The indebted

pig2

Julie Dickson is the country’s bank cop. She gave a speech this week to 1,433 mortgage brokers jammed into a Toronto convention centre and said meaty things about “prudent lending.” This is like lecturing teenage boys on gender respect. But the lady did manage to drop one telling piece of information.

The bank regulator has seen something new happening in the past five years that house prices have bloated – a big move into 30-year mortgages. They make up, she said, “about half of originations now.”

That’s a huge number. What does it tell you when 50% of all of the uninsured mortgages being arranged in the country have the maximum amortization? Probably that the borrowers are cash-strapped and are opting for the lowest possible monthly payments. It means they’re using historically low interest rates not to pay down debt faster, but to gobble up more of it. And that they’re financial fools.

julie  As you know, F & the Peckerettes already banned 30-year mortgages for house buyers who need CMHC insurance because their loans are high ratio – those with downpayments of 20% of less. But the door to go long was left open for buyers who could scratch together enough money to avoid the costly insurance premium. Until Julie spilled the beans this week, there was no official confirmation that lifetime mortgages were being sold at this pace.

So what?

First (as stated) the only possible reason to get a 30-year mortgage is because you can’t afford one with a shorter amortization. Or you were raised by golden retrievers. The longer the am, the lower the monthly payment, and the more interest you end up paying. It’s like making the minimum monthly on your credit card. (I owed Mastercard $12,325 recently after changing the oil and filters in my Hummer. My statement said, “The estimated time to repay the current statement balance if you only make minimum monthly payments is 87 years and 4 months.”)

Naturally, this makes irrelevant anyone (like F) who tells Canadians they should be using cheapo interest rates to pay off debt fast, because the likelihood of higher rates in the future is about 100%. He’s right. Mortgage rates will be doubled in fewer years than almost anyone expects. But if half of all the people who can actually afford a 20% downpayment are opting for the slowest, most costly way to handle their debt, it spels trouble ahead.

Remember, debt has piled up higher in the last four years than ever before, and the swelling continues. The cost of money will probably never in your lifetime be less than it is now. That means future payments on current debt will be higher. So you’d better pray your salary is, too.

Which brings us to Sears. And Heinz, Encana and others.

It was telling enough when the venerable retailer announced it was fleeing its flagship Canadian store in Toronto’s Eaton Centre, because it’s more profitable to sell the lease than socks, no-stick frying pans or liquid makeup. After all, 50 million people a year walk through that building. How can you not make money flogging them a load of stuff?

Now 712 people will be losing their jobs over the next few months as the company downsizes. Worse, the layoff news came just a day after an article was published in New York citing sources saying the CEO of Sears Holdings (it owns 51% of Sears Canada) has been shopping the company around, looking to dump it.

Best Buy is closing stores and punting hundreds. Blackberry is melting down and firing thousands. CP is laying off 6,000 in a major restructuring. Heinz shocked Leamington with news a 109-year-old plant is being shuttered, throwing 800 out of work. Disney’s Pixar Studio is pulling out of Vancouver. Postmedia is post-mortem. Encanada is laying off 20% of its workforce. It’s a long, long list.

There are a few reasons why stock markets in New York have more than doubled the gains in Toronto this year. One is our slowing, grinding, stuttering economy. Commodity prices are weak and our condo construction sector is now bigger than the oil and gas business. Seems we’re far better at selling each other houses than we are at actually manufacturing stuff and finding foreign buyers. And guess how long that can go on when we’re using fluke interest rates to mushroom personal debt?

That brings us to Cathy. She and her husband like to get oiled up and enjoy an evening of MLS sold listings and this blog. “We’ve entertained the idea of buying a few times in the past,” she says, “but could never bring ourselves to pay huge money for a 100-year-old crapshack in Riverdale or the Beaches.”

But here’s the thing. Everyone else is pushing.

“Our bank thinks we are nuts (CIBC) as do most of our friends/family. We’ve been approved for up to 900k (combined income at 175k with 110k saved – we’re both 29) but we would be comfortable around 400-500k in order to have a life, savings, children etc. Thanks again for your blog and for speaking truth in a truly messed up world!”

Julie??

188 comments ↓

#1 Sam on 11.26.13 at 10:02 pm

Garth..
when is the tipping point going to occur.

#2 totalinvestor.com on 11.26.13 at 10:05 pm

No more Rob Ford pics.
Come on Garth, you’re better than that.

#3 Sam on 11.26.13 at 10:06 pm

800 Job losses in Sears.

http://ca.news.yahoo.com/sears-canada-slash-800-jobs-services-units-head-214108210–finance.html

#4 chopper on 11.26.13 at 10:06 pm

Real estate in general is always an emotional decision it is addictive like crack. There will always be fools buying when they should be renting.

#5 Chickenlittle on 11.26.13 at 10:07 pm

“…combined income at 175k with 110k saved – we’re both 29…”

WHERE THE FLIP do you find these people?!? Do they work in the oil business? Did they win the lottery?

All I can say is WOW…

#6 Retired Boomer - WI on 11.26.13 at 10:07 pm

Julie has her stuff together, not like Lisa (no relation to ms Simpson). Just remember to keep your wits when all around you people are losing theirs -or at least half of their wits.

To the liquid go the spoils of change

first?

#7 Victoria - the Original on 11.26.13 at 10:09 pm

In Victoria I see so many homes for $1 million and plus on the market. I have never seen this before. So why are these people selling? They all came at once it seems.

Out of RE, Divorce, Downsizing, can’t afford payments, buying bigger houses, leaving Victoria???

#8 Rexx Rock on 11.26.13 at 10:09 pm

Another thing that no one talks about is how are evil goverment allowing 250,000 people a year coming into our country but with 1 400,000 unemployed.This makes wages lower and more desperation for people looking for work.Thank you Harper for making every one poorer and more destute.Every day more lay offs,failing economy and rising inflation.

#9 Victoria - the Original on 11.26.13 at 10:13 pm

http://www.huffingtonpost.ca/2013/11/26/housing-bubble-julie-dickson_n_4344884.html

She still won’t say if there is a housing bubble.

#10 Tiger on 11.26.13 at 10:21 pm

ISON is here ,Just in time to put the iceing on the cake !

!http://www.nationalpost.com/m/wp/blog.html?b=news.nationalpost.com/2013/11/25/comet-ison-expected-to-zip-by-sun-at-a-mind-boggling-1-3-million-kmh-but-could-shatter-in-intense-

heathttp://www.nationalpost.com/m/wp/blog.html?b=news.nationalpost.com/2013/11/25/comet-ison-expected-to-zip-by-sun-at-a-mind-boggling-1-3-million-kmh-but-could-shatter-in-intense-heat

#11 Mr Reality on 11.26.13 at 10:22 pm

Last night the tide turned. I sat having a beer with my hockey team. A year ago they talked about money and the boom in the oil patch. Last night they talked about debt.

They are worried. Things should start moving real soon now.

#12 Blase on 11.26.13 at 10:23 pm

Interest rate on a credit card vs a 2.6% mortgage is a key difference in the argument. Just saying.

#13 T.O. Bubble Boy on 11.26.13 at 10:23 pm

“Our bank thinks we are nuts (CIBC) as do most of our friends/family. We’ve been approved for up to 900k (combined income at 175k with 110k saved – we’re both 29) but we would be comfortable around 400-500k in order to have a life, savings, children etc. Thanks again for your blog and for speaking truth in a truly messed up world!”

That is absolutely insane!

Let’s do the math on that pre-approval:

$900k mortgage @ 3% / 25-yr = $4,267.90/month
add in property tax and insurance, and you’re at $5000/month on housing alone. Utilities and phone/cable, and you’re at $5250+/month.

$175,000/year = about $8750 per month combined (assuming 40% tax)

So, $8750 net income minus $5250 in basic housing expenses, and you’re at $3500/month (combined).

Add in a couple of cars + gas, and you’re down to $2500/month.

Add in say $500/month for food, down to $2000/month.

So, without any savings or kids or vacations or entertainment, you’ve got $2000/month leftover… 1 kid in daycare and diapers, and you’re at $0.

Gee – let me guess: the $900k mortgage was going to be insured by CMHC???

No subprime here folks!

#14 pathcontrolmonk on 11.26.13 at 10:26 pm

You forgot to mention the falling price of oil with Iran poised to flood the market after they lose “conflict oil” status. Baird is bummed.

#15 bubu on 11.26.13 at 10:27 pm

Chickenlittle, there are more and not in oil field.. .325k savings on top of other assets and 175k income also.. 65k saved this year( shares and cash in total) after an expensive 4 week vacation and other things… still renting… at least until I can buy something cash or with no more than 50k loan.

#16 waiting on 11.26.13 at 10:30 pm

Hi Garth, could you do a post at some point about Canadian home equity lines of credit? With an increasing number of US HELOCs hitting their 10-year anniversary, (at which point borrowers usually have to start paying down the principal on the loans as well as continuing the interest payments) I wondered if the same thing will happen here. I don’t have one, but I know a lot of people who do and who use them to continue to fund an otherwise unaffordable lifestyle.
.http://www.reuters.com/article/2013/11/26/us-usa-mortgages-homeequity-insight-idUSBRE9AP05J20131126

#17 World According To Herb on 11.26.13 at 10:34 pm

And while Herb and his cohorts are making 91,000 dollars a year here is the distinction BC gets:

http://www.cbc.ca/news/canada/british-columbia/b-c-has-highest-child-poverty-rate-in-canada-report-1.2440909

Way to go Govt !! Good to know my hard earned tax dollars are being well spent.

PS: We went looking at “used” RVs here in Chilliwack. I asked the dude who buys all the LARGE 250K units. You will never guess his reply:

“Ex Govt workers mostly”

#18 Tiger on 11.26.13 at 10:35 pm

Whatever happens, it’s bound to be interesting. The quip from my colleagues is, ’Comets are like cats: They have tails and do whatever they want.”’ A quote I find very interesting! Comet Ison is real!

#19 AisA on 11.26.13 at 10:37 pm

La, la, la, la, la, la………………….

Madness.

La, la, la, la, la, …………………….

Don’t like any of the conspiracies out there? I am sure most of you will be coming up with your own soon. :-)

#20 Smudgekin on 11.26.13 at 10:44 pm

Guess ketchup doesn’t go with buffet…

#21 Igor on 11.26.13 at 10:44 pm

“Thanks again for your blog and for speaking truth in a truly messed up world!”
and this: )
“Add in say $500/month for food”

500 $ month for two in Toronto? to eat more or less healthy -probably unreal

#22 Shawn on 11.26.13 at 10:44 pm

Bank Regulators Behaving Badly?

Remember the Asset- Backed-Commercial-Paper Fiasco of 2007?

It was caused when big institutional commercial paper investors decided not to “roll-over” their 30-sday investments one month (August 2007) and decided instead they wanted the money back. The issuers had invested the money in longer term investments. But they had a back-stop with the banks that would allow them to remain solvent is a case where the investors deiced they wanted out.

But oops the banks said look we found a loophole, the market is not ENTIRELY disrupted ’cause a few asset backed commercial paper issuers were still solvent. The Banks were able to escape stepping in with lines of credit. (Some would say they reneged on the spirit of the backstop deals)

The loop hole the banks used was created because the “backstops” were “Canadian style”. All the rest of the world used better backstops, no similar loophole.

In Canada, as I understand it OSFI and our friend Julie were somehow involved in crafting these Canadian style backstops that did not have to be honored just when they were needed. (They were safer for the banks so the regulator liked that)

Investors got killed. For whatever reason OSFI and Julie has never had to “wear” this they escaped blame.

#23 Early Spring on 11.26.13 at 10:48 pm

Job transfer to Saskatoon, easy 115k+yr… Looking to rent. Tons for sale and just playing the waiting game. What are/is the thoughts on saskatoon realestate and advice from fellow bloggers? Thanks

#24 HHS on 11.26.13 at 10:52 pm

Encanada is laying off 20% of its workforce,

Actually Calgary could be a net benefit. 1/2 the workforce is being fired in Texas (400). It pays to Read beyond the front page.

#25 Freedom First on 11.26.13 at 10:52 pm

Excellent Garth! And the photo of the pig is perfect for this post!

I would like to tell a brief story about just how stupid the Canadian Banks think Canadians are. I got a phone call 3 weeks ago from my Bank Credit Card people offering me a 0% loan for 12 months with only a $25 Administration fee. I said no thanks, as I carry no debt,
this offer is just not worth cluttering my brain with the idea I have to pay this money back, even though I could profit from it. Then, 2 weeks later, now being only last week, the same Bank Credit Card Company phoned me again, this time offering me a 1.99% loan for 12 months with no administration fee. For the mathematically challenged, who cannot figure out the absurdity of this, please, have someone else manage your finances, as that is you sitting in the chair.

#26 Nemesis on 11.26.13 at 10:53 pm

That’s so unfair to GoldenRetrievers, AuldPol…

In other news…

[CBC] – Updated: BC Hydro rates to increase 28 per cent

…”Energy Minister Bill Bennett and BC Hydro CEO Charles Reid announced a 28 per cent electricity rate hike over five years, with a nine per cent jump coming April 1, 2014.”…

http://www.cbc.ca/news/canada/british-columbia/bc-hydro-rates-to-increase-28-per-cent-over-5-years-1.2440437

[CBC] – B.C. has highest child poverty rate in Canada: report: One in five children statistically poor, says new report by youth advocacy group First Call

…”The child poverty rate rose from 14.3 per cent in 2010 to 18.6 per cent in 2011,” said the report, which used the agency’s low-income cutoffs before tax as a measure of poverty.

“On this measure, one in five B.C. children were poor — the highest rate of any province,” it continues.

“The number of poor children in B.C. was 153,000 — enough children to fill the [Vancouver] Canucks’ stadium over eight times,” it said in reference to Rogers Arena, which has 19,000 seats.”…

http://www.cbc.ca/news/canada/british-columbia/b-c-has-highest-child-poverty-rate-in-canada-report-1.2440909

[NoteToRalph: Sometimes… hedonics don’t quite MakeTheGrade – although I willingly concede your earlier points on that question. NoteToWatchDog: What was that you were saying about CPI? I sense a looming DisturbanceInTheForce… I’m so glad I stocked up on TeaLights last month: http://youtu.be/brHqBcZqNzE ]

#27 Barold on 11.26.13 at 10:53 pm

Correct me if i am wrong, but aren’t financing approvals done based on the 5-yr fixed rate, on a 25 yr amortization – opting for the 30 gives you the option of lower commited payments, but hopefully these people are opting to prepay to the extent their mortgage allows.
Unfortunately if you look at what is being sold in downtown toronto, 900k doesn’t buy much anymore.

#28 Carpe Diem on 11.26.13 at 10:55 pm

I’m with #13 T.O. Bubble Boy … that is insane!

$900K mortgage for maybe 9000k post-tax per month is crazy!

Include a couple of kids in the mix, reduced income during young children’s year and and this young successful couple will regret it.

If you are paying a penny more than $3000 per month (1/3 of your income) on housing, you will feel the pain in the future …

I think $2000 per month is just right, so I’m renting a nice exec-home on a treed lot – all cost included (expect for utilities). No taxes, no repairs, shoveling or landscaping costs, no worries! But I did buy a chainsaw to cut some dead trees down – ’cause that’s fun!

My investments and savings are doing just fine as well and no debt!

#29 Obvious Truth on 11.26.13 at 10:55 pm

Way to go Cathy.

There are lots of young people out there who can do math.

This is paying yourself.

Hopefully the comments from many experienced posters helped you yesterday. You’re going to have to be patient. This housing situation doesn’t need Julie to help solve it. It will solve itself. The catalyst that starts the fall will just appear.

Then you wait till everyone you know tells you never to buy a house.

It’s a wash rinse and repeat pattern that plays out in all kinds of assets continually. It’s never different.

I’m a sucker for a good news story. Hope Cathy isn’t fictional. These last two posts are a tale of two life paths.

#30 superdave on 11.26.13 at 10:56 pm

Garth. Lets not forget that half the folks who took out 40 year am mortgages for the year or so they were around were making advance payments. ie. they were not textbook rational. they could afford a shorter am, but clearly wanted the flex to make smaller payments when desired. If you get your mind out of the textbook for a second, people often make decisions that do not minimize lifetime interest, but maximum short term cash flow flex. I bet half of the 30 year conventionals are paying bi-weekly, much like the 40 year crowd did. maxing am does not automatically imply cash strapped.

#31 HHS on 11.26.13 at 10:57 pm

#7 Victoria –
Out of RE, Divorce, Downsizing, can’t afford payments, buying bigger houses, leaving Victoria???

Victoria is a “B or C” class on the scale of international destinations. 97% of homes bought are by Canadians. So very little is international. Most “retort” city’s across the country are hurting. Debt = it costs!!

#32 sideline sitter on 11.26.13 at 10:58 pm

I’m with #15, almost the same numbers… including vacations! renting rules!

#33 Devore on 11.26.13 at 11:00 pm

#12 Blase

Interest rate on a credit card vs a 2.6% mortgage is a key difference in the argument. Just saying.

Interest on $1000 on credit card, vs interest on $800k mortgage?

What are you saying exactly? I wish people would just come out and say what they want to say, instead of playing 20 questions.

#34 Chris C on 11.26.13 at 11:01 pm

#13 TO Bubble boy.
No chance they are at a 40% tax rate, making $90k each, more like 22% effective tax (and approx 35% marginal)

Still not enough margin and way too much debt payment though

#35 Bottoms_Up on 11.26.13 at 11:03 pm

Julie, once you have a child (or two, or three), that 400k mortgage is going to look, feel and actually be, massive. Throw in daycare and higher interest rates, and your dinners will forever be kraft.

#36 Bottoms_Up on 11.26.13 at 11:08 pm

#8 Rexx Rock on 11.26.13 at 10:09 pm
—————————————–
We need immigration — without that close to 1% population growth, we’d be a country destined for deflation, much worse that your misinformed notion that somehow this is contributing to lower wages.

#37 Ripped on 11.26.13 at 11:08 pm

Poverty among seniors on rise in Canada: OECD

http://globalnews.ca/news/990708/poverty-among-seniors-on-rise-in-canada-oecd/

#38 Smoking Man on 11.26.13 at 11:09 pm

Tomorrow my essay on the state of the world, and where things are going.

From the Oracle of Oracles.

Stay tuned to this bat channel. It’s going to be technically flawed, but deadly accurate.

My connection to the UCC coming in like a blasting sub woofer with the treble set to max.

#39 mikek on 11.26.13 at 11:11 pm

I recently traded my 10 year amortization to 30 years to max out our TFSAs and education grants. When the mortgage is up in 5 I’ll reassess and pay down mortgage or continue to invest balanced-like. My rate of return on investments is far outpacing my 2.89 fixed mortgage rate. BTW, the mortgage payments are now way (way) lower than renting, even with property tax and maintenance.

#40 Okotokian on 11.26.13 at 11:13 pm

Here is a clip of F laying on a beating onto faux-rich home ‘owners’ who bought too much house.

http://www.youtube.com/watch?v=JdwzOcl1H-k

#41 peter on 11.26.13 at 11:20 pm

If the economy is the way it is, how come Canada brings in250,000 people per year? Seams to me stupid and crazy!

#42 Serge on 11.26.13 at 11:20 pm

GTA Weekly Drop – November 24, 2013
http://gtapricedrop.blogspot.ca/2013/11/gta-weekly-drop-november-24-2013.html

#43 dutch4505 on 11.26.13 at 11:25 pm

as my previous preacher from Lubbock TX use to say….”it’s time to have thine house in order” that means family, finances, and…….

This will not end well for Canada. Please learn from our mistakes. (USA)

#44 Ronaldo on 11.26.13 at 11:28 pm

#39 Mikek – Is the interest on the amount you added onto your mortgage to buy the TFSA’s tax deductible?

#45 not 1st on 11.26.13 at 11:28 pm

Garth, I was at BMO the the other day when I overheard the guy in the next window over giving the poor teller the gears. Low and behold I look up and see about an 80 yr old guy. It was the topic of conversation that had me floored. He was trying to explain how his $1000 per month mortgage payment was coming out of the wrong account.

$1000 per month mortgage payment at 80 yrs old? Maybe you should interview some older types instead of the younger hornies cause some of them ain’t doing much better.

#46 Fabes on 11.26.13 at 11:31 pm

$175K per year gives $11K per month net, assuming income equally distributed among spouses.

Also, I think they meant $900K including the downpayment, so mortgage of ~$800K.

#47 not 1st on 11.26.13 at 11:33 pm

#41 peter on 11.26.13 at 11:20 pm

If the economy is the way it is, how come Canada brings in250,000 people per year? Seams to me stupid and crazy!
——–
This is the part thats not talked about cause its racist, but most foreign workers coming to canada are taking these $10 hr jobs at fast food outlets and retain stores only to find out you can’t live on that in Canada let alone ever own a place or support a family abroad or hope to bring them here to help you out. Local kids don’t take those jobs for good reason.

So most of these people are living 4 or 5 people to an apartment or 10 to a house and using the food bank and social services on the side. In Sask, our food bank usage has skyrocketed even though the place is apparently booming. This so called “boom” has a lot of warts on it.

#48 Roy on 11.26.13 at 11:35 pm

Nice pic of our nation.

#1 in household debt in the world. And expanding, because the population is ignorant of reality. The population thinks the problems that happened to the rest of the world cannot happen to them. They play the fools, and are still stocking up on debt.

They do this because they agreed with the bankers, realtors, economists, and media that it is good to “take advantage of low rates.”

They are like hogs, fat and ready for the slaughter.

So job losses are now multiplying. Wasn’t that what happened in the US? People down there gorged on debt for houses they had no business buying, and then jobs caved and the economy collapsed. Enough money is now being diverted from the economy on accord of housing that people can’t buy socks at Sears. Adios.

But people here don’t get it. They live in an alternate Beaver Cleaver reality where they have decided these fundamental laws do not apply to their life. They sit back and watch Global TV, and hear about how the latest stabbing in Surrey, fall fashion trends, and how a search and rescue operation is “global” newsworthy.

Meanwhile major western central banks (BoE, BoJ, ECB, and US Fed) have had the floodgates open for 5+ years, and floated asset prices on thin air. A feat never done before in history. Nothing to see here. All is normal, and well.

How about some recent Re/Max articles I found?

1) Canadian real estate is not in a bubble, Poloz says
2) Vancouver house prices still climbing

It must be glorious to live in Wonderland.

Don’t worry about the transition to a part-time workforce, you will still be able to afford your shoe box or McMansion in the future.

We’ve traded away freedom for granite, convinced it is our Holy Grail. Try home owe-nership

And this is what we would spend a million dollars on if we had it?

I guess it’s easier to make the call when you don’t have it. And go hog wild on the fantasy and delusion that a Beaver Cleaver economic reality to pay for it will still be there tomorrow.

#49 Snowboid on 11.26.13 at 11:39 pm

#17 World According To Herb on 11.26.13 at 10:34 pm aka Dean Mason…

Here’s a clue, in 2001 BC elected a party called the Liberals, a name they hijacked to avoid using the Socred/Con word.

In the previous post you neglect to point out that all the ‘largesse’ you refer to is at the hands of a conservative provincial government.

Did you miss the ‘sleight-of-hand’? You really think you are ahead after 12 years of Cons in charge of BC?

PS: Used 250K RVs mainly bought by govt workers? You just made that up, right?

I thought the Esteemed Professor told you to stop, anyway!

#50 CanFerret on 11.26.13 at 11:39 pm

It looks like the word about Canadian housing market risks is spreading fast. I came across this article from an investment outlet while looking at my XRE performance

http://www.fool.ca/2013/11/26/7-remarkable-numbers-from-canadas-housing-market/?source=c75yhocs0040001

#51 JimmyAAA on 11.26.13 at 11:59 pm

#49 Snowboid on 11.26.13 at 11:39 pm
#17 World According To Herb on 11.26.13 at 10:34 pm aka Dean Mason…

Here’s a clue, in 2001 BC elected a party called the Liberals, a name they hijacked to avoid using the Socred/Con word.

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

They actually did not hijack it. Gordon Wilson re-started the BC Liberal party as an alternative to the bi-polar nature of BC politics. A nature which exist to this day. A stunning debate performance allowed him to kill the existing Social Credit (conservative) party and become the official opposition to the NDP in the next election. A series of errors, including an affair with a fellow MLA, eroded support for Wilson and Gordon Campbell won the leadership race in 1994.

Nevertheless, you are essentially right – The BC Liberal party bears little to no resemblance to any other Liberal Party in Canada. A conviennent fact that Mr. Mason has omitted several times (among others). I’m sure because it serves his narrative. Why lie when you can just omit the truth to further your point of view. Another reason why I almost ALWAYS doubt anything so called conservatives say as fact.

#52 Fed-up on 11.27.13 at 12:01 am

@#50 CanFerret on 11.26.13 at 11:39 pm

__________________________________________________________________

Yes it’s official. We are international idiots.

So glad I sold my house in October.

#53 Dean Mason on 11.27.13 at 12:05 am

Credit Unions which the federal government does not regulate still have their 30 and 35 year mortgage amortization schedule available.

Why didn’t the Ontario Liberals, McGunity and now Wynn cut Ontario’s credit Union’s mortgage amortization down from 35 and 30 years to 25 years.

I would not be surprised if B.C. and other provinces did not act either on this necessary cut to credit union mortgage amortization schedules for 35 and 30 years to 25 years.

Provincial governments need to act immediately and make policies to tighten credit and mortgages.

#54 Andrew Woburn on 11.27.13 at 12:09 am

#132 not 1st on 11.26.13 at 1:17 pm
The most disturbing thing about that doc The Condo Game was the sterile downtown towers in Toronto filled with latte drinking metros and millennials living in 600 sqft boxes and no families with kids anywhere in sight.
===================================

If you think it’s bad now, wait until someone brings an effective male fertility pill to market.

#55 not 1st on 11.27.13 at 12:11 am

#50 CanFerret on 11.26.13 at 11:39 pm

I came across this article from an investment outlet while looking at my XRE performance
—–

That same article says people are over-exposed to REITs as well which accounts for the yield being cut in half. Garth always says these will be fine in a RE correction. hmmm…….

There is no correlation. REITs should be under 10 per cent of any balanced portfolio. — Garth

#56 Babblemaster on 11.27.13 at 12:16 am

Mortgage rates will be doubled in fewer years than almost anyone expects. – Garth

——————————————————–

Japan has had more than a generation of super low interest rates. I’d personally love to see rates double to stop this insane debt orgy, but it’s not going to happen.

Of course it will. — Garth

#57 Bob Rice on 11.27.13 at 12:31 am

Igor post #21: “$500 month for two in Toronto? to eat more or less healthy -probably unreal”

This is one thing that is cheaper in toronto…groceries… believe me, t.o. has the cheapest food in the country.. maybe continent..know this from experience and family in the business..

#58 Edmontonboy on 11.27.13 at 12:33 am

Getting worried here. I work in Fine Dining in Edmonton. I’ve noticed this year that we’ve really had a lot of christmas parties where many of the guests only have water to drink, not even a juice or bottled water. Opting for just a small appetizer for dinner, and pigging out on the free bread!

Does anyone know where you kind find out the average household consumer debt for Alberta? In addition to the massive debt the Conservative Government has plunged the Province of ALberta into, I think there are serious signs that we have a massive consumer credit bubble here!

#59 Spiltbongwater on 11.27.13 at 12:34 am

$12, 325 for oil and filters for the Hummer? And you tell others they suck at finances?

#60 45north on 11.27.13 at 12:46 am

Mr Reality: Last night the tide turned. I sat having a beer with my hockey team. A year ago they talked about money and the boom in the oil patch. Last night they talked about debt.

They are worried. Things should start moving real soon now.

that got my attention

#61 Son of Ponzi on 11.27.13 at 1:19 am

#38 Smoking Man
There is a treble setting on your subwoofer?!
Better patent ist quickly.

#62 Son of Ponzi on 11.27.13 at 1:21 am

Oil filters for Hummers are no longer in stock.
Have to be 3D printed.
Hence the cost.

#63 broadway skytrain on 11.27.13 at 1:24 am

$12, 325 for oil and filters for the Hummer?
——————————
– i;m sure he got a wash and vac thrown in too.

#64 Victor V on 11.27.13 at 1:25 am

An expat couple’s citywide search for a $650,000 house lands them in a $770,000 home. See the properties they chased: http://lif.to/1crxHPy

Listed at $699,000, sold for $770,000.
While the open-concept kitchen, master ensuite and big backyard were all pluses, this house was $50,000 over their budget. But there was a rental unit in the basement, and their agent did some creative number crunching. He explained that renting the basement for $1,000 a month would cover the cost of an extra $200,000 on a mortgage. Six parties bid on the house, and the Cavalcantis won out in the second round. The day after the signing, Fernanda found out she was pregnant with their first child.

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

Over budget. Creative number crunching. Bidding war. Baby on the way.

This will end badly.

#65 drydock on 11.27.13 at 1:29 am

Mary mother of God that puke green velour chair is hideous.

#66 former hippy on a gulf island on 11.27.13 at 1:47 am

The financial advice is good, but is getting repetitious.

I just come to this blog every night for the writing.

Hunter S. Thomson is not dead. He is Garth Turner:

“First (as stated) the only possible reason to get a 30-year mortgage is because you can’t afford one with a shorter amortization. Or you were raised by golden retrievers. The longer the am, the lower the monthly payment, and the more interest you end up paying. It’s like making the minimum monthly on your credit card. (I owed Mastercard $12,325 recently after changing the oil and filters in my Hummer. My statement said, “The estimated time to repay the current statement balance if you only make minimum monthly payments is 87 years and 4 months.”)”

#67 Wise Guy on 11.27.13 at 1:52 am

My wife works (worked) at Sears, but was on maternity, but never planned to go back, so it sort of works out. She would come home from her McJob and tell me how confused she was that Sears was still open. Half the time in her mall, Sears was empty, but the mall was packed, so it was only a matter of time.

The thing that makes me wonder is why on earth did a big chain like Target venture over to Canada. I knew when they first made the announcement that they would be opening in Canada, it was a big mistake and apparently after their most recent quarterly reports, the Target stores in Canada are dragging them down. They’re just walking into a Tsunami when the going gets real tough in a few years.

As for us, we rent, we aren’t stressed at all and still save money on my one income here in Toronto. Now if I lose my job….the poop will really hit the fan…good thing though that we have plenty of savings and no debt.

#68 KG on 11.27.13 at 2:02 am

Only when it falls off, the crater will appear.

#69 drydock on 11.27.13 at 2:02 am

http://www.vancouversun.com/videos//video.html?embedCode=Y3dnlsaDpm5_rvUiN4BlSUAfSqD6Z6D4

Here you go Montreal, this is how Vancouver deals with replacing a bridge.

#70 ILoveCharts on 11.27.13 at 2:04 am

Garth:
1) An honest question
Given that money is dirty cheap right now and that it’s still possible to get a 30 year mortgage, wouldn’t that be the wise thing for anyone to do to retain flexibility and provide the maximum amount of protection against rate hikes in the future?
It is true that some people may be fully extended with their 30 year mortgage but I bet that a lot of other people are capable of paying in 15 years but recognize the value of getting a 30 year mortgage to provide a buffer in case the interest rates go through the roof or they lose their job or the 30 year mortgages get banned in the future. Those people may be making additional payments as if they were on a 15 year schedule. It doesn’t mean that they are extended.

When I looked at buying recently, I was capable of getting a much shorter term but I would have signed up the 30 year – especially if I could have got a transferable 30 year mortgage. That could be a huge advantage when trying to resell the house in the future if the 30 year mortgages get cut. Is that right? I’m just a virgin and I’ve never actually had a mortgage so I don’t know all the ins and outs.

2) A respectful criticism
Cherry picking companies or branches that are closing (such as the tiny Disney Pixar office,) without making any mention of companies that are growing rapidly (such as HootSuite,) is disingenuous. It’s like listing off names from the obit section and claiming that everyone is dying without making mention of the fact that there are even more births listed on the next page. Companies are born and companies die – that’s important for the functioning of an economy.
The tech sector in Vancouver is one beacon of hope – despite the fact that Christy is putting all her eggs in the LNG basket.

#71 Son of Ponzi on 11.27.13 at 2:14 am

Is the pig sitting on a green TD Canada Trust chair?
Better dump the shares.

#72 JUNO on 11.27.13 at 2:21 am

Its interesting

Proverty rising for seniors and 5% higher for family

Yet there is no inflation. On cknw they talked about higher wages required and more high paying jobs. But I f you do the math and crunch the numbers.

Over 70% of families own 1 house I’m sure many own more than 1. Now what they didn’t mentioned in the news cast was one of the reasons why more bc residents are poor asses is because they are so heavy in debt because of there freakin house.

Its simple HOUSING is too expensive, adding extra load on taxes.

Companies who come here move out of dodge once they get their property and rental bills.

Why would a company have a HQ or manufacturing base here when you can move elsewhere and cut your rental expenses from 5000+ month to 1000 to 2000/ month for a small business)

Why would you want to come here if you know the wages for a canadian cost a heck of alot more than an american or a person in china.

Use your brain people.

#73 World According To Herb on 11.27.13 at 2:47 am

PS: Used 250K RVs mainly bought by govt workers? You just made that up, right?

I thought the Esteemed Professor told you to stop, anyway!
——————————–

No sir.. O’Connor RV in Chilliwack. Call them and ask them. One of these days the working poor sheeple are going to figure out how badly Govt Pencil Pushers are FLEECING them and then who knows. But I think it will get ugly “TAXES going up so that the private sector can pay for Govt Worker Salaries and Pensions (and RVs).”

#74 LH on 11.27.13 at 3:01 am

@5 chickenlittle

I am 29 too, and my wage income has been approx 850-900k per annum for the last couple of years, and over 3 mil before taxes over the past four years. We do exist, somebody has to be the 1% around here. It sounds like a lot but there are many around here with much, much more. There’s always a higher mountain.

Including passive income I am well into the low 7 figures for gross income. So I actually manage to save over 100% of my after tax wage income. Why do I still work? It’s a lot of fun! Cheers.

LH

#75 Tony on 11.27.13 at 3:27 am

Credit is also drying up as the article must be from “the economist”. 42 percent got turned down by the big 5 and had to get a mortgage elsewhere.

#76 Bonnie on 11.27.13 at 3:40 am

lecturing mortgage brokers about prudent lending is like lecturing teenage boys about gender respect. BWAHAHAHAHAHAHAHAHA. HA. you’re the best garth.

although, to be fair, there really are non-idiot teenage boys out there. i’ve met them, they do exist. so perhaps there’s hope for mortgage brokers too.

#77 betamax on 11.27.13 at 4:06 am

Garth: “And guess how long that can go on when we’re using fluke interest rates to mushroom personal debt?”

Longer than I ever imagined possible.

When my new (and improved!) wife and I started looking at housing in the middle of the previous decade, we saw what looked to be an inconvenient housing bubble that would soon pop.

Now it’s 8 years later and the credit bubble (as all bubbles are at heart) has swelled to Hindenburgian proportions. I no longer bother prognosticating when it’s finally going to finally ignite, and I don’t know whether it’s going to burn slow or fast, but I know it’s going to burn like hell when it does, and it’s going to leave a generation or two of scorched survivors in its wake.

The final outcome will be a horrific retirement crisis when the bills finally come due at the same time their income and equity both fall to near nothing. Oh, the humanity, indeed.

It worries me, though not enough to keep me up at night. Likely because I sleep like Scrooge McDuck: blissed out on a king-sized pile of cash — mostly accumulated while others were racking up debt.

Do I have regrets? Sure, I should have taken out a (seemingly at the time) large mortgage in 2003 instead of paying off debts from my first marriage. I also should have bought more shares of Apple before I did and sold them all later than I did. I also should have asked out every pretty girl I met when I was in my twenties, because some would have said yes, and if they’d said no, the result would be no different than it is now.

On the other hand, I’ve rented great places for cheap over the last decade, and I’ve socked away wads of cash while still living the good life and going on ‘bucket list’ trips and adventures that we would have probably skipped if we’d been paying down a mortgage.

And I might have settled down with one of those many pretty girls in my twenties and missed out on meeting my wife (the new and improved one!). She is my true soul-mate. And (unlike Wife 1.0) she makes more than she spends, so that’s a plus.

#78 drydock on 11.27.13 at 4:20 am

http://www.youtube.com/watch?feature=player_embedded&v=WhSoHXq67N8

This is a video for smoking man to watch.If you are not smoking man DO NOT WATCH.

#79 nancy on 11.27.13 at 4:38 am

Let’s face it people. Canada is a bit different. Foreign money seem to love this country. Now that China is easing up on the one child policy, there will even be more foreigners to love this country. They love our clean air, mild climate (BC), multi-culturalism, great education, free medical care.
So in absence of nuclear attack, global warming, rampant hate crimes, and elimination of free education and healthcare….we are so very different here.

#80 Onthesidelines on 11.27.13 at 5:44 am

#56 Babblemaster on 11.27.13 at 12:16 am
Mortgage rates will be doubled in fewer years than almost anyone expects. – Garth

——————————————————–

Japan has had more than a generation of super low interest rates. I’d personally love to see rates double to stop this insane debt orgy, but it’s not going to happen.

Of course it will. — Garth
————————————————————

I’m with Babblemaster on this. It is difficult to see how rates would rise given that when the economy goes down the tubes not only will easy money policy need to be continued but, additionally, many will flock back to bonds. The same goes for the US when their QE fueled stock market implodes.

Garth’s continued insistence that rates will rise is more of a shouting match as he has yet to provide the rationale for this opinion whenever he is challenged.

#81 live within your means on 11.27.13 at 5:48 am

We got the best ever quarterly dividend cheque from Emera.

I never believed you owned a gas guzzling Hummer Garth. Years ago we laughed when a guy & his son would deliver a newspaper in a Hummer.

We’re going to be switching to Bell Aliant. Hubby has friends who are also serioursly considering switching as well so he’s trying to get a better rate for bringing in more customers. Sales guy was here for a few hours this eve as well as a neighbour. Aliant has to install a few days before Hubby leaves for France as he has to teach me how to use it (a big task) & I have to write down the instructions as my memory is so poor now. Thankfully we have Primus for LD calls.

#82 Rob abroad on 11.27.13 at 6:11 am

Noticed this little titbit in a forum for exapts I frequent

My background is political science and political economy. I’ve worked and lived enough in rural/small town Ontario “sacrifice zones” to see that there is a recession coming – it hits these areas much sooner than middleclass suburbia and city – most Canadians are completely oblivious to it. In any case, we don’t want to be here for it. I’ve fought long enough and it’s time to cut our losses and get ou

Yupp not everyone is a house horney fool!

#83 A Memory From 1989 Says... on 11.27.13 at 7:13 am

“Interest-rate fears sent Canadians scrambling for shelter last month, a rush that generated a record house-buying spree, the Canadian Real Estate Association says. But further rate increases could do just the opposite and end what at least in Central Canada has been a four-year real estate boom… Anticipation of higher interest rates added heat to what traditionally is a time of year when sales are slowing…”

-Toronto Star, April 29th 1989

#84 Love Child of the Summer of Love Says... on 11.27.13 at 7:19 am

“House prices have skyrocketed out of the reach of nine families in ten….This [housing boom] is different. It has new dimensions. It hits the guy at the next desk, the professional man, the executive type – persons for whom housing has always been a cinch….”

– Toronto Star, January 23rd 1967

#85 WhiteKat on 11.27.13 at 7:55 am

Many Canadians who bank at TD will soon be sitting on this comfy (NOT) green chair:

http://isaacbrocksociety.ca/2013/11/26/td-vows-to-make-fatca-a-comfortable-experience-for-impacted-customers/

#86 recharts on 11.27.13 at 8:30 am

MLS# C2763755 W2778129
Initial price 1199000 1299000
Relisted 1089000 1175000
Sold 923000 1105000
% of relist 85 94
% of initial 77 85
Taxes 4619.48/2012 6333.41/2013
Declared DOM 40 21
Real DOM 41 171

#87 eddy on 11.27.13 at 8:37 am

There is too much Toronto bashing on this blog, the city it’s too big to make sweeping generalizations. I hate Toronto City Hall, but the city itself is still a great place to live. People who relocate to cheaper areas find it very hard to come back.

#88 drydock on 11.27.13 at 8:42 am

It’s all about energy in the end, i don’t believe this will end at all well.

— a “reality check for those hyping a new age of global oil abundance,” the Financial Times wrote in an article Monday.

Oil companies’ expenses for exploration and production have increased 180% since 2000. Global oil supplies rose 14% in the same period, the newspaper said, citing the International Energy Agency’s World Energy Outlook 2013.

“The most straightforward interpretation of this data is that the economics of oil have become completely dislocated from historic norms since 2000 (and especially since 2005), with the industry investing at exponentially higher rates for increasingly small incremental yields of energy,” the article said.

The industry has been able and willing to keep up with its increased capital investments owing to the dramatic increase in prices — from $38 a barrel in 2000 to $112 in 2012 for Brent oil, a 195% increase, the FT said.

Since 2005, however, capital outlays have risen faster than oil prices, and in the past two years expenses continued to increase and Brent oil prices averaged $5 less in 2013 than in 2011. That’s a “flashing light on the industry dashboard,” the FT said.

Without significant technological breakthroughs, prices will have to increase further or else capital expenditures — and future oil production — will fall. The increases in expenditures has also occurred against a backdrop of record-low interest rates, the FT said, and once rates start going up again, it will put further pressure on the industry’s ability to spend as much as needed to keep supplies growing.

The deal with Iran could provide some temporary relief — Iran exports could increase by up to 1.5 million barrels a day if the sanctions were fully lifted (which they weren’t during the interim agreement). Even if demand grows only marginally, however, the Iranian extra barrels would be “fully absorbed” by the market within about 18 months, the article said.

Increases in global oil supplies have been mostly in “unconventional” crude (from sources such as ultra-deep water, oil sands, and tight oil) or natural-gas liquids. Unconventional crude is costlier to produce and NGLs have a lower energy density.

#89 Bigrider on 11.27.13 at 8:56 am

In case no one has seen it yet, RBC just stated” home affordability on the rise. Average Households devote 43% of their income to home ownership”

The love affair with housing continues

#90 X on 11.27.13 at 9:18 am

The new normal is high house prices, we have 0-5% down purchases, RRSP home buyers plans, cash back mortgages, 30 amortization periods.

The lowest interest rates in a generation, have not only added to high housing prices, but they have fueled the highest household debt amongst Canadians as well.

Unless some of these change, nothing will change in regards to housing costs or household debt levels.

Perhaps with the comments the other day, 30 year mortgages will be on the way out.

IMO a buyer should have to put down more than 5% to buy a property (and none of these cash back mortgages), but that would probably be too big a move for the RE markets to handle at this point.

#91 Smoking Man on 11.27.13 at 9:43 am

#74 LH on 11.27.13 at 3:01 am

@5 chickenlittleI am 29 too, and my wage income has been approx 850-900k per annum for theo last couple of years, and over 3 mil before taxes over the past four years. We do exist, somebody has to be the 1% around here. It sounds like a lot but there are many around here with much, much more. There’s always a higher mountain.Including passive income I am well into the low 7 figures for gross income. So I actually manage to save over 100% of my after tax wage income. Why do I still work? It’s a lot of fun!
Cheers.LH
……………….

Exactly,

people have no concept of how the 1 present live. school, obidance cert, and a 50k tax farm gig equities to success.

We both know that sucks, but it’s collective consensus beleaf, and when you point it out for there own good you are attacked.

We have different reasons for tax farming, but my gig is fun, I sit on a mountain of cash from pervious gambling and businesses ventures.

All the loot from farming goes into slot machines, taxes and generous tips to the bar tenders at club 101 at Seneca.

But tax farming keeps me and forces me from over drinking, and keeps me challenged.

I’M weak in sin department.

Advice to you young grass hopper… Keep the sins in check…

#92 The average Joe on 11.27.13 at 9:43 am

#74 LH

Yes i know LH, i concer! Most of us young fella’s are are pullin in good Big City incomes, such as mine.
(somewhere between $500K – $700K/ yr).
We still find time to get on this blog and help lesser Canadians who are having some trouble. (we have not forgotten our meager roots of which,…through our stronge poasitive abitition, wits, high education in business of course, and all-out capability to multitask 10 things at once, we have risen above).
We are the new age youth who work hard and play hard.

#93 Big Dog on 11.27.13 at 9:47 am

Average home owners devote 43% of pre tax income is what the RBC ( We know its your money ) just reported on Canada AM.

#94 Garth, you are not brainwashing us ..aren't you? on 11.27.13 at 9:47 am

This article is full of bad news coming from the feds themselves, yet you are saying that US is recovering.

http://www.bloomberg.com/news/2013-11-27/fed-reveals-new-concerns-about-long-term-u-s-slowdown.html

“Slower growth in productivity might have become the norm,” the central bankers noted at their Oct. 29-30 meeting, according to the minutes released last week. That’s a switch from past comments by Bernanke that the deceleration probably was temporary and would end as the expansion continued.

A combination of forces may be at work. Chastened by the deep economic slump, corporate executives have reduced spending plans for factories, equipment, research and development. Startup businesses have been held back as would-be entrepreneurs find it harder to get financing from still-cautious lenders. And out-of-work Americans have seen their skills atrophy the longer they’re without jobs. ”

“Slower growth” is growth. Doesn’t sound so bad to me. — Garth

#95 Garth, you are not brainwashing us ..are you? on 11.27.13 at 9:49 am

Typo: no “n’t” in the title

#96 Toon Town Boomer on 11.27.13 at 9:54 am

#23 Early Spring
Job transfer to Saskatoon, easy 115k+yr… Looking to rent. Tons for sale and just playing the waiting game. What are/is the thoughts on saskatoon realestate and advice from fellow bloggers? Thanks

Just a few facts about Saskatoon. Be prepared for:
– seriously over valued home prices
– rent is very high
– roads suck
– poor infastructure
– taxes continuely increasing

#97 Buy? Curious? on 11.27.13 at 9:54 am

Hey Garth, what about strategically declaring bankruptcy? You can’t do it with student loans but you can do it with just about everything else. I knew a woman that was $60k in debt to various credit cards, went out and got a boob job via financing then declared bankruptcy before the scars healed. That was 5-6 years ago. Through lax privacy settings on Facebook, I found she bought a house 2 years ago. It’s in Winnipeg though but still bought a house.

How come you never talk about defaulting or bankruptcy?

#98 Victor V on 11.27.13 at 10:36 am

Canadian homeowners are feeling the pinch of rising prices and mortgage rates: http://ow.ly/retGn

It would take 84.2% of an average household’s pre-tax income to maintain a home in Vancouver, a rise of two percentage points from the second-quarter reading.

In Toronto, the affordability measure rose 1.3 percentage point to 55.6%, the second worst in the country…

The RBC says it does not expect the Bank of Canada to start hiking rates until sometime in 2015 as bond yields, the main driver of fixed mortgage rates, are projected to drift only “gently” upwards in the next year or so.

#99 brian on 11.27.13 at 10:48 am

Hi Garth, not everyone taking 30 year mortgages are stretched. I’m 33, my wife and I gross 190k, with a net worth of $0.9M. That we choose to borrow at 2.59% fixed for the next 5 years and keep a $300k balanced portfolio returning around 6% just means we’ve decided to make a mortgage tax deductible (drew on a second line). We choose 30 yr amortization to provide flexibility and increase quarterly contributions.

Aside, our combination borrowing is under $450k.

So, $900,000 net worth of which $600,000 is in a house, supported by $450,000 in debt? Hmm. — Garth

#100 recharts on 11.27.13 at 10:49 am

“Slower growth” is growth. Doesn’t sound so bad to me. — Garth

Don’t tell me that this sort of forecast is accurate to the decimals and you believe them more than you believe CREA’s numbers.
As for CREA’s numbers when they say it is worse it is actually that bad that they can not hide it anymore.

Let’s be honest here, there is nothing in that article that tells us that the chances are that the things will improve. On the contrary. In 2008 we kicked the can worldwide. They started printing money and so far it has not worked, the result is clear for everybody: RE bubbles and asset bubbles everywhere.

The US eocnomy strengthens monthly. Those who miss harnessing this incremental growth in a balanced, sane fashion will wish otherwise. — Garth

#101 jess on 11.27.13 at 10:53 am

brand repair – through lobbying and PR

OIL- “offshore incorporations limited”

“The damage caused by the International Consortium of Investigative Journalists getting its hands on a cache of 2.5 million records detailing the offshore assets of people should not be underestimated,” Hong Kong-based Offshore Incorporations Limited says.
“The scandal has created a crisis of confidence in the industry.”
http://www.icij.org/blog

Their findings in full, with ICIJ’s annotations, are available here.
http://www.icij.org/blog/2013/11/tax-havens-face-crisis-wake-offshore-leaks-report-says

====
Message to Congress on Tax Evasion Prevention.
June 1, 1937
http://www.presidency.ucsb.edu/ws/?pid=15413#axzz2j35ZdPjf

http://www.publicintegrity.org
Accountability
Secrecy for Sale‎ Nov 20, 2013 –
“In 1921, the U.S. Congress raised questions about foreign subsidiaries that were used to “milk” their U.S. parent corporations, helping them cut tax bills. In 1937, U.S. Treasury Secretary Henry Morgenthau warned President Franklin D. Roosevelt that Americans were dodging taxes by setting up holding companies in the Bahamas, Newfoundland and elsewhere, resorting to “all manner of devices to prevent the acquisition of information regarding their companies…”

#102 Daisy Mae on 11.27.13 at 11:08 am

#48 Roy: “But people here don’t get it. They live in an alternate Beaver Cleaver reality where they have decided these fundamental laws do not apply to their life…..”

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

Excellent post. I find, too, people just don’t want to hear about the true state of our economy preferring to believe instead, the ‘Beaver Cleaver reality’. Absolutely amazing. They keep buying, they keep renovating….and as long as credit in any form is available, they’ll use it. Until they can’t.

#103 Daisy Mae on 11.27.13 at 11:14 am

#49 Snowboid: “PS: Used 250K RVs mainly bought by govt workers? You just made that up, right?”

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

What amazes me is that the dealer took these 250k units off their hands. How is HE going to move these monstrosities?

#104 Bikini Bottom on 11.27.13 at 11:21 am

Ok, guys, time to hack my money bags.

Currently have 47K left on our Toronto home, 30k on the car. (I know, I know.) Hubble and I make 170K/year. Three kids with maxed RESP contributions, and not much in savings. (Like 5k.)

I’d like to start investing, so what do we do:

1. Save for a lump sum to invest
2. Devote a portion of our monthly salaries to investing
3. Don’t even think about it until the house and car are paid off (est. 2 years.)

Please go easy on me. I’m an investing noob.

#105 Daisy Mae on 11.27.13 at 11:21 am

#51 Jimmy AAA: “Why lie when you can just omit the truth to further your point of view….”

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

Omitting the truth is a lie.

#106 Jill on 11.27.13 at 11:26 am

I think it’s funny that people are pushing for a review in food safety, but maybe you need it when times are tough and money is tight. http://goo.gl/N80BtI

#107 2cntsCdn on 11.27.13 at 11:30 am

Well …. 50% of the mortgages being at the max 30 yrs doesn’t surprise me at all. I’d be interested to hear how many (or %) 40 yr ones got issued.

One question I have (anyone know?) I know there are zillions of homes and condo’s sold in the last 5 or 6 years …. how many (house horny/ three quarters of every pay cheque gone for the next 30 years / 30 yr/am) people are there in the country? Is it 10%, 20% or 50% of the over-all population? Lots of people had homes long before 2008 …. I’m just wondering what % of the population is in debt up to their eye balls (and if anyone knows it) .. throw in the people who WERE financially comfy … but then loaded up on cheap HELOC money in the last 5 years to buy “stuff”.
thanks

#108 DM in C on 11.27.13 at 11:35 am

#58 EDMONTONboy

I don’t know specifically about Edmonton, but the local papers in Calgary have been covering this for a while

http://www.calgaryherald.com/business/Average+consumer+debt+Calgary+second+Vancouver/9160530/story.html

#109 Daisy Mae on 11.27.13 at 11:43 am

#67 Wiseguy: “Half the time in her mall, Sears was empty, but the mall was packed, so it was only a matter of time.”

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

I wonder if the mall shoppers are window-shopping or actually buying…and if they’re buying they’re quite likely using credit.

#110 Mr. Frugal on 11.27.13 at 11:50 am

It must be nice to start out making $175K combined income! But, it’s an awful long way to fall if even one wager earner loses their job. The problem here is that kids will come to expect that money grows on trees and every day is sunny. For my 2 cents, alot of young people are about to get a free class at the school of hard knocks.

P.S. Thanks for all of your efforts Garth. I took your advice and bought into US equities. A much better plan than the new house purchase we were contemplating at the time.

#111 Devore on 11.27.13 at 11:51 am

#24 HHS

Encanada is laying off 20% of its workforce,

Actually Calgary could be a net benefit. 1/2 the workforce is being fired in Texas (400). It pays to Read beyond the front page.

Implying they are hiring in Calgary while cutting in Texas. Are they? I am reading beyond the front page, and I don’t see it.

#112 Devore on 11.27.13 at 11:53 am

#30 superdave

they could afford a shorter am, but clearly wanted the flex to make smaller payments when desired.

Yes, clearly.

#113 Randis on 11.27.13 at 11:55 am

#44 Ronaldo:

I believe the interest is not tax deductible, because the gains you earn inside a TFSA is not taxable.

#114 Daisy Mae on 11.27.13 at 11:56 am

#80 OnTheSidelines: “Garth’s continued insistence that rates will rise is more of a shouting match as he has yet to provide the rationale for this opinion whenever he is challenged.”

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

Garth didn’t say when. It won’t be tomorrow. But, of course, they will rise. They always fluctuate.

#115 Daisy Mae on 11.27.13 at 12:00 pm

#81 LiveWithinYourMeans: “I never believed you owned a gas guzzling Hummer, Garth…”

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

What’s the big deal? Garth can certainly afford one, so why not?

#116 calgaryPhantom on 11.27.13 at 12:12 pm

2 full years of listening to ” Told ya!, you should have bought with us”, from my relatives and friends.

I guess in today’s world, people can’t stand seeing anyone happy and content with what they have.

#117 Devore on 11.27.13 at 12:14 pm

#57 Bob Rice

The point is not that groceries are cheap in TO, but that a couple is expected to eat on $500/month. That’s $15 a day. For two people. Doable? I guess so. Apparently necessary to live like a miser, just so you don’t get priced out forever.

A recent financial advice column for a youngin in money trouble over a condo she bought had the adviser recommending the set aside $150 a month for food. That’s $5 a day. A coffee, PST/GST, and a quarter in the tip jar, you’re well over half way there already. Seriously, if living on $5 a day is the price of home (condo) ownership, no thanks.

#118 curious on 11.27.13 at 12:14 pm

I doubt the 29 year olds here who claim to make 500k are earning that kind of income on a career or in jobs.

They most likely have started from scratch or inherited a business.

There are only a handful of people who in all of canada who earn 500k+ on a career/job. They are executives, min director level if not VPs, famous in their circle and are def. Not 29.

So which one of these are you guys in to make that kind of money?

#119 Vamanos Pest on 11.27.13 at 12:24 pm

#104 Bikini Bottom
Keep in mind I’m not a professional, if Garth subsequently comments and disagrees with me, listen to him (I do).

As far as lump sum vs consistent contribution, no question make consistent contributions. This will spread out your portfolio “buys” and lowers your risk of entering the market at the top.

As for when to start, that depends. I assume the interest rate on your home is sweet, so I wouldn’t rush that at all. The car you might want to tackle as a bit of a priority, but if your interest rate happens to be really low, you may leave that too, as your overall debt to income is not in itself a concern.

Good luck!

#120 Rainclouds on 11.27.13 at 12:34 pm

Dubious distinction

http://www.businessinsider.com/chart-over-and-undervalued-markets-2013-11

#121 recharts on 11.27.13 at 12:39 pm

The US eocnomy strengthens monthly. Those who miss harnessing this incremental growth in a balanced, sane fashion will wish otherwise. — Garth

I think we are going to find out the truth sooner than we are going to find out the truth about the canadian RE market since the american investor is less eager to put up with the B$ coming from FEDs. Also the risks implied by a recession in the american economy are smaller that the risks implied by a crash/recession in the canadian RE market

For canadians, this is all we have got: RE masturbation, all the other sectors are at most flat. They have all the reasons in this world to make us believe that this ship is still floating.
The american approach and the existence of groups with conflicting interests will make the lies less tolerable there so..let’s wait and see :-) how higher can the US stock market go.
http://tinyurl.com/pav2kry

#122 Son of Ponzi on 11.27.13 at 12:39 pm

Just finished reading : “Europe on $5 a day”.
I’m leaving tomorrow.

#123 Nemesis on 11.27.13 at 12:44 pm

@Eddy/#87….

“There is too much Toronto bashing on this blog…”…

Right you are, Mr. Eddy.

Indeed – clearly, TorontoTheGood has been unduly ‘hogging’ the NationalLimeLight of late. Fortunately, and as you no doubt well know, our MagnanimousHost’s “bashing” policy is built upon a solid foundation of EqualOpportunity.

Besides which, why would anyone want to waste their time obsessing about FordTown HogTown this morning when ColumbieBrittanique’s very own Premier Christy Clark is trying so hard to win this years PoliticalMalapropism award [and succeeding!]:

“You can’t spend more than you take in; B.C. has been a leader on that front.” – BC Premier Christy Clark

[Tyee] – Premier Clark lectures Americans on fiscal responsibility

…”Clark’s BC Liberal campaign bus was emblazoned with the “Debt Free B.C.” slogan during last spring’s election. When she came to power in 2011, the province’s debt was $45 billion. It is forecast to hit $69.8 billion by 2015-2016. Public Accounts also show an additional $99.8 billion in contractual obligations.”…

http://www.thetyee.ca/Blogs/TheHook/2013/11/25/Clark-Fiscal-Lectur- e/

Hmmm… Strangely, neither Jack Lew nor Ben Bernanke chose to respond to the Premier’s admonitions [perhaps it’s because they were secretly hoping to enjoy a more VigorousSpanking at the hands of PremierClark on another, later, more ‘private’ occasion?].

Never mind, though – because when it comes to WinningFriends & InfluencingPeople there is no-one more persistent than the EternallyEffervescent Premier Clark. And, as rumour has it and unlike Washington, it was StandingOvations AllRound for the ChinaFirst!Premier:

“There was a reason BC was the first issued a bonds into the RMB market, it is because China was first in our agenda.” – Premier Clark

[CCTV COM] – Liu Yang interviews Canada British Columbia Premier

http://english.cntv.cn/program/newshour/20131125/103108.shtml

Hmmm… One is almost tempted to conclude that Premier Clark’s MandarinOutReach was actually just the first of yet many carefully choreographed international PhotoOps to come… because, if you haven’t already heard, PM Harper’s got ABraveNew “Global Markets ActionPlan!”…

[G&M] – Tories’ new foreign-affairs vision shifts focus to ‘economic diplomacy’

http://www.theglobeandmail.com/news/politics/tories-new-foreign-affairs-vision-shifts-focus-to-economic-diplomacy/article15624653/

Yep… and there ain’t no doubt about it either,
Sheikh Abdullah Bin Zayed Al Nahyan [UAE’s Minister of Foreign Affairs] is clearly enjoying having his Timmies served up by Canada’s Foreign Minister John Baird.

Speaking of which, and as Minister Baird obviously can’t be expected to permanently man the percolators… why not turn a certain SportsCommentator’s dilemma into an opportunity!:

[G&M] – Don Cherry: “Do I Still Have A Job?”

http://www.theglobeandmail.com/sports/sports-video/video-don-cherry-uncertain-what-new-nhl-deal-means-for-him/article15622258/

…at the Tim Hortons, Abu Dhabi Mall in Abu Dhabi!… Well, it’s a thought.

And now, SaltyDogz – some IndebtednessZen to enjoy with your MorningTimmies [SpoilerAlert: Husbands are advised to remain seated, with their safety belts securely fastened, during all spousal arguments occurring on MotorWays]:

[UK Telegraph] – M25 victim was hit and killed by lorry after storming out of car after argument with wife

…” A row about a husband taking the family credit card abroad with him ended in a motorway tragedy when the man stormed out of the car clutching his suitcases.

His wife had pulled over on what they both thought was the hard shoulder of the M25, not realising that it was a live lane because of roadworks. “…

http://www.telegraph.co.uk/news/uknews/law-and-order/10478202/M25-victim-was-hit-and-killed-by-lorry-after-storming-out-of-car-after-argument-with-wife.html

#124 Rick on 11.27.13 at 12:46 pm

http://www.winnipegfreepress.com/business/finance/federal-government-should-end-insuring-high-risk-mortgages-through-cmhc-imf-233611201.html

Hmmmm….. what a shocker!

#125 HD on 11.27.13 at 12:57 pm

@ #119 Vamanos Pest on 11.27.13 at 12:24 pm
#104 Bikini Bottom

As far as lump sum vs consistent contribution, no question make consistent contributions. This will spread out your portfolio “buys” and lowers your risk of entering the market at the top.

You might want to read this:

http://canadiancouchpotato.com/2013/05/31/does-dollar-cost-averaging-work/

Best,

HD

#126 Son of Ponzi on 11.27.13 at 1:05 pm

Regarding the 29 year old millionaire.
On the Internet, everyone can be Bill Gates.

#127 Republic_of_Western_Canada on 11.27.13 at 1:09 pm

DELETED

#128 Vamanos Pest on 11.27.13 at 1:14 pm

#125 HD
Yep, a really good point. History shows that if you have a lump sum moving it all in will put you ahead more often than not.

I don’t think that applies here, though. Bikini Bottom doesn’t have a large lump sum. I think her question was should she (yes, bikini bottom might be a he, not judging) save up a lump sum and move it in at a later time (after having saved it up). I don’t see any advantage to this strategy. To your point though, the 5k she does have can be moved in as lump sum to start.

#129 Chickenlittle on 11.27.13 at 1:27 pm

Re: #15 bubu:

You live with your parents, don’t you?

#130 Obvious Truth on 11.27.13 at 1:36 pm

#99

Writes about using home as leverage if I’m reading right.

Like I said. We don’t need help from Julie.

#131 Debt is for Growth not Consumption on 11.27.13 at 1:46 pm

@ 13 TO Bubble boy
Thats nothing. About 5 years ago I spoke with a broker. At the time: $38G/yr, $20G in student debt, basically no assets (some small cash to close a deal), and living just off broadway in west Van ($$$).
Broker says, “I can probably get you around $375,000 and some cash to buy a car rolled in” He wanted to lend me $385-390G! Thing is, at those prices you only get a apartment or at best a townhouse (either way a strata of $200-500/mnth.) I had no money, a crap job, long commutes and pretty big debt. He said it like this was normal. And I could get all that for 5%! Needless to say I passed and found a new broker.
Fast forward a couple years, significant raises (50%), paid off the student debt, got a car and some decent liquid cash and moved to a cheaper centre. Talked to a broker again. He said tops he would get me (‘would’ being key here, he would not sell me a mortgage that would reduce me to poverty for the rest of my life) is $275,000, and that is only if I put down at least 5%, pay closing costs in cash and get a place with no strata or rental restrictions and have no other debt.
I had friends, DINKs, decent jobs. Probably made around $90-100 between them. But, they carry crazy debt and spend like sailors on leave. Two cars with payments, CC that always have a balance, student debt, hundreds a month on meds, big dogs.
They went to buy a year after renting a very nice 2 bed apartment. No cash. They talk to a broker. After selling one of the cars (for less then the debt on it!), they get a cash back mortgage for $390,000 with $0 down and buy a brand new 1/2 duplex with paper thin walls, a patch of dirt instead of lawns and a driveway, no fence, and a make-shift back staircase built for the builders! It didn’t even come with appliances! They had to sink another $20,000 of debt to get the place livable for themselves and their dogs. For a $100G more they could have literally got a 15yo 5000sqft mansion with an indoor pool in the same city!)
Perverse incentives all around. The broker made out like a bandit and the realtor worked for the builder. Any realtor worth their salt would have ensured they got a lawn and appliances at that price, like their neightbour did!
I am sure this is happening all over the country.
I wonder what happens to a society that takes on too much consumer debt? Anybody have an historic example of a society that took on massive amounts of consumer debt and what happened? Recession, delfation, inflation, crashes, low wages, meteor strike?

#132 Bill Gates on 11.27.13 at 2:02 pm

126 Ponzi – You’re right

#133 Shawn on 11.27.13 at 2:09 pm

Bankruptcy Option

Buy? Curious? at 97 asks?

Hey Garth, what about strategically declaring bankruptcy?

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

Loser Much?

Is this for losers, those without morals or a combination of both?

(And yes, I realise some people get into a bankruptcy situation in sad circumstances not of their own making, but that’s the exception, this post talks about strategic bankruptcy, a strange concept for a blog populated by people trying to grow wealth)

#134 Incubus on 11.27.13 at 2:30 pm

The Most Overvalued And Undervalued Housing Markets In The Developed World

http://static1.businessinsider.com/image/52961697ecad042c2dc88951-800-/cotd-83.jpg

Read more: http://www.businessinsider.com/chart-over-and-undervalued-markets-2013-11#ixzz2ls8ERrk6

#135 TnT on 11.27.13 at 2:36 pm

#57 Bob Rice

This is one thing that is cheaper in toronto…groceries… believe me, t.o. has the cheapest food in the country.. maybe continent..know this from experience and family in the business..

**********

To add, we also have the most variety of food due to the many different ethnic communities.

All these cooks working their culinary skills from all over the world ordering their foreign spices and foods via our terminals.

Very few North American cities have the variety we have…

http://www.toronto.ca/toronto_facts/diversity.htm

#136 Ralph Cramdown on 11.27.13 at 2:42 pm

#133 Shawn — “[…] strategic bankruptcy, a strange concept for a blog populated by people trying to grow wealth”

Maybe not as strange as you’d think. Plenty of people who go bankrupt do it the worst possible way. They cash in the life insurance and other assets that might otherwise be protected, borrow from family and friends, start defaulting on a few cards incurring large interest and penalty charges, and generally live a horrible, poverty-stricken and stressful life for a few years, and STILL end up going BK in the end.

Much better, if BK is inevitable, to do it sooner rather than later, so that credit is reestablished that much sooner and retirement savings can begin again.

Behind every BK who made bad decisions, there is a line of creditors, at least some of whose bad judgement led to their losses. Morality should play no part — that’s why we got rid of the stocks and debtors’ prisons in the first place. For an advanced class, study how big corporate deal makers default on their loans when a deal doesn’t work. Parent corporations don’t step in to prop up a BK subsidiary, nor do creditors expect them to. Creditors suck it up, divide what’s left and move on.

#137 Debt is for Growth on 11.27.13 at 2:43 pm

Hey Superdave @ 30.
This is the case for some, myself included. I went to the broker (the second one from my last post) and said, ‘I want the lowest interest rate, the longest Amort, and the lowest monthlies you can get me.’
I wanted to be sure that in a pinch I could drop those payments to the floor. I ended up with a big house that I turned to a legal duplex. One half will cover the monthlies and taxes
Almost as soon as I started payments I changed to weeklies, dropped almost 5 years off the amort. The place is fully rented now and giving very nice returns. Soon the reserve fund will be filled. At that point I will liquidate it and put it in an investment account that I will use to secure a LOC for emergencies. At that point, the money I was using to fill the fund will go to pumping those weeklies to the max and shave another 5 years off the amort. All this can be changed in minutes online for free.
If things get rough, I can always drop back to monthlies at the lower payment. Worst case scenario I have already added enough equity (with DIY renos) that I can weather a big drop in value.
So, yes, some of us Gen X’ers can do a little math and know how to use credit. Not saying this is the best use but, better then the consumers I mentioned above…

#138 future mind on 11.27.13 at 2:47 pm

Rising rates have an inverse relationship with bonds and preferreds. A doubling of the interest rates will crater bonds, reits and preferreds…pretty much all fixed income will get killed when risk reward shifts back to cash….where does a passive balanced investor go when two legs of the fixed income market go away?

Mortgage rates rose 50% earlier this year, and my preferreds are still paying me 5.2% with a dividend tax credit. That is why they may dip, but will not ‘crater.’ — Garth

#139 Young & Foolish on 11.27.13 at 2:48 pm

Soooo much debt …. it’s the new normal. Unpayable at every level. Are you expecting things to go back? Seriously? Ha! That would be “regency”.

For sure big city housing is expensive and is divorced from “fundamentals”, but so are the equity markets (i.e. amazon at $380 and no profit in sight). And your dollar is not worth a dollar any more.

#140 BCD on 11.27.13 at 2:56 pm

@ 131
“I wonder what happens to a society that takes on too much consumer debt? Anybody have an historic example of a society that took on massive amounts of consumer debt and what happened? Recession, delfation, inflation, crashes, low wages, meteor strike?”
___________________________________________

Nothing happens. . .people wake up some days with a hangover worse then the other days. . .they pay down, borrow and the cycle of life continues. Interest rates are low, and will stay low forever. . .at the same time GIC interest rates will stay low forever to punish the savers. What they aren’t giving to the “savers” they are taking from the “spenders”. This is the new order for our world and so get used to it. Everyone saying “it won’t end well” does not realize that it already HAS ended.

As a side note. . .all this talk about how much debt people are taking on makes me wonder how much is true. The baby boomers stuffed mounds of cash under their matresses, so we can assume that they are helping all their young offspring buy with sizeable chunks of cash. Is there really that much debt? My siblings both took on huge mortgages, but they plan to pay it off in half the time!

All I am saying is that all you “doom and gloom” types praying for blood on the streets might just have to take a trip to your local slaughterhouse to get your fix. The world continues to turn in the housing market and with personal debt. In other news, you can expect the major players in the stock market to start cashing in circa 2008 style–you didn’t think they were going to let your investments continue to rise without withdrawing their share and sinking the whole ponzi scheme again did you?

#141 Rexx Rock on 11.27.13 at 3:09 pm

Another thing the goverment is lying about is inflation being under 2%.What a joke ,do they think Canadians are that stupid to believe it.They don’t include food and energy prices.Hey here in B.C. hydro rates are going up over 25% in the next few years.Also insurance rates are going up,way over 2%.Give up the lies and propaganda.

#142 Vamanos Pest on 11.27.13 at 3:27 pm

#133 Shawn

Bankruptcy is NEVER of the debtors own making, as in all debt, someone made the decision to lend them money. I’d say it’s pretty obvious that in Buy?Curious?’s example it is the creditors, and not the borrower, who are the losers.

Don’t hate the player, hate the game.

#143 Worldview on 11.27.13 at 3:35 pm

Looks like Canada tops the country list in price to rent ratio at 85% above the average:

http://www.businessinsider.com/chart-over-and-undervalued-markets-2013-11

#144 Steve on 11.27.13 at 3:39 pm

#12 Blase

Interest rate on a credit card vs a 2.6% mortgage is a key difference in the argument. Just saying.

Interest on $1000 on credit card, vs interest on $800k mortgage?

What are you saying exactly? I wish people would just come out and say what they want to say, instead of playing 20 questions.
_____________________________________________
At the risk of over-simplifying, if you focus ONLY on cash flow – meeting the monthly costs you have committed yourself too, and do not include NET WORTH in your thinking, you will take the long mortgage (regardelss of rate) and you will run up your credit cards (regardless of rate) and you may even think payday loans are the best thing since sliced bread.

I believe that one of Garth’s points is that too many people are overlooking the debt (see the title today?) and the net worth impact and are looking only at the cash flow. After a life time of meeting minimum payments, they will be worth nothing, or less than nothing, entering retirement. Those with a house as their only asset risk a lack of liquidity.

It is amazing to me how we sign up by the droves for a lifetime of debt, with no clear end in sight. Too many of the population willingly making themselves slaves to the debt, and the holders thereof. F & the Peckerettes should indeed be loosing sleep over this, but we should not expect government to be responsible for our actions.

We really do need to save ourselves.

#145 Shawn on 11.27.13 at 4:15 pm

BANKUPTCY WINNERS?

VAMANOUS PEST SAID:

Bankruptcy is NEVER of the debtors own making, as in all debt, someone made the decision to lend them money. I’d say it’s pretty obvious that in Buy?Curious?’s example it is the creditors, and not the borrower, who are the losers.

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

Interesting. I agree the creditors lose and may be partly to blame for the situation.

Still, most winners in life never go bankrupt. A few rebound from it and become winners. But i suspect it’s not that many.

In life the past often predicts the future.

Winners win, and losers lose. (Not always, but in general).

Right, Smokey?

#146 erebus on 11.27.13 at 4:20 pm

#140 BCD

well, since everybody is sinking in debt and it’s the new normal, I might as well just do what everybody is doing and borrow borrow borrow!! I don’t wanna stand out as the guy who doesn’t have a mortgage, huge consumer debt, and granite and toys to show for it. What would my friends think of me?!?!

…sigh….

#147 NeedAdvise on 11.27.13 at 4:32 pm

Since many people visiting this blog are older, wiser, probably wealthy and with rich life experience, I’d love to get some career insight from you experienced folks and the “29 year olds making 500k+ per annum”

I’m in my mid 20s, male, hard working. Engineer.
What careers out there lead to salaries of 300k+ a year?

Most people say, try to get into management in big companies and climb the corporate level path but they quickly forget or are unaware most people in those senior level roles making 300k+ are social or political elites born into those jobs with serious big-business/big-family connections.

Basically, the average Joe, regardless of how smart or capable he or she maybe won’t be promoted.

Are there careers out there that pay a competent, qualified, hard working guy that well without being born in to business?

Only other path I see is entrepreneurship. Having a successful high turn over business.

#148 Shawn on 11.27.13 at 4:52 pm

You Need Advise, I got Advice

Need Advice asks:

What careers out there lead to salaries of 300k+ a year? (for an engineer)

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

Probably very few. Some people will climb the ranks. Be prepared to work 12 hours a day to make that happen.

Getting with a very small company and earning stock options could do it… again, 12 hours per day.

First step get to Alberta, get some experience, move around, be willing to take lower pay now for bigger gains later. Save money to invest. If not on track by age 35 or so re-evaluate the entreprenership role. But first try total devotion to the career to see what happens.

#149 pinstripe on 11.27.13 at 4:52 pm

#97 Buy? Curious?

How come you never talk about defaulting or bankruptcy?

———————————————————-

add to the talk 1) transferring money to a tax haven off shore. 2) how to latch on to a govt contract. 3) how to obtain a subsidy for a small business. 4) how to obtain grant money from the govt. 5) money laundering.

#150 Holy Crap wheres The Tylenol on 11.27.13 at 4:55 pm

#57 Bob Rice on 11.27.13 at 12:31 am
Igor post #21: “$500 month for two in Toronto? to eat more or less healthy -probably unreal”

This is one thing that is cheaper in toronto…groceries… believe me, t.o. has the cheapest food in the country.. maybe continent..know this from experience and family in the business..

_____________________________________________

Really?
After living in the city for years I came to notice that I was ripped off every time we went out shopping. I don’t know where you shopped for food but it was never cheap. Toronto is not cheap for groceries!
Just go one county over to the west in Mississauga and shop there. Much cheaper for almost everything. Larger stores, more variety, lower costs. Besides unless you walk to your supermarket and live downtown try carting a couple of 24 packs of soda home with your sacks of potatoes? Even then downtown was very expensive when I lived there.

#151 Holy Crap wheres The Tylenol on 11.27.13 at 5:03 pm

#38 Smoking Man on 11.26.13 at 11:09 pm
Tomorrow my essay on the state of the world, and where things are going.
From the Oracle of Oracles.
Stay tuned to this bat channel. It’s going to be technically flawed, but deadly accurate.
My connection to the UCC coming in like a blasting sub woofer with the treble set to max.

……………………………………………………………………
Treble refers to tones whose frequency or range is at the higher end of human hearing. In music this corresponds to “high notes”. The treble clef is used to notate such notes. Examples of treble sounds are guitar tones, female voice (such as soprano ), young boy voice, etc. They have frequencies above 2 kHz. Treble sound is the counterpart to bass sound.
So how does your treble adjustment work on a sub woofer in 20hz range or lower? The treble circuit would filter out lower frequency’s.
Just trying to understand the UCC?

#152 Smoking Man on 11.27.13 at 5:06 pm

145 Shawn on 11.27.13 at 4:15 pm

BANKUPTCY WINNERS?VAMANOUS PEST SAID:Bankruptcy is NEVER of the debtors own making, as in all debt, someone made the decision to lend them money. I’d say it’s pretty obvious that in Buy?Curious?’s example it is the creditors, and not the borrower, who are the losers.*****************************************Interesting. I agree the creditors lose and may be partly to blame for the situation.Still, most winners in life never go bankrupt. A few rebound from it and become winners. But i suspect it’s not that many.In life the past often predicts the future.Winners win, and losers lose. (Not always, but in general).Right, Smokey?
……………

No such thing as winners and losers.

Some people give up, some don’t, some get obsessed till they get it right.

For every major success I have had, I have 10 fails.

Trick is never stop trying…

#153 Son of Ponzi on 11.27.13 at 5:10 pm

# 147 Need advise.
You people are cracking me up.
Coming here for advise on how to make 300k at the age of 29!
Whatever happened to working at MacDonalds and then make an educational trip to Europe and then start at the bottom of some company and then by the time you retire you have a decent pension and maybe can go to Florida during the summer.
Jeez.

#154 WhiteKat on 11.27.13 at 5:11 pm

@NeedAdvise re:comment #147,

I have only word of adviCe.

#155 Mr. Finance on 11.27.13 at 5:13 pm

#74 LH on 11.27.13 at 3:01 am
@5 chickenlittle

I am 29 too, and my wage income has been approx 850-900k per annum for the last couple of years, and over 3 mil before taxes over the past four years. We do exist, somebody has to be the 1% around here. It sounds like a lot but there are many around here with much, much more. There’s always a higher mountain.

Including passive income I am well into the low 7 figures for gross income. So I actually manage to save over 100% of my after tax wage income. Why do I still work? It’s a lot of fun! Cheers.

LH
———————————
I’m 27 and pulled in $1.5M consistently for each of the past 3 years. Feel a little bad for you, as you probably haven’t worked as hard as you could have…

What kind of work do you do? I’m a realtor. :)

#156 Son of Ponzi on 11.27.13 at 5:13 pm

#151
SM has figured out a way to incorporate a treble circuit on his subwoofer.
That’s why I suggested he’d get patented quickly.

#157 Son of Ponzi on 11.27.13 at 5:15 pm

# 147
of course you could become a diciple of the SM.
Not sure if he still accepts new ones.
Has a limit of 12.

#158 Babblemaster on 11.27.13 at 5:22 pm

#114 Daisy Mae

Garth didn’t say when. It won’t be tomorrow. But, of course, they will rise. They always fluctuate.

————————————————-

“They always fluctuate?” Really? FYI these are extremely low emergency rates and, prior to 2008, they are unprecedented. This is not just a routine fluctuation. Garth has been stating that rates are going to climb for the last 5 years and it hasn’t happened yet (not significantly). Even with QE at a rate of 85 billion per month, we have these extremely low rates. Under what scenario does Garth believe rates will rise? When the economy does better? Good luck with that wishful thinking. Or, maybe when investors wise up and begin to demand more from their bond investments. That doesn’t seem likely either. Not when the Fed is happy to buy bonds at extremely low rates. There’s just no pressure for bond rates to go up.

Long mortgage rates rose 1% already this year. More to come. Come back on March 20th. (And I’m really sorry about your gold. Tough break.) — Garth

#159 Herb on 11.27.13 at 5:24 pm

#17 and 73 World and Government According to our Neandercon Troll,

there was a public debate in Ottawa last night between a union economist (Jim Stanford) and a Conservative intellect (Prof. Tom Flanagan). Both put their arguments in writing for the Ottawa Citizen this morning. Although the debate was about whether or not the Public Service should have the right to strike, the difference in remuneration was considered by both sides.

Of course you won’t like Stanford’s argument, but you might ask yourself if Flanagan demolished it or reinforced the former’s point that “tilting at public sector unions is all about politics, not economics.”

http://www.ottawacitizen.com/opinion/op-ed/Should+public+service+have+right+strike/9216352/story.html

http://www.ottawacitizen.com/opinion/op-ed/Should+public+sector+have+right+strike/9216350/story.html

#160 Nemesis on 11.27.13 at 5:37 pm

@NeedAdvise/#147…

EasyPeasy*… just check out the CareerPath either of these two VeryEntrepreneurial Engineers:

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

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

[*Naturally, there are certain ‘drawbacks’ to that line of work… but if you can persuade someone else to start your car for you and manage to avoid motorcycles during your daily commute you should be just fine.]

#161 Yitzhak Rabin on 11.27.13 at 5:49 pm

“The US eocnomy strengthens monthly. Those who miss harnessing this incremental growth in a balanced, sane fashion will wish otherwise.” — Garth

No. The Fed balance sheet grows by $85 billion a month which inflates asset prices to absurd values. Such as the Russell 2000 trading at 75x trailing earnings. Underneath the surface in the real America things get worse every month.

The HELOCs taken out in the USA during the bubble years are starting to reset. $29 billion of these loans at the biggest banks will see their monthly payment jump next year, followed by $53 billion in 2015, $66 billion in 2016, and $73 billion in 2017.

The greatest fools will be those who bet on the phony US “recovery” that is ever more dependent on QE. Look out.

The phoney recovery has given me a 9.5% average return for the last two years. How much has your fear yielded? Oh wait, gold is down 36%. — Garth

#162 Spiltbongwater on 11.27.13 at 5:55 pm

Garth, do you think Bitcoin will be worth more then gold by the end of the year?

I’d take real estate over either one. — Garth

#163 elchavo on 11.27.13 at 6:08 pm

Hi everyone,

I’m 23, and I’m clearing 10.5 million a year after taxes. It’s very easy! I get to save all my paycheques because I work hard and I’m awesome. I also enjoy coming to this blog and making up stories because it gives me personal satisfaction knowing that some of you might actually believe what I’m typing.

It’s easy to clear 10.5 million a year. I’m a very young and skilled professional hitman.

#164 Smoking Man on 11.27.13 at 6:13 pm

#162 Spiltbongwater on 11.27.13 at 5:55 pm

Garth, do you think Bitcoin will be worth more then gold by the end of the year?I’d take real estate over either one. — Garth

I’m buying 2k worth next dip, there will be only 21milliion in circulation once done.

But it’s fun money, can easily feed that into a slot machine on a drunkin stupor..

#165 Stuck in Vancouver on 11.27.13 at 6:16 pm

@ not 1st #47

“They sit back and watch Global TV, and hear about how the latest stabbing in Surrey, fall fashion trends, and how a search and rescue operation is “global” newsworthy.”

LOL! You pretty much described Global BC’s news hour every night of the week. Although, it’s just as often a shooting in Surrey as it is a stabbing. Also, you forgot to mention the weekly run/walk for breast cancer, prostate cancer, or some other charitable cause. There’s also It’s amazing how predictable and formulaic our news broadcasts have become.

#166 DM in C on 11.27.13 at 6:25 pm

I’m 27 and pulled in $1.5M consistently for each of the past 3 years. Feel a little bad for you, as you probably haven’t worked as hard as you could have…

What kind of work do you do? I’m a realtor. :)

+++++++++++

Well, ahahahahaha that EXPLAINS everything! Well we just will all believe THAT then.

You work for Mommy’s business then? Heh. Or selling condos to HAM? $1.7Mil Indeed.

I’m a VP for a global company and am 43. I don’t make half that. The world is a strange and interesting place.

#167 BCD on 11.27.13 at 6:34 pm

@163
Hi everyone,

I’m 23, and I’m clearing 10.5 million a year after taxes. It’s very easy! I get to save all my paycheques because I work hard and I’m awesome. I also enjoy coming to this blog and making up stories because it gives me personal satisfaction knowing that some of you might actually believe what I’m typing.

It’s easy to clear 10.5 million a year. I’m a very young and skilled professional hitman.

______________________________

There is probably no one who has ever visited this blog that makes 900K a year @29 years old. Lol to that! My wife and I are 40 years old (with house) and gross 160K combined (100K net income) and I reckon that is pretty damn good (considering we are in a position to save 60K CASH a year even with two kids). Not bragging. . .but at least I am telling the truth. Problem is we are losing money everyday at these awful low GIC rates–and don’t tell me that ETF’s are the way to go, I don’t believe in anyone offering 5-9% without the ability to lose your shirt. If it sounds to good to be true it probably is.

#168 economictsunami on 11.27.13 at 6:44 pm

Financial engineering is a no brainer, print money.

Economic and social engineering though is a whole other kettle of fish…

Analysis: Surfing central banks in a benign ‘QE trap’…

http://www.reuters.com/article/2013/11/27/us-investment-centralbanks-analysis-idUSBRE9AQ07520131127

Fed Reveals New Concerns About Long-Term U.S. Slowdown:

http://www.bloomberg.com/news/2013-11-27/fed-reveals-new-concerns-about-long-term-u-s-slowdown.html

#169 rosie "moving forward" in the knowledge that, "this won't end well" on 11.27.13 at 6:46 pm

#164 and others.
So long as the music is playing, you gotta get up and dance.

#170 eddy on 11.27.13 at 7:01 pm

@#150 Holy Crap wheres The Tylenol

You want cheap? Here is Etobicoke’s best kept secret, nothing fresher, nothing cheaper.

http://www.dimpflmeierbakery.com/retailStore.html

#171 Shawn on 11.27.13 at 7:14 pm

How to Measure Income

If a 50 year old makes $120k per year at work and has also managed to build a portfolio of $500k which is averaging 7% or $35k, how much does this person “make” (pre-tax)?

$120k because that is all we normally like to count?

$155k, counting the portfolio income?

$120k because the extra $35 k is volatile and can’t be counted on?

More than $155k equivalent because the $35k is probably attracting little tax.

What is your “vote”.

#172 Bgreene on 11.27.13 at 7:14 pm

@ #92 The average Joe

“pulling income” is for losers
By 29 I was on my third startup

#173 huh on 11.27.13 at 7:40 pm

Why isn’t anyone pointing out the ‘bubble of ’89’ saw real estate prices rise 22% every year…we are nowhere near that yearly increase in the last 12-15 years or so. If you compare Canadian real estate trends from the 60’s onwards, what is happening right now isn’t so shocking. I bought and am happy I did. I follow the blog for general investment advice but anything specific to real estate, no thanks.

You must have been stoned in the Eighties. — Garth

#174 whitekat on 11.27.13 at 7:50 pm

@BCD re: comment #167

I believed you until the part about being able to save 60K a year with a net income of 100K. How can a family of 4 with a house live on 40K a year? It’s gotta be KD, or no mortgage.

#175 T.O. Bubble Boy on 11.27.13 at 8:22 pm

@ #171 Shawn on 11.27.13 at 7:14 pm
How to Measure Income

If a 50 year old makes $120k per year at work and has also managed to build a portfolio of $500k which is averaging 7% or $35k, how much does this person “make” (pre-tax)?

$120k because that is all we normally like to count?

$155k, counting the portfolio income?

$120k because the extra $35 k is volatile and can’t be counted on?

More than $155k equivalent because the $35k is probably attracting little tax.

What is your “vote”.
———————————–

In the eyes of a working stiff: $120k
In the eyes of the government: $155k

So, it depends who is asking.

#176 happity on 11.27.13 at 8:23 pm

If one cares to look, Stockman adds, “there are bubbles everywhere,” citing Russell 2000 valuations of 75x LTM earnings as an example, “that makes no sense. It’s up 43% in the last year, but earnings of the Russell 2000 companies have not increased at all.”

Those who were taper punked and now preach the stock market ain’t seen nothing yet

As much as you wish for it, there will be no market crash. A correction, however? Of course. — Garth

#177 T.O. Bubble Boy on 11.27.13 at 8:24 pm

@ #164 Smoking Man on 11.27.13 at 6:13 pm
#162 Spiltbongwater on 11.27.13 at 5:55 pm

I’m buying 2k worth next dip, there will be only 21milliion in circulation once done.

But it’s fun money, can easily feed that into a slot machine on a drunkin stupor..
——————

Drunken Stupor, eh?

Who would have thought that “Smoking Man” refers to smoking crack, and not cigarettes?

#178 BCD on 11.27.13 at 8:30 pm

@174

It’s “almost” no mortgage. . .and 60K might be stretching it a tiny bit (gotta push myself). It will probably be closer to 55K, but we gross closer to 170K. I’ve decided to go into saving mode for at least 2 years. Wife is on board.

And no, we don’t eat KD. We eat clean healthy food. I buy meat and veg and starches at Costco and we rarely eat out (nice to know we can whenever we want though). I have always driven old crap cars, we don’t commute, and the wife and kids have a new car paid for with cash (25K). I’ve always been raised to buy what I can afford, I wish more people would think this way as I get REALLY frustrated when we go out to a restaurant and it is ridiculously busy and service is crap (shouldn’t all those people be at home if wage/debt ratios are to be believed).

#179 Observer on 11.27.13 at 8:50 pm

(I)nstructions (M)r (F)laherty

:-)

#180 Nemesis on 11.27.13 at 8:55 pm

You win, AuldPol. Discretion is the BetterPart of Valour.

I still say it was funny, though.

[NoteToSaltyDogz: It was an EditorialDecision doubtless spurred by Nem’s impromptu PoorTaste WordAssociation joke. Of course, it was all SM’s fault.]

#181 huh on 11.27.13 at 9:38 pm

Why isn’t anyone pointing out the ‘bubble of ’89′ saw real estate prices rise 22% every year…we are nowhere near that yearly increase in the last 12-15 years or so. If you compare Canadian real estate trends from the 60′s onwards, what is happening right now isn’t so shocking. I bought and am happy I did. I follow the blog for general investment advice but anything specific to real estate, no thanks.

You must have been stoned in the Eighties. — Garth

LOL!! No, I was not not stoned actually. I was barely walking. What I meant was a 22% yearly increase between ’85 and ’89, to be more specific.

Avg home price Q1 1985 – $113K, Avg home price 1989 Q4 – $254K. House prices more than doubled. 125% increase.

Avg home price Q3 2009 – $379K. Avg home price Q3 2013 – $453K. Increase of 20%.

If I am comparing a apples to apples, comparing about 4 years in each decade. No cherry picking here.

If you look up the pricing index, you’ll find 2005 to 2013
http://homepriceindex.ca/hpi_tool_en.html

and look up earlier home prices:
http://canadabubble.com/charts/real-canadian-existing-home-prices-for-30-years.html

#182 Daisy Mae on 11.27.13 at 9:51 pm

#30 superdave: “they could afford a shorter am, but clearly wanted the flex to make smaller payments when desired.”

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

And if they can, they will.

#183 HogtownIndebted on 11.27.13 at 10:01 pm

Hey Garth,

That photo is quite flattering, even has more hair than I do. I think I will use it for my avatar as I write a few more letters to the editor before the National Post collapses.

Thanks!

#184 Vangrrl on 11.27.13 at 10:04 pm

#163: hehe ;)
That could actually be a really fun job…

#185 Daisy Mae on 11.27.13 at 10:16 pm

“Holy Crap wheres The Tylenol”

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

This handle always makes me laugh! Yeah, we’re all in deep do-do and we’re gonna need Tylenol.

#186 What about CMHC? on 11.27.13 at 11:55 pm

#124 Rick

I am now beginning to get answer to my question?

#187 World Traveller on 11.28.13 at 10:05 am

about the sub with treble, it has been done;

http://www.youtube.com/watch?v=mBMXUyBP6Tw

#188 pbrasseur on 11.28.13 at 3:55 pm

@huh #173

I follow the blog for general investment advice but anything specific to real estate, no thanks.

Interesting, for me it’s exactly the opposit!