The hedge

hedge modified

When he sipped on his Starbucks and gazed out my 53rd-floor window at the crazed ants below, Seth Daniels was categorical. “There are going to be a lot of surprised people in Toronto” he said. “Even more in Vancouver.”

I told you about this guy. He’s a hedge fund manager from Boston, with JKD Capital. He believes since all the ants now have themselves up to their thoraxes in debt, the future’s a given. They’ll be squished. And that reeks of opportunity.

So Daniels came to see me as part of his research for a new hedge fund, to be launched in a few weeks, called the Spartan/Libertas Real Asset Opportunities Fund, which is betting heavily Canadian homeowners are but months away from an insecticide cocktail. And while it’s not easy to short the housing market here (as it was in the States), Daniels and his colleagues are determined to try.

As you know, lots of people (like them) think we’re insane.

While the Canadian economy decelerates, jobs are lost and incomes stagnate, housing prices continue to climb. Realtors claim the November year/year gain nationally was 9.8%, with sales romping in Toronto (up 14%), Calgary (19%), Vancouver (37%) and even Saskatoon (10%). At the same time more layoffs have been announced than in any period since 2010, while the Bank of Canada has started talking darkly about deflation.

The Economist says we’re idiots. So does the IMF. And Goldman Sachs. And Deutsche Bank. When measured against what people here earn, and what a house rents for, prices are overvalued (depending on the expert) between 30% and 60%, compared to global standards. Household debt is extreme and now that the Fed’s started the tapering process, it’s only a matter of time before fixed-rate mortgage costs bloat. Potash and oil and gold are not exactly hot, and inflation just died. So, what are the ants thinking?

On Friday, as news finally broke in the MSM (Globe and FT) I asked Seth and his buddies for the inside track on a fund which will be available on FundServ and RRSP-eligible, but only open to accredited investors (a.k.a. ‘wealthy’). Here are a few of the things they gave me to pass along…

On timing the market:

Daniels argues Canada is saturated in credit, thanks to crazy-low rates and CMHC insurance. So as credit dries up (through regulation and bond market yield moves) the number of new buyers will shrink fast, and the market cave – especially once the meme of rising prices is proved false in a country overweighted on real estate.

“Timing credit bubbles is notoriously difficult, and in Canada it is even more difficult due to CMHC, as well as global quantitative easing policies. That said, I think that 2014-2015 will be pivotal years fo Canadian real estate. I always come back to the basics: supply and demand. I think that both supply and demand will begin working against the industry over the next 2-3 years. On the supply side, we have an unprecedented number of Toronto condominiums due for completion in 2014-2015. On the demand side, it appears that most of the marginal buyers are already long housing (Canadian home ownership rates, household debt, and use of HELOCs rival or exceed those of the US at its peak in 2006) and new regulations are constraining the availability of credit.”

On when to invest. Here is Gary Ostoich, president of Spartan Fund Management:

“We believe that the real estate market will experience a significant correction which will provide investors of the fund the potential for significant gains. This is a matter of when (not if) the market corrects. Timing is always difficult therefore we believe that it is prudent to have a hedge in place beforehand and not wait in the hope of reacting to the correction as it occurs.”

On how they plan to do it. Here’s Michael Brown, portfolio manager of the fund:

“We have spent a great deal of time researching the potential repercussions of a deflating Canadian housing market and its investment implications. We search for investments that will suffer from small losses when we are mistaken and large gains when we are correct. We strive to minimize the carrying cost of these positions. We are not able to discuss specific investments, but our goal is to  construct a portfolio of investments across asset classes that we believe will most effectively hedge out portfolio exposure to the housing market for Canadian-based accredited investors. Unlike in the US in 2007-2008, there are no instruments that are perfect hedges to the housing market, so all of our investments are indirect hedges, however we do have more tools available at our disposal than the typical manager since we are able to invest across many asset classes beyond equities and equity options.”

I’m not endorsing this fund, of course. But it’s an interesting play. Remember that to invest you need the ability to sustain losses (accredited investors require an income of $200,000 and a million in assets) and Brown suggests, “we think that minimum of 1-2% may be prudent for investors with exposure to housing.” That’s right – it’s ideally for hedging against your own weighting in real estate.

Of course, if you have a million in financial assets, you’re probably no ant. For the rest of us, the real estate play is simpler. Sell.

191 comments ↓

#1 T.O. Bubble Boy on 12.20.13 at 7:53 pm

c’mon Garth – you must have $5M in assets… dive in and let us know how it goes!

#2 active on 12.20.13 at 7:54 pm

bam!

#3 chopper on 12.20.13 at 7:56 pm

I can’t wait for it to happen. Already started saving for a down payment to buy my dream home somewhere in SOUTHERN Ontario. Hoping to do so in about three years time by that time I should have lots of bargains to choose from. I will wait till then to make the move.

Thanks for the service you provide Garth.

#4 Richard from Orkeans on 12.20.13 at 7:58 pm

I would not bet for a housing crash. Since when has the Bank of Canada our economic genius PM Harper (masters economics, former mail room boy, former pr guy) and company ever been wrong? This is not in the Action Plan ads at all. Since when has CMHC ever been wrong?
The Sun always rises so housing prices will rise too!

#5 House impotent on 12.20.13 at 8:07 pm

Great post Garth,
I met your close friend Brad J lamb last week, I went up to him to introduce myself. I told him “it was very nice to meet you” he seemed really impressed that I recognized him. But then I told him that I recognize him because I read your blog. Needless to say he was not impressed. Thought I would share that with you.
Keep up the great work Garth!

#6 TurnerNation on 12.20.13 at 8:13 pm

Mind control examples:

1. That colourful pie chart at the gas pump explaining why you’re paying 50% in taxes – severely hampering both commerce and family.

– You could look at it this way:

“See the Feds are only taking XX%, but look, the province is taking a further XX%! Oooohh, the provincials. How dare they.”

– Or this way:

“See the Province is only taking XX%, but look, the Feds are taking a further XX%! Those Feds are crushing us.”

Divide and conquer. Which one do you go after?

2. Some downtown liquor stores are asking for donations to Sick Kids hospital at the cash.
Shouldn’t someone look down at their purchase and say W..w..wait a sec, that’s 40% taxed
right there…why not move some of this to the hospital.
No, no that’ll never happen. We get 2nd World hospital service, begging for handouts.

It’s a pyramid. You’ll never get at its top. Front liners and call centres only.

3. Not about religions but freedom of mind/speech: you’d never refer to the holidays of Ramadan or Hanukkah by any other names. That would be silly. And insulting. But there’s another holiday, forbidden to speak of in most workplaces under pain of
firing/sanctions or even a court date/human rights [sic] tribunal. In fact our elites have X’d out a key word and name.
We know this now as: Xmas.

(What are they scared of, if it is – as they say – just an olde-book-of-fairy-tales?)

#7 Bob on 12.20.13 at 8:15 pm

I will need a new car in the next year or two. My RRSP and TFSA are maxed out but I don’t have the cash for a new vehicle. There are some very attractive financing deals out there now. Should I buy now (financed) or wait a year or two and hope I can I find a good deal on a repo’d vehicle at auction.

#8 conan on 12.20.13 at 8:26 pm

Garth if you had to speculate what areas of investing do you think will go down little if they are wrong and go up huge if they are right?

#9 Big Brother on 12.20.13 at 8:33 pm

Just spotted Smoking Man at Club101, drinking wine again hiding from his wife! Don’t forget take the blue pill!

#10 T.O. Bubble Boy on 12.20.13 at 8:34 pm

forgot to mention — what a week for equities!!!

VTI (broad U.S. ETF) up almost 29% YTD, plus 7.5% USD/CAD gain YTD.

Lots of winners… time to rebalance.

#11 Freedom First on 12.20.13 at 8:42 pm

Interesting post Garth.

My thoughts of late too, how to play the coming big drop in Canadian RE. RE has been good to me in my life, and of course I am a lowlife renter right now:) . Renting is a gift right now, if one is renting according to a smart formula according to their finances. Garth, your blog has helped me in my re-balancing, the last one being in the last couple of months. For me to buy RE again, renting would have to look a lot more expensive than owning. That is the only times I have bought RE in my life. Being flexible is extremely valuable. Also being a kid of parents who relocated through several provinces while growing up, I have never had an attachment to a “building”. My memories and life lived have nothing to do with a “building” . I am at “home” and comfortable with where ever I live. That has been a great gracious gift given to me, and has probably been as big a piece of avoiding “RE financial Insanity”, as much as the fact of having to be self supporting since the age of 17, through circumstances beyond my control. Having financial diversity, liquidity, balance, cash, cash flow, income streams, awareness, and common sense pay huge dividends. A side note: I believe the term “Common Sense” to be the #1 oxymoron in existence.

#12 Obvious Truth on 12.20.13 at 8:43 pm

Does anyone think Mr Daniels and his sleuth of bruins (googled that) noticed the outside day in RY today. Big volume. Sitting at the 50 day. I’m not an accredited chartist but like to know what the technicals are saying right now.

I wouldn’t suggest shorting banks especially during RSP season but it may be fun to watch. I say leave the hedging to the pros and the accredited. I prefer to wait for a sale.

Hey Garth. Next time take these guys to the Bobby Orr hall of fame to see the most famous bruin. And a ride on the island queen.

#13 Devore on 12.20.13 at 8:44 pm

#153 Son of Ponzi

Blackberry loses 4.4 b.
Shares up.
Go figure.

Other news happened, which you missed. Investors did not.

#14 Smoking Man on 12.20.13 at 8:45 pm

#9 Big Brother on 12.20.13 at 8:33 pm

Ha long way to go for an autograph, especially ice storm coming.

But you intelligence is of, 101 is tomorrow night. And will take the blue pill.

#15 waiting on 12.20.13 at 8:46 pm

According to BOC, Canada is not experiencing a housing bubble.
“Bank of Canada governor Stephen Poloz believes that Canada’s housing market will not LIKELY suffer a sudden and sharp correction in prices UNLESS there is another major global economic shock. He believes home prices will stabilize, ALTHOUGH an imbalance in the market and high household debt remain key risks.”
Very reassuring: LIKELY, UNLESS, ALTHOUGH ..

#16 Tudor on 12.20.13 at 8:47 pm

On average, hedge funds (particularly short hedge funds) have performed poorly compared to the market as a whole. I’d be really surprised if this hedge fund (with its lack of transparency regarding investments and its probable high fees) will make investors any money after fees.

http://www.bloomberg.com/news/2013-12-06/hedge-funds-trail-stocks-by-the-widest-margin-since-2005.html

#17 blase on 12.20.13 at 8:49 pm

Free tip for the blog dogs today:

If you have any problems with your bank and are getting the runaround from your bank, issue a complaint in writing to your bank’s ombudsman. If the ombudsman doesn’t rectify your complaint to your satisfaction, issue a complaint to the OSFI.

I was getting the cold-shoulder from the call-centre pee-ons at my bank before I decided to get OSFI involved. I got 3 reply letters within 24 hours from the OSFI ombudsman and my bank’s ombudsman. Government regulation, turns out it can work for you.

#18 It's Neanderthal night, sorry I'm late on 12.20.13 at 8:55 pm

“The Economist says we’re idiots. So does the IMF. And Goldman Sachs. And Deutsche Bank.”
——
ROTF LMFAO

What does Bernie Maddoff think?
Any word from Michael Milliken?
Conrad Black?

#19 Observer on 12.20.13 at 8:59 pm

Well, if hedge fund managers are drinking it, then maybe I should buy some SBUX….. ;-)

#20 DocInWaitingRoom on 12.20.13 at 9:00 pm

Liked yesterdays blog, though this hedging along with big banks imf is spelling end of this gas bag. Even then will be renting for a while to save a good down payment, decide where to live (who said im stuck in this hole weve lived in pacific and very warm places too!) and invest more before we move into a nice house that will suck growth from us and potential enjoyment time/travel. Hey at least the garage is heated and I dont waste my life shoveling snow. Somone poor old lady died after slipping on ice while shoveling… maybe rent forever is best.

#21 Daisy Mae on 12.20.13 at 9:12 pm

Reading the local paper today, the food bank ad was stating the “altho’ the economy is improving, the need is greater than ever…” (duh?) So we really are ‘insane idiots’.

#22 Musty Basement Dweller on 12.20.13 at 9:16 pm

Sign me up big time for the hedge fund. How refreshing to hear people talking more about solid data and painfully obvious future direction.

#23 walltiger on 12.20.13 at 9:18 pm

1. T.O. Bubble Boy

Garth’s net worth is between 2.0 to 2.5 million.

Chequing account. — Garth

#24 AK on 12.20.13 at 9:27 pm

“I’m not endorsing this fund, of course. But it’s an interesting play. ”
====================================
I can’t believe that these Dudes are waisting their time on the Canadian real Estate Market.

On the grand scheme of things, it’s very small.

How much money can they really make?

Personally, even if I qualified, I would not invest a penny with this outfit… :-)

#25 Babblemaster on 12.20.13 at 9:27 pm

“The Economist says we’re idiots. So does the IMF. And Goldman Sachs. And Deutsche Bank.” – Garth

——————————————————

Are these the same geniuses that didn’t foresee the housing debacle in the US back in 2008?

#26 walltiger on 12.20.13 at 9:31 pm

Garth, you mentioned you own a house in the countryside worth less than 1 million, representing 1/3 of your net asset the other day.

Nope. — Garth

#27 Andrew on 12.20.13 at 9:32 pm

What asset classes are negatively correlated with housing?

#28 Chickenlittle on 12.20.13 at 9:32 pm

#6 Turner Nation:
“(What are they scared of, if it is – as they say – just an olde-book-of-fairy-tales?)”

I know!!! Anytime I hear of someone wanting to ban and/or repress ideas or beliefs that are “baseless” and “without proof” I have to wonder why.

Politicians, philosophers, and leaders of all types: putting the “mental” back in “fundamental” since the beginning of time!

It’s the human condition.

#29 Adrian on 12.20.13 at 9:34 pm

May this bubble last only a few months so that we can get to the spring. No traffic where we live in BC this time of year.

#30 quebec economist on 12.20.13 at 9:37 pm

caption for photo

-ready for when the shit hits the fan-

Garth says ‘Potash and oil and gold are not exactly hot, and inflation just died.’

Good thing we have great Diamonds mines in Northern québec (on with good potentiel is TSX: SWY) Diamond prices going up.

Cheers,

#31 jess on 12.20.13 at 9:45 pm

PARIS (Thomson Reuters Foundation) – Money allegedly stolen by Russian officials in a major scandal and funds looted from Afghanistan’s Kabul Bank are sitting in Dubai but international authorities have failed to hold the United Arab Emirates to account, a leading French politician said this week.

Eva Joly, a former magistrate known for exposing high-level political and business corruption in France, said officials should demand that Dubai give back the money stolen in Russia’s Magnitsky case and from Kabul Bank…”

http://www.trust.org/item/20131213143038-zrhlb/?source=hptop

#32 timmy on 12.20.13 at 9:46 pm

Making that call correctly has about the same chance as the Gateway pipeline actually going through–the one that almost no-one, except Harper, and his band of neo-cons want pushed through

#33 jess on 12.20.13 at 9:53 pm

…”Friday saw 14 more senior officers removed over a series of anti-corruption raids and the detention of senior businessmen close to Erdogan as well as sons of three cabinet ministers. The powerful Istanbul chief was sacked on Thursday following the dismissal of dozens of unit chiefs…”

http://www.trust.org/item/20131220135330-gnque/?source=dpagetopic

http://uk.reuters.com/article/2013/12/20/uk-turkey-imf-idUKBRE9BJ1DS20131220

#34 Waterloo Resident on 12.20.13 at 9:55 pm

Not a good idea for a hedge fund. Canadian real estate prices are notoriously ‘STICKY’, and on top of that the Canadian government is going to do whatever it takes to keep this market afloat, so they will indirectly and directly support the housing market. The best I can see for anyone hoping for a quick crash is to have the prices for Canadian real estate stay flat for 40 years, that’s about all that will happen.
So anyone who buys that hedge fun will see their money stay flat for 40 years: not a smart move.

#35 hedge fund on 12.20.13 at 9:55 pm

This hedge fund sounds hilarious

We cant tell you how we’re gonna do it but don’t worry. Trust us, small exposure if we are wrong but huge windfall if we’re right.

And they say realtors are sleazy!

Wonder what the fees in this fund are?

#36 not 1st on 12.20.13 at 9:58 pm

I think I will short that fund.

#37 economictsunami on 12.20.13 at 10:09 pm

It may be somewhat understandable why many individuals (even politicians) aren’t very savvy when it comes to financial acumen.

What excuses do the big bonus bank execs and their Risk Management Teams have?…

Hanson: Housing “Bubble 2.0″; Same as “Bubble 1.0″, only different actors

“When other asset classes go through periods of excessive price appreciation or returns, most reasonable people worry that a “consolidation” or “correction” could happen at any time. In large part, this fear can keep an asset price higher for longer than anybody ever thought possible. However, with respect to housing, when prices are moving higher, not a single soul will ever forecast a “consolidation” or “contraction”, rather periods of “less appreciation”.

Or, when ”greater fool” trades consisting of highly populated cohorts blow up there are serious consequences like we saw when housing crashed in 2008-09. But, at least, because the demand base is so wide you have ‘some’ heads to hit the bid all the way down. However, when greater fool trade cohorts are razor thin like in “Housing Bubble 2.0″ – local area private investors and a hand-full of giant PE firms – extreme volatility is almost certain.”

http://mhanson.com/archives/1546

#38 45north on 12.20.13 at 10:28 pm

We search for investments that will suffer from small losses when we are mistaken and large gains when we are correct.

I read that senior debt holders could gain controlling interest in case of default. based on contract law

#39 IM in C on 12.20.13 at 10:46 pm

Those hedge fund guys are going to get cleaned out. Because this Canada , not the States. The real estate market will not collapse, at least not for another 20 years when the baby boomers all start to sell

#40 Godth on 12.20.13 at 10:47 pm

“He believes since all the ants now have themselves up to their thoraxes in debt, the future’s a given. They’ll be squished. And that reeks of opportunity”

Ya know I was talking to an older fella of a certain order the other day a I mentioned that when when the ladder of consciousness is formalised into institutional hierarchies it always becomes corrupted. I love the reactions.

So you met a sociopath recently and he gave you the inside scoop…tell us more…oh, right you just did. I’m surprised Canadians were able to soak up this much debt, figured this ride would have ended awhile ago.

People, average people, don’t think enough and trust too much. When that trust is betrayed (which it is) things get interesting…sometimes very interesting. History has a tale or two to tell.

Given the tsunami of advertising, propaganda, and dependency on and in this ponzi scheme of debt, why wouldn’t the plebes gamble on something tangible with so much confirmation bias and encouragement supporting it? Country after country, this fraud goes round and round.

How do you propose we double the amount of debt in the system now, oh bearded oracle, to keep the inevitable at bay? It’s a systemic need, don’t you see? The predators do.

#41 Smoking Man on 12.20.13 at 10:47 pm

Been patiently waiting for someone to spot the baby in the pick.

Guess dyslexics don’t hang here.

As always, takes a dyslexic to point out the obvious that normals can’t see.

#42 45north on 12.20.13 at 10:56 pm

economictsunami: However, when greater fool trade cohorts are razor thin like in “Housing Bubble 2.0″ – local area private investors and a hand-full of giant PE firms – extreme volatility is almost certain.”

I read that too but don’t understand it. companies have bought up blocks of houses, apartments sight-unseen with the idea of renting them out at a profit. Does Hanson mean that after some period of operation it would become apparent that there is no profit and wouldn’t be. In which case the companies would sell the houses and apartments at whatever price they could. No matter the affect on the market?

#43 Nemesis on 12.20.13 at 11:00 pm

“Chequing account.” — Garth

“Hah!”

You are, like, so HidingYourLightUnderABushel, AuldPol… DareI?… WhyNot! TeeHee!:

http://tinyurl.com/3rbz2pb

&TheFollowing – althought not suitable for FridayNight – may serve to elucidate and or entertain those who, for whatever reason, have few other options this evening…

The BillionaireAuthor of, “The Big Short” [pay attention, SM – a dyslexic who is also somewhere on the VeryHighFunctioningEnd of the AutismSpectrum]…

http://www.bloomberg.com/video/72756316-michael-burry-profiled-bloomberg-risk-takers.html

[NoteToSaltyDogz… RE: ElGarto’s Hamptons CurrentAccount – what would CaptainFlint say?… If you guessed, “YoHoHo… A Pirate’s Life for me!” – collect FiveGoldStars. Everyone else, do your homework. Oh yes, in the further interests of SeasonalJollity – a StrangerThanFiction TrueStory: The last time ‘someone’ said, “You’re hiding your light under a bushel” to ‘Nem’ – well, let’s just say they were adorned in Crimson&Ermine and wearing a VeryBigWig… Powdered, of course. http://en.wikipedia.org/wiki/Royal_Courts_of_Justice ]

#44 Herethere on 12.20.13 at 11:01 pm

Do experts have an opinion if the latest Supreme Court’s decision, will have any effect on real estate? Do such a decision present a bone of contention, no pun intended, specially to condo owners and corporations? Will condo corporations need to pass by-laws a la “no pets allowed”? Will help or hinder values in properties? Will it provide new investment opportunities?

#45 Smoking Man on 12.20.13 at 11:18 pm

#44 Herethere on 12.20.13 at 11:01 pmDo experts have an opinion if the latest Supreme Court’s decision, will have any effect on real estate? Do such a decision present a bone of contention, no pun intended, specially to condo owners and corporations? Will condo corporations need to pass by-laws a la “no pets allowed”? Will help or hinder values in properties? Will it provide new investment opportunities?
…….

I have a huge essay on the topic, and probably have more experience than any other lesser scribe on this pathetic blog.

But you have to wait till tomorrow, I really damaged something on my see if you can die experiment drinking an entire bottle of Jack in like 2 hours.

#46 Alwyn on 12.20.13 at 11:38 pm

Yesterday was the 170th anniversary of the publication of Charles Dickens’ “Christmas Carol” and I was reminded of another Dickens character: Mr. MiCawber.

Income: 20 pounds (sterling)
Expenditures: 19 pounds, 19 shillings and sixpence
Result: Happiness

Income: 20 pounds (sterling)
Expenditures: 20 pounds, and sixpence
Result: Misery

#47 Paul on 12.20.13 at 11:39 pm

#41 Smoking Man on 12.20.13 at 10:47 pm
Been patiently waiting for someone to spot the baby in the pick.

Guess dyslexics don’t hang here.

As always, takes a dyslexic to point out the obvious that normals can’t see.
.—————————————————————-

I saw Two

#48 Old Man on 12.20.13 at 11:40 pm

I miss those ‘everything is going to crash’ blog posts.

Bring them back! I don’t like the ‘no crash’ posts.

#49 45north on 12.20.13 at 11:42 pm

Herethere: Do experts have an opinion if the latest Supreme Court’s decision, will have any effect on real estate?

this stupid self centered decision is not going to increase the value of real estate. At all. Right now it’s against the law to run a body house. A law not a by-law. If you’re a landlord who discovers that his tenant is turning tricks the police do the heavy lifting. There’s a court case, evidence is presented, arguments made and a judgement rendered. By-laws are rules passed by municipalities completely under the authority of the provinces. By-laws are weaker. Nobody goes to jail. Authority is limited to fines.

This decision is an attack on the middle class. Harper should pass a non-withstanding bill and call an election. Last best chance he’ll get.

#50 gladiator on 12.21.13 at 12:01 am

@6 TurnerNation:

Small correction, if I may. E&J brandy 750 ml is 24 CAD at LCBO and 11 USD in a Boston supermarket. I think you were a bit modest about the percentage of taxes we pay on booze. I have never seen more expensive booze in my life – Canada is firmly number one.

#51 Old Man on 12.21.13 at 12:06 am

I saw someone in this room making a joke about food banks, as just wrote out a check for $10,000 for not just food, but to pay for xmas gifts for kids because Santa Claus is coming.

#52 Old Man on 12.21.13 at 12:08 am

#48 is a fraud as that is not me.

#53 vangrrl on 12.21.13 at 12:21 am

#49:
It’s bawdy house… Though that made sense, ‘body house’ ;)

#54 KommyKim on 12.21.13 at 12:23 am

RE: We are not able to discuss specific investments, but our goal is to construct a portfolio of investments across asset classes that we believe will most effectively hedge out portfolio exposure to the housing market for Canadian-based accredited investors.

Anyone who invests in a “fund” and doesn’t know what is in it or how it works is a fool soon to be parted with their money.

#55 Smoking Man on 12.21.13 at 12:27 am

#52 Old Man on 12.21.13 at 12:08 am
………..
48 fake.
Happens to me all the time.
Testament to your popularity.

There is only one real old man. Very nice you pledged the loot.

Take it one step forward, feed em on Xmas day.

Kind of like when Jesus was washing feet.

Don’t get me wrong, I’m not a nice man. Just need book food.

:)

#56 Gary M on 12.21.13 at 12:31 am

“On average, hedge funds (particularly short hedge funds) have performed poorly compared to the market as a whole. I’d be really surprised if this hedge fund (with its lack of transparency regarding investments and its probable high fees) will make investors any money after fees.”

Hedge fund managers are typically seasoned investors and trade on fundamentals. This market has been driven by anything but fundamentals for the past four years.

#57 Worried realtors on 12.21.13 at 12:35 am

You can tell who the worried realtors are on this blog. If the market was so strong and not built on a house of cards that is now bigger then the monstrous US housing bubble. Realtors are Con men.

#58 john on 12.21.13 at 12:46 am

Canada is now the biggest housing bubble / ponzi scheme in the whole world back by cheap debt. When the US interests want to crush you they will do it. Everyone in the world can see Canada is falling apart like the newly built toronto Condo’s. Companies closing down / downsizing and laying off their workers. Just heard from a friend the chrysler plant in brampton is going to be on lay off for a week. Food banks begging for donations as people in the GTA are starving in record numbers. Lol everyone will buy a $700 k starter home with no job / reduced hours or laid off. Good logic realtor pigs.

#59 assman on 12.21.13 at 1:27 am

You will not get a housing crash in Canada. I think the fund idea is stupid. What you will get is no movement in housing prices for maybe 10-15 years. In Canada mortgages have recourse which is why there are far fewer foreclosures than the US. So in the US when housing is overvalued in crashes but in Canada it just goes nowhere for insanely long periods of time.

#60 Son of Ponzi on 12.21.13 at 1:43 am

#153 Son of Ponzi
Blackberry loses 4.4 b.
Shares up.
Go figure.
Other news happened, which you missed. Investors did not.
Devore.
Crack berry signed a contract with a Chinese Company that treats their employees like shit.
They used to jump out of the windows.
So they installed nets outside of the windows.
Ok, Devore,
Go ahead and load up on Blackberry shares.

#61 Rural Rick on 12.21.13 at 2:06 am

Dyslexics Untie

#62 Son of Ponzi on 12.21.13 at 2:06 am

Tiny Santa Rally in the US and Canada.
In ASIA and Europe all indices are down.
Better sell your shares now.

#63 R on 12.21.13 at 2:08 am

As David dodge said on bnn or roubini said the forces feeding real estate are still active unless vrm rises significantly or economy collapse no real estate crash or significant correction. Only excess supply will not do the job. Unless little F changes the rules party will continue on cheap money

#64 Son of Ponzi on 12.21.13 at 2:12 am

This used to be a blog about overpriced RE in Canada.
Now, it’s become a store for Garth to sell his investment vehicles.
WELL, IT’s his blog.
But, buyer beware.

Buyer beware of what? It’s not my hedge fund. I don’t sell anything. And you’re free to leave. — Garth

#65 Andrew Woburn on 12.21.13 at 2:26 am

#39 IM in C on 12.20.13 at 10:46 pm
Those hedge fund guys are going to get cleaned out. Because this Canada , not the States. The real estate market will not collapse, at least not for another 20 years when the baby boomers all start to sell
==================================

Baby boomers are already selling. They started turning 65 in 2011 and the last ones turn 65 in 2029. The real bulge started around 1950 so look for steady selling after 2015. Question is, who are they going to sell to? There’s apparently only 30% of Canadians left, presumably consisting mainly of readers of this blog and the terminally credit challenged.

#66 Cici on 12.21.13 at 2:46 am

#41 Smoking Man

Everyone saw the baby; don’t worry! It’s only screaming its head off…that’s the whole point.

#67 James on 12.21.13 at 2:54 am

All in all this is more of a condo play. I don’t think sfh will suffer much. With rates remaining low for a very long time it won’t see pre 2007 level. I mean whats 1 or 2 percent in rate increase over like a decade.

#68 Tony on 12.21.13 at 3:00 am

Re: #13 Devore on 12.20.13 at 8:44 pm

The bottom line hasn’t changed the company is burning through cash fast. Without an imminent buyout the company will have to file for bankruptcy. Problem is no entity is going to buy them out so like Nortel and all the rest it”ll just be the same story all over again.

#69 Cici on 12.21.13 at 3:16 am

#43 Nemesis

Thanks for the video link to the Michael Burry story: truly fascinating; very interesting guy :-)

#70 Tony on 12.21.13 at 3:17 am

Re: #16 Tudor on 12.20.13 at 8:47 pm

What a question! Of course everyone in the fund will get wealthy. As you see now Toronto has moved into the denial stage just like what Vancouver was in. Less sales and less listings. This is easy money that’s why the fund is being set up.

#71 Andrew Woburn on 12.21.13 at 3:26 am

#129 SofaKing on 12.20.13 at 11:38 am

#22 Son of Ponzi
Spot on. There are way too many greedy wrinklies currently double and triple dipping in their retirement with a HUGE fcuk’n sense of entitlement while they demand generation x,y,z to suck it up and work longer to expect less.
=================================

You know, if you didn’t snarl at Mom and call her a f*ck*ng b*tch when she asks you to get off the sofa and clean your room, she might lend you the car once in a while.

#72 Down Market on 12.21.13 at 3:50 am

What do people do when there’s a real estate crash? They move. So, I’d invest in moving companies and major truck rental companies.

Also, when the economy is down it’s not like people don’t spend any money at all, they just spend less and buy cheaper things. So, “down market” retail where people are buying relatively essential things would sound to me like a good investment.

#73 John on 12.21.13 at 3:59 am

Thanks for keeping us posted on the hedge strategy

#74 gtrz4peace on 12.21.13 at 5:18 am

Well you can’t get any sleazier than this “short the country” hedge fund. Say, is there anyone left of the “middle class” in this blog dog pound? Because if there is, guess what — the same Hedge Fund jerks, the same banksters destroying the US middle class are going to roll up their sleeves and get to work now on what’s left of Canada’s.

It’s a safe bet if they can make money based on Canadian Real Estate crashing, the crash process will follow as quickly as they can help make it happen.

Yes, Canadian real estate prices are a joke. But who suffers once all of you get rich quick betting on the misfortune of others? That’s right, it’s your friends, your neighbors, your family. Ultimately, the entire country suffers by breeding more of the kind of in inequality destabilizing the US.

Bravo to the people who said “Short the fund.” Real estate will correct, and it should. But betting on the misery of others should be illegal — then there is far less incentive to help the misery alone.

Canada’s criminal neocon leader, Stephen Harper, will succeed in giving you a Canada you won’t recognize, just like he promised.

But I wouldn’t be so happy about it — there’s always the old saying, “be carefully what you wish for.”

In the US those blocks of houses were bought by criminal corporatists like Blackstone to rent at top dollar — and they are cruel, and sadistic overlords who are poor landlords if you happen to be so unlucky as to live in their abodes.

Is this sort of scene really what you all wish on your countrymen?

#75 economictsunami on 12.21.13 at 7:41 am

Interesting reads while waiting for the ice to thaw.

(Judge Rakoff is the U.S. District Court judge who’s been at the heart of some of the most significant trials stemming from the financial crisis.)

Rakoff ponders: The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?

“For example, the Financial Crisis Inquiry Commission, in its final report, uses variants of the word “fraud” no fewer than 157 times in describing what led to the crisis, concluding that there was a “systemic breakdown,” not just in accountability, but also in ethical behavior.”

http://www.nybooks.com/articles/archives/2014/jan/09/financial-crisis-why-no-executive-prosecutions/

Judge Rakoff Wants Someone to Pay:

http://www.bloomberg.com/news/2013-11-15/judge-rakoff-wants-someone-to-pay.html

A system who’s very construct was built to be purposely complex/opaque, appears to have been given a free pass by the Statute of Limitations …

#76 Time bandit on 12.21.13 at 9:52 am

Former Goldman Sachs investment banker appointed to head CMHC

http://business.financialpost.com/2013/12/20/cmhc-evan-siddall/

You can read the tea leaves, they placed the fox in the hen house. You know the way this story will end.

#77 Stickler on 12.21.13 at 9:54 am

long companies that clean up after devastating house fires & short rona?

#78 Bottoms_Up on 12.21.13 at 10:07 am

And the irony is, how many of those accredited investors made their wealth through real estate and on the backs of CMHC and our now heavily-indebted fellow Canadians?

Typically not many. — Garth

#79 Herb on 12.21.13 at 10:14 am

#41 SM,

OK, you’re dyslexic and can see the obvious, but I’m schooled and can tell you what it means.

Big Brother was hamming it up with Little Smoking Man’s diapers, depriving him of his customary comfort. But worse than that, the Universal Consciousness Coordinator (UCC) had just gleefully told him that he was dyslexic, would suffer horribly in school, and would spend his life trying to get even with the school system and normal people.

Remember bawling your head off?

#80 Joe Schmoe on 12.21.13 at 10:15 am

#4 Richard

Yawn.

You must think this is the CBC site…your angst is misplaced here.

#81 Ralph Cramdown on 12.21.13 at 10:22 am

#56 Gary M — “Hedge fund managers are typically seasoned investors and trade on fundamentals. This market has been driven by anything but fundamentals for the past four years.”

And the past four hundred. Fear and greed? Bull and bear? Multiple expansion and compression? “It is not a case of choosing those [stocks] that, to the best of one’s judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.” — J.M. Keynes, 1936

And hedge funds employ a variety of strategies. The commodity funds are almost all technical trend followers.

#82 Not 1st on 12.21.13 at 10:24 am

Garth deep down isn’t QE and CMHC really doing the same thing? Both are instruments to keep rates low and allow the ease of entry into housing. Big Ben stimulated until he saw the after effects spill into housing cause that’s the wealth effect for 75% of people. The stock market is just a bonus side effect for the other 20%.

We bash F and lending practices here and then cheer the US fed. There isn’t really a difference in what they are doing.

#83 Penny Henny on 12.21.13 at 10:42 am

Garth’s net worth is between 2.0 to 2.5 million.

Chequing account. — Garth
——————————————-
I hope it’s a high interest chequing account!

#84 Ralph Cramdown on 12.21.13 at 10:45 am

Hey, Nemesis: Looks like the navy is changing. No longer satisfied with a tot of rum, they’re into the hard stuff

“The crew of the HMCS Toronto gains access to illicit narcotics found during a search on a vessel of interest on Dec. 18” — http://www.torontosun.com/2013/12/20/hmcs-toronto-crew-celebrated-for-job-well-done

Yo ho ho, indeed.

#85 Ronaldo on 12.21.13 at 10:45 am

#63 R – absolutely right. It was the VRM’s that kept the prices stoked going back to the early 2000’s and especially between 2005 and 2006 when the big increase in prices happened. When a condo( e.g. Red Deer), rose from $149,000 to $249,000 in one year, I knew the party was over. The markets in Alberta topped out in May of 2007 and basically went flat. Not so in the larger centers like Vancr and Toronto which skyrocketed after the BOC started lowering the rates dramatically to the point that they were lowered a full 4 percent by spring of 2009 making it affordable to by 800,000 homes and causing the prices to climb to over 1 million in Vancouver. It all had to do with cheap money. Young people back in 09 were all giggly over the low mortgages they were getting and that was the main talk around the water cooler. HAM and yellow helicopters and lineups at condo sales, phoney interviews by developers on MSM was all just an illusion.

2014 may very well be the end of this charade and I would not be surprised to see the equity markets take a beating along with it. These cycles seem to repeat every seven years. It’s due.

#86 Herb on 12.21.13 at 10:48 am

“Home ownership emerges as Canada’s great political divide”

Nothing startling, but the fact that this is written up in a main stream newspaper in itself is interesting.

http://www.ottawacitizen.com/business/Home+ownership+emerges+Canada+great+political+divide/9311524/story.html

#87 Chris on 12.21.13 at 10:51 am

Would you still recommend Selling in Nova Scotia Market?

I feel like Condos in Halifax are sprouting up like daisies, I would definitely not want to own a condo here.

But I am just asking for my parents, because they are in retirement, I keep telling them they should sell and downsize to something smaller since they’ve been saying they dont want the upkeep when they get older. I think they will lose 15-20% in the next 5 years. Is that too much here in NS? Were not that bad compared to the rest of the country.

#88 Smoking Man on 12.21.13 at 10:54 am

#79 Herb on 12.21.13 at 10:14 am

Dyslexia is a gift.

I have no issues with schools, just the present day robotics of teachers that can’t think.

They know not what they do.

#89 b on 12.21.13 at 11:24 am

I am a young investor with less than 100k in assets. I hear the common refrain that I should “know my risk tolerance” and “understand the risk of ETF X Y and Z”. Although i am numerically competent, when I try to find risk assessment tools for myself or potential investments I am quickly overwhelmed. Anybody have suggestions on how to get started?

#90 jd on 12.21.13 at 11:43 am

Why I learned to stop worrying and love the property bubble:

http://www.cbc.ca/news/business/why-a-housing-bubble-is-good-but-maybe-bad-for-you-1.2470614

#91 walltiger on 12.21.13 at 11:45 am

Garth’s net worth is between 2.0 to 2.5 million.

Chequing account. — Garth
——————————————-
I hope it’s a high interest chequing account!

It should be in a well balanced portfolio full of ETFs earning 7%. lol.

#92 Infused with Opiates on 12.21.13 at 12:18 pm

61 Rural Rick – you can always join ADA – Dyslexics Against Drugs. Their motto is just say “On”

#93 rosie "moving forward" in the knowledge that, "this won't end well" on 12.21.13 at 12:27 pm

#88 and others

Generalizations are inept, redundancy is tiring.

#94 TurnerNation on 12.21.13 at 12:38 pm

The danger of Leslieville semis. Built before fire codes.
If ones goes down three go down.

http://www.cbc.ca/news/canada/toronto/homes-damaged-in-queen-east-fire-1.2471399

#95 bentoverpayingtaxes on 12.21.13 at 12:47 pm

As I have said….”whats to short”….banks are immune from any crash as they have limited risk assets on the books….no stock to borrow from any of the condo tower contractors…..they are numbered LLC’s on paper. The commercial lendors money is primarily large pools spread out over thousands of individual investors. Insurance co’s are immune. Straight line logic would think…OK…. Home Depot and Canadian Tire are going down…..but they make money during resessions from the home reno guys who dig in and pay their mortgages come hell or high water……I repeat…”whats to short?” This is not the USA when it comes to industry….government intrusion is far more systemic than anything an American can ever imagine….bankruptcy and foreclosure laws are nothing like they are in the US…so the numbers that worked in the US simply won’t work kere….ever hear of the Order Nisi?….it takes years to ‘ask’ a homeowner to leave his castle…and only then after he refuses to accept government help to repay…..there’s no courthouse tax auctions here….these particular Americans are babes in the woods if they’ve come across the border without doing their homework. I have a suggestion…..short these guys and anything they own…..its dumb money looking for a home in my pocket. Garth..take them to a full skin strip show…the kind they can’t see at home…and send them off…..beer headed and fuzzy……obviously they’re not ready for prime time.

And did anyone note….this is the 17th year without global warming….in fact the 10th coldest year on record….so why are we paying all these carbon taxes? Oil and gas stocks are whats warming my butt. If I was you…….I would have charged them for the interview and then kicked their asses into the elevator for wasting my time.

#96 Doug, back in London on 12.21.13 at 12:48 pm

Too bad you need to be so wealthy to buy into this fund, otherwise I would put a few grand into it then patiently wait for the inevitable to happen. As this option isn’t available to we small investors, I like Down Market’s idea (post #72) of buying into moving companies.

@Waterloo resident, post #34:
Yes, so far real estate prices in Canada have been sticky. Will they stay that way? Keep in mind they weren’t so sticky during the real estate bust of the 1990s. Speaking of which, the economy of Canada is now performing much like it was in the early 1990s and while housing prices haven’t reflected that performance so far, that doesn’t mean they won’t going forward.

#97 TurnerNation on 12.21.13 at 12:49 pm

Weekly round up of online Toronto mags.

Our forum host preaching to the lions den.

http://www.postcity.com/Eat-Shop-Do/Do/December-2013/Turner-on-Real-Estate-making-sense-of-the-markets-numbers-and-headlines/

Turner on Real Estate: making sense of the market’s numbers and headlines

#98 Smartalox on 12.21.13 at 1:12 pm

@45 North:

I’ve often wondered (academically, of course) how condo owners could live/work in their overpriced 595sq ft. Boxes in the sky.

I came up with two possibilities: either vertically integrated retirement and assisted living facilities – groceries, cinema, coffee shop all just a heated elevator ride away, or

The other use, made possible by the recent supreme court ruling. With fewer jobs and looming mortgage payments, ‘private contracting’ could be the way to go. At least it’s not illegal any more.

#99 Lurker on 12.21.13 at 1:20 pm

When I walk through the mall there are girls standing in front of the bank (BMO) handing out credit card applications to all and sundry. Pushing consumer credit like its crack (the bad kind!)

#100 Barry in Pickering on 12.21.13 at 1:23 pm

This hedge fund will likely be shorting many of the things that Garth is recommending. (CDN REITS, CDN bank pref shares, cad equity ETF).

If housing tanks, so will these, (and ‘no’ they aren’t somehow protected from a fall)

There is no direct correlation between demand for and pricing of Canadian residential real estate and commercial real estate trusts or the perpetual preferred shares of banks. It is distressing how many times the same information needs to be imparted to people. No wonder personal finances are a disaster with knowledge levels like this. — Garth

#101 Ralph Cramdown on 12.21.13 at 1:34 pm

#89 b — “I hear the common refrain that I should “know my risk tolerance” and “understand the risk of ETF X Y and Z”. Although i am numerically competent, when I try to find risk assessment tools for myself or potential investments I am quickly overwhelmed.”

The risk they’re talking about is the risk that you’ll buy inappropriate investments and then sue them if you lose money. Usually it’s called the “Know Your Client Rule.”

Go to your library and keep reading books on investing. Avoid products with high costs and fees. Stick to low fee broad index funds until you know more, and maybe forever.

The biggest “risk tolerance” problem faced by young investors with a long time horizon is that they’ll buy stocks or stock funds just before a market crash or correction (they happen sometimes) and then sell at a loss, locking in their losses and foregoing the inevitable subsequent gains. The solution usually isn’t to put more in bonds and less in stocks (especially at today’s crummy bond yields), but to accept and live with the volatility.

#102 Tiger on 12.21.13 at 1:55 pm

79 Herb!
Nice!

#103 Son of Ponzi on 12.21.13 at 1:58 pm

Another Goldman Sucks executive becomes a major financial policy maker.
The prophecy is unfolding as planned.

#104 T.O. Bubble Boy on 12.21.13 at 2:17 pm

@ #83 Penny Henny on 12.21.13 at 10:42 am
Garth’s net worth is between 2.0 to 2.5 million.

Chequing account. — Garth
——————————————-
I hope it’s a high interest chequing account!
———————

I’ve heard $2.5M is the minimum balance to get fees waived by your bank these days. They call it the “Garth Unlimited Account”, and market it only to him, Smoking Man, and Shawn the Investor’s Friend.

#105 darkselling on 12.21.13 at 2:35 pm

I generally disagree with most of the pessimism posted on this blog. I think Garth has a flair for the dramatic as he should trying to draw veiwers to the blog. Being even keel and without a strong opinion one way or the other makes for a pretty boring read.

I think Toronto and Vancouver could be in for a reckoning. Sounds like the condo market in Toronto could be a mess and Vancouver prices just seems assinine. I usually defend Calgary based on the income to price. Calgary homes aren’t priced like Toronto and Vancouver homes, same for Condo’s yet the household income and weath is significantly different. Garth has yet to actually show any real stats on Calgary other than bunching it in with Toronto and Vancouver when bad news comes out about either of those two cities.

I share his views on the industry as a whole. I think realtors spew the same garbage regardless of which way the market is going and are the least educated, trained, and regulated bunch considering they practically manage the wealth of the majority of the country.

Anyway… Thoughts on buying shares in Boardwalk REIT? I’d wager these hedge fund guys would have to be including some sort of rental REIT in their fund. I haven’t done any reasearch on BEI.UN of late but am going to take a serious look at it over the next few weeks. It’s still able to refinance properties at significantly lower rates than it’s current average debt. CMHC insured spreads are 75-85 bps for 5-10 years over the applicable GOC bond. So you’re still looking at sub 4.0% 10 year rates (3.55%).

#106 Blacksheep on 12.21.13 at 2:45 pm

gtrz4peace # 74,

“Well you can’t get any sleazier than this “short the country” hedge fund.”

“Yes, Canadian real estate prices are a joke.”

“But I wouldn’t be so happy about it — there’s always the old saying, “be carefully what you wish for.”
—————————————————-
Vehemently disagree.

Canadians had a front row seats to the housing correction circus in the US, but our arrogance and greed allowed us to not only ignore the obvious, but actually elevate our debts to the next level. Most on this blog have been warning friends and family for years, not to take the candy from the man with the windowless van, but were ignored.

Appeals to the blog collective at this late date, will fall for the most part, on deaf ears.
Victims with self imposed wounds, will have no one to blame but themselves.

#107 McMansion on 12.21.13 at 2:49 pm

This fund is seem a good idea but it really dump in the detail. The main purpose of this fund ,if I understand well, is to hedge patetic McMansion with this fund. Sound good but the best outcome for somebody with a McMansion and a even value than his home in this fund is to break even if than someone manage to put the same value of his McMansion. But wait they use indirect hedge, so that a garanted lag to the house crash. If you want a hedge againt your bad decison, stop making them in the first place. Hedge fund is just a luxury brand of really bad mutual fund made for the wealty.

#108 Ralph Cramdown on 12.21.13 at 2:53 pm

#95 bentoverpayingtaxes — As I have said….”whats to short”….banks are immune from any crash as they have limited risk assets on the books

Nobody buys Canadian banks for their assets, as evidenced by the fact that they’re trading at 2x book value. If there’s a real estate crash, their earnings are going to hurt and those regular dividend increases would get irregular.

There’s publicly listed lenders that specialize in loans to developers, appliance wholesalers who do a lot of business with builders, lumber and building material suppliers which are mainly domestic, and of course every domestic consumer discretionary stock would be affected.

#109 Mister Obvious on 12.21.13 at 3:11 pm

#65 Andrew Woburn responding to #39 IM in C
——————————————————–

Absolutely correct Andrew. I’m a baby boomer born in 1950. I completed the sale of all three properties I owned between 2006 and 2010. (One principal residence & two recreational).

I’m done with real estate and haven’t looked back. It had become clear there would be very few eligible SFH buyers remaining by 2020. At least, not in my town and certainly not at the mad prices we see today.

The writing is so obviously on the wall.

#110 Casual Observer on 12.21.13 at 3:20 pm

You will not get a housing crash in Canada… In Canada mortgages have recourse which is why there are far fewer foreclosures than the US. So in the US when housing is overvalued in crashes but in Canada it just goes nowhere for insanely long periods of time.

House prices may not have crashed in Canada like they have in the U.S. but they have fallen before. It’s just that it’s been a long time and most people’s memories are short.

In the early 1990’s RE prices “drifted” lower for years, even though the economy was doing OK, interest rates were low and falling, and the stock market was rising.

The price action was not sideways, it was down.

Prices may not crash, but if they fall 30% over a number of years, versus a number of months, the end result is still the same. It’s just more drawn out.

#111 sue on 12.21.13 at 3:24 pm

#34 Waterloo resident
Prices may be “sticky” but all it takes is for 1 person in the neighbourhood to HAVE to sell (job loss/relocate/divorce) and that lowered price becomes then new benchmark. With debt at nosebleed levels, it really isn’t a stretch for people to have to sell, even if still employed.
So many homeowners have no business owning homes and go into debt trying to pull off the facade.

#112 TurnerNation on 12.21.13 at 3:46 pm

#40 Godth – forgot to mention this book. 1983. Everything old is new again. I’m not a thumper so what I found most interesting is the push towards new “reformed” beliefs in general. See: re-education kamps and cultural revolutions. When is ours over?
They even used the Beatles for this – the TM phase. harikrishna indeed, George.

http://www.amazon.com/Hidden-Dangers-Rainbow-Movement-Barbarism/dp/091031103X/ref=sr_1_1?

#113 Barry in Pickering on 12.21.13 at 3:48 pm

Garth: It is distressing how many times the same information needs to be imparted to people. No wonder personal finances are a disaster with knowledge levels like this.
==============================

Why can’t you run a blog without attempting to insult people? You have no idea of my knowledge level, let alone be distressed about it.

Pointing out your financial confusion is a service, not an insult. — Garth

#114 Deb on 12.21.13 at 3:59 pm

Although I’m a debt-free aunt, I also sense danger.

#115 Alwyn on 12.21.13 at 4:23 pm

Toronto, Vancouver and Calgary are listed by The Economist Intelligence Unit as among the 10 best cities in the world in which to live. Nice.

http://www.telegraph.co.uk/property/propertypicturegalleries/9477990/The-worlds-10-best-cities-to-live-in.html?frame=2311071

#116 pinstripe on 12.21.13 at 4:34 pm

With so much talk about the housing bubble and crash, it is a guarantee that nothing will happen.

The damage will always hit hard in the quiet zone when and where only a few know the action.

The personal debt will not be an issue if tax was reduced at the fed, prov and municipal level.

Never underestimate F and the peckerettes.

#117 Worried realtors on 12.21.13 at 4:45 pm

Worried realtor pinstripe #116 your reasoning is more wishful thinking. Facts is people are losing jobs and companies are leaving Canada because workers demand high wages to pay for overvalued houses. Canadians are more in debt then Americans were at the height of their housing bubble. Bankers from around the world who crunch numbers all day Say Canada is the most overvalued housing bubble in the world. The only bankers who disagree are Canadian banker who profit from said bubble. How will people with no job or deduced hours and maxed out in debt keep or buy houses. Let’s not for get the monster condo bubble in the gta.

#118 Barry in Pickering on 12.21.13 at 5:01 pm

Pointing out your financial confusion is a service, not an insult. — Garth
==================

Yes, and it’s a service that’s worth what people are paying for it here.

You’d wise to spend more time learning what REITs and preferreds are, and less trying to needle me. — Garth

#119 raisemyrent on 12.21.13 at 5:54 pm

Hopefully everyone has seen a version at least of the graph in this article:
http://www.cbc.ca/news/business/why-a-housing-bubble-is-good-but-maybe-bad-for-you-1.2470614

New Paradigm!!! lol brilliant

the article itself is not a bad/great read either

Every 10 comments or so, there is someone talking about YET another market that is different haha

fear of being wrong is a powerful thing

#120 Sparky on 12.21.13 at 6:02 pm

Garth,

For those of us that read your blog and feel that you are truly trying to educate, where is a good place to start? Do you have any books or trade magazines that you feel are in line with what you are trying to get across?

There is a lot of stuff out there to read but it is hard to tell what is quality and what is not. Thanks. And Merry Christmas.

#121 economictsunami on 12.21.13 at 6:24 pm

Vastly overbuilt, (per capita housing completions were 4X as high as in the US) now left unoccupied; or many who bought endure substandard construction.

Irish Try to Eradicate Ghosts of a Housing Crash:

“Experts say some owners of substandard homes may eventually stop paying their mortgages, causing more problems for the country’s troubled banks. The number of people falling behind in the mortgage payments on their homes continued to grow last quarter, to 99,189, up 1,315 during the three months ending in September, according to Ireland’s Central Bank.”

http://www.nytimes.com/2013/12/22/world/europe/legacy-of-a-crash-ghost-estates-haunt-ireland.html?ref=business&_r=0

#122 Smoking Man on 12.21.13 at 6:46 pm

DELETED

#123 bentoverpayingtaxes on 12.21.13 at 7:01 pm

You get comments like these..

“This hedge fund will likely be shorting many of the things that Garth is recommending. (CDN REITS, CDN bank pref shares, cad equity ETF)……because many people on this blog follwed the advice offered and bought REITS and Prefs which are all under water. People are pissed the you aren’t always right……one of the reasons I never work wit the public anymore.

In the past I opined about the fate of ‘the hot hand’ syndrome in the market…this is an example of that. A trader is lucky to be right 70% of the time whereas passive investors will get hammered because they have no idea that being nimble and losing from time to time is also part of an overall investment strategy. A ‘hot hand’ will be righteously right when the market is going their way……

It is the same thing with people hanging on to multiple real estate holdings ….hoping things will start to go back up…..and prove them right…the hot hand trap was that the market made them look like geniuses on the way up…but they can’t admit that the strategy no longer works and prices are going down.

REITS and PREFS bought in the past year have lost capital ( 15 to 30%) and it may take several years for them to recover the losses by holding and collecting dividends…this will leave opportunity and inflation costs lost while the money could have been working elsewhere. There is no guarantee that these sectors will recover soon….Tax loss selling has been heavy with issues like REI.UN this year…..if you missed this opportunity to offset…then you really shouldn’t have bought these without understanding the risk they posed in the shifting environment. I understand what you’re saying that eventually the prefereds will mature at nominal value….but obviously a majority don’t….they think you’ve given them ba advice because they see the share price has been whacked.

#108 RC…can’t disagree more..

“Nobody buys Canadian banks for their assets, as evidenced by the fact that they’re trading at 2x book value. If there’s a real estate crash, their earnings are going to hurt and those regular dividend increases would get irregular.

There’s publicly listed lenders that specialize in loans to developers, appliance wholesalers who do a lot of business with builders, lumber and building material suppliers which are mainly domestic, and of course every domestic consumer discretionary stock would be affected.”

Canadian Banks make money in trade…they do not own warehouses or dockyards…..they do not own houses…..or mortgages……HELOCS are a cash cow….and entirely secured. If theres a real estate crash they will be the first to profit from credit lines called in….from builders and retail clients. CMHC holds 100% of the mortgage risk. If you’re losing sleep about anything….watch as TD, RY & BNS expand into industrial loans. Their trading desks delivered 11 tp 15% of total profits this year…if anything….dividends will continue to increase.

If you look at the customer base for WFP or NBD you see that Canadian construction is nothing compared to US and Chinese consumption…which BTW is going gangbusters as you’ll see the share prices reflecting. If you’re referring to consolidation lenders like Faifax Financial…good lucking shorting that runaway train. As I said…CDN TIRE or Home Depot have little to worry about. So who are the ‘publicly listed enders’ tha you refer to ??

#124 Smoking Man on 12.21.13 at 7:02 pm

Deleted

let’s not pretend humans are not perfect, no we won’t do that that sir garths a lot.

Hooking is a valid profession, the ladies in the trade, come from all walks of life. From the upper chambers of high society, to the ones sleeping in sleeping bags on the street. The fact that topic gives you that Ivy league boyish uncomfortable sindrom, and feel you need to delete the greatest most experienced writer of our times pisses me off.

Dude I have done all, bad and good. Don’t deprive your such ups from me.

#125 Trader on 12.21.13 at 7:24 pm

@JKD Capital In your research, check out about 10 or 15 years ago when the BOC decided to nail speculators to the wall who were short their currency…

Secondly, CMHC should worry you. If things get a little dicey, they can just bring back to 40 year mortgages, or a new 50 year if they so choose. Canadians like the monthly payment amount to be comfortable… its obvious Canadians don’t worry too much about the loan amount.

You want a great trade… short the yen. They have been very clear what they want to do.

#126 Smoking Man on 12.21.13 at 7:25 pm

People should not be allowed to out live there minds, made a tear today. Doesn’t happen that often.
Dad is gone, he walks and runs, darn they got a gps on him. Look into his eyes, he’s some where off in a lost land. He will be
98,come Feb 25

Mom who’s body has been broken for a while, her mind has gone to lala land.

I’m the last one standing. Sibs are gone.

I need better drugs. Reality and living in the moment is far to over rated.

Where the hell is Becky.

My folks are over, not here any more. 2 hours rubbing my mom’s back today.

She don’t know who I am.

God I’m ready to let me go.

You Take them and I will kill you.

#127 Smoking Man on 12.21.13 at 7:39 pm

God I’m ready to let me go.

Should have been let them go.

I think God had an issue with me. Keeps trying to break me.

Fold smoking man. Be nice to teachers. Give your employees a raise. Stop short turning.

God know this, there can be only one. You have given me prosperity beyond my Wildest dreams. I’ve done things that normals can only dream about.

But you torment me with my loved ones.

There are going to consequences when I get up there old boy.

I not letting you off with shit you put me through.

I’m offing your head and taking your seat.

There can only be one.

THE BRAVO OF JD.

#128 Godth on 12.21.13 at 7:42 pm

#112 TurnerNation

The watchword has always been transformation. Start at Gobekli Tepe and move forward. Jiroft, Indus, Sumeria – the ancient Egyptians consciously transformed their architecture for 3-4 thousand yrs.
http://eawc.evansville.edu/essays/brown.htm

We’re attempting to go global now, floating on oil. It’s becoming too much too manage.

http://jonrappoport.wordpress.com/2013/12/09/art-imagination-and-magic/
“One ring to rule them all,
one ring to find them,
one ring to bring them all
and in the darkness bind them.”
http://www.zerohedge.com/news/2013-12-21/hidden-motives-behind-federal-reserve-taper

Don’t be hoodwinked by it all.

#129 Smoking Man on 12.21.13 at 8:00 pm

DELETED

#130 Paul on 12.21.13 at 8:02 pm

#113 Barry in Pickering on 12.21.13 at 3:48 pm

Garth: It is distressing how many times the same information needs to be imparted to people. No wonder personal finances are a disaster with knowledge levels like this.
==============================

Why can’t you run a blog without attempting to insult people? You have no idea of my knowledge level, let alone be distressed about it.

Pointing out your financial confusion is a service, not an insult. — Garth
———————————————————-
Barry
It does sound like you must be a little Stressed about something

#131 -=jwk=- on 12.21.13 at 8:16 pm

You will not get a housing crash in Canada… In Canada mortgages have recourse which is why there are far fewer foreclosures than the US. So in the US when housing is overvalued in crashes but in Canada it just goes nowhere for insanely long periods of time.

Recourse is a state/provincial law. blanket statements like the above just expose your ignorance. There was no difference between recourse states and non-recourse states foreclosure rates in the US. In other words, recourse vs non-resource is irrelevant. If people can’t pay, they walk. Period.

#132 Smoking Man on 12.21.13 at 8:18 pm

DELETED

#133 Smoking Man on 12.21.13 at 8:28 pm

Delete, delete, yup got it figured out. Mind you not really sure what go deleted
Garth wants to work for the star.

Big story today about Wynne and her pall, curcut.

Void of

Ehealth

Fine print in cancelation wording
in gas plants.

Health tax.

Wind farms

And driving business to Nigeria where the devel you know is better.

#134 Smoking Man on 12.21.13 at 8:30 pm

Back to Floyd and me new friend JD.

Night dogs

#135 World According To Garth on 12.21.13 at 8:38 pm

So while Dictator Harper and his glorious Action Plan only feeds Govt Workers (roads and bridges are paid for with tax dollars not private sector money) a little bit more of tax dollars to pay said Govt workers and their $91,000 salaries and million dollar pensions is Chinatized and has left Canada.

Where is all this money to pay these govt workers going to come from? Oh yes…..the working poor.

http://www.allvoices.com/contributed-news/16201200-blackberry-enters-into-crucial-5-year-deal-with-foxconn

#136 Godth on 12.21.13 at 8:41 pm

He’s stressed out over what a small planet it’s become and that the chickens have come home to roost. If that isn’t what he’s stressed about, well, he should be. This country has been swallowed whole, digested, and is about to be excreted. Let the blame game begin. Hope you weren’t counting on your pension ’cause they’ll be no soup for you.
What do you call a pyramid with no base? Rubble.

#137 Smoking Man on 12.21.13 at 8:57 pm

My comment is waiting moderation.

How arrogant, let’s not piss off anyone. F-en computers.

Did I pass gartho mood swing,
Nothing should be moderated.

Censorship, I understand, garth likes me, protecting me. After all I’m number 2.story of my life.

Let me self destruct.

I need book food damn it.

I don’t care about the tax farm man.

Poverty wages.

I need banishment to feel

#138 Waterloo Resident on 12.21.13 at 9:14 pm

Oh oh; RIM has just sold 5 of their buildings to the University of Waterloo. If RIM was expecting their cell phone business to IMPROVE, they would be BUYING, not selling more space.

Now here is why I feel that Real Estate prices in Ontario will never fall more than 3 to 5% before bouncing back up 15 to 30% a few weeks later. Just look here at this blog, there are SO MANY people who keep saying that they are so ready to pounce on any bargains and that they cannot wait to buy. Well, guess what; Every time a house falls by 1 or 2%, there are multiple bidders who come along and bid up the house 15% to 30% over asking price. So as long as we keep seeing people here on this blog talking about how they are waiting and waiting for bargains to appear, then there are NOT GOING TO BE ANY BARGAINS. Simple.

This is WHAT WILL HAPPEN: For the next 40 to 50 years, prices for real estate will remain flat, or rise at approximately the inflation rate (1 to 2% per year, max). And millions and millions of people will be waiting all of those 40 to 50 years, hoping to buy a bargain. Meanwhile the stock market will roar ahead by 5% to 8% each year, leaving the real estate market far behind.

The only positive thing I see about the real estate market is this: If one can get 2% per year on his house going up in value, then the price of that house will double after about 40 years. So if the person buys a $1,000,000 house with only $100,000 down, then that house will be worth $2,000,000 in 40 years time, and that person’s tax-free profit from that house is about $1,000,000 (minus a few small expenses).

Meanwhile, if that same person invests $100,000 in the stock market and earns 8% each and every year for 40 years, then at the end that person’s stock will be worth about $2,000,000 and with 30$ capital gains then that person’s profit will only be about 1,300,000.

So either way the results are about the same; either buy a really expensive house right now and make a million in 40 years, or invest in the stock market and make a million in 40 years, it all comes out the same.

#139 Barry in Pickering on 12.21.13 at 9:54 pm

Garth: You’d wise to spend more time learning what REITs and preferreds are, and less trying to needle me. — Garth
—————————
Garth, it sounds like for you, learning about REITS on a Saturday must work like a little blue pill. Thanks for the advice, but I’ve always been an equity investor, 5% per year doesn’t do it for me….

#140 Nemesis on 12.21.13 at 10:02 pm

For all his verve and insouciance – McMurphy never made it out alive, SmokingMan…

But ChiefBromden did:

http://youtu.be/c3Dz6FOE_Gk

ChiefBromden had ‘a thing or two’ to say about FireWater, as well… but you can look that up on IMDB yourself.

#141 Bottoms_Up on 12.22.13 at 12:13 am

#6 TurnerNation on 12.20.13 at 8:13 pm
—————————————–
That donation thing does get me. That liquor or grocery store has the nerve to make billions of dollars of profit, yet ask their highly indebted customers for a token donation. And that donation, no doubt, is to go to that hospital that charges you $15 to park for the day and $12 for lunch.

The Christmas thing is starting to get it’s just recognition. A short two years ago it was frowned upon to say merry Christmas around the office. Now it is encouraged. Go figure. I always thought it was OK to say given it’s written on the calendar and everyone gets the day off. What was the deal with trying to hide the celebration anyway? Like happy X year, like we can’t say new year because in some cultures it’s not the new year yet? Good to see we have finally drawn the line on this thing.

#142 Randy Randerson on 12.22.13 at 12:47 am

@138

If you buy a $1mil house with a $900k mortgage, assuming 40 years amortization with 3.5% (somehow magically the interest rate won’t go up), you’re paying a total of $1,673,529.60 in mortgage payments. Your total interest is $773,529.60. So even if your house is worth $2mil after 40 years, you’ve only made a bit over $300k.

Use a mortgage calculator to check your math next time. An unwashed will always be an unwashed.

#143 KommyKim on 12.22.13 at 12:55 am

RE: #137 Smoking Man on 12.21.13 at 8:57 pm
My comment is waiting moderation.
How arrogant, let’s not piss off anyone. F-en computers.
Did I pass gartho mood swing,
Nothing should be moderated.

You need to sober up and talk to yourself in the mirror. Pull yourself together and appreciate all the things you do have. Life is too short to waste chasing a dream or living a nightmare.

#144 Bottoms_Up on 12.22.13 at 1:00 am

#65 Andrew Woburn on 12.21.13 at 2:26 am
—————————————————
People like to live in their homes. Last time I checked, 65 year olds were fully capable of living independently. Average life expectancy (and functionality) is mid-to-high 80’s. Therefore base on your numbers I expect boomer homes to start selling en masse in the 2030’s.

#145 Bottoms_Up on 12.22.13 at 1:08 am

#95 bentoverpayingtaxes on 12.21.13 at 12:47 pm
—————————————————–
Fail.

You obviously missed this research, just posted, warmest global November on record, since the initiation of such records in 1880:

http://ca.news.yahoo.com/blogs/geekquinox/november-2013-tops-global-list-warmest-november-record-210031484.html

Note this isn’t anecdotal evidence, but global data (i.e., it’s actually telling you something).

#146 Bottoms_Up on 12.22.13 at 1:16 am

#106 Blacksheep on 12.21.13 at 2:45 pm
——————————————
There was an analysis done several months (if not a year or more) back that our elevated housing costs, relative to the USA, could be attributed to our essentially free health care. That is, transport your home to the USA, give half your mortgage payment to the bank and the other half to the doctors. Makes sense. Also, we have higher family income (also higher debt levels). I think the short fund is not going to do as well as they anticipate.

#147 Bottoms_Up on 12.22.13 at 1:18 am

#108 Ralph Cramdown on 12.21.13 at 2:53 pm
———————————————-
Banks earn the lion share of their profits from investment banking, which I was lead to believe doesn’t include profit from mortgages.

#148 Bottoms_Up on 12.22.13 at 1:20 am

#111 sue on 12.21.13 at 3:24 pm
—————————————
No, that one lower sale does not set the benchmark. Those sales are always written off as ‘distress’ sales. It’s when the truly macroeconomic factors take hold, and whole neighbourhoods have to sell, when prices truly ‘crash’.

#149 Bottoms_Up on 12.22.13 at 1:23 am

#120 Sparky on 12.21.13 at 6:02 pm
——————————————
Garth’s “Money Road” is all you will need to feel fuzzy and warm for the holidays.

#150 Observer on 12.22.13 at 1:32 am

Micro-Apartments Could Be Hazardous to Your Mental Health
The apartments are supposed to enable single city dwellers access to a cheaper alternative to sky-high rents, but tenants might be choosing between their sanity and their salaries.

http://observer.com/2013/12/experts-link-mental-health-dangers-to-modern-micro-unit-apartments/

#151 Jimers on 12.22.13 at 3:17 am

Bruce Lee Remix – Be Water My Friend

http://www.youtube.com/watch?v=0EygqL–RW4

#152 Dose on 12.22.13 at 6:20 am

Caution, always. Australia looked to be a lock on RE falling but the Gov and Rates conspired and now it is boomboomboom. Again. Highest investor levels, lowest first-home-owner levels… I know, I know, recipe for disaster yada yada yada. Well, it is how many years since the GFC and things are still going up. THEY NEVER REALLY FELL. Don’t think this will all play out quickly.

My experience over here is you require the patience of Job to get out alive.

Renting. It sucks. Everyone else’s houses are earning more then them. I’ve made my bed… We’ll see, I guess.

#153 Tony on 12.22.13 at 7:10 am

Re: #138 Waterloo Resident on 12.21.13 at 9:14 pm

Odds are very high the converse will happen as money just isn’t created out of thin air. Read the book “zero-sum society”.

#154 AK on 12.22.13 at 7:45 am

#139 Barry in Pickering on 12.21.13 at 9:54 pm
“Thanks for the advice, but I’ve always been an equity investor, 5% per year doesn’t do it for me….”
====================================

Most “Investors” diversify. However, if you are a speculator, then that’s a different story.

#155 economictsunami on 12.22.13 at 8:02 am

Interesting read. Excerpt from Irwin’s new book:

The Alchemists: Three Central Bankers and a World on Fire.

The Federal Reserve was created 100 years ago. This is how it happened…

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/21/the-federal-reserve-was-created-100-years-ago-this-is-how-it-happened/

#156 Herb on 12.22.13 at 9:14 am

#137 SM,

dyslexia and a couple of personality disorders are enough. Becoming an arrogant piece of shit would be carrying “character development” too far.

#157 Stickler on 12.22.13 at 9:45 am

@ #115 Alwyn on 12.21.13 at 4:23 pm

Toronto, Vancouver and Calgary are listed by The Economist Intelligence Unit as among the 10 best cities in the world in which to live. Nice.

——————————–
The study…” which looks at how “tolerable” it is to live in a particular place”

…MMMMMMMmmmmm “tolerable”…sounds about right.

#158 Stickler on 12.22.13 at 9:47 am

Tolerable –

: unpleasant but able to be accepted or tolerated

: good enough to be accepted but not very good

#159 Mister Obvious on 12.22.13 at 9:54 am

#144 Bottoms_Up

Why do you think that most boomers will wait until the last year or two of their lives to sell their homes?

If you’ve been reading this blog for any time at all you will know that for most of them the equity in their homes constitutes the sum total of their retirement nest egg.

Are you perhaps taking the view that these homes will be sold instead by the children of boomers after they discover their failing parents can’t function in them and require extended care?

Even so, who will pay the freight until that happens?

The smart boomers are starting to move their homes now. The march to the exits already underway will become self limiting in the coming years as interest rates rise and the pool of buyers capable of paying insane prices dries up.

The inevitable result… prices must fall.

#160 Daniel on 12.22.13 at 10:29 am

Canadian institutional set-up is one of the finest and able to attract an almost endless stream of quality credit. Betting against it would most probably prove a quixotic endeavor. -D

#161 Zeeman1 on 12.22.13 at 10:41 am

#146 bottoms up.

What the hell are you talking about?

We most certainly do not have free health care in Canada.

We have massively expensive health care.

#162 Daisy Mae on 12.22.13 at 11:04 am

#106 Blacksheep: “Canadians had a front row seats to the housing correction circus in the US, but our arrogance and greed allowed us to not only ignore the obvious…”

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

Right. Canadians are a bunch of naive, greedy, self-entitled, ill-informed idiots…believing CREA and the general media. What’s the governments excuse?

#163 Daisy Mae on 12.22.13 at 11:24 am

#124 Smoking Man: “Hooking is a valid profession…”

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

‘Valid profession’? Don’t insult the rest of us.

#164 Al Berta Drill Hadist on 12.22.13 at 12:17 pm

What are you all complaining about, if you don’t like the price of houses move to another country.

This is a free and fair market isnt it ? You should just be able to go an work in any country you want, so do it.

#165 Derek R on 12.22.13 at 12:37 pm

#146 Bottoms_Up on 12.22.13 at 1:16 am wrote
There was an analysis done several months (if not a year or more) back that our elevated housing costs, relative to the USA, could be attributed to our essentially free health care.

That actually makes a lot of sense. Also explains why other stuff tends to be more expensive here than there.

#166 Kitchener on 12.22.13 at 12:54 pm

142/138 – Waterloo Resident also claims that running costs on a house will be negligible over 40 years. Not so. Besides property taxes and insurance, there is also upkeep. Over 40 years a roof will need to be replaced what, twice? Not to mention new kitchens, bathrooms (several in a million dollar house) etc etc. That 300k gain is getting smaller and smaller….

#167 Son of Ponzi on 12.22.13 at 1:21 pm

This is how one realtor in Richmond interprets RE data:
http://www.shuchatgroup.com/blog.mobi/richmond-real-estate-market-report-10

#168 bentoverpayingtaxes on 12.22.13 at 1:29 pm

#145 Bottom……stop waiting for the next PC announcement from the CBC…..global warming is a myth …climate change is a constant…..Kyoto was a scam to get western money into the hands of third world dictators and luddite greens…..heres some ‘global data’…..read it and weep while you shiver in the dark waiting for global warming

http://www.globalresearch.ca/copenhagen-and-global-warming-ten-facts-and-ten-myths-on-climate-change/16467

#169 Vamanos Pest on 12.22.13 at 1:49 pm

#146 Bottoms_Up

Free health care?

In 2013, healthcare in Canada will cost $211,000,000,000
about $6000 for every man, woman, and child in the country, or about $3.80 for every $10 the government spends (almost 40% of government budgets!!!).

So, pretty please with sugar on top, explain to me how that’s “essentially free”.

#170 VICTORIA TEA PARTY on 12.22.13 at 1:52 pm

VULCHERS ON THE TAKE?

Now that Canada’s real estate “industry” is soon to be apparently picked clean by a new US-based hedge fund has all the trappings of a “Welcome to the Third World” odor, does it not?

And to be plucked by the Wall Street folks whose financial follies, going back decades, caused the GFC in the first place!

The nerve!

Well, when the US dollar is the world’s reserve currency, just about anything can happen to the peons existing on the sidelines. Especially if said peons live just along the north side of the 49th!

I will be interested to see which securities are bought up and packaged to the apparently rich-only customers, I mean investors, to be subsequently shorted. This could be fraught with financial danger. Careful.

#123 bentover… has an interesting take on this.

Will there be enough investors to make this venture pay or will the luster of low gold prices beckon even more so? The Chinese are buying the stuff left, right and centre.

What is it, crumbling real estate in a relatively small market or feverish gold trading?

The US stock market is at nose bleed levels, or is it (?), and investors everywhere, heartened by recent US central bank fun and games, are looking forward to more filthy lucre as Christmas Day approaches. Are they feeling lucky today?

Greed overrules fear right now. But fear is palpably STILL “out there.”

And there is always the possibility of instead shorting the marvellously-structured, and apparently bullet-proof, US economy at some point.

That might look like a Canadian-based hedge fund going long on US poverty!

#171 Vamanos Pest on 12.22.13 at 2:03 pm

#74 gtrz4peace

There is a difference between causing calamity and profiting from it.

The investment strategy of shorting is a zero sum event.

For every unit that is shorted, which may initially tend to push the price down, it will later be covered (the second half of the trade) in order for the investor to realize profit.
This tends to support the price in it’s decline. It’s a one for one trade, and therefore CANNOT, mathematically, have an overall effect on valuations.

It can therefore be argued that shorting, or the ability to short, in a market is good for that market. It increases it’s efficiency by limiting the extent to which bubbles can form, and then limiting the extent to which they burst.

As losses incurred in the process are experienced by those who bought into a bubble, any suffering experienced in the process is the fault of the sufferer, not the hedge fund.

If you’re worried about losing money in a housing correction, don’t complain about some hedge fund, sell your house.

#172 HD on 12.22.13 at 2:10 pm

@#169 Vamanos Pest on 12.22.13 at 1:49 pm

“So, pretty please with sugar on top, explain to me how that’s “essentially free”.”

LMFAO.

Love that movie….can’t get enough of it.

If you were referring to Pulp Fiction that is.

Best,

HD

#173 Bottoms_Up on 12.22.13 at 2:11 pm

#169 Vamanos Pest on 12.22.13 at 1:49 pm
————————————————
Our healthcare costs are built into our taxes, so we are use to paying it, we pay it every year and it is steady.

For those Americans that need to budget to pay their healthcare (much like financial planning for the future), well, many likely don’t, and how is average Joe going to come up with $250,000 in chemo treatments?

Go ask a Canadian who’s had relatives fight cancer for years what bill they received? None. Not bad for hundreds of thousands of dollars in medical care.

So, yes, our healthcare (in a relative sense) is essentially free–that is, steady, predictable, not going to lose our home due to medical bills.

And people much smarter than me have run the economics of our two countries and shown that a large chunk of our real estate difference vs. USA can be explained by not having to account for unforeseen medical costs.

#174 Kam on 12.22.13 at 2:16 pm

#146 Bottoms_Up on 12.22.13 at 1:16 am wrote
There was an analysis done several months (if not a year or more) back that our elevated housing costs, relative to the USA, could be attributed to our essentially free health care.
#165 Derek R That actually makes a lot of sense. Also explains why other stuff tends to be more expensive here than there.

Have you heard about EHT and Ontario Health premium?
Do you know for how may hours you have to wait in emergency @ St Mikes (Toronto) or Sick Kids Hospital before getting treatment ?

#175 Bottoms_Up on 12.22.13 at 2:16 pm

#168 bentoverpayingtaxes on 12.22.13 at 1:29 pm
——————————————————
So your ‘global’ Research organisation is “Global Research” a Montreal based group that self-proclaims:

“Global Research had become a major news source on the New World Order…”

ROTFLMFAO that’s credible.

#176 Bottoms_Up on 12.22.13 at 2:28 pm

#159 Mister Obvious on 12.22.13 at 9:54 am
———————————————–
I tend to believe that boomers will want to stay in their homes where the memories are, they’re familiar with the local shops, friends/family in the area etc. Obviously some will have to sell. Some will take out reverse mortgages or use a HELOC to fund living, or sell other assets such as cottages. Some won’t be able to sell, or won’t sell in a declining market. I’ve witnessed elderly family members cling to their home during their last days or last functional days. I’ve not known any boomer tell me that they plan to ‘cash out’. In fact, most are happy considering they will live to their last possible day in their home.

Garth’s advice does stand though, for those that are completely financially screwed, they should consider selling. This does not mean there is going to be a mass exodus from housing, and in fact almost implies the reverse will be true (because the herd generally doesn’t do what’s financially best for them).

Surveys consistently show at least 30% of Boomers plan to sell homes in order to finance their retirements. Given the fact most people hide their financial mistakes, I’d put this number closer to 50%. — Garth

#177 Alwyn on 12.22.13 at 2:44 pm

# 157 Stickler – the single quotation marks around the word ‘tolerable’ have some meaning here, methinks.

The world’s 10 best cities to live in, according to the Economist Intelligence Unit global “liveability” study, which looks at how ‘tolerable’ it is to live in a particular place given its crime levels, threat of conflict, quality of medical care, levels of censorship, temperature, schools and transport links.

#178 Humpty Dumpty on 12.22.13 at 3:24 pm

A christmas card for all who love the Yanks…

http://www.jibjab.com/view/0pYdndfQiQlgpXaU

Compliments of Martin…

#179 Shawn on 12.22.13 at 3:42 pm

A Valid Profession?

Daisy Mae at 163 said:

#124 Smoking Man: “Hooking is a valid profession…”

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

‘Valid profession’? Don’t insult the rest of us.

*****************************************
Well I guess the Supreme court has given the profession some legitimacy…

I once heard a guy on the radio describe himself as “a bottle-picker by trade”.

I thought good for him to be non-apologetic about that.

No matter our circumstances we all crave respect. And sometimes people do what they have to do to survive.

#180 Ralph Cramdown on 12.22.13 at 3:53 pm

#173 Bottoms_Up — “And people much smarter than me have run the economics of our two countries and shown that a large chunk of our real estate difference vs. USA can be explained by not having to account for unforeseen medical costs.”

Interesting. How did they explain away the obvious observation that less than a decade ago, when the US and Canadian healthcare systems were basically the same as today, houses in the US were more expensive than here?

#181 Porsche on 12.22.13 at 4:18 pm

#164 Al Berta Drill Hadist
What are you all complaining about, if you don’t like the price of houses move to another country.

This is a free and fair market isnt it ? You should just be able to go an work in any country you want, so do it.

………………………………………………………………………

Hey drill bit, if it were that easy the tar pit would be the only place that had workers left.

#182 Nemesis on 12.22.13 at 4:52 pm

TheCheeseRoyale & Other ComparativeCultural Observations… or; Vincent explains the FinerThingsInLife to Jules:

http://youtu.be/6Pkq_eBHXJ4

#183 Herb on 12.22.13 at 4:53 pm

Comparing health care …

I personally know of two cases in the USA that I would like someone to give me Canadian equivalents for:

1. Seniors having lived a good life in Florida for decades – until the old man got sick. They lost their home to medical expenses, and had to move to Canada to live with an adopted son.

2. Married couple in California getting along well – until the wife developed a nasty disease. The medication to keep her functioning was so expensive that she divorced her husband to have the meds of a poor single woman paid by a charity. They could not have afforded the treatment for the duration even if they had stayed together and ruined the husband financially.

I fear that attacks on our universal health care system are based on political ideology and self-interest. There indeed are better health care systems in the world, but they are unacceptable because they would be tarred as “socialist.”

#184 Andrew Woburn on 12.22.13 at 4:59 pm

#159 Mister Obvious on 12.22.13 at 9:54 am
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I tend to believe that boomers will want to stay in their homes where the memories are, they’re familiar with the local shops, friends/family in the area etc. Obviously some will have to sell. Some will take out reverse mortgages or use a HELOC to fund living, or sell other assets such as cottages.
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Having gone through this decision process, I agree that boomers want to stay where they are but a lot depends on situations and options. If they live in a pleasant small city where RE prices are not crazy, they have less cash-out potential but their community is still as livable as it has always been. If they live in Vancouver, for example, they can relocate to a smaller community or downsize and pocket a big win on one hand, and on the other, the city keeps changing in ways that are less friendly to older people and gets more congested and expensive every year. Once you start living on a pension you become very aware of how vulnerable you are to inflation so the idea of owning a cash cushion becomes hard to resist. My guess is there will be a mini-stampede of panicked city boomers when they finally realize prices are actually dropping.

#185 Bill Gable on 12.22.13 at 5:37 pm

> Enjoy > Please sit down, and put the seat in the upright position.

I can hear the forehead slapping from here in soon to glowing in the dark, Vancouver, all the way to Lunenburg.

Here we have a, cough, CBC article slice:

“Rule No. 1: A property bubble isn’t a bubble till it pops. Whether it’s Shanghai, London, or Toronto, until the final blow-up, it’s just a rising market driven by rising demand.

Just ask the people who sell real estate. They will tell you we are nowhere near a bubble. And lately we’ve seen a number of opinion pieces by what you might call “bubble scoffers,” who are reacting to the loose use of the term that ascribes bubble characteristics to everything from bitcoins to stocks to the boom in technology start-ups.”

http://tinyurl.com/moadjaz</

#186 Casual Observer on 12.22.13 at 6:24 pm

#146 Bottoms_up” …our elevated housing costs, relative to the USA, could be attributed to our essentially free health care.”

We have “free” healthcare in Canada, but people forget that in the U.S. they are able to deduct mortgage interest from their income taxes.

It’s been this way for decades, yet for most of that time, house prices in both countries were almost the same when taking into account family income, etc.

I don’t buy the argument that it’s different here because of healthcare. A more reasonable explanation is that prices are higher here because our household debt has continued to increase, while the Americans have been paying down theirs.

#187 jan on 12.22.13 at 6:44 pm

Canada, the most polarized country on the world. FREE MARKETS HAVE DIED.
There is no free market here !!!!!

Inflation….Good
Deflation….BAD

Real estate goes up/////GOOD
Real Estate goes down…..Bad

THERE NO FREE NARKETS IN CANADA, only rigged ones!!!

#188 Nemesis on 12.22.13 at 7:09 pm

@Jan/#187….

“Certainly the game is rigged. Don’t let that stop you; if you don’t bet, you can’t win.” – Lazarus Long

http://en.wikiquote.org/wiki/Robert_A._Heinlein#Time_Enough_for_Love_.281973.29

[NoteToGT: We used to exchange notes. NoS**t. An author still on the RequiredReading list at Annapolis&WestPoint although most assuredly not at RMC/CMR; too much testosterone?]

#189 Nemesis on 12.22.13 at 7:15 pm

“A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.” – Robert A. Heinlein

[NoteToGT: I couldn’t resist the temptation.]

#190 Oceanside on 12.22.13 at 7:22 pm

#65 Andrew Woburn on 12.21.13 at 2:26 am
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People like to live in their homes. Last time I checked, 65 year olds were fully capable of living independently. Average life expectancy (and functionality) is mid-to-high 80′s. Therefore base on your numbers I expect boomer homes to start selling en masse in the 2030′s.
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Sounds about right, we are definitely different than our parents or even folks in their mid 70’s. I am 63, most of my friends are between 62 and 71. They cross country ski, hike, climb, ride motorcycles, travel. All but a few own homes, they garden, entertain and enjoy having a yard and outdoor space. None of my close friends have mortgages and I don’t imagine will sell until their 80’s or if they suffer a serious health issue. I keep hearing how many Boomers are deeply in debt but don’t see that around my middle class friends.

#191 Daisy Mae on 12.22.13 at 8:55 pm

#179 – Shawn: “No matter our circumstances we all crave respect. And sometimes people do what they have to do to survive.”

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Yeah, it’s all about ‘choices’…. LOL