanities and history of western philosophy. Rand was a buffoon in comparison.

As for stocks, I took a look at the historical chart of some of these REITs like Dundee; I hate to buy anything when it is on such an upwards run. Makes me think a downturn is coming. (‘blood on the streets’, you know)

#126 Herb on 08.29.12 at 11:16 am

#72 Blue Monster …,

no, Dear Boy, I don’t hate Ayn Rand. I forced myself to plow through Fountainhead and Atlas in my college days in the early ’60s and found the lady irrelevant to my intellectual universe.

But do you that know I love your blog handle? When I served in the Canadian brigade in Northern Germany, a staple of the British hard rations we ate in the field was canned “Meat and Vegetables”. Irreverent Canadians, of course, called that menu “Muck and [V]uck”. Your blog handle is so appropriate!

#127 penpal on 08.29.12 at 11:23 am

@ # 92 Buy? Curious?

If your comments are not sarcastic and meant to amuse – but are representative of your beliefs – then you are an infinitely more objectionable lifeform than any renter, over 40 single person or any others who you have insulted on this blog.

You are just another poster whose comments I – and probably most people here – will scroll by.

#128 tkid on 08.29.12 at 11:39 am

No, I don’t see you waving in that photograph – it is at least 20 years old as my old condo building isn’t shown in the photo! *is cranky this morning*

#129 OlderbutWiser on 08.29.12 at 11:53 am

Canadian Watchdog #17 – Derivative financial instruments are not ponzi schemes and are certainly not fraud. You need to educate yourself. Many large Canadian multinational corp’s (including the one I work for) take out both currency and interest rate swaps (which are two forms of derivative financial instruments) to manage both of these types of risk. The counter party are the large financial institutions. This does not make these instruments ponzi schemes or fraud. There are very good reasons for their existence.

#130 Seriously? on 08.29.12 at 11:55 am

And the evidence is in and logged.

Canadians have been played to the beat and are rollin’ in the deep.

You are the new slaves, hog tied and tattooed.

Banks and businesses are flush with cash.

You and the other hand are flush with debt.

A bloodless coup.

It’s over.

Thanks for coming out, better luck next time.

#131 Just Park It on 08.29.12 at 11:55 am

Okay, I am making a comment I have no true understanding but it just seems fishy..

Scotia bank sells hard assets in the financial core, their flagship for decades and now is the time to sell for mega bucks (does this not have warning written all over it?) … Dundee buys at a premium and rents the very premises to Scotia … what gives!! The way I am interpreting Garth’s writing – it’s a win win situation for all parties – still not getting it!

My wife works in the heart of the financial district – and very quietly many Investment firms and law firms are letting go people on a weekly basis. A firm that had occupied 3 floors in her building sits empty for 7 months and counting.

I give Garth credit for not wavering on his views – I for one just don’t see how the banking system can escape what “may” unfold. I call those who say Canada is immune to the Europe crisis as BS – the books are cooked. Taxpayers the world over will be holding the bag on this one! No more free lunches or what appears to be free.

IMHO

#132 futureexpatriate on 08.29.12 at 12:11 pm

#94- You forgot “and future Prime Minister”.

#133 OlderbutWiser on 08.29.12 at 12:12 pm

Eagle eyes #74 – thinking that a majority of Canadians will simply walk away from debt is pie in the sky delusional thinking. You have no idea of the long term impact of declaring personal bankruptcy. We do not have non-recourse debt in Canada and unless you are in dire, dire straights personal bankruptcy is no easy way out. And frankly, that is the way it should be.

People need to start taking responsibility for their actions and stop blaming others when their own choices turn around and bite them in the a$$. If you cannot afford something then don’t buy it. If you don’t understand what you are doing – then either don’t do it, or get some advice, or do some reading to educate yourself.

It never ceases to amaze me that people will invest in something based on hearsay without ever researching what they are buying or reading a prospectus or looking at a financial statement (or checking a pay-out ratio). Can’t read a financial statement or prospectus? – then get advice or get educated. Don’t come back crying that you lost all of your money.

I have been presented with a number of investments recently that all claim to have “yields” > 7%. Read the prospectus folks – a return of your own invested capital is NOT yield.

Sorry for the rant. Just bothers me when people spend hours researching the purchase of a $500 computer but will invest thousands of their hard earned retirement funds in seconds, based on a hunch.

#134 CalgaryRocks on 08.29.12 at 12:34 pm

#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).

Is this really a plus? When 99.99% of your 6 figure earners are all paid by taxpayers.

#135 Smoking Man on 08.29.12 at 12:38 pm

I may be a twit. But I’m always right.

Teranet home price index Prices Hit New High.

Toronto still on fire. See financial post

#136 coastal on 08.29.12 at 12:41 pm

“#7 mel in victoria – You didn’t mention the third member of that great CKNW financial triumvirate, Michael Levy, who believes the “trickle down” theory works. All geniuses on Saturday mornings – Michael C., Ozzie J. and Michael L. God bless radio.”

Levy is indeed the genius that GlobalBC trots out to tell us housing is still the hot place to be, and two months ago said gold is going to $1200 ASAP….and this guy sells gold for a living. Talk about scary when the so called pros can never get it right.

Dundee REIT looks interesting with it’s 7% dividend, but I would wait a couple months to see where this Euro debacle leads the markets. A couple of months patience could make for a 10% or more saving if the crap hits the fan again. Boardwalk collapsed 50% a few years back but is much higher now, so timing is everything.

#137 Dontcallmeshirley on 08.29.12 at 12:42 pm

#92 Buy? Curious?

Buddy, you know there’s a lot of criminals and deviants that own their homes right?

#138 truth hammer on 08.29.12 at 12:52 pm

Another nail in Vancouvers coffin……the now dead gaming industry ‘entrepeneurs now exist on ‘personal money’ in other wods grammies money…..Government grants…in other words parasite the taxpayer……and take no wages…..in other words losers in denial……in other words vancouver has discovered a new layer of leaches dependent on the taxpayer dime.

http://www.vancouversun.com/business/whole+game/7158077/story.html

But isn’t this a flashbulb into the mindset of Vancouverites generally who are immobile to the extreme…..instead of going where the jobs are……they hunker down and go on welfare instead…..this is a great set up for an NDP government eh? In Europe Asia and US people will move for jobs….not here.

I’m sure glad I’m not an ‘investor’ in one of the hundreds of ‘Game Design Colleges’ that grew overnight like mushrooms in Vanc Dumpo. I’m glad I’m not one of the tens of thousands of parents who got suckerered into paying $10’s of thousands of dollars for little BoBO to learn game play and now find themselves locked out of both the going bankrupt schools and graduating into a jobless market filled with losers who have been recently let go.

Along with the thousands of well educated engineers, QA testers…..marketing and communications specialists who have been laid off recently from the cell phone and general industry implosion…….it’s not looking good for Vanc Dump.

But if the NDP get in we can expect thousands of leaches, party workers, brothers in law, sons and daughters of party workers to settle in to high paying government jobs all paid for by the shrinking taxpayer base.

#139 Investx on 08.29.12 at 12:54 pm

80 Piccaso:
#24 Investx on 08.28.12 at 10:11 pm

ETF’s decay… you trade them, you don’t hold them
—————————————————————

I’m referring to dividend and preferred ETF’s, which you hold for their distributions.

#140 Investx on 08.29.12 at 1:00 pm

90 Stickler:
@49 Van guy:

>>A distribution yield is not the same as a dividend yield. It may distribute 7% back to you, but if the underlying assets do not generate 7% in the form of dividend or cap gains then you are getting your own money back…not that there is anything wrong with that. Just dont be fooled into thinking that you are getting 7%
—————————————

This is confusing. Are you earning a 7% yield or not?

#141 dm in c on 08.29.12 at 1:22 pm

Bi curious is just enjoying the negative attention. Don’t feed the troll.

#142 Investx on 08.29.12 at 1:24 pm

106 Van guy on 08.29.12 at 9:29 am
#62 Investx
49 Van guy:
#35 JSS on 08.28.12 at 10:53 pm

Anyone know anything about an ETF called ‘FIE’?
————————————–

Really stable the last few months. Great dividend yield at over 7%. Its a good time to buy it now as I just did again!
————————————————–

Are you buying these ETF’s through a discount broker?
Any brokerage you recommend?
…………………………………………………
Seriously? Maybe Garth can answer this one
………………………………………

You wouldn’t recommend the brokerage you’re even using?

#143 NoName on 08.29.12 at 1:26 pm

you cant put lipstick on mit but you can on his wife…

http://www.theatlanticwire.com/politics/2012/08/fact-checking-ann-and-mitt-romneys-hardknock-early-years/56321/

#144 Van guy on 08.29.12 at 1:45 pm

#113 Spiltbongwater on 08.29.12 at 10:29 am

CPD 52 week low is $16.80, and 52 week high $17.60, with no dividend paid. How do you make any money with this? I prefer to swing trade HND, HOU etc in my TFSA as they go up and down 2% or more per day.
————————————-
What are u talking about? I got dividends paid. You should put that bong away stinky.

#145 Investx on 08.29.12 at 1:47 pm

113 Spiltbongwater:
CPD 52 week low is $16.80, and 52 week high $17.60, with no dividend paid. How do you make any money with this? I prefer to swing trade HND, HOU etc in my TFSA as they go up and down 2% or more per day.
————————————————————–
Huh? CPD has a monthly dividend. No?

http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=65458

#146 sciencemonkey on 08.29.12 at 1:50 pm

@106 Van Guy: Questrade is supposed to be ok. RBC DI and TD waterhouse are good if you have more than $50,000 to invest.

@113 Spilt: CPD pays monthly dividends, according to its website.

@115 Revierview: I am an investing noob, but this is how I understand it. From individual preferred shares I looked at from RBC and TD, they terminate every five years, with the holder having the option to take the principal amount of money, or have them converted into a new issue of prefs. (Some are fixed at a given percentage, some reissue at the current interest rate + a fixed percentage.) The principal redemption value is equal to the issue value ($25), or issue plus fifty cents. They actually trade at a value of $26-27 last time I looked. If interest rates go up, the prefs might go below $25, but at least at the end of the period you would have the option to recover the $25. (I guess it’s similar to a 5 year bond in that respect.) The thing is, the majority of prefs reissue based on the current interest rate, so they might climb back up in price closer to the reissue date.

I personally took the simple route and recently bought some CPD.

#147 Old Man on 08.29.12 at 2:05 pm

#92 Buy? Curious? – The best place is not at a pro-choice meeting to meet chicks. Now promise me you will not tell a soul, as will tell you where to score the bigtime. Go to a major grocery store at 10:00 PM at night to shop, and do not mean for food, but make it look good so put something in your basket. Troll the rows looking for a prospect, and move in slowly for a sale; I recommend the canned goods section, and look for the wedding ring or you could be in trouble.

Now, this babe looks good to you and is looking to buy something, so point out to her something on sale that is just as good to save money; she will love you for showing concern. Then chat her up with some good old conversation, as you have become the best of friends; then go for the closing sale, and ask her out for a date. It works most of the time.

#148 Randman on 08.29.12 at 2:39 pm

Hey all …here’s where you tax dollars are going…

Exploding sausages

http://ca.news.yahoo.com/blogs/dailybrew/ottawa-invests-tax-dollars-keep-canadians-safe-exploding-181111102.html

#149 DAFFY DUCK on 08.29.12 at 2:51 pm

#139 Truth Hammer

What do you think has been happening in BC for the last 12 years, the current gov has it’s supporters, family members everywhere.

Nothing like trashing what hasn’t happen and sticking your head in the sand to what is currently happening. You lost the last bit of credibility if you ever had any.

#150 Old Man on 08.29.12 at 2:53 pm

I do all my discount trading with RBC as am a member with what is called the Royal Circle if I use the phone for trading with special phone lines, and pro traders at the other end to execute quickly.

#151 Harlee on 08.29.12 at 2:53 pm

#94 In GARTH Almighty…
You keep praising Garth on high but you never announce when you’re forming the new religion based on Him. The Garthists ? Where will the temple be located – Bay Street ? Very frustrating…

#105 Daisy Mae
Yeah ?? Which window ? Which window ?

#152 Sign of the Times on 08.29.12 at 2:55 pm

A friend of mine recently became an Owner of a Shoppers Drug Mart store (Associate in Shoppers-speak) in Vancouver. Been working 18 months, married for 12 with a house horny wife and , based on his first two months salary as an “owner”, $160k salary (I called bs but he has the paystubs to prove it). On the hunt for a “starter” home around $1M because everyone wants to live here…

I’m urging him to be cautious, with an NDP government on the way and changes to Pharmacare coming in April, but he’s confident Shoppers is positioned to weather the storm and his salary is “safe”. Sigh…

#153 eagle eyes on 08.29.12 at 2:58 pm

#134 OlderButWiser
“Eagle eyes #74 – thinking that a majority of Canadians will simply walk away from debt is pie in the sky delusional thinking.”

Yes, the impact of declaring personal bankruptcy is a huge long term effect, but sometimes cannot be avoided if you don’t have money to pay. I think you should get off your high horse. When there is a loss of employment income, and you can’t pay your bills, what can you do? In the past, Banks and Government have made it so easy for anyone with a pulse to get credit. Now that they are pulling back and employers are tightening their belts creating thousands of job losses, it has created a perfect storm for many people with no other choice but to declare bankruptcy. Don’t be so judgemental of the victims. They were but merely stupid pawns in this whole charade.

#154 Suede on 08.29.12 at 3:00 pm

#95 Mark

The difference between CPD and XPF is in their eligible dividends % (aka the amount of tax you will pay is slightly higher for XPF than CPD). Reason being is that XPF holds a US preferred Share Index as part of its make up which doesn’t qualify for eligible canadian dividends. However, the dividend yield for XPF is currently higher than CPD.

More info:

XPF
http://ca.ishares.com/product_info/fund/overview/XPF.htm

CPD
http://ca.ishares.com/product_info/fund/overview/CPD.htm

Here are the rates in BC, adjust accordingly if you’re not in the “BPOE” to find out your net take home

http://www.taxtips.ca/taxrates/bc.htm

#155 T.O. Bubble Boy on 08.29.12 at 3:01 pm

@ #113.

It might be called a “distibution” vs. a “dividend”, but you definitely get paid monthly on a ETF like CPD.

#156 Tom from Mississauga on 08.29.12 at 3:04 pm

One other thing with the default part of this post. Not sure I agree with that. Lots of advertising on TV, radio, bus shelters and the like for trustees in bankrupcty. They must be doing a brisk business to afford that. Still own bank stocks anyways though.

#157 Perplexed on 08.29.12 at 3:09 pm

Hey Garth, what’s the deal with Manulife buying Wellington West from National Bank? Can you provide more info?

It didn’t happen. WW is defunct, abosrbed into NBF. — Garth

#158 T.O. Bubble Boy on 08.29.12 at 3:18 pm

@ #117 Lost and Confused


I am 43, married, 3 kids – 19, 14, 10
No house, $180,000.00 in savings (all liquid), no debt.
I will be buying a home in the GTA when the markets turn.
With your rule of 90 – age for home ownership, what % of my $180,000.00 do I use for the down payment and I’m guessing the balance will be for retirement investing?

Unfortunately, based on Garth’s “Rule of 90”, you should have less than 47% (90 – 43 = 47%) of your net worth tied up in real estate.

So, if you have $180k in Net Worth, the *TOTAL* value of that house should be under $90k (including mortgage).

If you were to buy the average GTA house (say $600k) with that $180k all put towards down payment, you still have $600k of assets (and $420k of debt) tied into a house.

So, in that scenario, you would have 333% of your net worth (600/180) tied up in the house.

This is very typical of the average Canadian, and exactly what all banks push — the idea that putting 3x or 5x of your entire life savings into a house is a great idea.

#159 T.O. Bubble Boy on 08.29.12 at 3:25 pm

@ #115 Mrs. Riveriew in Winnipeg

What happens to the trading price of Pref Shares as interest rates rise?

Intuitively, I would think the trading price would be the inverse of prevailing interest rates.

Yes – that is the risk with pretty much any fixed income type of investment (bonds, preferreds, etc.).

However, there are some floating rate Preferreds and Rate Reset Preferreds that help to mitigate some of that risk… but – many of the Banks are redeeming their Rate Reset preferreds, so you have to watch out for a $27+ per share price getting redeemed at $25-$26 (and you lose 1-2 years of dividends).

#160 T.O. Bubble Boy on 08.29.12 at 3:31 pm

@ #80 Piccaso

ETF’s decay… you trade them, you don’t hold them

Yes, leveraged ETFs have decay… but most standard ETFs actually hold shares of companies (not futures contracts).

#161 Smoking Man on 08.29.12 at 3:31 pm

From Toronto Sun.
Canadians expect raises this year.

So to re cap.

Mortage rates no where to go but down
Jobs and more money on the way
No inventory in the 416. SFH

Yet its going to be a nasty crash realtors a nasty crash.

LMFAO

#162 John on 08.29.12 at 3:34 pm

Eaglebay parksville wrote:

#89 John on 08.29.12 at 6:53 am

“Which planet are you from?
Ever heard of common sense?
You’re full of conspiratorial, mindless theories.
If you’re not careful, you’ll give yourself a heart attack.
Dumbo…”

I understand the depth of denial we have to wade through. It’s not easy having to defend your beliefs.

Since you chose not to debate and be specific, the only thing I can see you doing here is publically dropping your pants thinking you have “cover”, using terms and defences that have less meaning by the hour.

Again…understandable. You likely start with conclusions, turn to others for your “thinking”, and …voila…your iron clad belief system.

#163 Blacksheep on 08.29.12 at 3:51 pm

OlderbutWiser # 129,

A little out of my depth here, but based on your comments, I assume you would be comfortable with a stranger taking out a ten million dollar insurance policy, in case of fire, on your personal home? This may not actually be legal, but I’m sure you see my point. I’ve done little research on derivatives, so feel free to educate.

take care
Blacksheep

#164 penpal on 08.29.12 at 3:59 pm

@ # 135 Calgary Rocks

The list of 100K jobs I listed IS NOT NOR INTENDED TO BE EXHAUSTIVE, BUT REPRESENTATIVE.

Got It?

I specifically listed these jobs as their salaries are on public record.

Got it?

There are many other local companies, who are private and don’t diclose the salaries they pay, although knowing a number of executives in the area and business owners I can assure you that there are literally 100’s and 100’s of jobs 100K in this city.

Got it?

You know, someone with as unsophisticated thinking as yourself should probably stay in Calgary.

That is, if someone doesn’t round you up and move you to Ponoka – you know what I’m saying cowboy?

#165 disciple on 08.29.12 at 3:59 pm

Breaking…kelly osborne is HRH princess queenie of york…
…gentleman usher of the black rod david leakey is kevin kline… ….lady sophie windor is renee zellweger… …king juan carlos of spain is paul newman… …his wife queen sofie is joann woodward… full stop.

#166 Midas on 08.29.12 at 4:17 pm

@ #10 Frustrated Kiwi:

At one time gold was money. So, of course, no one made any money on it.

Nowadays, one might purchase gold as a hedge against the possibility that central banks are going to print a lot more paper, thus devaluing that paper.

Central banks haven’t yet found a way to print gold.

#167 Old Man on 08.29.12 at 4:22 pm

I remember when the Insurance Companies were strong like Manulife, and many others, but deflation set in to change the economic equation for them, and might be wrong, but believe they are all in trouble for years to come.

#168 truth hammer on 08.29.12 at 4:34 pm

#150 Daffy…..so the layoffs at the game devs etc like NOK..MOT…MFST…EA…RE….etc etc etc happened 12 years ago?? You must have been out of the country for the last 12 months. Thousands of layoffs and ‘shrinkage’..in just the past few months.

Given your imaginery time frame I have to assume that you ‘Hate Gordon Campbell’….and say ‘George Bush’ a lot with practised distain at every Liberal hugger convention . Trust me…my ‘credibility’ with the leftists has been zero forever…..talk to anyone on the net….the Truth Hammer is very unpopular where it comes to outing the sacred cows of the socialist gafferino’s. I’m very proud of that.

#169 DM in C on 08.29.12 at 4:39 pm

#135

You pointedly ignored this part: “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.”

Lucky for me, that’s the industry I’m in. Not really much of a market for that here in Calgary, unless you’re in O&G and building software to support O&G. Or work for SMART Tech (which is going the way of RIM — only faster)….. been there, done that.

#170 Old Man on 08.29.12 at 4:40 pm

#117 Lost and Confused: Just keep saving and parking the cash away, and here is the problem. GTA covers a large area, and don’t get sucked into a false bottom, as this might take years, and do not jump in too early, so worry not about the percentage of downpayment at this time, but research the area that you want to buy in first; just relax and go into cash. The false bottom can be a killer, so do nothing out of emotion, but rather sit back, as when the bottom comes into play it will show up eventually, and then make your move.

#171 Steven Rowlandson on 08.29.12 at 4:46 pm

Re: # 159 &117.
If you buy a house that is priced at more than 3 times a single annual income you are making a mistake and you should not make such a mistake as it endangers your fiscal integrity. A 25% down payment with the balance financed at a fix rate for the next 25 years is also advisable. Offering less than 3 years pay is better and if there is nothing available then rent or make an offer that is equal to or less than 3 years pay and I do mean one income. If you get turned down look some where else. If enough people follow this approach the market will have to yield and make discounts to the prices or have no or too few sales. No sales is bad for realtors.

#172 Rob now in Nova Scotia on 08.29.12 at 5:10 pm

Garth, I checked and the stock price of D.UN is way better than CEF.A. You may be onto something with these REITs.
I will never sell my silver, tho but may have to invest some funds in D.UN going forward. Thanks for the head’s up.

#173 love_depends on 08.29.12 at 5:11 pm

“Hmmm. Well, that those hairshirted, Depends-wearing doomers who skulk around this pathetic site telling us we’re a few gasps away from bank collapse, systemic failure and universal hemorrhoids are dingdongs. They make it up, then sell each other pieces of gold. I’ve said repeatedly there is zero evidence of a financial crisis brewing, despite the volatility, debt and change in the world. It just ain’t happening, dudes”…

Garth ,Ever heard of Eric Sprott ? Is he included in that bunch above?
I think he’s got a few more shekels than you do…
The guy must be doing something right….

#174 Canadian Watchdog on 08.29.12 at 5:24 pm

Every wonder where your mortgage goes after you sign it? http://i46.tinypic.com/2wnb48x.png

#175 cynically on 08.29.12 at 5:33 pm

#72 Blue Monster, etc. – I’m not a Marxist nor a Socialist or religious and I don’t agree with Ayn Rand’s beliefs on both economic and political issues but I don’t hate her for her writings. Hate is a very strong word so I would suggest you cut out the meat and make sure your vegetables are organic for that cleansing you seem to need. However I do agree with you about governments and their employees if what I heard on the radio today is true and that is that employees in the government-run liquor stores in backward B.C. make $28 an hour while those in the few sanctioned private stores make $12 an hour. If this is correct and I’ve no reason to doubt it because the afore-mentioned government pisses away the taxpayers’ dollars like no one can imagine (well, maybe you can) then I’m with you on this one and there are others, federally.

#176 Devore on 08.29.12 at 5:35 pm

#80 Piccaso

ETF’s decay… you trade them, you don’t hold them

Only the ones trading in derivatives. Bear ETFs, leveraged ETFs. If your ETF just holds stocks, why would it decay? Do the stocks evaporate?

#177 Devore on 08.29.12 at 5:48 pm

#114 Steven Rowlandson

In terms of gold or silver the value of the official currencies are at or near zero. Zero oz divided by 1 unit of fiat currency equals zero.

Last I checked it was not zero, and in fact has gone up in the last year. But if you insist, I am sure I can scrape up an oz of some metal around here, I’ll trade it for all your worthless units of fiat. Should be a great deal for you, trading something for nothing.

#178 OlderbutWiser on 08.29.12 at 5:54 pm

Eagle Eyes, I was not referring to people who have lost their jobs. That is something that nobody wishes on anyone and is a devastating thing to have happen. I was referring to others comments on this blog who seem to think that they can borrow to the hilt, reap the rewards, and then say screw you if the tide turns and housing prices decline. That I find offensive.

#179 Devore on 08.29.12 at 6:02 pm

#141 Investx

This is confusing. Are you earning a 7% yield or not?

Stop chasing yield, and start paying attention to what you’re buying.

Every distribution a Canadian company or fund makes specifies the type mix. The distribution can be interest/income, dividends, or return of capital. The combination of these determines how the distribution is taxed. Income taxed at your marginal rate, dividends at the dividend rate, and return of capital at zero. It’s 0 because you’re just getting your money back.

Is it better to have a fund that pays 7% distribution as interest, or 6% that pays dividends? You must know what you are buying. Otherwise you’ll end up broke like Smoking Man who bought YLO because it paid 30%, shortly before they decided paying 0% worked better for them.

#180 OlderbutWiser on 08.29.12 at 6:08 pm

Blacksheep #164 – LOL, I have to agreed that I don’t understand CDS’s either. I was referring to other types of derivatives like currency and interest rate swaps which represent a huge segment of the derivatives market. The amount of these types of derivatives can be significant (our company has billions -with a b – in currency swaps for example) but there is absolutely nothing fraudulent or “ponzi” like in the relationship between our company and the financial institutions on the other side of the contract.

#181 Hugh Jasz on 08.29.12 at 6:10 pm

T.O. Bubble Boy on 08.29.12 at 3:18 pm
@ #117 Lost and Confused
So, in that scenario, you would have 333% of your net worth (600/180) tied up in the house………

“net worth” calculation doesn’t pass the smell test.

Ignoring everything but the home, mortgage and equity:

Assets:
$600K home

Obligations:
$420K mortgage

Net worth:
$180K……all of which trapped in home equity.

This means 100% of your net worth is in your home.

By definition, any net worth calculation that results in your sum net worth higher than 100% is invalid.

#182 OlderbutWiser on 08.29.12 at 6:31 pm

Devore #180 – I couldn’t agree more. The problem is that people do not want to do the homework and the marketing on these products is pure BS with the headlines indicating “7% yield” when in fact a portion of that is a return of capital. That is misleading advertising in my view and should not be allowed. Of course if you have a look at the prospectus it is all set out so they can cover their a$$.

I have made the mistake in my younger days of believing the headlines without looking at the “fine print” if you will. Have not made that mistake for a long time now and the portfolio is MUCH better for it. I strongly advise all to look at the prospectus. Google it and you will usually find it.

Also, don’t ever buy something because your “friend” tells you it has a great yield. Take the time to at least find out what the payout ratio is. Find out how much of the companies earnings and free cash flow is going to fund the distribution. This is all free information on the internet. Lots of high yield companies pay out more than 100% of their earnings or free cash flow. This is not something that a company can do for long.

#183 Devore on 08.29.12 at 6:44 pm

#162 Smoking Man

Canadians expect raises this year.

Good news for TO real estate: I expect to win the lottery this year!

#184 jess on 08.29.12 at 6:45 pm

divy recaps

Greed and Debt: The True Story of Mitt Romney and Bain Capital
How the GOP presidential candidate and his private equity firm staged an epic wealth grab, destroyed jobs – and stuck others with the bill
by: Matt Taibbi

http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829?print=true

=

bain and co.

http://www.rollingstone.com/politics/news/the-federal-bailout-that-saved-mitt-romney-20120829#ixzz24yLtvXL8

#185 Old Man on 08.29.12 at 6:52 pm

#180 – I have no idea if Smoking Man lost some money, but have made a few myself, as any investor who says otherwise is a liar. We win some, and lose a few, as nobody is perfect, and not me, as have taken a few hits. But as a professional investor it is all part of making a few mistakes in our walk in life to charge it off, and move forward for a better day with a clear mind to do better.

#186 Van guy on 08.29.12 at 7:04 pm

#141 Investx on 08.29.12 at 1:00 pm
90 Stickler:
@49 Van guy:

>>A distribution yield is not the same as a dividend yield. It may distribute 7% back to you, but if the underlying assets do not generate 7% in the form of dividend or cap gains then you are getting your own money back…not that there is anything wrong with that. Just dont be fooled into thinking that you are getting 7%
—————————————

This is confusing. Are you earning a 7% yield or not?
————-
Yes confusing. The price for each share is about $6.35. U get $.04 per share paid monthly

#187 Grim Reaper/Crypt Speculator on 08.29.12 at 7:19 pm

Lets see..

Bait= a 6 pack….Newfie Hoooch….farmers Almanac….Braille Playboy magazine and Commodore 64

all set and ready to recapture Smoking Man ….

#188 espressobob on 08.29.12 at 7:22 pm

#180 reply,

You hit the nail on the head! FIE returns capital & ZWU & ZWA write covered calls. OK in an rrsp. After all the power of compounding is worth noting and so is homework many investors overlook.

#189 espressobob on 08.29.12 at 7:34 pm

#174 reply

Eric sprott? Remember Timminco?

#190 Grim Reaper/Crypt Speculator on 08.29.12 at 7:48 pm

#92 Buy? Curious? on 08.29.12 at 7:51 am

Now if you’ll excuse me, I’m off to a pro-choice meeting. Personally I don’t care what anyone does with their lives. I go there to meet chicks.

==============================

Oh yes…..you”ll have the pick of the litter there, for sure.

Just make sure you have a pre-nuptial….ignore their Sontag/ Freidan/Steinem literary collection…as well as morning and bedtime boot camp lectures that men are pigs

http://www.theatlantic.com/magazine/archive/2012/09/boys-on-the-side/309062/

#191 Hoof-Hearted on 08.29.12 at 8:04 pm

#139 truth hammer on 08.29.12 at 12:52 pm

But if the NDP get in we can expect thousands of leaches, party workers, brothers in law, sons and daughters of party workers to settle in to high paying government jobs all paid for by the shrinking taxpayer base.

===============================

Yep….

BC already broke, the pigs are at the trough, got till May to fill THEIR bellies..

NDP , the default party will get in short of a miracle…last one left ( no pun intended ) turn out the lights. They were in for almost 10 years before a new party grew to replace them

==================================

Also:

Cabinet shakeup to follow Kevin Falcon’s resignation as B.C. minister of finance

Finance Minister Kevin Falcon’s resignation Wednesday isn’t the only change on tap for the struggling B.C. Liberal government.

Just hours after Falcon announced Wednesday morning that he was leaving his position immediately and won’t be running in the May 2013 election, Premier Christy Clark revealed there will be what she called a cabinet “renewal” next week.

Read more: http://www.theprovince.com/news/Cabinet+shakeup+follow+Kevin+Falcon+resignation+minister+finance/7161907/story.html#ixzz24z0F2d4y

Rats leaving a sinking ship…

#192 Nostradamus Le Mad Vlad on 08.29.12 at 8:05 pm


#149 Randman — “Exploding sausages” — Would go extremely well with strong, free beer and red hot afterburning stomach chili! Bob Lamb, Ozzie Campbell, Brad Jurock and Michael Rennie along with a few others, are seen here pondering the magnificent state of RE.
*
Hard hit savers There is a major difference between using one’s wealth (as per Garth’s 40 – 60 plan), and saving it; US$16 trillion “Over the last 286 days the US national debt has rose from $15 trillion to $16 trillion at the record rate of $3.5 billion per day.”; 0:43 clip Draghi says non merci to Jackson Hole meeting; Does NAFTA suck? Try the EU – Canada FTA, and The Treasonous Elite “Now all that is left is to get 250 million of us heavily armed to bow to their dictate.” Add Canada into that mix; 1:41:52 doc. Corporate fascism strangles the west; 3:35 clip “Record high unemployment in the EU has forced some of the larger consumer goods companies to shift marketing strategies. They target poverty-stricken Europeans’ demand for cheaper goods in the midst of an economic crisis.”; Melted cheese on toast with Worcester Sauce is tasty. This, not so much and this; Egypt – China “The US (west) makes war while everyone else makes deals!” wrh.com; Iceland No more rate hikes for the time being; Extreme Poverty in Tampa suburb; Decentralized Network Keeping Spain’s unemployed unemployed.
*
Ron Paul won, but might be better if he ran independently. Then see how man Repubs- Democrats join him; 1:52 clip America has officially flipped. See clip and judge for yourselves; Russia Not about to walk away from Syria; Eliminating GMOs prevents disease Odd. One would take the view that GM foods would be good, and Slow Death and Fast Profits “In a sane world, this would not be allowed to happen. The best we all can do here, is to try to buy food grown as locally as humanly possible, with no pesticides and no GMO products used to raise it.” wrh.com; Israeli nukes “Israel’s Ambassador to the IAEA Ehud Azoulay, has censured the initiative, saying the Arab nations have no moral right to point fingers.”; Kidnapping “During a period when mental health detentions are becoming more and more common for dissidents and activists, one might wonder if the homeless are the next to be sent off to the gulag.”

#193 Hoof-Hearted on 08.29.12 at 8:09 pm

Scotiabank to buy ING Bank of Canada for $3.13 billion in cash

TORONTO — Scotiabank plans to scoop up ING Bank of Canada from its Dutch parent company in a $3.13-billion deal that will give the country’s most international bank a stronger foothold in domestic consumer banking.

ING Direct would continue to operate separately and maintain its 1,000 employees under the deal announced Wednesday.

And it will keep the same branding — popularized in ads set against its orange lion logo in which viewers are exhorted to “save your money” — for at least 14 months after the deal closes. But the name will change within 18 months.

Scotiabank said the deal — one of its largest acquisitions ever — to buy the no-fee online banker, with a book value of about $1.7 billion, $40 billion in assets and about $3 billion in deposits, will add “modestly” to its earnings within the first year.

etc etc.

Read more: http://www.theprovince.com/business/Scotiabank+Bank+Canada+billion+cash/7163935/story.html#ixzz24z2cuFHs

Read more: http://www.theprovince.com/business/Scotiabank+Bank+Canada+billion+cash/7163935/story.html#ixzz24z2NNhoW

http://www.theprovince.com/business/Scotiabank+Bank+Canada+billion+cash/7163935/story.html

#194 Windsurfer on 08.29.12 at 8:31 pm

REPLY TO
Rob now in Nova Scotia on 08.29.12 at 5:10 pm

I will never sell my silver, tho but may have to invest some funds in D.UN going forward. Thanks for the head’s up.

As you know, owner silver is problematic. Either un-allocated (existing in the ether at the goodwill of the vendor) or allocated (sitting in a vault in Zurich, you hope, as you continue to pay monthly storage) or held physically (in a safety deposit box or buried in your back yard). So, on balance, 1000 oz in a safety deposit box might be best but you need one box big enough, then upon selling, you might need it assayed (an un-documented feature of your owning it).

All in all, keep investing but watch the details because Joe Retail always loses.

Hello to Garth – I supported you in your losing campaigns but you fought the good fight.

#195 Canadian Watchdog on 08.29.12 at 8:35 pm

#139 truth hammer

BC’s Government transfers as a percentage of total revenue has grown from 11.2% in 2001, to a whopping 20% in 2011. http://i50.tinypic.com/fjm8gj.png

In other words, one fifth of BC’s economy has been socialized, and growing.

#196 Old Man on 08.29.12 at 8:56 pm

My portfolio is so solid and boring with cashflow that miss the action, so might execute a call option this fall on Orange Juice, and pray for a bad winter, and a big freeze.

#197 Daisy Mae on 08.29.12 at 8:58 pm

#134 Olderbutwiser: “People need to start taking responsibility for their actions and stop blaming others when their own choices turn around and bite them in the a$$. If you cannot afford something then don’t buy it. If you don’t understand what you are doing – then either don’t do it, or get some advice, or do some reading to educate yourself.”

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

Easy to say. These naive kids have been lured — by the government, the banks, the realtors, the developers, and TV. They’re about to learn the hard way. Like we ALL did. It’s unfortunate. And it’s sad. But it’s a fact of life.

Your handle says it all. They will eventually be….’older but wiser’.

#198 Smoking Man on 08.29.12 at 9:00 pm

#186 Old Man on 08.29.12 at 6:52 pm

Old man your right we win some and lose some, but we are in the ring, the rest just trade time for shit wages.

And Dev I knew it was dog, I said it was a dog when I bought I could have gotten out long before It went to basement. But sadly my ego got in the way.

Plus happens everytime you pick up a tip at the duke of devon. I stick with batman 85% of trades are winners

#199 T.O. Bubble Boy on 08.29.12 at 9:01 pm

@ #182 Hugh Jasz on 08.29.12 at 6:10 pm
T.O. Bubble Boy on 08.29.12 at 3:18 pm
@ #117 Lost and Confused
So, in that scenario, you would have 333% of your net worth (600/180) tied up in the house………

“net worth” calculation doesn’t pass the smell test.

Ignoring everything but the home, mortgage and equity:

Assets:
$600K home

Obligations:
$420K mortgage

Net worth:
$180K……all of which trapped in home equity.

This means 100% of your net worth is in your home.

By definition, any net worth calculation that results in your sum net worth higher than 100% is invalid.
—————-

I beg to differ… The house represents 333% of the $180k net worth. The house is worth $600k, whether or not someone happens to have a mortgage doesn’t decrease the value.

If the house decreases 50%, does this guy only lose $90k, or does he lose $300k?

If you want to make your point accurately, the *home equity* would be 100% of the net worth, but that is only 30% of the house price, which is how the asset is valued.

#200 T.O. Bubble Boy on 08.29.12 at 9:03 pm

Reference to Garth’s rule of 90:
http://www.greaterfool.ca/2012/04/13/the-trouble-with-women/

#201 T.O. Bubble Boy on 08.29.12 at 9:06 pm

Here’s a better one:
http://www.greaterfool.ca/2011/04/03/what-smoke/


So here’s a rule of thumb appropriate for the times. Take 90 and subtract your age to equal the percentage of your net worth a house should represent. So for a couple in their twenties, it can be in the 70% range. For a Boomer in her sixties, it shouldn’t exceed a third. How to calculate net worth? All your assets minus all your liabilities – so home equity is on one side of the ledger and the mortgage on the other. Then divide in fair market value of your property.

#202 Herb on 08.29.12 at 9:11 pm

#169 Truth Hammerer,

… talk to anyone on the net….the Truth Hammer is very unpopular where it comes to outing the sacred cows of the socialist gafferino’s. I’m very proud of that.

Getting a little full of ourselves, are we?

#203 espressobob on 08.29.12 at 9:37 pm

#173 reply

Silver? Next to gold the most worthless metal on earth and the gold thumpers, please. In fact these metals (commodities) are in fact not legal tender in north america. Speculation and investing are two different animals.

We all all in the same boat. Currency will not crash in this civilization, can’t happen! If it did does anyone really give a rats butt about that crappy metal?

Doom & Gloom has been around for decades & thats the point. Stick with Garths views.

#204 billybill on 08.29.12 at 9:40 pm

garth why are preferred bank shares better than an etf like the zwb offered by bmo…i get dividends and safety using covered calls on the bank shares….

#205 Investx on 08.29.12 at 9:47 pm

155 Suede:
#95 Mark

The difference between CPD and XPF is in their eligible dividends % (aka the amount of tax you will pay is slightly higher for XPF than CPD). Reason being is that XPF holds a US preferred Share Index as part of its make up which doesn’t qualify for eligible canadian dividends. However, the dividend yield for XPF is currently higher than CPD.
——————————–
Great info, thanks!

Damn, figuring out the resulting taxes on mixed US and Canadian funds seems like it would be complicated.

#206 Investx on 08.29.12 at 9:59 pm

180 Devore on 08.29.12 at 6:02 pm
#141 Investx

This is confusing. Are you earning a 7% yield or not?

Stop chasing yield, and start paying attention to what you’re buying.

Every distribution a Canadian company or fund makes specifies the type mix. The distribution can be interest/income, dividends, or return of capital. The combination of these determines how the distribution is taxed. Income taxed at your marginal rate, dividends at the dividend rate, and return of capital at zero. It’s 0 because you’re just getting your money back.
————————————

So the answer is yes, you are getting a 7% return, made of a mix of dividends, interest etc.

So return of capital is not taxed. Isn’t that a good thing?
When you say you get it back, do you mean it reduces the amount of shares you bought?

#207 DAFFY DUCK on 08.29.12 at 10:06 pm

#169 truth hammer

My words were not in regards to the layoffs at game developers. My comments were in regards to your projections that an NDP government would mean that they would hire family members, friends etc. But no no don’t even talk about the current asses who run BC – remember to stick your head up their butts also. I loath all those who abuse the system and provide no public value. I don’t choose a color and vote for it blindly as I believe you do. BUSH! Really. Go buy a house, buy it now before it’s too late, or you’ll be priced out forever and while you are at it, ask Iraq if they have weapons of mass destruction. Support a man whose DADDY got him the job.

As for the recent layoffs in gaming industry, people have to have jobs to buy the games and they are a lot of games out there to date. SUPPLY AND DEMAND. and yes I would gladly say this to you in person. I HATE the bully mentality you come across as being. Maybe you are having a bad day, maybe you lost your game developing jobs and if that is the case, I am sorry for your loss. But your HANDLE “Truth Hammer” means that you hammer the truth. Call me out and I will come.

I apologize to all blog dogs, but some people never grow up and this boy child needs some learning _ and I could care less if he is 60. In BC we just went through the biggest commodity boom on record and are in debt.

#208 An Cat Dubh on 08.29.12 at 10:19 pm

REIT and shares are cool, but even some businesses are shutting down in Vancouver due to high rent.

http://www.theprovince.com/news/Chef+Dale+MacKay+closes+Vancouver+restaurants+blaming+high+rents/7152975/story.html

#209 Hugh Jasz on 08.29.12 at 10:46 pm

#202 T.O. Bubble Boy on 08.29.12 at 9:06 pm
Quoting the G:

……….How to calculate net worth? All your assets minus all your liabilities – so home equity is on one side of the ledger and the mortgage on the other. Then divide in fair market value of your property.

The bearded oracle’s model works as long as your home’s value is less than 100% of your net worth. Above that, it breaks down.

There is one sentence describing the net worth calculation. Simple, it’s 180K.

The next step tells you to divide in the home’s value……

In the case where home value exceeds 100% of net worth, this is a horses ass in logical terms.

Simply put, your net worth is 180K and it’s all in a house. That’s 100%.

To be fully valid, this relation clearly needs finite range/domain on the variables.

Whatever. Boring argument about something that doesn’t really matter. The key point is it’s a dumb frigging idea to have all your money in a house, and I’ll agree with that.

#210 Gunboat Denier on 08.30.12 at 2:02 am

201 TOBB – from Garth

“so home equity is on one side of the ledger and the
mortgage on the other.”

So assets on one side and liabilities on the other. But
Home equity is not the asset – the home is, and of course
the mortgage is the liability, with the diff being the
equity.

“Then divide in fair market value of your property.”

What is meant by “divide in”?

#211 Herb on 08.30.12 at 7:04 am

#207 Daffy Duck,

well said!

#212 Stickler on 08.30.12 at 8:20 am

@ #206 Investx on 08.29.12 at 9:59 pm

180 Devore on 08.29.12 at 6:02 pm
#141 Investx

This is confusing. Are you earning a 7% yield or not?
————-
>> Lets simplify it as an example:
You buy one unit for $100 of the ETF.
The Unit pays you a monthly distribution of $1.00

That is $1.00 X 12 months = $12 per year.
Which is $12/$100 = 12% distribution for the year.

Now imagine the ETF holds 2 things only:
– Bond that yields 2% per year
– Some bank stock that yields 4% per year

…but wait…you got a distribution of 12% !?!

If the value of the bond or bank stock does not go up then the remaining 6% that the investments did not yield is considered “return of capital” (your own money back.)

…so did you increase your wealth by 12% -> NO.

You got 6% + some of your money back.

On ishares website you can download the prospectus that will explain it

#213 Andrew on 08.30.12 at 9:40 pm

Most of the jobs these days have moved to office parks in horrible areas like Mississauga, where Air Canada and various other planes fly overhead 24/7. Office space in Scotia Plaza is expensive.