Game-changer

distraction

A lot changed this past week. Most of it will be lost on your neighbours. But that goes to the little chat we had here yesterday about rich people. There ain’t many. The Occupy people got it right when they made ‘We are the 99%’ their rallying cry. The gulf between people with assets and people with debt is yawning wider every month.

Sure, real estate’s a big part of that. Most Canadians continue to throw all their net worth into one single asset, usually bought with extreme leverage and at inflated values. The odds of that turning out well for everyone in a deflating world are about zero.

Recall the chart I published here some days ago which showed the lower the income level, the more net worth sits in real estate, accompanied by big borrowing. The only way that creates wealth is if you luck out in a hot market, or inflation comes along and lifts wages and prices while dampening debt.

And this brings us back to the ugly week which just happened. Could be a game-changer. Here’s why.

The 16-day shutdown of Washington cost $23 billion and will take a bite out of the US economy, eroding the GDP. It damaged the Americans, disgusted voters and could alter the political landscape. On Thursday I suggested this could also help push money north of the border where many stocks are, like me, cheap and appealing. On Friday the TSX jumped a hundred points, just to make the point. Expect more.

But most people don’t have equity market exposure, because they’d rather invest in grout. Too bad. Because while financial investors can do extremely well in a slagging economy, real estate never does. What the Tea Party nutjobs accomplished in Washington will hurt Canada, too, and our central bank will likely be downgrading its growth forecast. In other words, fewer new jobs and stagnant salaries. In fact, we could be entering a new season of corporate belt-tightening, as is now the case at Loblaws, Sears, Blackberry, CP, Talisman. And you know what happens in big layoffs? Yup, stock values rise. The 1% make more. The 99% worry.

Last week also means you can forget all that noise about the US central bank cutting back on its stimulus spending. That’s now off the table until March. The results of that were so predictable. In fact, they were even predicted here – falling bond yields and rising bond prices (giving a capital gain to those holding bonds in a balanced portfolio). In addition, a rebound for interest-sensitive stuff like REITs (real estate investment trusts) and preferred shares.

Here’s some proof for you:

XRE

Now, does your brother-in-law have a diversified portfolio with a fixed-income component comprised of government and corporate bonds, high-yield and real return bonds, REITs and preferreds? Nah, didn’t think so. But he might have a killer Wolf stove, which depreciated a little more last week.

Real estate feeds on inflation, growth, income gains, cheap money and hormones. Three of those are now gone. Off the table for a few years. Because the 99% have almost all their money there, you can figure out why this is not the best strategy. Mix in a little job stress, and watch long-term confidence (along with housing sales) weaken.

Financial assets, in contrast, are omnivorous. They feed on anything. Stocks jump when corporate profits rise, even when workers are being punted in droves (look at 2010 markets). Bonds and other fixed-income assets can rock even when chaos rules and the economy wilts (like now). Rich people know they’re likely to stay that way if they maintain three things: balance, diversification and liquidity.

Balance means a proper weighting between stuff that’s safe (like bonds and preferreds) and things that grow (like equity ETFs). When one part of the portfolio is under pressure, the other is likely gaining.

Diversification means lots of asset classes, a wide geographic array, and exposure to multiple sectors of the economy. So when Canadian markets suck, for example (the last three years), US or European ones may not. You also want diversified income – return of capital (no tax), capital gains or dividends (little tax) and interest (the worst).

Liquidity means not being locked into long-term commitments. Own nothing in a portfolio that cannot be turned into cash in three days or sold in four seconds. This allows you the flexibility to sidestep danger and exploit opportunity.

Now I’ll state the obvious: having all of your money in a house with a mortgage is unbalanced, undiversified, illiquid.

At least you’ll have company. 99%. And growing.

175 comments ↓

#1 TheRealTruth on 10.18.13 at 9:15 pm

…and fixed mortgage rates will stay low for a long time….

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#3 calgaryPhantom on 10.18.13 at 9:19 pm

Took your advice, built my income portfolio since August. Last week built some of my equity portion too, as i thought it was a mouth watering buying opportunity.

Guess what, i’m gonna party this weekend!

#4 Retired Boomer - WI on 10.18.13 at 9:21 pm

From the measuring devices found on-line, the best I van figure is I’m up in the top 84-87%. Well, close enough for government work, and for me not to have to.

More interesting when rational people do stupid stuff makes we wonder, and smile!!!

#5 pathcontrolmonk on 10.18.13 at 9:23 pm

You forgot to mention that this week Robert Shiller won the Nobel Prize for showing people how stupid they are in regards to RE.

#6 John on 10.18.13 at 9:27 pm

“This allows you the flexibility to sidestep danger and exploit opportunity.” This quote and whole post remarkably resembles ideas found in the book “Antifragile” of Nassim Taleb… awesome stuff Garth, there is so much to gain from this disorder

#7 Realtor #1 on 10.18.13 at 9:27 pm

Tapering till March
that means interest rates for a long time
Lets hope for job losses.

#8 Obvious Truth on 10.18.13 at 9:29 pm

Does anyone else feel a little dirty by being like Garth while knowing others will have a difficult slog in the coming years?

I’ve kind of been hoping for inflation to help them out. I can profit in many ways under this scenario. The 99% need it. Maybe boomers get lucky again.

Feels like open skies for the .85.

Uneasy about it being this easy.

The Dems will probably take the house next year. Grover is sounding like an apologist and Ted has disappeared.

Another tail wind?

#9 calgaryPhantom on 10.18.13 at 9:32 pm

SMH-

Buy this Ottawa home and get a leased Jaguar for free

http://ca.finance.yahoo.com/news/buy-ottawa-home-leased-jaguar-free-220004295.html

#10 Obvious Truth on 10.18.13 at 9:34 pm

# 3 Are you a pseudo for Dion preparing for life after nhl

Way to go.

Invest in yourself. The pay off is always better.

Keep reading.

#11 nincompoop on 10.18.13 at 9:34 pm

But the price of cheeze will be coming down!

#12 IfGalbraithWereAlive on 10.18.13 at 9:39 pm

Here come the retail investors buying at the top. The final suckers rally run up in global assets before the next crash. Welcome to the effects of boom bust bubble economics and the stupid people who support it….

#13 not 1st on 10.18.13 at 9:41 pm

Garth, have you given any consideration to the fact that people make dumb decisions is because of the insane amount of advertising that they are subjected to every day. I mean there has to be 10 times more advertising of everything than there was 25 years ago. Magazines, internet, billboards, TV, movies etc etc. Consumables are marketed to people, not assets.

#14 ValleyBoy on 10.18.13 at 9:41 pm

Good evening blog dogs,

This Youtube video is getting allot of hits on the scam of an economy we are all involved in you may wanna check it out. Normally these videos get 10 000 or less hits it at over 400 000 in 4 days.
http://www.youtube.com/watch?v=iFDe5kUUyT0

Also even Jim Cramer is talking about getting out of the US dollar.
Did Garth say the US wont tapper till March now, hmm haven’t the crazy basement dwelling gold bugs been saying this months ago. Im not saying I like the idea of flocking to Gold thou, but to get things back to they way they have always been. Why fight it.

Ralph Cramdown you criticized my gamer a couple days ago. I suck at spelling, guilty as charged. Played to much sports and continue to, to have ever committed to the English language. My Bad.

#15 zee on 10.18.13 at 9:46 pm

In a few weeks, the tsx will go back to under 13000. These investors will realize that there are not many stocks to invest here. Too many resource stocks and not enough tech and industrial stocks.

Will fixed 5 year go down to below 3 again?

#16 Dave on 10.18.13 at 9:53 pm

OK careful Garth…that’s back-to-back excellent posts that I totally agree with…

#17 Devore on 10.18.13 at 9:54 pm

#175 Son of Ponzi

What were are watching is a classic Greek drama:
The Protagonist (Ralph Cramdown) vs the Contagonist (Canadian Watchdog).
Cast your vote.

You should vote for both, unless the “dismal science” has become significantly less dismal and more scientific while I wasn’t looking.

#18 Cory on 10.18.13 at 9:55 pm

I never bailed on Canada. Everybody was down on The TSX and big on the S&P which means people should have been buying the TSX. I agree with alot of your blogs but not on ETF’s. Individual stocks if you know how to analyze a balance sheet and financials are the way to go everytime. But if you don’t know how to evaluate a company, either learn it or do what everyone else does and simply buy mindless ETFs and hope for the best.

The individual companies that you say lie in their financials with accounting tricks are the same ones held in ETF’s. So instead of holding one liar, you hold many. Lol

QE was never to be tapered and never will be.

#19 AK on 10.18.13 at 10:02 pm

“The 16-day shutdown of Washington cost $23 billion and will take a bite out of the US economy, eroding the GDP. It damaged the Americans, disgusted voters and could alter the political landscape.”
====================================
What will happen when Japan defaults on their massive debt within the next 2 years?

#20 Realtor on 10.18.13 at 10:02 pm

I thought tapering would end by the end of this year?
Nope, lets revise and and say “next year”.
And when we get to March we will revise and say October and so forth.
Just like this housing bubble that will pop because of house hold debt, or 70% of people already own or seniors will be selling their homes all at the same time etc.,,,
Big Mistake Waiting.
prices in the GTA will not hit 2010 levels.
At this point you would need a 25% decline.

#21 [email protected] on 10.18.13 at 10:07 pm

Y’all should sell your homes now and flood the TSX with purchases. Then rent and live large. Mexican Mojitos anyone?

#22 Basil Fawlty on 10.18.13 at 10:17 pm

A $23B loss to the US economy does not seem that large, given the size of their GDP. In addition, they are printing $85B per month. If this hiccup is going to do enough damage to push QE through to March, it sounds like the economy was rather weak before the budget fiasco.
Of course, many consider that the US economy has been weak for years. This is witnessed by steadily falling real incomes, massive money printing and a replacement of quality jobs with poor paying part time positions. None being the sign of a improving economy.

So many America-haters on this blog. Mother issues. — Garth

#23 D.D. Corkum on 10.18.13 at 10:25 pm

#18 Cory on 10.18.13 at 9:55 pm

“QE was never to be tapered and never will be.”

—–

I agree with much of your post, but not this part. QE will eventually end. It can’t realistically go on forever.

Done by this time next year. — Garth

#24 Devore on 10.18.13 at 10:28 pm

#14 ValleyBoy

Also even Jim Cramer is talking about getting out of the US dollar.

???

This is a buy signal. Confirmation will come in when Goldman Sachs advises clients to dump USD.

#25 espressobob on 10.18.13 at 10:28 pm

#15 zee

You made the point you should think about, diversification! Why would anyone invest solely in Canada? We’re 4% of the world economy!

What about the remaining 96%?

That would include US, International, & emerging markets!

Homework Zee! Good Luck.

#26 prairie person on 10.18.13 at 10:54 pm

They’re not just buying houses with insane mortgages. Read this Globe and Mail article and weep.
http://www.theglobeandmail.com/life/relationships/meet-the-new-breed-of-bridezilla-fork-over-the-cash-or-face-social-media-wrath/article14902806/

#27 Son of Ponzi on 10.18.13 at 10:56 pm

Devore #17.
Typical Canadian response.
That’s what kids are learning in school, everyone is equal and right.
For me life is a zero sum game, you either win or lose.
Just like in a classic Greek drama.

#28 John in Mtl on 10.18.13 at 10:59 pm

“The 16-day shutdown of Washington cost $23 billion and will take a bite out of the US economy, eroding the GDP.”

What’s 36 billion to the Americans? – small change. They count in trillions now.

#29 John in Mtl on 10.18.13 at 11:00 pm

@#13 not 1st on 10.18.13 at 9:41 pm:
“Garth, have you given any consideration to the fact that people make dumb decisions is because of the insane amount of advertising that they are subjected to every day. I mean there has to be 10 times more advertising of everything than there was 25 years ago. Magazines, internet, billboards, TV, movies etc etc. Consumables are marketed to people, not assets.”

It is each person’s responsibility to ignore that advert or let himself be influenced by it. If enough people stopped being swayed by advertising, maybe we would get less of it. Personaly, it would be a welcome good riddance.

#30 Basil Fawlty on 10.18.13 at 11:03 pm

“So many America-haters on this blog. Mother issues. — Garth”

There was no animosity towards America in my comments, I love Americans . Nor was there any reason for you to insult my Mother. Especially, after your continual reminders to attack the position, not the man.
Grow up.

#31 Ben on 10.18.13 at 11:04 pm

Looking forward to competing with Eastern Europeans for wages, Canadians? Race you to the bottom…

#32 Ralph Cramdown on 10.18.13 at 11:10 pm

#20 Realtor — “Big Mistake Waiting.
prices in the GTA will not hit 2010 levels.
At this point you would need a 25% decline.”

Hmm, who should I listen to, you or the guy who just won a Nobel Prize for saying the opposite and who was proven correct by subsequent events? Let me guess: You haven’t been in the business long enough to have experienced the last big bust?

#33 A Yank in BC on 10.18.13 at 11:14 pm

23 billion or 24? If you’re quoting S&P Rating Services, I believe it’s actually 24.

Anyhow.. Mr. Market seems to disagree about the supposed effects of this. Either that or they think the number itself is complete balderdash.

#34 Ralph Cramdown on 10.18.13 at 11:17 pm

#22 Basil Fawlty — “This is witnessed by steadily falling real incomes, massive money printing and a replacement of quality jobs with poor paying part time positions. None being the sign of a improving economy.”

The thing about well paying full time jobs is they’re the absolute last thing to get created in an economic recovery. First companies pay overtime, then they hire temps, THEN they consider adding full time staff. Which is why employment is a trailing indicator, and why the uninformed have complained about “jobless recoveries” since the word recovery was coined. Learn about leading indicators, coincident indicators and lagging indicators, and watch the right ones.

#35 Canadian Watchdog on 10.18.13 at 11:26 pm

The American recovery that everyone is ignoring.

Cash-strapped Americans turn to selling hair, eggs, kidneys

70% of children born to poor families won’t ever reach U.S. middle class

Average wage among renters: $14.32/hour. Average wage needed to afford market-rate rent: $18.79/hour

Meh..who cares? Stocks are up! As long as I get mine, everything is good. Until the day parents realize what kind of miasmic wasteland they left for their kids and grandchildren, because it's always easier to kick the can and bury one's head in the sand.

I assure you, it is headlines such as above that breeds more anti-government activists (many once middle class) who watch their dollars go to funding fat cat bonuses and stock rallies for the rich. If only forty or so members of Congress could entice a near default, then what happens if sixty or eighty get voted in next year's midterm elections?

Moreover, what happens next is what the Fed is trying to avoid the most, and that is becoming a lender of last resort to loser of credibility as more people realize that the Fed is causing the problem, not solving it.

#36 Stupesing in Cabbagetown on 10.18.13 at 11:30 pm

With respect to the 99%, someone sent me this interesting link: http://tinyurl.com/obmvfaj

#37 Ralph Cramdown on 10.18.13 at 11:46 pm

Watchdog, I had a long comment about inflation, but Garth’s server ate it.

Bond investors aren’t expecting inflation:
http://libertystreeteconomics.newyorkfed.org/2013/08/creating-a-history-of-us-inflation-expectations.html

http://www.clevelandfed.org/research/data/inflation_expectations/archive.cfm?dyear=2013&dmonth=8

And the MIT Billion Prices project isn’t seeing it:
http://bpp.mit.edu/usa/
http://www.pricestats.com/us-series

#38 Basil Fawlty on 10.18.13 at 11:50 pm

#34 Ralph Cramdown – Learn about leading indicators, coincident indicators and lagging indicators, and watch the right ones.

Recent learning and watching indicates that the new part time positions tend to be low paying service sector positions, while quality full time manufacturing positions are in the decline.
Is this incorrect?

#39 Ralph Cramdown on 10.18.13 at 11:58 pm

“This survey, which records respondents’ perceptions of price changes over the past 12 months as well as their expectations for price changes over the next 12 months, has uncovered a surprising result. The data indicate that the public’s estimates and predictions of inflation are significantly and systematically related to the demographic characteristics of the respondents. People with high incomes perceive and anticipate much
less inflation than people with low incomes, married people less than singles, whites less than nonwhites, and middle-aged people less than young people. This Commentary describes what is perhaps the most curious observation of all: Even after we hold constant income, age, education, race, and marital status, men
and women hold very different views on the rate at which prices are changing.”

People overestimate inflation. Some more than others, apparently. Fascinating paper.
http://www.clevelandfed.org/research/commentary/2001/1101.pdf‎

#40 Bobby on 10.19.13 at 12:00 am

#20 Realtor,

You should get out more or haven’t been around for long. I recall the crash in Ontario in the early nineties. Realtors said prices wouldn’t drop then also.
Have a look here on Vancouver Island. Lots of stalled and reduced listings. It’s a buyers market out there.
Looked at a new condo building, only half sold and been on the market for a year. Realtor on site says they are selling quickly. Looking around, I was the only one there.

#41 Ralph Cramdown on 10.19.13 at 12:15 am

#38 Basil Fawlty — “[T]he new part time positions tend to be low paying service sector positions, while quality full time manufacturing positions are in the decline. Is this incorrect?”

http://research.stlouisfed.org/fred2/graph/?g=nvX

I suppose so, though not all service sector jobs are low paying (think Wall St.) and there’s a lot of semiskilled and unskilled labour making money in the fracking patch.

BUT your original assertion was that the economy as a whole was not improving, but leading and coincident indicators say that it is. A low paying service sector job is better than no job at all.
http://1.bp.blogspot.com/-ijU6PH-8dt0/UV7FocJzo7I/AAAAAAAAZtM/WUPGUOPBf9g/s1600/EmployRecMar2013.jpg

#42 Scott in Gibsons on 10.19.13 at 12:18 am

Darn it Garth!! All your predictions were coming true, until those crazy Tea Partiers ruined it!! I knew there would be a lame excuse. You’ll never get it…………

#43 jim on 10.19.13 at 12:22 am

“The 16-day shutdown of Washington cost $23 billion and will take a bite out of the US economy, eroding the GDP.”

GDP is a measure of consumption, and a poor way metric for the health of an economy. Wealth comes from production and capital accumulation, not from consumption.

#44 Son of Ponzi on 10.19.13 at 12:23 am

Basil, to support your comment.
To make matters worse, in Canada many of these jobs are filled by Temporary Foreign Workers.

http://www.theglobeandmail.com/report-on-business/international-business/majority-of-us-fast-food-workers-need-public-assistance-study-says/article14867740/

#45 giorgio on 10.19.13 at 12:36 am

what a load of crap get the hell out

#46 van guy on 10.19.13 at 12:40 am

Garth,

Are the miners cheap or just dead?

#47 ValleyBoy on 10.19.13 at 12:41 am

# 36 Supesing in Cabagetown
Good video puts the divide in wealth in the US a little more clearer. We in Canada cant be to much further behind.

Again Garth we are frustrated with the US because the government needs to tax the wealthy and ultra wealthy hard. Also Chinese imports need to be taxed hard to so we actually maybe could make our own things here in the west. Yellen needs to have a good speech and talk about cracking down along with other things. Sadly I doubt any will happen.
The more I read the main stream media it seems like there are more articles popping up about other countries getting away from the dollar. Even Canada signed a major trade deal with the EU recently. It’s Almost like the Elite are trying to crash the dollar and move on.

True wealth is your time.

#48 Freedom First on 10.19.13 at 12:45 am

#36 S i C

I have seen that before, but it is nice to see it again. The ignorance of the average citizen is mind numbing. It really is every man for himself in our society, as the masses are being screwed over by people who know they are screwing them, without even a peep from the masses. It is like they are brain dead. The bottom 80% of the population all think the same, and are not aware of how financially illiterate they are, as they all only listen to each other, so they do the same thing. Income is only a part of being financially well off, as some people of average incomes do exceptionally well, while others of much higher incomes are financial idiots. I like balance, diversity, liquidity, being debt free, and another very important rarely discussed in financial circles, living a healthy lifestyle/looking after ones health. Look around, see the obesity epidemic. Health is wealth, MORE, than anything else. No exception. Remember, Freedom First.

#49 Ralph Cramdown on 10.19.13 at 12:57 am

Subprime Chronicles:

Lesson one. Never lend a million dollars to one guy who says he’ll pay you 29.5%. Good, legal businesses can get money for less, and bad businesses… but you know how it’ll end. http://www.cbc.ca/news/canada/manitoba/winnipeg-man-sues-real-estate-broker-over-loan-agreements-1.2101781

Lesson two. Howmuchamonth? “The attitude of how to sell [subprime mortgages] has to change; you have to be able to sell a 14 per cent interest rate. Brokers on the B side are used to selling payment as opposed to rate,” http://www.mortgagebrokernews.ca/news/bdeals-take-different-skillset-175348.aspx

Lesson three. When someone tells you that private REITs are better than public REITS because of the lack of price discovery, hang up. The story eventually changes to ” The second factor, resulting from the recovery of the credit markets, has been an increase in the demand for redemptions by investors. During and following the financial crisis, it has been my experience that investors were Interested in the stable returns associated with real estate. Once the financial crisis passed, Investors have indicated to me that they are more Interested In higher risk investments with higher returns than those offered by the League Group. […] Finally, the growth of the League Group has been exponential and greatly in excess of my expectations. The result has been that the League Group has outgrown its current corporate structure(which has become too complex) and its project-by-project funding model.
61. The result of the above is that the League Group no longer has sufficient cash, and has ceased meeting its obligations as they become due in the ordinary course of the League Group’s business.” That’s from the affidavit filing for a CCAA restructuring.

I can see why investors might want higher returns than the dimes on the dollar that are undoubtedly coming their way, but higher risk? What I hate about this process is that it often allows the clowns who drove the car into the ditch in the first place to stay on for the restructuring, often with a hefty retention bonus.

#50 willworkforpickles on 10.19.13 at 1:52 am

Average mortgage rates in Canada will rise to the 5% mark in 2014.
A depreciating dollar with another round of US debt ceiling impasse to come , ( not due to tapering but the reverse surprisingly ) is going to affect both countries rates.

#51 Mark on 10.19.13 at 2:26 am

#34-Ralph
The thing about well paying full time jobs is they’re the absolute last thing to get created in an economic recovery. First companies pay overtime, then they hire temps, THEN they consider adding full time staff.

So Ralph, we’re to believe the US economy, juiced by 85-billion a month in QE that even Garth now admits can’t be scaled back even a little bit anytime soon, has been recovering for 4 years now and we still don’t have full time jobs?

Think about it Mr. Cramdown, FOUR years into this “recovery”, no full time jobs, and they can’t scale back to 75-billion a month QE.

Maybe there isn’t any recovery?

#52 Tony on 10.19.13 at 2:30 am

I think i’ll just put money into long term bonds and watch the worldwide stock markets plummet during that time. America will no doubt end up like Japan with zero interest rates for the next 20 to 30 years.

#53 jj on 10.19.13 at 3:13 am

Game changer? Not a chance, again, hellooooo

What did you think was going to happen? OF Course there was going to be no default DUH

And what, 23 Billion on a 1.2 Trillion dollar economy? NEXT, next next next next next WHO CARES?

Nothing Happened people, Nothing! A bit of fluff for a couple weeks and its back to the same ole same ole.

Also the FED is boxed in, wakey wakey, Boxed in! Do you understand? They can Never ever get out of doing QE ever again UNTIL the monetary system is reset.

They trial ballooned the IDEA they were going to taper, Not do it Bob, just the IDEA of tapering and the bond market got b0mbed and markets dropped. Guys, just the IDEA let alone doing ANY tapering does this! And you think they can just sell their balance sheet somewhere down the line? FORGET IT, the FED is TRAPPED.

Until March? Really? OH wait it was September AH that’s it! Forget about March, forget IT! There is a ZERO probability of a taper in March. ZIP

This whole shutdown is forgotten by Tuesday and its business as usual in America.

The US indexes are STILL going to well outperform the TSX going forward.

#54 Obvious Truth on 10.19.13 at 7:33 am

#20 Realtor

I have made comments with respect to your previous entries. Sorry to do it again but it will be the last time.

You sound like Ted Cruz. The same inane comment based on opinion with no actual substance.

There are no tailwind left for housing. No catalysts as we say. Previous tailwinds are shifting. Now headwinds. Time to trim.

Where it stops?

When we don’t know the magnitude of potential headwinds and price discovery is murky we look to the charts. 2010 doesn’t register. We’ll stall at 09. People will think its a good deal. No doubt it gets to 07. We’ll see from there.

Only inflation can help but with ultra low rates it may not this time. Not knowable now. I’m aware tips have cratered but inflation can show itself quickly and without much warning.

Within this there is always room for negotiation but 2010 if off the table.

Full disclosure. I own plenty of real estate. None in the last five years. There were good deals in 09. Credit was frozen. I know it will go lower but il have a final ten year term on it.

#55 Ralph Cramdown on 10.19.13 at 8:23 am

#51 Mark — ‘Think about it Mr. Cramdown, FOUR years into this “recovery”, no full time jobs, and they can’t scale back to 75-billion a month QE.’

I do think about it. But against the Fed’s easy monetary policy you have to balance the bonehead fiscal policy of the government. Remember when the sequester was a series of threatened spending cuts so draconian, and affecting so many spending priorities of both parties, that they’d HAVE to reach a deal to avoid it? It’s now the law of the land. That’s accounted for a lot of Federal government layoffs. The states and municipalities have been busy, too. Funded mainly by state income tax, and property tax which in some places fell automatically in the property bust, and unable to run budget deficits, they resorted to massive layoffs and spending cuts. Oh, and let’s not forget middle class payroll tax increases, refusal to extend unemployment benefits, cuts to food stamp programs…

So this recovery, which economists already predicted would be long and painful because of it being a balance sheet recession rather than an inventory recession, has been fighting significant headwinds from government fiscal policy.

#56 Realtor # 1 on 10.19.13 at 9:21 am

#54 Obvious Truth

My statement is based on opinion and yours is based on what? Is it fact that prices will hit 2007? or 09? When?
Let me guess in five years? I’ve realized thats the theme of this blog.
I have been reading this blog since 2010; and the bloggers have been telling everyone to wait there will be a crash because of the reasons mentioned before. Three years of reading this blog and nothing. I even thought when rates hit mid 3% this fall that it would change things, it hasn’t.
Rates are basically at 2010 levels and the amor rate is lower and CMCH has tighter rules. Explain to me why prices haven’t dropped?

I told everyone to subscribe to tosolds.ca and look at the prices sold and make your “opinions”

But please Obvious Truth tell me when and why it will hit 2007 levels?

#57 mind my own business on 10.19.13 at 9:30 am

GSK Canada (GMS) laying off people for Christmas (it is a tradition), all contract positions and some full time.

#58 Wally on 10.19.13 at 10:07 am

You expect people to get excited about investing at 6% per year? That’s like watching paint dry.

It’s not about excitement, but a steady, consistent growth in wealth and financial security. Lots of people would be happy with that. — Garth

#59 a prairie dawg on 10.19.13 at 10:35 am

If you like dogs, you’ll love this:

http://www.businessinsider.com/best-dog-pictures-2013-10#ali-trews-adorable-hungarian-vizsla-won-the-puppies-category-1

#60 Ralph Cramdown on 10.19.13 at 10:39 am

#56 Realtor # 1 — “But please Obvious Truth tell me when and why it will hit 2007 levels?”

I know neither the hour nor the minute. “In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”

But I do know that investors’ views on asset classes don’t go from mania to apathy, except briefly on their way to reviled. If you want to put a floor under how far prices could fall, think of how much ROI a cash buyer with no leverage would expect from rents alone, without factoring in possible capital gains. That’s where a number of frothy US markets found their bottoms. Think 7% to 10% cap rate, net of all expenses and allowances.

#61 You unworthy worms of the stock market! Here is how "a real man' lives on 10.19.13 at 10:44 am

Counting nickels and dimes will never take you here:

http://www.torontolife.com/informer/toronto-real-estate/2013/10/11/slide-show-versailles-vaughan-mansion/

Open house today !

#62 T.O. Bubble Boy on 10.19.13 at 10:58 am

@ #56 Realtor # 1 on 10.19.13 at 9:21 am
#54 Obvious Truth

My statement is based on opinion and yours is based on what? Is it fact that prices will hit 2007? or 09? When?
Let me guess in five years? I’ve realized thats the theme of this blog.
I have been reading this blog since 2010; and the bloggers have been telling everyone to wait there will be a crash because of the reasons mentioned before. Three years of reading this blog and nothing. I even thought when rates hit mid 3% this fall that it would change things, it hasn’t.

Rates are basically at 2010 levels and the amor rate is lower and CMCH has tighter rules. Explain to me why prices haven’t dropped?
——————————

For someone who’s been reading Garth since 2010, you’re missing the key message. To clarify: Garth’s message is not “wait to buy” or “don’t own real estate”, it is “be diversified and balanced”.

The Rule of 90 (mentioned countless times on this blog) sets a ceiling for the maximum % of your net worth to put in RE.

Several other topics, such as using a HELOC to take some equity out of your house as an investment loan (with tax-deductible interest), also aim to diversify RE investments vs. avoid them.

As the realtors say: “you’ve gotta live somewhere”… but that “somewhere” should represent 60% or less of your net worth for the average adult Canadian if you’re balanced at all.

#63 Thornhill on 10.19.13 at 10:58 am

9 Signs That China Is Making A Move Against The U.S. Dollar

http://www.zerohedge.com/news/2013-10-18/9-signs-china-making-move-against-us-dollar

Too bad, America-haters. The US$ will be the global reserve currency longer than you are alive. — Garth

#64 Thornhill on 10.19.13 at 11:02 am

Hey hey let’s party

We just rolled $17T on the debt clock

http://www.usdebtclock.org/

#65 Simple Truth on 10.19.13 at 11:07 am

Simple truth
SIMPLE TRUTH 1
Lovers help each other undress before sex.
However after sex, they always dress on their own.
Simple Truth: In life, no one helps you once you’re screwed.

SIMPLE TRUTH 2
When a lady is pregnant, all her friends touch her stomach and say, “Congrats”.
But, none of them touch the man’s penis and say, “Good job”.
Simple Truth: Some members of a team are never appreciated.

FIVE Other Simple Truths
1. Money cannot buy happiness, but it’s more comfortable to cry in a Corvette than on a bicycle.
2. Forgive your enemy, but remember the ass hole’s name.
3. If you help someone when they’re in trouble, they will remember you when they’re in trouble again.
4. Many people are alive only because it’s illegal to kill them.
5. Alcohol does not solve any problems but then neither does milk.

Bonus Truth: Condoms don’t guarantee safe sex.
A friend of mine was wearing one when he was shot by the woman’s husband.

Did anyone mention to you that this is a financial blog, with hormonal overtones – not the other way around? — Garth

#66 B on 10.19.13 at 11:09 am

My wife and I are young renters with roughly 100k liquid to invest and no desire for a house, but can’t seen to get the attention of any non-commission advisor. What do you recommend we do? Start with a book or two or see a fee based advisor right away? What’s the best book to walk us through the way to build a diversified balanced portfolio?

#67 recharts on 10.19.13 at 11:12 am

You little imbecile, your colleague @ http://www.itssoldyouaremoving.com indicates that sites like Tosolds.ca are not reliable. Read here
http://urbantoronto.ca/forum/showthread.php/10523-Baby-we-got-a-bubble!?p=772436#post772436

I counted less than 450 condos sold between Oct 1-Oct 15 while your colleague shows us that the correct number is 582 condos.

Another colleague of yours shows that that number is 540
http://urbantoronto.ca/forum/showthread.php/10523-Baby-we-got-a-bubble!?p=772723#post772723

So what sort of data are you pretending you use when three of you can not agree on a such simple matter. You realize that you look like an idiot when you try to tell us that your opinion is based on facts.

Bottom line: with very rare exceptions you are all a bunch of uneducated greedy and unscrupulous manipulators

#56 Realtor # 1 on 10.19.13 at 9:21 am
#54 Obvious Truth

My statement is based on opinion and yours is based on what? Is it fact that prices will hit 2007? or 09? When?
Let me guess in five years? I’ve realized thats the theme of this blog.
I have been reading this blog since 2010; and the bloggers have been telling everyone to wait there will be a crash because of the reasons mentioned before. Three years of reading this blog and nothing. I even thought when rates hit mid 3% this fall that it would change things, it hasn’t.
Rates are basically at 2010 levels and the amor rate is lower and CMCH has tighter rules. Explain to me why prices haven’t dropped?

I told everyone to subscribe to tosolds.ca and look at the prices sold and make your “opinions”

But please Obvious Truth tell me when and why it will hit 2007 levels?

#68 Ayn Rand Army on 10.19.13 at 11:17 am

Too bad, America-haters. The US$ will be the global reserve currency longer than you are alive. — Garth
——–
Are you telling us we’re all gonna die soon?

Won’t OHIP save us?

Help!!

#69 Thornhill on 10.19.13 at 11:21 am

“There are three classes of people: those who see. Those that see when they are shown. Those who do not see.” Leonardo da Vinci”

There’s no money….there is only debt
Current debt per capita…..$50,000

http://www.zerohedge.com/news/2013-10-18/you-are-here
***

There’s no money….there is only debt
The world is waking up to the truth that one of the functions of “money” is a store of value. Looked at this way there is debt and our precious and other things of value which certainly does NOT include the us$.

Well we can be thankful that the us$ is NOT debt. The bad part is that the us$ is worth less than debt which has a possibility of being collected. The us$ promises NOTHING to no one.

http://www.bloomberg.com/news/2011-09-15/gold-backed-dollar-signals-10-000-metal-price-chart-of-the-day.html
***

A world based on debt

How can a world with $250 trillion of debt and over $1 quadrillion of worthless derivatives ever recover? Of course it can’t, especially since this is a world that is supported by legs of worthless printed paper money – legs that are just getting longer and more unstable by the day as trillions are added to the debt every year.

Wherever we turn Europe, USA, Japan and many other nations, the situation is totally beyond repair. But as I have said in recent interviews and articles, it is not just beyond repair but we are likely to be at the end of a major economic cycle that started at the end of the Dark Ages. I wrote about this already back in 2009 in my article “The Dark Years Are Here” . Major economic cycles take a long time to develop and if we are now at the beginning of a major downturn in the world economy, people living today will only experience the very beginning of the downturn. But sadly the beginning will be a major and very unpleasant upheaval that virtually nobody will escape.

We have had a century of false prosperity based on printed money and credit. In the last 100 years we have seen the creation of the Fed in the US (a central bank owned, created and controlled by private bankers) combined with fractional reserve banking (allowing banks to leverage 10 to 50 times), exploding government debt and a derivatives market of $1.4+ quadrillion. These are the principal reasons why the world economy has expanded in the last century and particularly in the last 40 years. These four extremely shaky legs, Central bank printing, Bank leverage, Government borrowing and Derivatives manufacturing have created a world of delusional wealth and illusory prosperity. Also, there is a total absence of moral and ethical values. We are in the final stages of an era of extreme decadence, an era that sadly cannot and will not have a happy ending.

Europe a hopeless case

But still, governments and the media are continuing to feed us with good news which bears no resemblance to the real state of the world economy. In Europe the Mediterranean countries are expanding their debt at exponential rates. Government debt to GDP of Spain, Portugal, Italy and Greece is ranging from 100% to 180%. There are futile attempt at austerity but this only leads to lower growth and higher debts. There is sadly no way out for these countries whose population is suffering terribly. The best solution would be to leave the EU and the Euro, renege on the debts and devalue currencies. But the Eurocrats are unlikely to accept this and would rather add more debt and print more money, making the situation even worse.

US debt will sink the world

The situation in the US is no better. There is hardly one economic figure being published that has anything to do with reality. Real unemployment is 23% and not 7% as published. GDP using real inflation figures has been declining for years, and real wages have declined for 40 years. The perceived increase in living standards has only been achieved with a massive increase in debt. US government debt was $1 trillion in 1980, $8 trillion in 2006 when Bernanke became Chairman of the Fed and is now $17 trillion and growing by at least one trillion a year. So Bernanke has managed to create $9 trillion of debt during his brief 7 years as Chairman of the Fed. It took 230 years from 1776 to 2006 for the US to reach $8 trillion and Bernanke has beaten that in 7 years. An astonishing achievement. And this debt excludes unfunded government liabilities of around $220 trillion. Who in their right mind can believe that the US can get out of this hole!

Yes the US and the rest of the world will print unlimited amounts of money. But printed money is printed worthless pieces of paper and has nothing to do with wealth creation. The worldwide printing will just add to the already unsustainable debt worldwide and not create one penny of added prosperity. Instead we are likely to see a hyperinflationary depression in many countries.

For the privileged few that have financial assets to protect, physical gold stored outside the banking system is likely to be the best way to preserve wealth and purchasing power.

Source

https://www.goldbroker.com/news/world-based-on-debt-europe-hopeless-case-us-debt-will-sink-world-320.html

***

We don’t need no steenkin math.
Eric Sprott: “The United States is already insolvent. They announced their own GAAP budget deficit, which was $6 trillion last year. $6 trillion! They (only) had revenues of $3 (trillion). And the combined debt and entitlements is now $60 – $70 trillion.

Now, can you expect somebody with $3 trillion of annual revenue to be able to deal with $60 trillion of debt? It’s impossible. So, mathematically it’s over….

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/18_Billionaire_Sprott_Asks_How_Will_People_Survive_Whats_Coming.html

***

How in the world did we get in this fix?

PEOPLE PAY CLOSE ATTENTION TO THIS:
When it comes to impromptu speaking, Obama is clueless. He depends on memorized lines, that any good actor could accomplish. Let’s face it, the man is incompetent and completely lost without his teleprompter. How in the world did we get in this fix?

This comes from Danish TV.

This is embarrassing. You’ll probably NEVER see this on American TV or on late night talk shows like Letterman. This man cannot function without a script and/or teleprompter! This is what is on European TV.

Click below to watch.

http://www.youtube.com/v/erYpXzE9Pxs%26

Also some of the clips at the emnd are just as interesting. Lookl at the one about his worst tv clip.

***
A Tiny Dot

http://www.youtube.com/watch?v=H6b70TUbdfs

***
Charlie Mcgrath
http://www.youtube.com/watch?v=_jmLJrklY6o
***

U.S. debt jumps a record $328 billion — tops $17 trillion for first time
By Stephen Dinan-The Washington Times

Updated: 2:05 p.m. on Friday, October 18, 2013
U.S. debt jumped a record $328 billion on Thursday, the first day the federal government was able to borrow money under the deal President Obama and Congress sealed this week.

The debt now equals $17.075 trillion, according to figures the Treasury Department posted online on Friday.

The $328 billion increase shattered the previous high of $238 billion set two years ago.

The giant jump comes because the government was replenishing its stock of “extraordinary measures” — the federal funds it borrowed from over the last five months as it tried to avoid bumping into the debt ceiling.

Under the law, that replenishing happens as soon as there is new debt space.

In this case, the Treasury Department borrowed $400 billion from other funds beginning in May, awaiting a final deal from Congress and Mr. Obama.

http://www.washingtontimes.com/news/2013/oct/18/us-debt-jumps-400-billion-tops-17-trillion-first-t/
***

5% of the world’s population, 25% of the world’s prison population

http://www.globalresearch.ca/the-prison-industrial-complex-locked-up-in-america/5353924
***

Study: Food Stamps Most Rapidly Growing Welfare Program
BY: Elizabeth Harrington October 17, 2013

Food stamps are the most inefficient, vastly expanding social welfare program in the country, according to a new study.

Forty-seven million people participate in the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps, and costs have increased over 358 percent since 2000.“This program has expanded rapidly over the last decade in a way that is not justified by the recession that we went through,” Tanner said.
http://freebeacon.com/study-food-stamps-most-rapidly-growing-welfare-program/

“There’s very little bang for all this increased buck.”

Tanner’s report, “SNAP Failure: The Food Stamp Program Needs Reform,” finds that in 2000 the cost of the food stamp program was just $17 billion. It has risen in cost to $78 billion today.

Spending on advertising and outreach for food stamps by federal and state governments has also increased, now amounting to $41.3 million a year.

States like Florida have hired “food stamp recruiters,” who have a quota of signing up 150 new recipients each month. Rhode Island hosts “SNAP-themed bingo games,” and the USDA tells its field offices to throw parties to get more people on their rolls.

***

#70 Townsend on 10.19.13 at 11:29 am

http://www.onthebrinkbook.com/housing-bubble-paper/

Why are you posting under multiple names? — Garth

#71 Doug in London on 10.19.13 at 11:33 am

Well, it looks like the 4 month fire sale on REITs, preferred shares, and utility stocks has come to an end. All good things come to and end sooner or later. I’m sure glad I took advantage of this long sale of these assets. Why would anyone not do so?

#72 Mister Obvious on 10.19.13 at 11:40 am

#45 Giorgio

“what a load of crap get the hell out”
———————

Rarely are we treated to such thoughtful, articulate opinions. You’re the reason I spend so much time perusing the comments section. Rex Murphy should pay attention.

#73 Mindless Media on 10.19.13 at 11:40 am

This video is so ridiculous that it actually makes you want to punch through the screen. It’s time to wake up boys and girls.

Abby Martin
http://www.youtube.com/watch?v=xefMM7m2YfE

more
http://www.minds.com/blog/view/214002/the-best-evidence-you-have-ever-seen-that-puppet-masters-script-mainstream-news-reports

#74 jess on 10.19.13 at 11:55 am

info tech FRAUD

Vast Corruption in Information Technology Contracts in Spotlight as CityTime Trial Begins in NYC
The trial has begun in the largest corruption case in New York City history. Private consultants are accused of siphoning tens of millions of dollars in kickbacks from the scandal-ridden $700 million CityTime payroll project. Last year, the project’s main contractor, SAIC, was forced to repay the city $500 million as part of a deferred prosecution agreement. Juan González, who broke the story, discusses the latest developments.

http://www.democracynow.org/2013/10/18/vast_corruption_in_information_technology_contracts

—————
…”a Dallas-area physician and the office manager of his medical practice, along with five owners of home health agencies, were arrested on charges related to their alleged participation in a nearly $375 million health care scheme involving fraudulent claims for home health services. In conjunction with this action, CMS imposed payment suspensions against 78 home health agencies in the Dallas area.

•In the early phase of revalidating the enrollment of providers in Medicare, 234 providers were removed from the program because they were deceased, debarred or excluded by other federal agencies, or were found to be in false storefronts or otherwise invalid business locations;
•In 2011, HHS revoked 4,850 Medicaid providers and suppliers and deactivated 56,733 Medicare providers and suppliers as it took steps to close vulnerabilities in Medicare;

#75 Ralph Cramdown on 10.19.13 at 12:00 pm

#66 Thornhill — “For the privileged few that have financial assets to protect, physical gold stored outside the banking system is likely to be the best way to preserve wealth and purchasing power.”

THIS is the hook line. Pure flattery, aimed at the doctor-and-dentist crowd with a six or seven figure net worth. Here’s where the REAL privileged few have their assets invested:
http://www.forbes.com/real-time-billionaires/
Spot the goldbugs. Hint: There aren’t any.

#76 T.O. Bubble Boy on 10.19.13 at 12:08 pm

@ #64 Thornhill on 10.19.13 at 11:02 am
Hey hey let’s party

We just rolled $17T on the debt clock

http://www.usdebtclock.org/
———————-

“we” are mostly Canadian here… good thing there is a debt clock for us too:
http://www.nationaldebtclocks.org/debtclock/canada

#77 T.O. Bubble Boy on 10.19.13 at 12:13 pm

@ #61 You unworthy worms of the stock market! Here is how “a real man’ lives on 10.19.13 at 10:44 am
Counting nickels and dimes will never take you here:

http://www.torontolife.com/informer/toronto-real-estate/2013/10/11/slide-show-versailles-vaughan-mansion/

Open house today !
———————-

yikes – absolutely hideous.

whoever buys that ridiculous “palace” (in Vaughn!) must have a very small pecker.

#78 Obvious Truth on 10.19.13 at 12:16 pm

#67 recharts

It’s simple investing that always holds true. It’s why rebalance works without knowing any of the internals.

It’s not about absolute price ever. It’s about price discovery.

When cheap money, changing bank metrics, momentum and everyone in ends we reach a top. These are tailwinds that no longer blow. All assets need a catalyst. We no longer have one.

When we get stuck then prices get stuck. Price never goes sideways for long. Banks know this. Go see them and ask about helots. Salespeople will never admit lower prices in any industry.

All those tailwinds now turn to headwinds. It’s amazing how this repeats itself. Now we need price discovery with new metrics. Problem is that we are not sure what the medium term metrics are likely to be. Where will rates end up? How much lending will banks reign in? Will anyone want to buy?

In an unknown environment the only price discovery comes from long term charts because we really have no other info.

Real buyers are down there. Because they have some element of comfort.

Look at the long term trend and draw forward with your finger as it rolls over. Then project a little under.

It’s not rocket science.

Reits just did that. Nobody is hiding any of this. Stop trying to outsmart it. Price doesn’t care about opinions.

#79 Scully on 10.19.13 at 12:27 pm

I work in the fire industry and this has not been a great year even with low interest rates. Not sure where this is going to go but I am not in the mood to celebrate.

#80 Son of Ponzi on 10.19.13 at 12:32 pm

Simple truth # 65.
Thx for making my morning.
Can’t wait to share with the buddies.

#81 devore on 10.19.13 at 12:33 pm

#43 jim

GDP is fine. Money not spent on consumption would have been saved instead. The problem is when consumption is based on debt, and savings rate is negative. This necessarily means both spending and saving will need to decrease in the future to pay off the accumulated deficit.

#82 gg on 10.19.13 at 12:47 pm

Last week also means you can forget all that noise about the US central bank cutting back on its stimulus spending. That’s now off the table until March. ….

Stop with the Central Bank quarterbacking.

#83 Nemesis on 10.19.13 at 12:47 pm

New to the ways of the BigCity, Actors Hugh and Russell were perplexed by London motorists’ seeming indifference to their cheery Australian HitchHiking techniques…

#84 Mark on 10.19.13 at 12:52 pm

Garth, If mortgage rates wont rise in the near future. Do you think F will be any closer do anything.

#85 Ralph Cramdown on 10.19.13 at 12:53 pm

[…] report […] finds that in 2000 the cost of the food stamp program was just $17 billion. It has risen in cost to $78 billion today.

Really? There’s more people on food stamps in the depths of a recession than at the peak of a boom? Golly!

Get some perspective. Since 2000, US defense spending has increased on average about as much EVERY YEAR as SNAP has increased in the entire period. Hey… they say an army travels on its stomach, maybe a Soylent Green solution to both problems?

#86 Realtor # 1 on 10.19.13 at 12:59 pm

#67 Recharts
Are you illiterate ? I said price not sales. Where do I write about sales? If you click on your link it directs to a thread posted in 09 and it says interest rates and condo listing would explode in the next 17 months and cause a crash. (fours years and counting)

I read a your thread; are you telling people that prices will remain flat till rates rise? Rates did rise in the last three months and amor rate was decreased how come prices will remain flat?
And when will rates increase again? and by how much to bring prices down? So are you telling people they should
“wait till next year” LOL

#87 Valley Renter Chick on 10.19.13 at 1:05 pm

#66 B. You sound just just like my husband and I (renters, 100K liquid). My favourite sources of information are the canadian couch potato website, this blog and Stock Investing for Canadians for Dummies (the yellow book, a new edition of this book has just been released, I ordered off Amazon for about $15). 1% fee based advisors don’t seem to exist for people like us. No shortage of fee-only and commission based advisors though.

#88 Duncan on 10.19.13 at 1:07 pm

Where did you find that picture – looks like its 1970’s UK judging by the MkI Ford escort….

#89 jess on 10.19.13 at 1:15 pm

69 Thornhill those videos seem to be out of context

“weight” as in boxing term….

“Obviously, most recently, the operations in Libya could not have been as effective had it not been for the precision and the excellence of the Danish armed forces and their pilots. But that’s fairly typical of the way that Danes have punched above their weight in international affairs.”

and in speaking
…”Ireland also punches above its weight internationally when it comes to humanitarian assistance, peacekeeping. Irish troops are in many very difficult places in the world and provide the kinds of stabilization and humanitarian efforts that make all the difference and save lives.”

http://www.whitehouse.gov/the-press-office/2012/02/24/remarks-president-obama-and-prime-minister-thorning-schmidt-denmark-afte

=====================
Double Irish With A Dutch Sandwich

or these latest headlines
Swiss private bank Frey closes, citing burdensome regulation after US tax row (18 Oct 2013)
Swiss bank accounts: No refuge for tax evaders (18 Oct 2013)

Swiss private bank Frey closes, citing burdensome regulation after US tax row (18 Oct 2013)
Swiss bank accounts: No refuge for tax evaders (18 Oct 2013)

#90 Dan on 10.19.13 at 1:20 pm

Here is a great (non-doomer) article for all the Buffett wannabes out there:

The Bubble In Blue Chips

http://seekingalpha.com/article/1754992-the-bubble-in-blue-chips-part-1

#91 TurnerNation on 10.19.13 at 1:20 pm

Re. Inflation. In the early 1990s I seem to recall Ford’s economy cars costing at 12-13k. Today, you can buy a slightly used 2012 Ford Focus at the same price point!

Ie. “2012 Ford Focus SE-Accident Free, Loaded, $12,995 ”

What’s changed: domestic and even import luxury marques shifted their production to lo-cost centres: Mexico, Brazil. Even to Alabama, Tennesee.

Your Mercedes Benz is being made by freakin Billy Bob!
“What’s good for GM is good for USA”!?

– I’ve followed the old saw: ‘tune in, turn on, drop out’.

Haven’t own a car in years. A nod against the oil/insurance/financier/traffic & parking ticket cartels.

Over 95 pct of my time is spent in an area bounded by Yonge St. to the east, Queen St. at north, and, looking westward, Bathurst St. Lake Ontario being a southern border. Walk to work, natch.

905 who?
Everything is here. Weekdays I walk around the underground PATH, a city-below-a-city.

http://www.toronto.ca/path/
•According to Guinness World Records, PATH is the largest underground shopping complex with 29 km (18 miles) of shopping arcades. It has 371,600 sq. metres (4 million sq. ft) of retail space. In fact, the retail space connected to PATH rivals the West Edmonton Mall in size.

#92 T.O. Bubble Boy on 10.19.13 at 1:36 pm

In case you were wondering what happened to the magical “League REIT” that advertised all over the web with their guaranteed 10% annual distributions:

http://online.wsj.com/article/PR-CO-20131018-910189.html

Sadly, they seem to have taken a lot of people’s money with them — they had 3,500 “partner investors” according to their website:
http://league.ca/the-company/corporate-overview

Moral: don’t be a yield pig. — Garth

#93 dv8 on 10.19.13 at 1:41 pm

So many America-haters on this blog. Mother issues. — Garth

Nah I love driving there to visit in fear of someone shooting me for my hubcaps and the scenery is awsome with all them plywood covered windows in most cities. I love the adrenaline when you drive through Detroit,Buffalo,Cleveland etc……..

#94 tony bologny on 10.19.13 at 1:47 pm

“QE was never to be tapered and never will be.”

Done by this time next year. — Garth
Garth please provide a link to this info you are getting from somewhere otherwise its wishfull thinking like you said it was going to happen the last time

Bloomberg survey of leading economists. Makes sense to me. But perhaps you know better. — Garth

#95 ripped on 10.19.13 at 1:51 pm

#92 dv8

But it’s so much better here? Astronomical prices for everything because…. well because we idiots will pay it.

#96 dv8 on 10.19.13 at 1:59 pm

#95 ripped on 10.19.13 at 1:51 pm
But it’s so much better here? Astronomical prices for everything because…. well because we idiots will pay it.

you are free to move there anytime

#97 T.O. Bubble Boy on 10.19.13 at 2:02 pm

@ #90 Dan on 10.19.13 at 1:20 pm
Here is a great (non-doomer) article for all the Buffett wannabes out there:

The Bubble In Blue Chips

http://seekingalpha.com/article/1754992-the-bubble-in-blue-chips-part-1
—————————–

Agreed – a lot of the “safety” or “low volatility” stocks have been over-valued for a while… but the author clearly cherry-picked all of the high P/E stocks from the Dow.

If you look at the entire Dow 30, the average P/E is 14.5:
http://finance.yahoo.com/q/hl?s=DIA

#98 recharts on 10.19.13 at 2:03 pm

Do you have mental problems? I don’t think so. You are in fact as healthy as any RE agent. Stupidity is the norm. Intelligence and honesty is shocking exception.

I questioned that idiotic “trust me because I speak based on facts”. I did not argue with the price issue. That is another topic.
The problem here is that your kin claims credibility while you are caught with your hands in your pants ever other day.
You speak based on facts. Your facts! Are you retard? How can you claim credibility when your numbers do not add and do not match. I ask two agents what was the sales number for Condos and I get 2 different numbers.
I count the sales posted by a third agent and I get a lot less. Your group credibility is NULL. VOID. ZERO. NILL. NADA. NIX. How the hell do you say that in Chinese, Hindi etc.
Just a group of manipulators this is all you are.

Re price changes: the interest rates changed and that is coming into effect as we speak. In fact it is not coming because the banks are now slowly rolling back the increases and you know it very well. They increased the rates a couple of months ago and the price change won’t be visible if the buyers can now take advantage of the new rolled back rates.

You must have mental problems obviously. In that thread your colleagues told me that the stats based on Tosolds are void because the list is incomplete. On the other side you say: “subscribe to Tosolds.ca and see the prices yourself”.
Before we look at the prices can you, little imbecile, burning my time here, tell me how am I supposed to rely on Tosolds when Tosolds does not show all the listings?
How do I know if the missing listings (582-450=132) do not have lower prices and actually reflect a downturn?

When you ask for that, we are trying to have a logic conversation with retards like you. One of you says trust me these are the numbers, the other one says no that list is incomplete, the third one says go and use that list ..it is reliable you can form your own opinion by looking at it. Do you see our dilemma ?

So before you come here to ask for credibility I am asking you too.. how many condos were sold between Oct1 – Oct15 ? Can you provide a list with MLS numbers and prices ? We do not need anything else and that will not be disclosing any confidential information.

CanadianWatchdog where are you when we need you..can you please help with the above requested info?

#85 Realtor # 1 on 10.19.13 at 12:59 pm

Are you illiterate ? I said price not sales. Where do I write about sales? If you click on your link it directs to a thread posted in 09 and it says interest rates and condo listing would explode in the next 17 months and cause a crash. (fours years and counting)

I read a your thread; are you telling people that prices will remain flat till rates rise? Rates did rise in the last three months and amor rate was decreased how come prices will remain flat?
And when will rates increase again? and by how much to bring prices down? So are you telling people they should
“wait till next year” LOL

#99 tony bologny on 10.19.13 at 2:09 pm

Bloomberg survey of leading economists. Makes sense to me. But perhaps you know better. — Garth
Bloomberg lol funny thing is if you do the opposite of what they say you will usually make money same with Jim Cramer . back in 2008 Bloomberg was ranting and raving about how great the economy was while idiots like Peter shiff whom at the time I thought was an idiot was correct about the coming crash. so sometimes its good to listen to them “Idiots” WHY you ask because sometimes they just make sense and Bloomberg right now ain’t making sense

Sad you do not know the difference between a survey and an opinion. — Garth

#100 Old Man on 10.19.13 at 2:30 pm

#91 Turner Nation – I almost bought a Benz in 1997, as a nice model was selling for $35,000, as thought this might last for life. The salesman was watching what I drove into the lot, and ignored me as a looker with a modest junk car, so whipped out my pass book, and he saw a huge figure on deposit; I always dress like a bum of sorts; no suits anymore; as never judge how one is dressed, as have the best clothes that money can buy when and if I want to dress up. I passed on this all at the time because the costs for parts and service will cost a bloody fortune. I remembered that my first car cost me $1800.00, and paid all cash in my youth, and kept that receipt to always remember where I came from, and how hard I had to work to pay for it all with part-time jobs.

#101 Ralph Cramdown on 10.19.13 at 2:31 pm

Moral: don’t be a yield pig. — Garth

Humbug. The moral of the story is suggested in this pithy little quote from the affidavit of one of League’s principals: “[T]he investors are primarily individuals and not institutional. I have been advised by many of these investors, and do verily believe, that their investments in the League Group represents a significant portion of their net worth.”

Spread your bets! But if you didn’t see a red flag in League’s style, maybe you’re not ready for self managed investments anyway. And I agree with the thesis of the article cited by #90 Dan

More humour: “[S]hould the Honourable Court grant the orders sought herein, a proposed restructuring will likely involve: […] (e) a potential public offering of the restructured entity […]” GOOD LUCK SELLING THAT FLEA-RIDDEN DOG.

More via http://landlordrescue.ca/

That is what I said. Those who invest for big income without experience or guidance usually get slaughtered. Yield pigs. — Garth

#102 tony bologny on 10.19.13 at 2:31 pm

Sad you do not know the difference between a survey and an opinion. — Garth
survey and opinion isn’t that the same thing ,you get opinions from a bunch of people .i can get a survey buy asking peoples opinion

#103 Seeing it from both sides on 10.19.13 at 2:54 pm

Garth, why not post the XRE chart to reflect its 52 week performance rather than just the little bounce back from the bottom?
http://www.stockwatch.com/Quote/Detail.aspx

Because it’s been on sale. Now check out the payment – 5.1% — Garth

#104 ripped on 10.19.13 at 2:56 pm

#96 dv8

No i’m not free to move there but I sure wish I was. I’d have a job in a second and own a house.

and no I don’t pound nails which seems to be the jobs here.

#105 Canadian Watchdog on 10.19.13 at 3:01 pm

#37 Ralph Cramdown

Bond investors aren’t expecting inflation

Ha. Bond investors will be the ones who create inflation! One reason why we haven't seen massive inflation is because the Fed is buying bonds, keeping institutional money from rotating out of bonds into hard assets; more so commodities. Another reason is that some, if not most, governments or central banks force pension funds to buy domestic bonds. And lastly, if the government says inflation is 1.5%, then that is the benchmark pension fund managers (as fiduciaries that can be held personally liable) use for actuarial valuations. For all they care, as long as they beat what the government says inflation is, they're safe from lawsuits.

If bond investors were good at pricing real inflation, then why does the average pension payment buy less today compared to then? Obviously they're not pricing in real inflation, although the reason is more political rather then a lack of quality data.

PriceStats is a good measure for inflation momentum, but it's still based on a weighted basket like CPI that filters out volatility and measures 2013 prices with a 2011 basket, a time when consumers were buying more discretionary items compared to today. Another way to look at it is: what goods and how much consumers are buying today (2013) will actually be measured in 2015 when the BLS and StatsCan updates their CPI baskets.

Does it make any sense to measure CPI with a two year lag when real market prices are so volatile? Chart1 Chart2 (Alternative and retail items listed here) This is why a constant measure is needed to measure a standard cost of living.

Moreover, another obfuscation is pricing and quality-adjusting services. How can StatsCan possibly quality-adjust something like daycare services when it's based on personal preferences? And do they adjust prices when something like what happened to that child who died in Vaughan happens? No.  

Below is list of top 20 gainers for aggregated household expenditures. It's based on the average year-on-year percentage change from 2008-2012.

 Top 20 Growing Expenditures

1 Net expenditure abroad
2 Trusteed pension funds
3 University education
4 Cable, satellite and other program distribution services
5 Water supply and sanitation services
6 Fuels and lubricants
7 Education
8 Urban transit
9 Hospital services
10 Other social services
11 Expenditure by Canadians abroad
12 Other services related to the operation of transport equipment
13 Other education
14 Parking
15 Out-patient services
16 Pets and pet food
17 Veterinary and other services for pets
18 Air transport
19 Services for the maintenance and repair of the dwelling
20 Telecommunication equipment

This is where more and more of consumers' income is going towards: services and other taxes.

As I mentioned in my earlier post. What has occurred over the last five years is a dilution in quantity and quality for goods and services and, consumer economizing, i.e., eating less and/or settling for lower quality, living in smaller units, etc., thus keeping prices at affordable levels. I'm sure many on here would have noticed in many cases that it only takes a few washes to make a hole in that t-shirt that they thought was 100% cotton. It isn't. Why do people say organic meat is expensive when it's raised the same it was thirty or forty years ago? Because they believe the price of meat that's glued together and fed GMO feeds is regular meat. It isn't.

My point is, there are many deceptive ways to fool consumers and investors into believing inflation is subdued, simply because they are more focused on price rather then value and no means of tracking real prices. Collectively, this mentality is what turns countries poor as more goods, services, educations and community infrastructure deteriorates all around them.

Meh..who cares. Stocks are up!!!

#106 Realtor # 1 on 10.19.13 at 3:25 pm

#98 recharts

OMG, I talking price not units sold.
Cheapest 5 year rate I found was 3.48% compare that to 2.8% four months ago and I would call that an increase in mortgage rates.
PRICES are stable. Why?

#107 MrHulot on 10.19.13 at 3:25 pm

Garth, if you are predicting there will be no tapering this year and low interest rates will continue, doesn’t that mean that housing prices will continue to rise?

#108 Infused with Opiates on 10.19.13 at 3:26 pm

91 Turner nation – I would not get any joy out of walking 29k of retail. Handy, sure, but not a life for me…..

#109 john on 10.19.13 at 3:28 pm

“What’s my name” – New game show for stock market buffs.
I am a Russian oil stock. I am Russia’s second largest oil company. My largest shareholder last summer showed his faith in the company by buying stock at market prices. I trade at just 4.8167 times earnings with a 2.36% dividend yield. I have grown my dividends 27.23% over the last 5 years.

I am an American company that manufactures and markets consumer products in countries throughout the world. I trade for a current p/e of 19.6187 with a dividend yield of 3.03%. I have grown my dividends by 9.55% over the last 5 years. I have paid a dividend for every year since 1890 and have raised my dividend for 57 years in a row. I get 40% of my revenues now from developing markets.

I am a U.S. Internet subscription service for watching tv shows and movies. I trade at an elevated P/E of 144.65 (est. 12/2013) times earnings, I have a profit margin of 1.21% and I don’t pay any dividends.

The winner who can correctly name the companies gets to move to sunny Spain and become a Spanish resident for tax purposes and a Canadian non-resident for tax purposes. You get to pay a 52% marginal tax rate, a 100% capital gains inclusion rate, and a 21% VAT. If under 65yrs. of age, any gain from a sale of owner occupied property which is not reinvested in property is subject to capital gains tax at a 100% inclusion rate. Better yet the Spanish tax authorities do not recognize Canadian tax advantaged income so if you continue to maintain a Canadian brokerage account you will be denied the elective dividend deduction, and expected to pay full marginal tax on RSP and TFSA income http://www.thisismoney.co.uk/money/mortgageshome/article-2317127/Expats-head-home-Spain-forced-declare-overseas-assets.html. Tax scofflaws take note that non-compliance will result in a fine higher than the underlying asset.
Best still comes the one time only(we promise say Bolshevic academics at IMF) tax grab of 10% of all liquid wealth over 100,000EUR http://www.imerisia.gr/article.asp?catid=26517&subid=2&pubid=113128545 http://www.marketoracle.co.uk/Article42669.html

#110 Inglorious Investor on 10.19.13 at 3:31 pm

#100 Old Man on 10.19.13 at 2:30 pm

My wife and I were looking at Bimmers and Benzes last year to replace our aging Olds (which my wife loves, by the way). But, like you, I did not forget to take into account the overpriced maintenance and parts costs; I decided to pass and try to keep the old Olds on the road as long as possible (it still looks very good both inside and out). It’s not the money. It’s about the VALUE. You know the old saying about knowing the price of everything and the value of nothing? I’m willing to bet very few people who buy these cars take the operating costs into account. That’s fine if the costs are immaterial to you, but not so fine when you don’t have unlimited funds to blow on a ride. Good cars, though.

#111 Rick on 10.19.13 at 3:33 pm

I agree real estate’s a racket. I just got kicked out of a condo development meeting for prospective buyers for questioning if they were gonna build the thing. They were asking buyers to pay $100 to “hold” a unit for them until an unspecified time when they’re ready to sell one to you. Up yours. They’ll be plenty of cheap condos around if I wanna buy one in the next 2-3 years. If. Meanwhile, I rent.

But I also don’t buy your holy grail of the diversified portfolio, yet. I picked up a book by Bodie and Clowes where the authors The authors first demolish the conventional wisdom that a diversified stock portfolio, while risky in the short-term, is safe in the long-term. What do you think? The 7%, or sometimes 6%, returns you tout sound too good to true, therefore they probably are.
Do we have anything like U.S. I-bonds or TIPS here and are they only open to U.S. residents? The authors tout that.

#112 Inglorious Investor on 10.19.13 at 3:48 pm

When will they taper QE?

Does it depend on:
• the economy? No.
• employment? No.
• politics? Not really.

Banks can make money basically one of two ways (other than gaming the system, that is): loans and investments. But either way, because of the way our monetary system works, the money supply MUST keep expanding or the system fails. This is why the central banks absolutely loathe deflation––even though deflation is actually good for ‘We The People’.

So, as long as the banks can’t sufficiently expand the money supply via loans (remember, deposits come from loans, not the other way around), then the central banks will have to create more money for them to invest in the markets and to keep buying govy bonds. Oh, yeah, that’s the other side of this diabolical arrangement: the government, that also likes inflation as a covert tax.

So that’s when they will taper QE: when the banks can get back to the business of actually banking sufficiently to expand the money supply at the desired and necessary rate. Until then, the economy and employment are just tangential concerns that they can use as a (false) rationale for their policies.

#113 Canadian Watchdog on 10.19.13 at 3:54 pm

#106 Realtor # 1 PRICES are stable. Why?

Because realtors don't know the difference between nominal and real prices.

#114 Obvious Truth on 10.19.13 at 4:05 pm

#110 Rick.

Way to go. Skepticism is good but also apply it to the authors. Read more. And more. Try things without real money. Create a model mock portfolio on a free site. Go to ishares and read about different efts. Look inside them and see what they hold.

Inflation protection can be good. And there are many ways to do it and be diversified.

Garth tells it like it is. Make no mistake there. He doesn’t have to even be right on all his calls and his investing thesis still holds.

All in is for 20 dollar charity poker. Keep reading. Looking forward to reading more about what you learn.

#115 Exilled on 10.19.13 at 4:40 pm

Mr Turner: What impact do you see for Harper’s free ( It’s not ) agreement with Europe and also one with serious consequences with China , on the stocks and bonds now? Time to get out, or go in?

None, of course. — Garth

#116 Ralph Cramdown on 10.19.13 at 5:00 pm

#105 Canadian Watchdog — “My point is, there are many deceptive ways to fool consumers and investors into believing inflation is subdued, simply because they are more focused on price rather then value and no means of tracking real prices.”

I think in some ways you underestimate the consumer, and in some ways you overestimate. Observant people like me notice when package sizes shrink. In many grocery stores, there’s people paying five different prices: Buying regular priced stuff at whim, or paying store discount card prices, selecting the things on sale in the flyer, prices matches when the store honours a competitor’s flyer, and one of the above, but with an added manufacturer’s coupon. Statscan measures the walk in and buy whatever price. When gas stations added convenience stores and people with more money than time started shopping in them… more measured inflation. Someone who pays the $1.25 at the competitor’s bank machine instead of going a bit further to his own, or pays $3 at the white label machine in the C-store? Up goes inflation again. Whole Foods opens a new location and people start shopping there… up goes inflation. But who’s tracking that VWs now have automatic brake drying technology that was exclusive to high end luxury cars only a few years ago? Or that the new iPhone has a 64 bit processor? Today’s 55″ TV is the price of a 40″ one from two years ago? People register more package shrinks and price increases, and don’t notice the improvements and price decreases quite as keenly. Every year a few more blockbuster drugs come off patent and the generic manufacturers spring into action. Nobody talks about how gasoline is cheaper than a year ago, and new cars burn less of it anyway, per hp and per pound. The domestics will sell you a new 4×4 for $25k and cheap financing too.

We certainly live in interesting times; an epic battle between domestic inflation for labour- or transport intensive costs, and deflation/hedonic improvements for many manufactured and high-tech goods and services.

And at some point you have to admit that the benefits of moderate inflation accrue overwhelmingly to the young, the entrepreneurial, the indebted and the employed, while the benefits of even lower inflation, or none at all, accrue to the rich, the retired and the old. Rapidly developing societies typically endure inflation in the high single digits, sometimes higher.

#117 recharts on 10.19.13 at 5:03 pm

Realtor # 1 on 10.19.13 at 3:25 pm
#98 recharts

OMG, I talking price not units sold.
Cheapest 5 year rate I found was 3.48% compare that to 2.8% four months ago and I would call that an increase in mortgage rates.
PRICES are stable. Why?

You do like being called an idiot. So be it.
Prove to us that the PRICES are “stable”.
Come with reliable numbers from an independent source
TREB or CREA stats DOES NOT MEAN INDEPENDENT. That is manipulated data as proved many times. So how are you going to prove that stability???
You discredit yourself as I explained you and after that you and your colleagues demand to be trusted and you want us to demonstrate our point of view but with your manipulated data. How retarded is that?

#118 Republic_of_Western_Canada on 10.19.13 at 5:12 pm

#111 Rick
The authors first demolish the conventional wisdom that a diversified stock portfolio, while risky in the short-term, is safe in the long-term.

Diversification is indeed a useful tool to avoid unexpected investor’s financial calamities with otherwise healthy companies. It absolutely should be used.

For example a big mine might hit an underground river which floods out the whole operation. Or a regional railroad might have a car derail and destroy most of their rolling stock and for which they get sued, or an electronic device maker might have a competitor come out with a better or more popular product. Having a half-dozen good companies in your portfolio means that if any of these unlikely events happen, you won’t get wiped out. Of course, you’ll have to do a lot more homework to come up with 6 good companies to invest in and figure out what the best entry point is for them. (no free lunch)

However, all of that won’t help with systemic, wide-ranging problems, as we’ve seen in the U.S. real estate ‘business’ over the last decade. Just because you mix a whole bunch of mortgages into one big pot then slice and dice them into different ‘tranches’, doesn’t mean you won’t get killed if the whole industry/economy takes a face-plant. For that case, you’ll need different insurance, such as simultaneously investing in the VIX or setting up a strangle on an appropriate index, if you think something has hit unrealistic heights or lows. Of course, actively following the markets and the economy and political shenanigans around the world is also necessary at the same time to scout opportunities and avoid pot-holes. (no free lunch)

So, you have to use diversification, defensive market products and strategies, and general awareness to stay out of trouble.

#119 T.O. Bubble Boy on 10.19.13 at 5:19 pm

@ #109 john on 10.19.13 at 3:28 pm
“What’s my name” – New game show for stock market buffs.

I am a Russian oil stock. I am Russia’s second largest oil company. My largest shareholder last summer showed his faith in the company by buying stock at market prices. I trade at just 4.8167 times earnings with a 2.36% dividend yield. I have grown my dividends 27.23% over the last 5 years.

I am an American company that manufactures and markets consumer products in countries throughout the world. I trade for a current p/e of 19.6187 with a dividend yield of 3.03%. I have grown my dividends by 9.55% over the last 5 years. I have paid a dividend for every year since 1890 and have raised my dividend for 57 years in a row. I get 40% of my revenues now from developing markets.

I am a U.S. Internet subscription service for watching tv shows and movies. I trade at an elevated P/E of 144.65 (est. 12/2013) times earnings, I have a profit margin of 1.21% and I don’t pay any dividends.
—————————-

1) https://www.google.com/finance?q=MCX%3ASNGS
2) https://www.google.com/finance?q=NYSE%3ADOW
3) https://www.google.com/finance?q=NASDAQ%3ANFLX

now – don’t take my spanish assets away!

#120 Old Man on 10.19.13 at 5:27 pm

#111 Rick – agree that everything is a racket in todays world, but this is nothing new, as has always been this way with a difference, as today it has gone ballistic, and just look at Caesar for example, as this man has an agenda for Canada that is insane, and must be voted out or all will be lost. I feel pain with that gal that had $100K to invest the other day, and without detailed info could not help her, and wanted to, but without the complete facts with a full disclose there was no way; in her case it amounted to diversification, but without the total picture nothing can be done.

#121 Republic_of_Western_Canada on 10.19.13 at 5:38 pm

#110 Inglorious Investor
My wife and I were looking at Bimmers and Benzes last year to replace our aging Olds (which my wife loves, by the way). But, like you, I did not forget to take into account the overpriced maintenance and parts costs

Good for you for avoiding a new tool which is not appropriate for your needs. However, be careful not to compare two different kinds of products which are not really interchangeable.

Having driven a number of BMWs and Benzes in the environment for which they were designed, it’s clear the vast majority of n. american drivers will never see the advantages of their design or benefit from the expensive services which they call for, to maintain tight tolerances. That is, long-duration sustained high-speed driving on good highways, tight roads, changeable weather, and very complicated urban driving. Lots of value those vehicles, but paying for all that if you can’t use it becomes just an ego-trip.

Now I drive a truck – but the right one of course. Charging down the road in a highway tractor with air brakes and cat diesel just for commuting to work would be an ego-trip too. Of course maintenance and parts would be excessive, but I wouldn’t compare that to what I do drive.

#122 HAWK on 10.19.13 at 6:20 pm

#105 Canadian Watchdog on 10.19.13 at 3:01 pm

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

A super post CW, great analysis. Regrettably most aren’t that watchful or motivated to do much about it.

#123 Old Man on 10.19.13 at 6:21 pm

I want to rant a bit, as see so many people in this room wanting investment advice without a full disclosure, as if there is an answer to it all. Now if a person had a few $million could go to an accountant; a lawyer; a mutual fund or insurance salesman, or a so-called investment expert there would be no problem, and they will be happy to invest your money, or your bank wealth expert – omg!

Now we all know that Mr. Turner is a fee based advisor that charges a low fee, but there is a difference, as there is no way in hell that he can invest anything without a complete disclosure about your life with details about all holdings that involves many aspects in regards to marriage, children, taxation, real estate such as a cottage owned, life insurance, and how the last will and testament was set up; not to mention if a business operation is involved.

The only way to go with a substantial Estate to be reviewed is with a fee based financial advisor with knowledge to manage your Estate – the end!

#124 Dan from Calgary on 10.19.13 at 8:22 pm

Thought you might enjoy this:

http://freakonomics.com/2011/09/14/new-freakonomics-radio-podcast-the-folly-of-prediction/

#125 Dan from Calgary on 10.19.13 at 8:34 pm

You should really have a comment vote button on your blog, up or down. It would be an interesting dynamic for all your followers and their wise, wacky, and weird perspectives.

#126 gtaguy on 10.19.13 at 9:01 pm

Nutjobs and Wackos?

Yeah they must be. The nerve of them wanting to slow the speed of spending in the US and finally become fiscal responsible.

Holding up borrowing authority for the US stopped zero new spending. — Garth

#127 Cici on 10.19.13 at 9:07 pm

#54 Obvious Truth is a sailor!

Please keep up this brand of financial analysis (I’m learning to sail right now…offshore, from a book). This is a fun way to put the theoretical knowledge into somewhat more practice.

I know this is a financial blog, but I may have to ask you sailing questions in blog posts to come (the book goes into a lot of detail, but the photos don’t show half of it).

Thanks in advance :-)

#128 AfterTheHouseSold on 10.19.13 at 9:13 pm

#66 B

“Millionaire Teacher” by Andrew Hallam
For the newbie. Easy read. Walk you through everything you need to know to get started: where, how, what specific etfs.

#129 ed on 10.19.13 at 10:27 pm

http://www.businessinsider.com/3-charts-that-make-us-scared-for-canada-2013-10

#130 Victor V on 10.19.13 at 11:35 pm

http://www.torontolife.com/informer/features/2012/06/12/home-free/?page=all#tlb_multipage_anchor_1

Owning didn’t offer us security or happiness—just a lot of anxiety and expense. In the last year, as renters, my partner and I have travelled with our son to Spain, Vancouver Island and Chicago; we’ve stopped worrying about raccoons getting into the roof or termites in the walls; we’ve finally admitted that we hate gardening; we no longer bore people at dinner parties by droning on about contractors; and we’ve relaxed a lot about money, which is nearly impossible to do with a mortgage. It’s a life that may appear untethered, but it suits us far better than the one we had before. Oddly enough, by selling our house we finally feel at home.

#131 Derek R on 10.19.13 at 11:57 pm

#76 T.O. Bubble Boy on 10.19.13 at 12:08 pm wrote
“we” are mostly Canadian here… good thing there is a debt clock for us too:
http://www.nationaldebtclocks.org/debtclock/canada

$18,750 per Canadian. That’s worrying but it’s not scary. If you want to see a really scary debt number take a look at the amount that Canadians owe to the banks. That’s $47,000 per Canadian and whereas Canadians can escape the public debt by leaving Canada, they are on the hook for the bank debt until it gets paid.

#132 broadway skytrain on 10.20.13 at 12:12 am

My wife and I were looking at Bimmers and Benzes …Good cars, though.
————————————–
one yr ago i picked up the 97 benz that old man didn’t buy.

some old lady had it and kept it inside mostly for 15 yrs while putting just 89k on it. 6.5k purchase – mint cond all around, the engine/carpet/paint/everything looks new. drives perfectly. half the price of a newer used ford with the same miles – and here’s what blew me away – when i did the front brks the pads were only 20bux more than the cheapest chev cavalier pads i bought at the same time!!! if you can handle a wrench there is very little difference in mtce costs esp as a benz will need less of it.

where you need the big$$$ is at the pumps – a 6cyl thirsty for premium – ouch! but the money saved on the purchase will pay for 10 yrs of extra gas – and you get to say f-you to gore and suzuki and the CO2 fools.

#133 Infused with Opiates on 10.20.13 at 12:13 am

130 Victor – interesting article, but why do they compare owning the average GTA home with renting a 3br apt??

#134 jj on 10.20.13 at 1:02 am

#126 gtaguy on 10.19.13 at 9:01 pm

“Nutjobs and Wackos?

Yeah they must be. The nerve of them wanting to slow the speed of spending in the US and finally become fiscal responsible.”

Well well said, did I say well said? Well said

They are nutjobs for believing such tactics work. Obviously. — Garth

#135 Obvious Truth on 10.20.13 at 1:14 am

#127

I prefer a sale on shore. Instruction is simpler. Pictures more clear.

#136 Tony on 10.20.13 at 3:51 am

Re: #131 Derek R on 10.19.13 at 11:57 pm

Canada needs a regressive not progressive tax system to punish the McDonald’s and Walmart workers who have run up the national debt by paying dick all in the way of taxes.

#137 Tony on 10.20.13 at 4:10 am

Re: #112 Inglorious Investor on 10.19.13 at 3:48 pm

The bonds will be sold when the U.S. hits the next recession or worst. That’s when QE will stop.

#138 tom tindle on 10.20.13 at 6:27 am

Gen Y struggles in expensive housing, rental market

Famous article quotes

‘Home ownership ‘seems like a waste’

‘Others say the desire to own a home is an antiquated concept and they don’t aspire to purchase property’

“The idea of working eight hours a day every day at a job you don’t necessarily like to afford the house that you don’t necessarily ever get to use because you don’t have the time … it just seems like a waste,”

http://www.cbc.ca/news/canada/gen-y-struggles-in-expensive-housing-rental-market-1.2102109

#139 NoName on 10.20.13 at 9:51 am

goo.gl/8jtdje

MUST READ!

“Romantic commitment seems to represent burden and drudgery, from the exorbitant costs of buying property in Japan to the uncertain expectations of a spouse and in-laws.”

Hopefully this will not happen in Canada

#140 Inglorious Investor on 10.20.13 at 10:06 am

#132 broadway skytrain on 10.20.13 at 12:12 am

That’s a smart way to buy any car, if you, or a friend, know how to thoroughly inspect a vehicle. However, if you need to service a newer BMW or Benz at a certified service centre in order to maintain the warranty you will pay a premium for parts and service.

#141 T.O. Bubble Boy on 10.20.13 at 10:13 am

@ #136 Tony on 10.20.13 at 3:51 am
Re: #131 Derek R on 10.19.13 at 11:57 pm

Canada needs a regressive not progressive tax system to punish the McDonald’s and Walmart workers who have run up the national debt by paying dick all in the way of taxes.
——————–

Really? Walmart workers are the ones running up the national debt? Not auto bailouts and oil tax breaks and fighter jets and senator salaries and the like?

#142 maxx on 10.20.13 at 10:14 am

#79 Scully on 10.19.13 at 12:27 pm

“I work in the fire industry and this has not been a great year even with low interest rates. Not sure where this is going to go but I am not in the mood to celebrate.”

Your candor is refreshing.
Over the past 8 or so months, we’ve been repeatedly asked to “make an offer”, and told “they REALLY want to sell”, “it’s a buyer’s market”, and the best one so far: “low ball with confidence”- all from the seller’s agents….

I know where this is going.

Ralph Cramdown at #60 nailed it with:

“”I know neither the hour nor the minute. “In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.””

Prices ARE coming down- the evidence is everywhere, however MSM smokescreening is in overdrive by regurgitating loosey-goosie cartel stats. Instability is beginning to tear at the not-so-stable fabric of this murky and increasingly sluggish RE market.

Look at the fundamentals and remember that this is the nexus of non-commercial RE funding.

No need to hurry- not for a long time.

#143 Inglorious Investor on 10.20.13 at 10:18 am

#137 Tony on 10.20.13 at 4:10 am

I disagree. First of all, recessions are coincidental concerns. Yes, they matter to the US politicians in term of election cycles, but the stability of the banking system and the US dollar are the top priorities for the Fed.

They will do anything to protect their positions and preserve US dollar hegemony. For example, circa 1981 the Fed intentionally tightened monetary policy in order to prevent an impending bond market collapse as inflation soared throughout the 1970s. They knew that doing so would send the economy into a severe recession, but that was a secondary concern. The dollar comes first. That is the source of their strength.

Secondly, I don’t think they can actually sell bonds, even if they wanted to, at this point. Tapering is not about selling bonds. It’s only about buying less. But right now, it looks like they can’t even do that. More likely, they will increase QE.

#144 Inglorious Investor on 10.20.13 at 10:40 am

… By the way, again that was around 1981, when Garth was only one year old.

#145 Derek R on 10.20.13 at 10:51 am

#136 Tony on 10.20.13 at 3:51 am wrote:
Canada needs a regressive not progressive tax system to punish the McDonald’s and Walmart workers who have run up the national debt by paying dick all in the way of taxes.

Don’t worry, Tony. The banks are on the case. The Walmart workers may not be paying much to the government but they’re more than making up for it by what they’re paying to the banks.

#146 Infused with Opiates on 10.20.13 at 12:03 pm

138 tom tindle – thanks for the link. Interesting comments, though I think we have heard them all here before…..

#147 Ronaldo on 10.20.13 at 12:06 pm

#123 Old Man – you are right on the money with that post. That is great advice.

#148 ripped on 10.20.13 at 12:08 pm

Apparently, the ultrarich aren’t worried about a market correction.

Members of Tiger 21, an information-sharing network for investors with a median net worth of $75 million, aren’t reducing their healthy allocation of bonds and equities, and they hold relatively little cash

http://www.cnbc.com/id/101122232?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=101122232%7CWhat%20correction?%20Ultrawea

Wealthy people usually didn’t get that way trying to time markets. — Garth

#149 CalgaryRocks on 10.20.13 at 12:13 pm

#138 tom tindle on 10.20.13 at 6:27 am
Gen Y struggles in expensive housing, rental market

Famous article quotes

‘Home ownership ‘seems like a waste’

‘Others say the desire to own a home is an antiquated concept and they don’t aspire to purchase property’

The bigger issue is that we live in a country where young people can’t afford to own homes in major cities (where they work).

Every other generation has gotten financially comfortable using real estate but I guess the music stopped for gen y. So who’s the greater fool really?

#150 Ronaldo on 10.20.13 at 12:22 pm

#107 MrHulot

”Garth, if you are predicting there will be no tapering this year and low interest rates will continue, doesn’t that mean that housing prices will continue to rise?”

When prices for real estate rise to the point that even at zero interest rates, they are unaffordable. Why would they continue to rise?

#151 tv watcher on 10.20.13 at 2:03 pm

I just watched “Income Property” for the first time in a few years. lol lol lol!!! It seems they are dialing up the RE industry propaganda. They brought in a CIBC mortgage dude to talk the virgins into spending two-thirds of a mil on a piece of junk attached home because ‘it will go up’ and they can use the asset to take out loans (from CIBC!) to send their kids to uni. (Host is as hot as ever though, although now married.)

#152 Scott (GVRD) on 10.20.13 at 2:36 pm

This article was posted on CBC today: “Gen Y struggles in expensive housing, rental market”

http://www.cbc.ca/news/canada/gen-y-struggles-in-expensive-housing-rental-market-1.2102109

It states that Gen Y are finding both the ownership and rental of housing so out of their league that they are moving into alternative forms of housing: boats, collective houses, etc.

This saddens me immensely.

First, all of these people are single and/or childless, so they don’t need to worry about raising a child in a large/friendly atmosphere. That will change when/if they have kids. And then what are they supposed to do? No matter what, they need to pay expensive rent if they wish to stay in Vancouver, Toronto, or any other major city in Canada. Maybe that is where their work is, maybe not. But why should one (of healthy working age no less) be forced to move away? Doesn’t that gut the major working class of a city?

Second, look at what this is doing to the wealth gap in these cities. The older people either have lots of wealth and nice homes to live in, or major debt that is somehow manageable (right now). But the younger people are now being given an “FU” and being told to find alternate housing simply because there seems to be so much greed in this society. Some of that greed may be self-imposed, due to the large amount of debt taken on by the owner, but the fact still remains that prices are high everywhere.

I’m at a loss for an answer or a solution to this mess, but I worry that it’s all going to come crashing down some day very badly for everyone. And, sadly, I think the younger generation(s) are going to draw the short straw.

#153 Beach Girl on 10.20.13 at 2:39 pm

What is considered well off for a single 56 year old woman. No mortgage, car payments. Zip nadda. Just curious? No credit card bills, paid off automatically. They will not catch me with my pants down.

I own rental properties. Which are successful. Good income stream.

Regarding cars, have never, ever had a car loan. Drive an old beater which actually just passed an emission test.

When I want to splash out, I rent something nice for the day.

From old European stock. We always buy only when we have the quid.

Did well this month on the TSX, I have bought in since I was 21. With a 1,000 start from the old man, who is long gone. My Dad.

#154 Blacksheep on 10.20.13 at 2:52 pm

T.0.B.B. # 76 & Derek R # 131,

The elephant in the room no one is discussing:

Of the 636 billion in Canadian national debt, what % represents principle and what % compounding interest?

From the Canada’s Auditor General report, Nov. 1993.

http://www.oag-bvg.gc.ca/internet/English/parl_oag_199312_05_e_5944.html#0.2.L39QK2.DVW2PL.0FGQFE.EA
—————————————
“The cost of borrowing”

“5.41 The cost of borrowing is the third area that affects the annual deficit.”

“In 1991-92, the interest on the debt was $41 billion. This cost of borrowing and its compounding effect have a significant impact on Canada’s annual deficits.”

“From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls.”
—————————————
At that point, 90 % of the debt consisted of interest charges.

“That’s worrying but it’s not scary.”

I disagree.

#155 sciencemonkey on 10.20.13 at 3:05 pm

@149
I’m a gen Y in the GTA, turning 30 this week. Anecdotally I see at least half of the gen Y at work interested in RE. Usually single incomes look at condos and double incomes at townhouses.

I’m sure its a different story for my academic compatriots stuck in postdoc or unemployment hell.

I know I need to be flexible in my career, and as of now we are a single income couple, so I’ve actually come to prefer renting. Could also be sour grapes…

#156 TurnerNation on 10.20.13 at 3:16 pm

A quicker ETF picker upper:

“In late October, we will be adding the ability to purchase ETFs from third party websites. Currently, this “one-click” buy option will only be implemented on ishares.com by BlackRock, but we will be partnering with other sites in the future.

Here’s how it works: when you’re browsing ishares.com, you’ll see a buy now on Questrade button beside fund names that are available for purchase. Simply click the buy now button to be taken to an IQ platform to complete your pre-filled order ticket. “

#157 sciencemonkey on 10.20.13 at 3:21 pm

@152 Scott
When the greedy rents make it so, I think a lot of people stop having kids, since it becomes simply unaffordable. This is good for the planet. Its bad for any ponzi type scheme like housing or Boomer health care costs, but that can be solved by immigration. So to those making money, there really is no downside to Canadians pricing each other out of a decent apartment.

#158 Ralph Cramdown on 10.20.13 at 3:44 pm

#155 sciencemonkey — “Anecdotally I see at least half of the gen Y at work interested in RE. Usually single incomes look at condos and double incomes at townhouses.”

That, sellers paying both agents’ fees, and CMHC allowing the premium to be rolled into the mortgage and financed are all you need to know.

Condo owner meets condo owner, they fall in love, get married ($20k) and decide to get a townhouse. $50,000+ in agents’ commish and CMHC premia go up in smoke. That, the extravagant wedding and the condo taxes and maintenance fees which the agent didn’t include when she told each of the singletons that it “carries like rent,” and they could have had a 20% or 30% DP on the place they end up living in. But it’s probably CMHC fees all over again, instead. “YOLO!” says the hip, young real estate agent as she hands them a fistful of business cards for their friends.

#159 peter on 10.20.13 at 3:59 pm

Nothing else to do so I told wife to go and see open houses. In some open houses….crickets!!!! Few of them several people in open houses. But in general, feels weird out there, it is like nobody wants to openly admit that houses are overpriced big time. Nothing is worth close to price tag. Keep your money and have a good life, eat out, do trips. It is extremely stupid to lock money into a house.

#160 Shawn on 10.20.13 at 4:08 pm

HOW THE WEALTHY GOT THAT WAY

Wealthy people usually didn’t get that way trying to time markets. — Garth

*******************************************
Someplace I read that Benjamin Franklin belonged to a social club at one point.

A standing order of business at the meeting was:

Do you know anybody who is rich, and do you know how they got that way?

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

To get rich study and emulate those already rich. Pick one or a few to copy. Copy shamelessly.

#161 Old Man on 10.20.13 at 4:46 pm

I am laughing at Caesar and do not be deceived about him waving the flag over his deal with the EU. This is all a con as was signed in principal, as he was done nothing. This will take years of fighting; first with the Provinces in Canada, and then with the EU countries for any approval. It means nothing until the Fat Lady sings, and say might never be done, but he will say look at me Canada as a great leader – nonsense!

#162 Old Man on 10.20.13 at 5:21 pm

#153 Beach Girl – in other words you are a great catch for any man looking for a wife to take your hand in marriage. :)

#163 Infused with Opiates on 10.20.13 at 5:50 pm

152 Scott – OK i’ll provide a counter-view.

Firstly, rents are decided in the market. Landlords can only get what someone is willing to pay. If the market says $1000/mo for 1 bdr in location X, it is what it is.

Secondly, while the article gives examples, I can give 3 of my own from family and friends – all in BCs lower
mainland. But I’ll just give the one. My son and his GF
rent a bsmt suite while she attends school. Rent is $750.
His job at a major canadian retailer (ie no post-sec ed, less than 30hr/wk) nets him $600 or so bi-weekly. This covers rent, food, cell and car insur (her car). Sure its tight, but he only has a 3/4 job at a lower wage than what I pay any of my staff here on the island. Her
schooling is a two-year program for a specific tech field. No useless arts degree.

#164 Son of Ponzi on 10.20.13 at 5:53 pm

Ralph # 158
“CMHC premia”. Gotta love a guy who knows his Latin.

#165 Son of Ponzi on 10.20.13 at 6:00 pm

Free Trade Deal.
What does Canada have to trade? Oil.
The EU has Benzes, Bimmers, Porsches, Bosches, Mieles and, of course, French cheese.

#166 Young Man on 10.20.13 at 6:23 pm

#152 Scott (GVRD)

These people living in vans, boats, etc. probably would have led alternative lives irrespective of housing costs.

I don’t think you can blame “greed”. Cheap money has inflated demand, leading to higher prices. You also have to add in ridiculous government policies (i.e., zero down 40 year mortgages) from this so-called “conservative” government.

#167 Canadian Watchdog on 10.20.13 at 6:46 pm

70s old school Toronto monthly home price chart.

#168 KG on 10.20.13 at 7:00 pm

@165:
Iamsurethe Europeans are lining up for the sub-standard north american cars

#169 Son of Ponzi on 10.20.13 at 7:12 pm

# 163
“no useless arts degree”
imagine a world with only Economists, engineers, accountants, financial advisers, RE agents etc,
Without poets, musicians, painters etc.

#170 Tony on 10.20.13 at 7:16 pm

Re: #148 ripped on 10.20.13 at 12:08 pm

Correction should read “crash” and the continuation of the long bear market that dates back to the dot com crash.

#171 Daisy Mae on 10.20.13 at 7:20 pm

“She lives on a boat she went into debt to purchase and hopes to pay it off in five years, resell it and use the funds as a down payment on a house.”

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

It’s still a depreciating asset. She may be disappointed. Five years from now who knows if anyone will want the ‘toy’.

#172 Daisy Mae on 10.20.13 at 7:32 pm

#147 Ronaldo: @#123 Old Man – you are right on the money with that post. That is great advice.”

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

Actually, it’s a no-brainer.

#173 Smoking Man on 10.20.13 at 8:14 pm

One thing I realized this week end, our young are in a dark place, or they live in make belief land.

Either scenario will end badly for them.

I’m contemplating leading a clean atheistic life, booze free and smoke free only as an example. I can handle the lake on vodka and thunder storms. But my loved ones can’t

Life is more complicated than I could ever imagine for our youth.

I want to help…..

I’m going too. Not just my loved ones. but everyone’s kids.

#174 Infused with Opiates on 10.20.13 at 8:46 pm

169 Ponzi – those are fine arts, and if you are good enough at them to make a living then it is not useless.
Economists, lawyers, FAs and RE agents can all have arts
degrees.

#175 Beach Girl on 10.21.13 at 2:28 pm

Well Old Man, not walking down that road anytime soon. Like in not for ever. Too much fun alone.