This will be a simple post. At the end of the first serious week of 2014 the Canadian dollar was diving to the 92-cent level. The worst performance in years. It came on news the country has been losing jobs at the rate of 10,000 a week. Our unemployment rate’s gone up, as that in the US falls.
Our trade deficit was nine times worse than expected. Business investment has fallen badly. The central bank is worried about deflation. Energy and mining companies punted 8,000 people last month. Schools laid off more than 18,000 teachers, assistants and staff.
Yet another survey was released showing what real estate’s done to this country – sucked off all the cash. BMO says 60% of people won’t make any RRSP contribution this year because 70% say they have no money or are directing any extra money elsewhere (like renovating). Two-thirds of all contributions will be under $5,000 and the average is just over $3,500. Pathetic.
Our unused RRSP contributions are now approaching $1 trillion. Thirty per cent of retirees have a mortgage. Half the people with TFSAs have nothing in them. Over 40% live paycheque-to-paycheque.
Depressing? Damn right it is. This is financial suicide by real estate. Once the asset where the middle class has stuffed 85% of its net worth inevitably retreats, you’ll see what’s left. Debt. Piles of it. And precious little else for the average family.
Already the economy is being pulled back by consumers who borrowed way too much to acquire houses, with little left for appliances or investments. Suddenly a high-cost country with ridiculous real estate prices where workers need high wages just to survive is no longer competitive. Factories shut. Exports fall. Productivity drops. Employers retrench. Consumer spending fades because mortgage payments come first. It’s a vicious circle, and the world notices. The dollar sells off, making consumer prices rise.
Without good jobs, good wages, low interest rates and sustained consumer confidence, there’ll be no robust real estate market. It wasn’t subprime loans, higher mortgages or dinks on Wall Street responsible for the US housing collapse. The wheels only came off as unemployment ticked higher, through the 7% mark. By the time it hit 10%, the country was on life support, houses were 32% cheaper and the middle class was gutted.
Now, consider these facts, reported Friday, January 10th:
- Last time Canada’s jobless rate was higher than the US, as it is now: 2008.
- Number of full-time workers laid off or fired last month: 60,000. Part-timers added:14,000
- Amount job creation fell in Canada during 2013: 65%
- Net new full-time jobs added nationally in all of last year: 19,300.
- Number of net new unemployed people last year: 24,000
- Number of employees laid off last month by private companies: 26,300
- Number of employees added last month by government: 18,200.
- Jobless rate in Ontario: 7.9% (just soared from 7.2%)
- Labour force participation rate: 66.4% (The lowest in a decade)
- Number of Canadians who think their job is not secure: 54%.
When people worry about employment, it’s irrelevant how cheap mortgages are, or might become. Granite doesn’t matter. Or moving up. Or what your girlfriends say. Or the Remax guy. All that scared people care about is retreating to safety.
I may have to revise my housing forecast.
306 comments ↓
Hum, just driving home from the LCBO
Never seen so many people on a Friday night.
What was interesting I had 4 big bottles of Pino, most customers had like 4 beers, or just enough to last the night.
Garth may be onto something
There is such a thing as the madness of crowds. We see it in riots, in fads and, unfortunately, in investing. There was the South Sea Bubble, the tulip craze. It was all miraculous and everyone was getting rich until they weren’t. People lost everything. Of course, in those days, no one expected the government to step in and make it better. Now, the shock is going to be that the government can’t make it better. It may very well be that it doesn’t wan to make it better. In the US, the banks lent out money like madmen except, of course, if you take a bit longer view, they lent to people they knew couldn’t keep their houses. So, they got people’s money, the buyers defaulted, companies, not individuals, swooped in and started buying up all those cheap places. Just a natural accident? Really? Lend out money to everyone and anyone because you know you’re going to make out fine when you foreclose and sell the property again. That’s probably too complicated, though. It’s just people being paid on commission backstopped from any penalty by CMHC. Spending other people’s money with no penalty for using their credit card to make yourself rich. Should be a criminal offence.
Luckily Ontario is different….Utopia on wheels…
so, who’s got ideas on how to win in this environment.
Debt is modern day slavery.
Hi Garth,
One month does not make a trend. This will have no impact in the housing market. In a couple of months spring market will start and you will see there will be higher prices compared to last year. The reason being because low rates are still here and foreign investment into housing which you dismiss as being a non factor.
PLEASE revise garth, I am 1, great post for 2 days
You sound very ominous tonight Garth. Scary in fact. The numbers rattle you but I can tell you 99% of the country is oblivious.
This is just the beginning. Wait till interest rates start to rise.
I agree with you, I feel that you might have to revise your housing forecast … some UGLY job numbers today.
Mind you the US job numbers were not much better either … better but still ugly.
Slip sliding away!
Not a surprise as that’s been my feeling for a while as I watch house prices drop and businesses close in the Greater Victoria area. Huge mortgage payments mean a consumer does not have much left over to keep the restaurants, pubs, and other businesses going. When discretionary income shrinks the economy feels it.
what I meant was that post would get me thru to sunday with no withdrawal
What the hell do we need another 18,200 government employees for??? What a waste of money. It takes 60,000 tax payers to pay there wages!
Depressing Garth, just depressing. Thanks for the fine start to the weekend.
It can only get worse
u can c all this happening in Saskatchewan now
Because I have read this blog for years, I think I am prepared for what is coming financially. I don’t think anyone can be prepared for what is coming emotionally. It will be very tough watching friends and loved ones go underwater and lose their houses. To me, it seems as if we are about to careen down that slippery slope to financial disaster.You know the slope, the one that F and the peckerettes have said doesn’t exist. It looks to me like it may come faster than most would believe.The only soft landing here will be for those that are balanced and liquid.
Unfortunately it doesn’t matter how many times you say “Don’t put all your financial eggs in the real estate basket.”
The idiots just won’t get it. Huge arguments, denial, lying, all part of the game……..
You’ll just get the satisfaction of thinking,” I told ya so……”
We are doomed!
But the TSX is up 118 points. Everything is fine lol.
Short and sweet
there will be a lot of belt tightening comeing up in 2014 and beyond,For those recently layed off take this time to learn to embrace frugality and reconnect with friends ,family and your health,keep your mind and skills sharp. Retirement date on my callender cant come soon enough .
And what of these figures? Are we walking in tandem with the US?
What job losses? According to the commercials, Canada’s Economic Action Plan is creating tons of jobs for female mechanics.
I may have to revise my housing forecast.
Please Garth anything but that?
Too scary….oh wait, that was yesterday’s blog. For those who are religiously inclined, start praying. For those who aren’t, execute your survival plan.
A failing dollar indicates interest is moving elsewhere… Not the strong economy we once thought! Gonna stay renting for a while!
The House Horney
Today I parked my ass at union station to people watch. Looking for the perfect character to get inspiration for a few chapters.
Amazing it was, never found anyone but the herd incredibly stupid.
Like guppies in a fish bowl all staring up at the TV. In a trance waiting for the TV to tell them which track the train will arrive on. It’s usually posted 10 minutes to kick off.
9 minutes to go and nothing. They start to squirm, exhale in a frustrated gasp. Looking and staring afraid to blink, and generally getting pissed off. 7 minutes to go and nothing. The herd is ready to sacrifice someone’s child. The looks on peoples faces.
Now the train goes on the same track everyday for that time slot. I knew it was going to be on 9/10 It always is. If it’s not, there is a yellow streaming message that says, wait.
At 5 minutes to kick off the sign lights up. 5:13 Lakeshore west 9/10
They shove the push, swearing obscenities under there breath, heaven help a person with a back pack that makes a 180 and takes someone out with the back pack, a riot will break out.
Why is the obvious so oblivious to most.
Anyone who has crashed a motorcycle will attest to the similarity to a Real estate crash:
It’s over before you saw it coming.
Wise people could have and did tell you it was happening.
It seems to take for ever to hit rock bottom, although it was beyond recovery once it started, and over in seconds.
It hurts people for a long time, can take more than we dreamed of from us.
In my case, a VTR 1000 right after the best street ride in my life, just beyond whistler. Last summer.
Full leather race suit, boots, pads. Currently No bike, no North American real-estate.
Regards all, thank You Garth
This bubble I am afraid is bigger than most thought and when the gas starts to come out it will make the early 90’s look like a cake walk!
BAM!
You sound angry in this post. I like it.
905 and crappy inner suburbs like Scarberia are going to get eviscerated
That which is rare (SFH in C01, C02) will do just fine, thanks. Decent houses near the U of T St. George Campus rarely come up for sale and when they do they often get snapped up within days. This is happening because of the inevitable concentration of wealth and concurrent gentrification of the downtown core.
The FT had a great article on this:
http://www.ft.com/intl/cms/s/2/d8b97920-76eb-11e3-807e-00144feabdc0.html (paywall)
titled: Inheritance should not be an alternative to hard work
By Robin Harding
Houses in Paris, London, New York, Singapore, Hong Kong, etc are completely beyond the reach of those without top 1% inheritances or top 1% incomes (the dilemma of Rastignac)
Notably, Canada, with zero gift and inheritance taxes (there is a step up in basis / capital gains tax on appreciated assets), is clearly heading towards this direction.
Those nice urban, walkable houses around the Annex/South Annex/Kensington Market/Chinatown/Queen West are only going to drift further and further away.
As a relatively young person (hitting “3-handle” within a couple months) I feel a bit sorry for my mostly house-less cohort, when a decade ago that these walkable, urban houses were highly affordable even for the middle class. C’est la vie. Welcome to the 21st century folks.
LH
“It wasn’t subprime loans, higher mortgages or dinks on Wall Street responsible for the US housing collapse. The wheels only came off as unemployment ticked higher, through the 7% mark. By the time it hit 10%, the country was on life support, houses were 32% cheaper and the middle class was gutted.”
Housing prices were halfway to the eventual bottom by the time unemployment hit 5%. A rise in unemployment can certainly cause a housing bust, but that isn’t how it happened in the US. The gasbag collapsed of its own accord.
http://research.stlouisfed.org/fred2/graph/?g=qQ3
Your graph perfectly supports my comment. Housing hit bottom as the jobless rate peaked. — Garth
Almost sounds like a good time to start a company. Already have a full time job in an industry with unbelievable turn over working long hours, 56 in 4 days is not uncommon, yet am afforded the luxury of a 4 on, 4 off. Lots of time to start slow, watch the competition slit their own throats in a race to the bottom with pricing and put themselves out of business. Build my brand in the shadows while having my pick of the crop in employees desperate for a job, willing to take less for more. Blood in the water smells like opportunity, didn’t always think this way till I read SM.
In Canada, there is only one province hiring & paying people to work and of course that is Alberta:
http://www.chpc.biz/earnings-employment.html
Apart from the dismal stats that Garth lists above, AB continues to attract interprovincial migration because average earnings there are:
23% above the national Canadian average, 22% above Ontario, 28% above BC and a whopping 32% above Quebec.
Meanwhile the U.S. is building up it’s own energy sector.
As software consumes jobs, smart people are retraining and moving to where the incomes are.
Sure gonna get alot uglier before it ever gets brighter out there.
Yup…happy days ahead.
“At the end of the first serious week of 2014 the Canadian dollar was diving to the 92-cent level. The worst performance in years. It came on news the country has been losing jobs at the rate of 10,000 a week. Our unemployment rate’s gone up, as that in the US falls.
Energy and mining companies punted 8,000 people last month. ”
Precisely why energy and gold stocks have been moving into profit and gaining value. We investors have been making out like bandits lately…..the lower head count and lower dollar is damn good for this sector….ergo…rising share prices. …..gimme more misery baby….its good for business.
Sad! The politicians responsible aided and abetted by the generation that seeks to transfer all responsibilities for their own actions to others will probably live a secure retirement life.
Of course the political class still trying to pick up a turd by the clean end had nothing to do with this; no sir!
We might see more distressed sales in the upcoming year, will job loss and unemployment rate inching higher. I foresee the Bulls can’t use the reason of “they don’t need to sell their houses unless…”
Thanks for Garth for educating me in managing my ETF’s portfolio.
this reminds me of the 80’s. how depressing.
thanks for the forewarning Garth.
dividends .got to like them.anyway looks like a slight re-balance is in order for A and B.
Oh how nice to be sunning in Mexico without a morgage and a big fat USD brokerage account! Do’nt miss that house in Canada one bit…
So the bear in yesterday’s picture is revealed… not a pretty picture either today’s or tomorrow’s.
Batten down the hatches.
You try SO hard to save us from ourselves. It’s amazing. I sure do appreciate your efforts. I, personally, will never be a whiz at economics. But I’m learning alot. What will be, will be….
Don’t give up on us?
As a Canuck living in the U.S., I am ashamed at the stupidity of my fellow countrymen. Did Canada not learn a damn thing from the U.S.’ experience over the past 7 years?!? I look forward to a 12% unemployment rate in the Great White North.
from here on, the game has changed.
this past week, specifically Wednesday, the fed forced the sale of $100 billion dollars into the economy. this is just the beginning. professor janet yellen is going to spend and print like there’s no tomorrow.
Hold on; employment/jobs everywhere, inflation is ready for lift off, interest rates rise, bonds crash and the most important factor “velocity” increases.
the ship just left the dock.
People Not In Labor Force Soar To Record 91.8 Million; Participation Rate Plunges To 1978 Levels in the US. I could go on for days on end about the so-called US and European recovery but point is, the fundamentals in the US and Europe are twice as bad as 2008, and getting worse. It’s a wonder how you can be so admirably objective about Canada, but then you turn around and believe everyone else’s baloney. I really like you blog Garth, but when it comes to ”globanomics”, that’s where you lose me.
All while HARPER & CO delete the science of it all.
All for Stephen Harper Oil,,
So many manufacuring jobs lost while Harper at the helm.
And he says he’s creating jobs too…
I saw a similar survey like the BMO one, except it was about the TFSA. Apparently more than half of Canadians still haven’t opened up a TFSA yet. The number one reason they say is due to not having any contribution money. Housing is sucking up so much of people’s incomes that many are forced to forgo tax free gains on their investments :*( Maybe with the lower loonie we’ll see more jobs coming back to Canada, especially in manufacturing, but we have to properly diversify our investments. It’s not necessarily a good thing if unemployment drops and salaries go up across Canada, only to further stress our real estate market because people don’t know what else they can do with their excess money. 85% of one’s wealth in a single asset class is too risky.
#31 should have been posted as ‘valleyrenter’. Guess I can’t even spell my nom de plume right. Too much SM influence I guess.
Wow, what a post. I may have to revise my Paxil dosing for the weekend.
Garth called the tipping point this summer. With the jumper and the throw in the towel post. The commentary was telling. Most Canadian data since then worsened. Employment reports have been buoyed by self employed for months. Big time give back today. Nice construction jobs. That’s a leading indicator for me. I read that’s it’s the worst year for Job gains since 09.
All came apart today but it was evident then. Cicadas don’t read.
How’s the home price looking in US dollars? About 10 percent lower just on forex.
The ants did more than fine today. Especially the well balanced ones.
For the youngsters that have felt left out. For those who have taken abuse. Those that tried to help but became the bad guy. This ones for U. But don’t gloat. You still have to play the next period. Leave that to the growling guys on Fleet Street.
The social consequences could get be depressing. We still need to help the most vulnerable.
Thanks to Stephen Harper who racked up the biggest deficit of any PM in history. Yes, the Liberals left him a surplus and he turned it into a deficit. So not only has he substantially weakened environmental protection and removed the public from many decisions, but he has screwed Canadians financially.
Garth, if the RRSP contribution room is open by 1 trillion dollars, what are people using all those HELOCs for? Oh, wait, just figured it out…more granite.
Stephen Harper Oil was to carry Canada thru it all.
Stephen Harper Oil was believed the answer for this government.
The rest of the world will turn its back on Stephen Harper Oil.
Canada was once something other than what Stephen Harper has turned it into.
Canada, she was once a model for all the world to follow but after Stephen Harper Oil, the world will turn its back on her…..
“It wasn’t subprime loans, higher mortgages or dinks on Wall Street responsible for the US housing collapse. The wheels only came off as unemployment ticked higher, through the 7% mark….”
******************
But, initially, this was triggered by the dinks on Wall Street. Goes back to power, greed and mismanagement. It all filtered down — to layoffs, and all that came after. And here we are today.
Nope. House-lusty people overextended and were creamed when an inevitable correction arrived. Sound familiar? Evil bankers just made it worse. — Garth
Look, problem is this, and it is planned and ongoing:
Corporate management is hell bent on rendering Canada’s work force unemployed, with assistance from Jason Kenny, by offshoring labour – in the name of efficiency, profitability, et al. Jobs arbitrage!
Such action results in separation of Canadians from the incomes and careers associated with the production of the goods and services that they consume!
No income, no tax base, no consumption, no savings, no investments, …
This will not end well!
F.S. – Calgary, Alberta.
fantastic article.
Garth slowly aligns with my view of significant crash, not just a correction.
——————————————-
#6 zee
it is not temporary. Just watch it: unemployment, week dollar, deficits will not shrink but increase and worsen.
And once inflation comes….. run away.
Garth,
Jan 9 episode of Lang & O’Leary exchange talks about crazy RE and that most of Canadians do not know what’s TFSA.
run away….
as when (not if) CMHC blows up TSHTF and its over.
#16 mitzerboy
saskskatchewan might be in for some pain, as a whole, but saskatoon (alone) i feel will survive and thrive
Crash
Crash
Crash it will be no matter what the prostitutes at royal lepage will say.
Stupid people will continue to borrow their brains out with low rates. Perhaps there will be less now that it appears some are unemployed. Is it enough unemployed to affect the RE markets….we will see.
But the expert paid by the RE Board said ‘We expect no landing, no slowdown, and no correction in the near-term.’
Maybe he will be unemployed soon too…..
On another thought: I feel that Garth knew perfectly well what was coming since long time ago but could not say it at he would be ridiculed and called doom-er. It is Canada after all, we are all politically correct.
It is amazing how bunch of economists are trying to present the decline of the dollar with a positive spin (benjamin tall) while trying to downplay the trade deficit and represent bad house start numbers as price increases Phil Sopper).
The normal skepticism (the like of Peter Schiff) are completely absent from our environment and when we crash it would be really big time. Just watch F, does anybody frankly has any trust in his competencies?
Yup, and this from the Star Phony in Saskatoon today – layoffs in Regina coming:
http://www.thestarphoenix.com/business/Evraz+Regina+workers/9370821/story.html
#59 sheane wallace on 01.10.14 at 9:16 pm
run away….
as when (not if) CMHC blows up TSHTF and its over.
————————————————————RUN AWAY?
O.K. TO WHERE?
“When people worry about employment, it’s irrelevant how cheap mortgages are, or might become. Granite doesn’t matter. Or moving up. Or what your girlfriends say. Or the Remax guy. All that scared people care about is retreating to safety.” –
– my girlfriend is making me go to homedepot in the morning to look at new kitchen cabinets and counters.
Darth Vader: “I have altered the deal. Pray I do not alter it further.”
Garth Vader” “I may have to revise my housing forecast.”
#61 saskatoon on 01.10.14 at 9:19 pm
—
I live in Saskatchewan and while there has a been a flurry of activity here, its mostly related to new housing. There aren’t any really great jobs being created. Warehouse workers and trades and some resource hires. Thats it.
I predict that when the economy gets a little rocky, Sask will be shown for the one trick pony it has always been.
#13 Dr. Bob on 01.10.14 at 8:23 pm
Seems like we were a few taxpayers short for your spelling teacher’s salary…
TEMPLE
And the band played on……as they all went underwater.
Need a catchy title for the book.
Got a few here.
Suggestions welcome.
Fear and Loathing on Bay Street
Losers lounge, I like this one.
Amnesia in Vegas.
Quads.
The art of lying.
Can’t get a buzz on Jack
Drones are being used to try to sell homes in Vancouver:
“They’re using quad copters to capture bird’s eye views of the properties they sell – and even flying them through homes – to create breathtaking promotional videos…
The Macnabs are able to fly the drones inside the rooms of homes and condos, but must obtain a special permit from Transport Canada every time they use it for commercial purposes.
They’re even required to submit a flight plan of the drone’s path through the homes.”
http://bc.ctvnews.ca/drones-getting-buzz-in-vancouver-s-real-estate-market-1.1632914
Yahoooooooooooooooo, burts baby. By the way every year starts off with doomers saying this is the one. Hopefully they get it right this year.
I just got laid off this week. My husband is unemployed. Im so worried. How will we survive?
Will this crap storm never end? When will the prosperity for all come?
Hey Smoking Man, isn’t 4 big bottles of Pino just enough to last the night for you as well?
#45 Leviticus: “As a Canuck living in the U.S., I am ashamed at the stupidity of my fellow countrymen. Did Canada not learn a damn thing from the U.S.’ experience over the past 7 years?!?”
****************
Nope. Our ‘leaders’ don’t know how to lead.
Folks, get on with the times.
Quartz is the new granite.
Now you can tell the time by looking at your countertop.
Crafty Swiss!
Re- joined the wife in the checkout line at Loblaws today and said “They have those new led light-bulbs $42.95 each ! I guess we won`t be loading up on those. ”
The lady in front of us says” I am afraid of using any electricity at all (for fear of the monthly bill). I guess we will soon be burning candles like in the good old days ” I replied.
Yes TSwillHTF soon.
Sorry Garth. What is the relevance of the 1 trillion in uninsured RRSP contributions?
Thanks
Kilt
Unused. — Garth
#64 not 1st
i agree…like you said…saskatchewan is a one trick pony…but not saskatoon
SM,
Suggestion for your book title:
How to get rich recycling liquor bottles.
When one factors in the about 200K temporary foreign workers that gained employment in Canada in 2013, the net 100K jobs created in the year do not look good at all.
It may be no precise but this would mean that Canadian have a net lost of 100K jobs in 2013 while foreign countries collectively gained 100K jobs for theirs citizens. It does not look like a win situation for Canadians. I wonder,
Are we really creating jobs for foreign people?
Do we really do not have people to fill those “outsourced in-house” jobs?
Have the TFW program has become way too big?
7.2 unemployment, unbelievable. It would be interesting to see the number of TFWs admitted in 2013 by province compared to the jobs gains in 2013
http://www.theglobeandmail.com/news/national/foreign-worker-admissions-spike-in-2013/article15130667/
http://www.vice.com/en_ca/read/the-canadian-government-is-using-temporary-foreign-workers-to-keep-wages-low
People may not like Harper, but I didn’t see him holding your hand down with a pen in it forcing you to sign those mortgage documents.
And I seem his deficit was the direct response to a little coalition threat made by Jack, Stephan and Micheal a few years ago.
A large percentage of us will be screwed financially for life. The root cause is of course the market distorting policies and institutions of government, mainly the 1% BOC interest rate and ever increasing CMHC limits.
The best government is that which governs least.
This could cause a lot of social issues as people essentially become debt slaves. What could be real scary is the government “solutions” to the problems they created.
#81 saskatoon on 01.10.14 at 9:54 pm
—
Appreciate your confidence, but its not different there either as Garth would say. Its success is tied to ag and commodities just like ever other place in the province. There is no Silicon valley here and never will be.
Funny thing is that the lower C$ is supposed to help the Canadian manufactures who export their goods.
But we don’t have any manufacturing to speak of.
And of course, imports will become more expensive, fueling inflation, which will force interest up, which will force house prices down.
And so on, and so on.
And Flaherty and Poloz have run out of tools.
SMOKIN’ Book Title
Here’s your title:
Losers Lose and Winners Win
or variation thereof like:
Why Losers Always Lose and Winners Always Win.
I was going to trademark the phrase but it’s quite politically incorrect so it’s all yours.
72 Smoking Man on 01.10.14 at 9:35 pm
– where the house horny roam
Garth you gotta admit those jobs numbers out of the US were pretty darn bad, the Fed will likely take tapering off the table as the economy looks to be imploding.
Err. They created jobs. We blew them up. — Garth
Is there anything new to say?
Really, is there some shadow of a doubt about how this all winds up?
Once it all starts to slide, at least half of the mortgage holders in this country will be standing when the music stops, the other half will be wondering why the hell they threw so much damn money away.
#59 Balance on 01.10.14 at 9:15 pm
Stop talking about TSFA, Do you remember what happened to income trusts when they got to popular.
End it now.
Water cooler talk (figuratively) today was about this guy who wants to buy a condo in New Westminster “to rent out”. Sigh. I told him before (in a different context) and again today that my ex-gf was already underwater with a condo in New West, and that she could NOT rent it for what she paid on her mortgage (Garth featured her once). Didn’t seem to mind.
This is the same guy who married and divorced young and sold his townhouse in Port Coquitlam at a loss only a few years later.
He went on to get “advice” from someone else at work who bought in Tsawwassen (Google these places, by the way, they are NOT Vancouver) because that’s what her household could afford. I often think of them (her husband works there too) when I think of the typical middle class family whose net worth will literally be obliterated soon. I feel bad for their children.
But we’re being offered a fairly solid REIT at work and he is debating it lol
Whatever; each to their own.
I rent just by the water downtown, and if the housing market tanks, my rent might just go down.
#33 LH on 01.10.14 at 8:49 pm
“Houses in Paris, London, New York, Singapore, Hong Kong, etc are completely beyond the reach of those without top 1% inheritances or top 1% incomes…”
LH, I had the chance to visit the first three on your list more than once. Millions of people live there, and most of them are not in the top 1% of anything. Comparing GTA, Van or Calgary with these cities is just an exercise in wishful thinking.
“I may have to revise my housing forecast.”
Like I said to you the other day Garth, your blog posts scream 25% minimum, not 15% as you’ve always stated. Just look at Christy Clark’s failed make-believe jobs plan, down 17,000 private sector jobs. So much for the BC Liberals being pro-business, it’s all a crock of you know what.
Nice post Garth, and as usual, nothing but the truth. I always admire how you can give people the truth, knowing that many people are going to see it as bad news at times, and yet you deliver it with tact and in a gentle manner. Your Blog has made me realize what a hard a$$ I used to be in giving people the truth, even though I never wanted to hurt anyone with the facts, but only help them. Today, I keep my mouth shut, unless asked for advice, and it works very nicely. My life is more peaceful, as why should I open myself up to bichd at, I’m not even married. Side note, my girlfriends know right from the start that I live alone. I am not into using, or deceiving anyone, as peace of mind is priceless. Financial serenity is a big part of this. I can see that just in the figure that 40% of people live payday to payday. I don’t brag, I am just very grateful. This doesn’t have to be this way for people. Garth has been giving people the financial information for free for years to help them not end up like this, and every time some one writes him to thank him, I feel all warm and fuzzy inside. It’s like a victory over the dark side.
SilverMeridian Greater Ottawa surReal Estate Update
http://www2.ottawarealestate.org/home/NewsInformation/LatestNewsRelease.aspx
Here is the latest spin on December 2013 stats from the Ottawa Real Estate Board: “Members of the Ottawa Real Estate Board sold 610 residential properties in December through the Board’s Multiple Listing Service® system, compared with 615 in December 2012, a decrease of less than one per cent.” Sounds very calming and boring, just the way it should be in the stable market “devoid of large fluctuations”. Less then one percent, doesn’t look like not a big deal, but keep in mind that this is 1 percent less in comparison with December of the last year, which in turn was 18% lower than December 2011!
On top of that, there are “shadow” stats that OREB doesn’t even want to mention about, for example the Residential Active Listings, which are almost 50% higher than 2009 numbers. http://creastats.crea.ca/otta/images/otta_chart02_hi-res.png Combined with declining sales and ever growing list of active listings, Ottawa already has eight full months of unsold inventory, which is almost definitely going to grow even higher as we get closer to the highly anticipated spring market. If the trend continues like that, by the mid of summer 2014 Ottawa Real Estate Board might have to deal with excess of 10 000 active listings on its hands. http://creastats.crea.ca/otta/images/otta_chart04_hi-res.png
Power to you.
Really garth how could you be so shocked by all of this. There is a lot of canada that has been in the toilet for a very long time and the mainstream media doesn’t care or consider its existence. The current trend is just the good portion that masks bad is smaller and will continue to get smaller.
The dollar will go down more and more. Interest rates will rise slightly after the US increases theirs. US rates will only go up if the democrats know they can’t win 2016. We will have more debt, job losses, and bankruptcies for quite a few more years.
The only thing that will lower the prices of TO real estate is unemployment. Interest rates / debt servicing doesn’t matter since the average person is an idiot. There are some on this blog that say “can’t wait till that happens so I can scoop up a place for cheap”. Well, guess what blog-ster, you will be unemployed or close to it and won’t buy that property and it will be discounted for even less.
There is a tipping point and the country has been in it for a while, only now the numbers are catching up.
CAD going down just makes our real estate cheaper for the foreigners to buy with the fiat their governments have printed for them.
#85
Yes, government is clearly the source of all ills. Things would be so much better if we allowed The Market to determine everything. All hail Our Lord, The Market, The Source of all that is good. Amen.
If that sounds depressing, it only got worse.
The next leg of the long voyage was from Osaka to San Francisco and for most of that trip the desolation was tinged with nauseous horror and a degree of fear.
“After we left Japan, it felt as if the ocean itself was dead,” Macfadyen said.
“We hardly saw any living things. We saw one whale, sort of rolling helplessly on the surface with what looked like a big tumour on its head. It was pretty sickening.
“I’ve done a lot of miles on the ocean in my life and I’m used to seeing turtles, dolphins, sharks and big flurries of feeding birds. But this time, for 3000 nautical miles there was nothing alive to be seen.”
http://www.theherald.com.au/story/1848433/the-ocean-is-broken/
tjex: yes, but it also gave those already invested here a 10% haircut.
anyone like xpf? they just raised their distribution and at current prices is like 8% yield.
I think I saw a baby Black Swan today.
#72: Book Title:
-Gambler’s Nightmare
OR:
-Gambling on Granite (if it’s about Canadian housing!!!)
I’ll be waiting for my royalty cheques…
@# 33
Who wants to live in the “Annex” or those other “walkable” areas in inner-city Toronto
I left Toronto and moved to King. I am much happier (renting) almost an acre, less traffic and green spaces all around me… and if you happen to have to travel to that over-rated city, there’s a go train that ‘ll take u to that hell.
Garth, I enjoy reading your blog daily, and agree the prospects for the U.S. will be better for the next 3-7 years, but using today’s job report does not help your point. With participation rate at its lowest since the 70s, the U.S. recovery will only be impressive in comparison to the mess we’ve built here.
What’s this preoccupation with the US? The slow recovery continues. Worry about us. — Garth
The liars of Organized Real Estate, Mainstream Media, Marketers and Government all figure………..but Garth’s figures don’t lie.
The BOC, Finance and Industry hope Canada becomes more of an exporter and want more business investment to make up for the wobbling consumer.
No real cohesive plan working with provincial and municipal partners or incentives…
just hope…
ROSENBERG: A Lower Loonie Is The Canadian Government’s Policy:
https://businessincanada.com/2014/01/09/david-rosenberg-gluskin-sheff-canada-government-behind-low-loonie/
Statistics Canada says 45,900 jobs lost in December; unemployment rate rises:
http://www2.macleans.ca/2014/01/10/statistics-canada-says-45900-jobs-lost-in-december-unemployment-rate-rises-2/
Today we find out that Hamilton’s employment numbers (6.7%) are slightly improved and way better than Toronto numbers (8.4%).
Hamilton’s reality is somewhat different. I wouldn’t exactly sell the farm and show up in this town looking for work. The biggest “employer” in Hamilton is Ontario Works. If you aren’t collecting E.I., you don’t get counted as an unemployed worker.
Ontario’s overall number is up sharply from 7.2 to 7.9%.
Basement dwellers and bubble heads.
This is what you need to do if your dream of real estate armogedon is to come to fruition.
Join the the library party, help campaign, make damn sure Wynne wins.
You will help decimate Ontario, don’t know if you will have a job, but one more term with those loons, housing will be dirt cheap in Ontario.
And we will have lots of bike lanes in Toronto, no one will be able to afford driving a car, insurance will go parabolic.
Get in, sign up, and get revenge on your arrogant buddies who’s wives forced them into granite.
Add Schnieder Electric and Hubbell to the list of companies dumping Canada and moving everything into the USA. And why not, wages are half. They’ll still sell to us though, they know we are suckers.
Ah yes, of course. Vancouver will now experience another 10 solid years of 10% gains year over year. After all Vancouver, aka Scamcouver, also has the incomes to support million dollar bull doze jobs? How about million dollar dog kennels with monthly strata fees of $600 plus? Vancouver is poised ripe for a major collapse in house prices. That entire city is doomed for failure in values. Sell, sell, sell, Vancouver. Short all Vancouver (Scamcouver) real estate before it’s too late
#114 Dean
Bitter much?
True story. The woman at my bank told me today that the markets are starting to recover from 2008.
Stupidest human ever.
#83 Citizen
Are we really creating jobs for foreign people?
That's the plan according to the GG Commander-in-chief, and it's going to get worse, about 600 thousand PRs and TFWs by 2020, so be prepared.
The best part is they'll be hiring more foreigners to build even more condos and then sell it to them when they're done. Ha ha ha
Admit it. This is not the Canada you grew up thinking it would be.
That was ugly. — Garth
http://www.thestar.com/business/economy/2014/01/10/falling_loonie_is_the_worlds_way_of_doing_us_a_favour_olive.html
When you are globally regarded as a resource economy, and resources plunge in price, as they have, the value of your currency will drop accordingly, as the loonie is doing.
And Canada is no longer quite as welcoming of foreign investment than it was. The Harper government has quashed three proposed major offshore takeovers – the first three in history. Citing national security concerns, Stephen Harper is also discouraging energy investments by state-controlled Chinese enterprises.
Canada’s comparative “safe haven” status has eroded as the U.S. economy has begun to rebound, and Europe has at least stabilized if not yet returned to brisk recovery.
A dynamic opposite that of the 2000s is now at work. The sentiment of global investors seeking maximum returns is to get in on the ground floor of the recoveries now perceived to be in store in U.S. and E.U. jurisdictions where investments can be made at bargain prices.
As a minor currency in limited supply, the loonie requires not that much increased demand to soar in price. By the same token, as a thinly traded currency, the loonie suffers sharp declines as offshore demand for it wanes.
F said earlier in the week ““We look at debt to net worth. As long as the housing market remains relatively strong we don’t really have a debt issue.”
Interesting…
Ran into a friend in a cafe in town earlier this week. We chatted over this and that. Two days later, she called me to say that they had put their house up for sale. She said that it had suddenly dawned on her that my husband and I must be doing something right.
We didn’t have to worry whether the weather was going to cause any damage to the house; we could pack up and move at short notice if we want to. In fact we are just too relaxed and happy – so they are selling up so that they can become more like us. Hope that they can get out in time.
What the heck is this?
CMHC in China
No further comment.
Mu book is so anti book, it’s got to be perfect, like the apps I write. Bullet proof, idiot proof.
I only got one book in me. I’m not out to impress the writers guild, I want to destroy them.
Bunch of arrogant man purse toting, woman toe liking sweet wives.
I don’t crap if I only sell one.
Getting it out of my system, so I can let it go, let dementia set in and take me to the beautiful universe my dad’s in.
He mumbles and smiles, loves to hug, no idea what he says anymore.
Making a slight change to the plot.
The plot.
Have a reformed recovering drug addict son, who goes evangelical after his cure, cuts of my booze and gambling life style. He’s driving me nuts so I escape to Vegas, only to accidently find my way into a literary convention.
With an army of grammar nazis circling my wagon. I go on a rampage, hypnotically taking their woman and showing them the smoky move. The woman writers who are skilled and can make a man eating shark look like a new born puppy.
I’m taken them up to the room too.
Write about this buldginghh sleeping monster.
OK I’m hammered good night.
Already 120 comments? Kanadians are hopping this year.
…
We’re kept in distraction with First World Problems:
– Static cling.
– Peace of Mind for only pennies a day.
– Volumizing hair.
– Keeping whites their whitest.
– You deserve it.
#13 Dr. Bob on 01.10.14 at 8:23 pm
“What the hell do we need another 18,200 government employees for??? What a waste of money. It takes 60,000 tax payers to pay there wages!”
Dr. Bob: if those 60,000 pay my effective rate, it will probably take 120,000 of them.
Of course, I have an MBA in Finance & Marketing and live offshore, the credentials which mean I can count and my jurisdiction matters.
Labour force participation rate: 66.4% (The lowest in a decade) – Garth
So that last time the U.S. participation rate was this low (62.8%) you were in your 20’s Garth (1978), yet you make Canada’s participation rate a bullet point? Lowest in a decade is still in the 2000’s. Meh.
That is the only reason their employment rate went under 7%. Not this “recover” of which you speak. At this rate, the U.S will reach full employment at a 58% participation rate. Yippee.
This is hogwash. Spring will boost sales which in turn creates more
construction jobs, which helps restaurants, spending etc… Even when interest rates rise, so will incomes that will in turn be able to support the higher loan payments. 2014 house prices rise by 5-8% , mark my words !
Time for another round of Conservative Action Plan ads!!!
RE: #85 not 1st on 01.10.14 at 10:01 pm
People may not like Harper, but I didn’t see him holding your hand down with a pen in it forcing you to sign those mortgage documents.
And I seem his deficit was the direct response to a little coalition threat made by Jack, Stephan and Micheal a few years ago.
Really? Cutting the GST by 2 percentage points had nothing to do with it? How about all those personal and corporate tax cuts? I guess that never reduced revenues. Less is more is BS.
What recession?
http://www.cbc.ca/news/canada/kitchener-waterloo/opp-pay-raise-stretches-already-tight-community-budgets-1.2491351
OPP pay raise stretches already tight community budgets
Officers get an 8.55 per cent pay raise starting this month after a two-year wage freeze
“Almost every police officer in Norfolk County will be on the ‘sunshine list’ this year, which means they’ll make over $100,000 a year.”
The fear of losing my job just hit me a few days ago, even though I don’t have any direct reason to fear this. But seeing what’s happening around me has made me paranoid. I pray I’m safe, and I’ll be more mindful of how I spend my money.
All this worry about employment is overshadowed by the harper governments millions of dollars attack ads on those gouging Canadian telcos . Roaming fees and all . Except the winners will be businesses that use phones at a much higher rate than all of us grandpas and texting kids combined . I bet the new rates will be in place just in time before the election boiler rooms to benefit . What a snow job . Band width for sale just after the ad campaign . Steve must think we are all retarded or does he know most are . Makes my skin crawl . Steve feeds business pretending its about us little people the voters . And no one seems to even notice . Whiptalkcracy in lieu of democracy . Msm is either blind ,stupid or both and so is the opposition .
SM book title?
Of course:
“How to talk to a Track-6er (If you must).”
This is hogwash. Spring will boost sales which in turn creates more
construction jobs, which helps restaurants, spending etc… Even when interest rates rise, so will incomes that will in turn be able to support the higher loan payments. 2014 house prices rise by 5-8% , mark my words !
Garth why do you never post my thoughts, eventhough I abide with your rules. Oh I know, thank you.
#1 Smoking Man on 01.10.14 at 8:07 pm
Hum, just driving home from the LCBO
Never seen so many people on a Friday night.
What was interesting I had 4 big bottles of Pino, most customers had like 4 beers, or just enough to last the night.
Garth may be onto something
“”””””””””””””””””””””””””””””””””””””””””””””””””””””””””
The facade (a way of behaving or appearing that gives other people a false idea of your true feelings or situation)
Hard to spot those under stress when they are all driving new cars and dressed trendy. Appearances are deceptive though…If you watch closely enough you can pick out the subtle hints, such as a 4 pack of beer, or ten dollars of gas at the pump, our how about the empty restaurants. Most people I know who bought in the last 8 years are trying to make staycations trendy, I guess the justification is needed on some level.
Signs…Signs….Everywhere SIGNS!
Best of luck my fellow Canadians.
What chance is there for more stringent regulation of the real estate communications and stats? Blatant embellishments…gotta wonder what the payback is? One thing for sure is…a fair share of realtors will be needing to move on to other jobs soon.
Our host Garth says you can expect 7% returns on a portfolio over time and would like to comment on this assertion.
Odlum Brown has two model (theoretical) stock portfolios. The older portfolio was initiated in 1997 and has returned 15.5% CAGR since then. The model portfolio specially constructed for yield with a 13.7% weighting in utilities was started in 2002 and has a 14.5% compound rate of return.
A couple of things need to be said about this. First these returns are before income taxes and include reinvested dividends. Some studies conclude that 40% of the returns in a portfolio over time result from reinvested dividends. Obviously if the portfolio is constructed for yield, that is income, and the income is spent, not reinvested, then the return over time will be significantly less.
The total return is composed of increases in valuation and dividends. The increase in the valuation of the portfolio can not be spent without diminishing the earning power of the portfolio. It is similar to an apartment building. You receive a rent and the value of the apartment over time increases due to rent increases and the decline in cap rates as the area around the building increases in density. The important point is that the apartment owner can only spend the rental income, he can’t spend the increase in valuation without selling, and in this case he doesn’t have an income producing asset any longer.
Another fact here is the deliberately manipulated low interest rates emanating from the Fed., the Bank of England, ECB, etc. Financial repression has resulted in low dividend yields and increased stock valuations, and this phenomenon also applies to real estate. For instance cap rates in the lower mainland are now just 4% on average http://www.vancouvermarket.ca/tag/cap-rates/.
Odlum Brown’s model portfolio produces a 2.0% average yield(Dec. 15, 2013) and the portfolio for yield produces only 3.4%(Jan. 10, 2014). Obviously our understanding of wealth is distorted when a million dollar diversified stock portfolio for yield only produces $34,000 a year in income. This just doesn’t make a person wealthy these days at all.
Another point, and I don’t mean to quibble, but Garth says that to be an accredited investor you need a million dollars of net liquid worth. However John Mauldin in his job of gaining investors for his clients has stated that to be an accredited investor in the U.S. you need to have a net liquid worth of 1.5 million U.S. dollars.
In general I think that capital is made more valuable by financial repression, not less. The reason is that it takes a great deal more capital to have any decent income at all from investments.
That’s all very interested and partially true, but unless someone has a 7-figure portfolio, going all stocks (like your examples) is most unwise. I continuously refer to a balanced and diversified portfolio – and that certainly does not mean having just one asset class (equities). As for accredited investor definitions, they vary by jurisdiction. The example I used was for Ontario, where the greatest number live. Reference here. — Garth
Don’t worry Garth, redemption is coming, one way or another.
http://innovation.uk.msn.com/design/the-3d-printer-that-can-build-a-house-in-24-hours
Is is possible to draw a parallel to Spain? Gorge yourself with excess then crash. Rock bottom. Back to farming.
And when the country is cheap enough, smart money floods in from around the world to buy up the gold nuggets for cents on the dollar. Happening right now in Spain.
There isn’t a US hedge fund that’s not trying to buy something in Spain. And Bill Gates is on the hunt too.
Senate scandal not going to go away.
Economic Action Plan going down the toilet.
Anyone for an early Federal election in 2014 before it really gets nasty?
#121
Canada, puppet state.
Ech, CMHC in China? The US never had Fannie and Freddie Wong. There’s big concern about personal credit crisis in China, and sovereign debt in Japan.
I don’t see the point of CMHC, especially on any property over 200k, or any person earning over 50K or so. Canada’s a big country. Anybody, and I do mean anybody can own their own home here. Trouble is, it may not be Danforth or Bloor.. it may have to be Estevan, SK or Dominion City, MB.
CMHC has done too little in settling this vast country.
What do you think of the job reports in the US? It seems a bit better than ours but hardly the recovery people have been saying it is.
They only got 74,000 jobs in December, the Christmas month where there should be more hiring, and that is only half the rate of population growth. Despite this, their unemployment fell to 6.7% from 7% simply because people are not looking for jobs.
Of these 74k jobs, 70,700 are in whole sale and retail meaning non-exportable. Only 9,000 were manufacturing and over half of that was roofing metal which is generally not exported.
North America seems kinda screwed.
Those last numbers make sense when you realize they cut health care positions by over 10k.
#119 F said earlier in the week ““We look at debt to net worth. As long as the housing market remains relatively strong we don’t really have a debt issue.”
__________________________________
it’s already so obvious that for F&Co. the overall houshold debt is not a problem – for them the problem is that they have almost exhausted all known means to increase the debt… the people – biomass used by banks to derive profit – is fed up with credit up to their top… that means that we should expect the prime rate will be pushed further down.. as there is simply no any other alternative to this within the existing economic model… and then, there are no any strong leaders around who would be able to appeal to the people saying : we cannot spend by 35% more then we earn any longer, we all should start living within our means…
Portfolio is rocking though. Can TSX catch the S&P500 with CAD getting beaten up? Is it Canadian companies collecting USD revenue rallying? Recently bought REIT MRG.UN which does and is heading up.
Boy you’d never know the US is in a recovery the way the nytimes and paul krugman tell it
http://www.nytimes.com/2014/01/11/opinion/no-jobs-no-benefits-and-lousy-pay.html?rref=opinion&module=Ribbon&version=context®ion=Header&action=click&contentCollection=Opinion&pgtype=article
The problem is that the ‘good, high paying, middle class union jobs with indexed pensions and benefits” that would soothe the Stars and the Times of this world have been hollowed out of North America by creative destruction, unless your a cop, firefighter, ontario teacher or ottawa bureaucrat. That,s true on both sides of the border. This does not temper Garth’s long-standing bullishness on the US, but it should give anybody taking their wage for granted pause.
#121 Canadian Watchdog
From Vancouver Sun (?):
“As part of a little-known mandate to promote Canadian construction companies internationally, the federal housing agency helped local companies including Kryton International, a Vancouver-based concrete waterproofing provider, and local architectural firm Ekistics Architecture secure contracts in a $300-million residential development designed as a high-end, mini-Vancouver neighbourhood — with hundreds of planted trees — in northern Beijing.
Vancouver Forest, located 30 minutes from Beijing’s international airport, is being built in phases by China’s Beijing Capital Group.
The ongoing project, which was designed by B.C. architects and uses B.C. building materials including wood construction, will feature 900 Vancouver-style single detached homes ranging in size from 3,000 to 5,000 square feet on a 549,000-square-metre site that includes many natural landscape features.
It’s just one of many Chinese construction projects that CMHC has helped local companies get involved in.”
Operative word: “helped”.
Be very interesting to know the specifics here.
The US recovery is actually a financial and real estate bubble created by ZIRP and the printing of $85B per month out of thin air. Does anyone believe that the stock market would be at current levels without the biggest money creation spree in world history?
Falling median family income, falling labour participation rates, increasing income inequality, quality fulltime employment replaced by parttime McJobs. The emperor has no clothes.
Hi Garth
After 40 days and nights of rain, the sun is supposed to come out today here on the South coast of England. I note that I even have mould on the inside black rubber edging on my car windows! Plus point is that my summer bulbs are all showing well above the ground.
The key to my home and native land now is as I was saying all last year – nobody has any spare money. What a depressing life. My daughter got married here in England last summer and my dearest and nearest in Canada all cut cards to decide which two members of their families they could afford to send over to join the festivities.
Having such pathetic holiday entitlement doesn’t help either as many of our family in Canada only have 2 to 3 weeks paid holiday a year and what can you do with that! Very little and holiday is important to rest the mind.
There are three keys to a successful financial life.
One – pay yourself first, savings /investment made each month BEFORE you spend the rest of your paycheque.
Two – live small. Small houses have small bills and small maintenance. We once had a 3400 sq ft house in TO, never again. Current house I would guess at 1800 sq ft and being sold for a 1200 sq ft bungalow.
Three – priorise your health because without your health you have nothing.
Yes I agree that if anyone thinks that there is any city in Canada that are similar to London, Rome, Paris, Hong Kong, NYC, Singapore then you do need to travel more. I have been to all of them and there is NO comparison between this crowd of World Class cites and anywhere in Canada. The buzz of London and NYC are truly mind blowing.
Enjoy the weekend.
Sounds just like where Australia is heading – the difference is that the avg person here is unsofisticated enough to take up the pollies offer of throwing their superannuation at real estate to keep it afloat, and think it is a good thing…
Here is more about that CW, more gambling….
http://vancouvercondo.info/2011/12/in-china-cmhc-is-quite-important.html
This will not end well
Why do I think this amendment will not be a joyous celebration?
Nice photo! Garth on his new 750 water-cooled Harley?
Sure would like to know how we pay for all these useless $91,000 govt jobs with 1 million dollar pensions when Kanada is looooooooooozing jobs. Dictator Harpo’s Action Plan? How about his boss’s at Goldman Sucks plan. After all every prez for decades at the BOC comes from Goldman.
But I guess my husband and I are dumbass conspiracy theorists. Right up there with the vaccine pumpers and global warmers. Cuz bankers destroying the economies of the world can do no wrong right?
OHHHHHHH………….WWWWWAAAAAIIIIIITTTTT
http://www.bloomberg.com/news/2013-10-19/jpmorgan-said-to-have-reached-13-billion-u-s-accord.html
Guess 100 billion in fines to these great men is just the cost of doing business. Put the real criminals selling a bag of weed in jail for ten years you know. But slap the wrist of the men laundering money for terrorists, drug king pins, mortgage theives and the plethora of mafias of the world.
#118:
the US has even stronger laws that prevent chinese communist energy monopolies from investing in and controlling US resources. In spite of all of his failings, Harper is doing some things right. Chinese state industries are like the mafia: once you let them in you will never get them out.
It’s different here.
Print baby print.
Garth, we take exception now with you — “It wasn’t subprime loans, higher mortgages or dinks on Wall Street responsible for the US housing collapse.”
PLEASE WATCH THE MOVIE “INSIDE JOB” and do more reading. It was Wall Street that crashed the world economy and SUBPRIME LOANS were a big part.
We are FROM the US. We lived through that and it’s sad to see it happen here. But it’s the same players at the top with their same “siren song” — that worker’s protections like people enjoy in Europe, that trade tariffs vs. predatory economy destroyers like the TPP are somehow wrong and yes, how could it be those nice banksters engineering the collapse of whole economies, really?
Please read “The Shock Doctrine” by Naomi Klein. Come to think of it, chances are you have read it; perhaps the two of you are friends.
NO it’s not just consumers pigging out on real estate that is costing jobs in North America. it’s the privatization frenzy and “race to the bottom” that is now America, taking Canada along for the ride. And Canada seems quite happy to come along.
Does this mean that there is not a problem when people do not diversify their portfolios? Of course, that is a bad thing. BUT IT IS NOT WHY JOBS ARE DISAPPEARING. That is happening because there are very powerful interests vested in destroying what remains of a middle class, and it is being done by policies directed from the top down.
To Doctor Bob #9
Yes, just like Friday-January-10-2014 where long term bond yields dropped 6 to 8 basis points for 30 years and 11 basis points for 10 years.
74,000 U.S. jobs created and 46,000 jobs lost in Canada.
This is structural long term unemployment which long term rates can’t rise much in such a slow growing, lower wage, high debt society.
We are still celebrating real estate in Manitoba. Story on the front page of the Brandon Sun, Man sits in car for 12 hours to purchase lot, and then interviewed on CBC radio. It was presented as very joyous celebration. Newlyweds…
#152 But look …
“Chinese state industries are like the mafia: once you let them in you will never get them out.”
You mean sort of like the United Fruit Company and Latin American countries?
#155 gtrz4peace
Garth’s message still applies in your world and even if Garth believed in your world view and blogged about it then the real message of being balanced and diversified would be lost….
#135 john on 01.11.14 at 12:57 am
—-
Excellent post. This is the reason companies don’t buy each others stock except in a take over. A business would never put a million dollars to work at 5%. Companies look for 20%.
“CAD going down just makes our real estate cheaper for the foreigners to buy with the fiat their governments have printed for them.”
_______________________________________________
This is a good point… anyone watch the doc on condos on CBC recently? Huge swaths of downtown T.O. condos bought by russians, persians and Chinese that have never even visited Canada… they buy 30, 40, 50 units…
There is not doubt that foreign purchases of our RE is impacting on pricing, supply/demand…
There is no evidence to support the ‘huge swaths’ statement or that this has impacted overall market valuations. Citing a TV show as a source is lame. — Garth
@ #155 – “Please read “The Shock Doctrine” by Naomi Klein.”
Klein’s a commie… This is a blog about investing… commies need not apply.
For those who post and gloat about the jobs created in Alberta: ask yourself whether these jobs are being created in oil & gas. (?). Or are they related to the construction industry and urban sprawl of Calgary and Edmonton? Every few feet another Tim Horton’s going up in another neighbourhood of homes made out of cornflakes. Many of the construction workers are here on foreign work permits. Many of them are also from British Columbia and when the boom busts they always head back to their home province. Everyone working at the Tim Hortons is on a work permit from the Phillipines. At Starbucks they are from Korea. These “jobs” that are being created in Alberta don’t seem to be oil & gas expansion. They are all about some new strip mall created where warm bodies are needed to staff the franchise. “Round up the usual suspects”. That’s the ticket.
@#162 Bob Rice on 01.11.14 at 10:01 am
@ #155 – “Please read “The Shock Doctrine” by Naomi Klein.”
“Klein’s a commie… This is a blog about investing… commies need not apply.”
Congratulations Bob Rice, yours has got to be the most moronic reply I’ve seen here thus far in 2014.
Livin in S.E. Ehzhuh for the last 708 fortnights. I’m loving it you can’t freeze to death here. Mosquitoes so what. So the heck what! Manitoba mozzies – worse?
Talking w/ the old man back in Sack-a-Tune. I says ‘Sell dad sell, before the whole sh*#house burns on fire.’ Dad says he can’t afford a condo in Tempe. Yet. And if he sells he has no excuse to fix stuff. Plus theres the Jesus shrine.
This is a fear blog. A doom blog. The predictions won’t happen and I tell you why.
Vancouver IS a whirled-class city, right up there w/ Paris, NYC, Singabore, Bucharest, et al. Never crash, ever, in Vancouver. Too much Asian money and more is on the way. You can’t breathe the air in Beige-jing. And there’s no shortage of zillionaires in China with their eyes on Vancouver.
Tor-rot-toe, ON, different ball of wax. No rich Asian money flowing in there. It’s too cold and its just plain dumb place.
And the rest of Canada? A wasteland that will never attract foreign kapital. ‘Another new strip mall in Regina! Who cares!’
People in Kanada WILL go on gorging on cheap debt indefinitely. It’s the only way Kanada will stay solvent, ironically.
Thanks Garth for scaring people.
like kids coming down from a ‘sugar high’, we must now come down from a HUGE ‘cheap debt’ high.
this will take longer, and hurt more, than we can currently fathom.
to those of us who are indebted i say : gird yer loins!
Snow birds already bitching and complaining this week about the 0.92 dollar. Dohhhhhhh! (didn’t see that coming.. Yup,,,, ponies and candycotten for ever boomers)
Now they’re getting their boats seized for not paying 70 bucks. Lol
http://news.nationalpost.com/2014/01/10/heavily-armed-marines-seize-338-pleasure-boats-from-retirees-and-mellow-canadians-over-70-permit/?google_editors_picks=true
“Working with community organizations, the private sector and all levels of government in Canada, the Canada Mortgage and Housing Corporation has been assisting China in providing innovative solutions to high-rise building developments and construction standards.”
Maybe the Chinese need to first talk to some of those problem plagued condo owners in Van and Toronto first.
Canadian building materials, codes and inspections are laughable. What are the Chinese thinking?
“Our unemployment rate’s gone up, as that in the US falls.”
Few in the US are are regarding their job creation performance as positive. In fact, many are now saying monthly job creation in the states is so comatose it will likely delay the tapering of QE-3 by the Fed. More money printing is likely.
” Bob Rice #161
This is a good point… anyone watch the doc on condos on CBC recently? Huge swaths of downtown T.O. condos bought by russians, persians and Chinese that have never even visited Canada… they buy 30, 40, 50 units…”
Awesome.. They just lost 10% in the last year due to exchange rate…. keep going guys… 10 0years ago the CAD was $0.65 USD… There is enough room for them to lose money on real estate in Canada even if the prices in CAD will stay the same. Buy now at $0.91USD and sell it in one year at $0.75USD….
Do you see how ridiculous you are with your assumptions? People with money are not making the same assumptions… Who was smart enough started to move money out of Canada when $1 CAD was $1.1USD. Add that gain ( 20%) plus the value or the real estate in USA and some places Europe at that time and you will see a decent gain over the last 3-4 years… and safer than in Canada because the home prices went down already there.
#147 Basil fawlty — “The US recovery is actually a financial and real estate bubble created by ZIRP and the printing of $85B per month out of thin air. Does anyone believe that the stock market would be at current levels without the biggest money creation spree in world history?”
Well, I don’t. It would be higher if not for congress’s “austerity in a crummy economy” campaign to lay off workers and cut spending and benefits, but lower if BOTH the Fed and congress were tightening.
It ain’t rocket science. How’s the US economy? Growing, albeit slowly. How’s unemployment? Above Fed targets, but jobs are being created. How’s inflation? Below Fed targets. And the Fed? Accomodative, and committed to being so for a long time. How were stock market valuations one, two and three years ago? Not unreasonable. What are companies doing? Buying back and cancelling their own shares.
In the face of all that easily obtainable information, anybody who hasn’t been invested in US equities needs to re-examine his economic models and research process. If you think valuations are too high NOW, you can follow Garth’s advice and rebalance to take some of those profits off the table, or sell it all. But if you sat out the whole rally and stocked up on gold or bonds… well, like I said, it hasn’t been rocket science.
“Falling median family income, falling labour participation rates, increasing income inequality, quality fulltime employment replaced by parttime McJobs. The emperor has no clothes.”
This again is classic doomer confusion. First, there’s some positives which you forgot about. Jobs keep getting created in the US. Not fast enough, but everyone with a new job this month is better off. Household balance sheets have been deleveraging for a few years now, some from paying down debt, others from jingle mail or bankruptcy. Credit scores are improving.
But regardless of all that, you don’t estimate stock market performance by interviewing a bunch of lower- and middle class American households and asking them if things are getting better — leave that to sociologists and journalists.
Is the US economy growing? Yep. Are lower and middle class Americans still buying daipers and razor blades, and are they buying more new cars? Yes. Do many US public companies operate worldwide, are they expanding into rapidly growing or previously underserviced overseas markets, and is the world economy growing? Yes. Are US companies buying back stock, which increases per-share dividends and profits even if nothing else changes? Yes. Are earnings per share increasing? Yes. Have you been missing a once-in-a-generation US stock rally? It sure sounds like it.
N.B. If you think the broad market is expensive, there’s no rule against doing a little research and only buying stocks which are cheap. With over ten thousand that trade in North America and perhaps twenty thousand more worldwide, a work ethic and a willingness to research and crunch numbers are all that’s called for.
And about that US house price bubble: Huh? Investors big and small have been buying up residential real estate in all-cash deals, to profitably rent even assuming no capital gains. Find yourself a nice chart of the inflation-adjusted Case Shiller national house price index. No bubble.
Don’t know how many of you saw “Power and Politics” yesterday…I just caught a few minutes of an MP named Mark Adler, I didn’t know whether to laugh or cry. He was the most desperate politician I have seen on TV, he stated that S. Harper was the best prime minister Canada had ever had, J. Flaherty is the best finance minister in the world and that their job creation with the huge losses was still a tremendous success. It was pathetic, the most embarrassing rant I have seen yet. It amazes me that these people have such blind faith in a leader whose “kick the can down the road” policies are just prolonging the obvious.
#162 Bob Rice,
jackasses who fling labels instead of facts shouldn’t bother to apply either.
#160 Not 1st — “This is the reason companies don’t buy each others stock except in a take over. A business would never put a million dollars to work at 5%. Companies look for 20%.”
There are certainly many exceptions. Warren Buffett, Prem Watsa, George Armoyan, Bill Ackman, automotive companies’ cross holdings, Japanese zaibatsus and Koreak chaebols, Canada’s very own Power Corporation, whose financial structure is complicated, and Brookfield (nee Brascan) which is positively byzantine…
When securities and tax laws get complicated, so too do the structures of some conglomerates.
@ #36 Brian Ripley on 01.10.14 at 8:51 pm
In Canada, there is only one province hiring & paying people to work and of course that is Alberta:
http://www.chpc.biz/earnings-employment.html
Apart from the dismal stats that Garth lists above, AB continues to attract interprovincial migration because average earnings there are:
23% above the national Canadian average, 22% above Ontario, 28% above BC and a whopping 32% above Quebec.
Meanwhile the U.S. is building up it’s own energy sector.
As software consumes jobs, smart people are retraining and moving to where the incomes are.
————————————
I would restate that to “smart people [that need to work] are retraining and moving to where the incomes are.”
#129, Police, teachers and nurses have pretty much been totally isolated from economic reality. I like reading old newspapers and if you looked at employment ads from say 1950 you would see that your average clerk back then made not much less than a teacher or nurse did, a guy selling suits at Eatons made almost as much as a copper. What has happened is that the gap is now widened so that the public sector is paying 3 times relatively speaking what the job paid back in the day.
In my area the people buying the mansions are not doctors and lawyers and Bay Street stockbrokers but two income police couples who can easily bring home 250K between the two of them. It’s also why we are hearing stories of people tossed out of hospitals and dying on their front porch, they can’t afford to have patients stay the proper amount of recovery time that they would have if labour was more reasonable. The patients become collateral damage, staff salaries are more important.
The problem is the wages for these jobs are unsustainable, you can’t have a country where 50% of people earn less than 30K and then pay 100K for the public sector, sooner or later the whole thing implodes.
@ Smoking Man
To stay true to form your book tile should have a typo in it.
#5…. Debt is modern day slavery. There’s nothing modern about it
#91 Ole Doberman on 01.10.14 at 10:13 pm
Garth you gotta admit those jobs numbers out of the US were pretty darn bad, the Fed will likely take tapering off the table as the economy looks to be imploding.
Err. They created jobs. We blew them up. — Garth
——————————————————–
Garth are you saying it’s time to back the truck up on gold? Bitcoin is also been rallying – maybe my all in investments on these will soon pay off and I won’t need to mortgage when I buy a house, boooyah!
@ #91 Ole Doberman on 01.10.14 at 10:13 pm
Garth you gotta admit those jobs numbers out of the US were pretty darn bad, the Fed will likely take tapering off the table as the economy looks to be imploding.
Err. They created jobs. We blew them up. — Garth
————–
I think tapering will be slow too…
Food for thought, about 10,000 people turn 65 every day in the US.
Supposedly 60% of them are expected to retire….that would be 6,000 people per day leaving the work force in the US. (~180,000 per month).
#171 Ralph you should have finished that off with your top three picks.
Dear Smoking Man at post 72:
How about…
‘I don’t use highlighters’ or something to that effect.
That post of yours from years ago was the one that had me laughing for days, I still smile when I think about it and wonder how that girl you hired, the one that made the guy nervous… How did it work out?
Interesting article. The problem with the younger generation is not entitlement, it’s an addiction to impatience. http://www.salon.com/2014/01/04/how_baby_boomers_screwed_their_kids_—_and_created_millennial_impatience/
#155 gtrz4peace,
I agree with you until you get to “very powerful interests vested in destroying what remains of a middle class…” As a firm believer in Ockham’s Razor, that “Entities should not be multiplied beyond necessity”, I don’t need to assume that anyone has targeted the middle class for destruction.
While the destruction of the middle class may be happening, it does not follow that this destruction was anyone’s aim. There indeed are powerful interests, but these result from the co-joining of interest groups that then develop the power to pursue their particular interests. Thus, the destruction of the middle class does not have to be elevated to an aim, but is sufficiently explained as collateral damage of the corporate world pursuing maximum profits unconstrained by the governments they manage to elect, or any consideration beyond their own benefit.
Positing a conspiracy merely weakens the argument with a straw man that is pretty easy to knock down.
Isn’t this interesting
http://mobile.theverge.com/2014/1/9/5292568/fico-may-start-including-your-facebook-presence-in-your-credit-score
Keep on mind an average human can form around 150 releshionships, everyone with more “friends” than 150 may look ????????
…THESE LENDERS NOW FACTOR THE NUMBER OF FACEBOOK FRIENDS YOU HAVE INTO THEIR DECISIONS TO MAKE LOANS…
Ford CEO is so proud that (ford)
“We know everyone who breaks the law, we know when you’re doing it. We have GPS in your car, so we know what you’re doing. By the way, we don’t supply that data to anyone,”
http://www.businessinsider.com/ford-exec-gps-2014-1
So if you have sync you better behave. I always kind of wonder did poli. Ever override fob rods OnStar to listen what is going on in a truck. So if you are paranoid my best advice, keep driving that car from 90s and use golden nuggets and bicons…
And this, where a growth is Chanise provinces gdp surpassing some developed countries.
http://www.chinasmack.com/2014/stories/wealth-of-chinese-provinces-rival-developed-countries.html
According to 2012 GDP rankings, the top 5 provinces in our country are Guangdong, Jiangsu, Shandong, Zhejiang and Henan. If placed on the global chart, the rankings of the above-mentioned provinces would roughly be No.16, No.17, No.19, No.24 and No.28.
#164 Onthesidelines on 01.11.14 at 10:32 am
Agreed!
There’s actually some good news in all this doom and gloom. As of Jan. 10 the dollar dropped to 91.6 cents U.S. and some analysts think it could drop further. That’s good news for Canadian companies that export to the U.S. Some of these companies, after years of barely breaking even, are actually making money now. That probably won’t save companies that are already planning to pack up and leave, like Kelloggs or Heinz, but it may save others. That doesn’t mean the near term future for Canada’s economy is bright, just not as dim as it could be if the dollar were closer to par.
#165 Tim Berland great post man.. keep ’em comin’
#72 Smoking Man on 01.10.14 at 9:35 pm
Here’s your book title SM
Of Girlie Men and Track 6ers: Waiting to be Herd
#136 not 1st on 01.11.14 at 1:00 am wrote:
Don’t worry Garth, redemption is coming, one way or another. Link to article about the 3d-printer that can build a house in 24 hours
Pity it can’t create the land on which you build the house.
It’s cool and all — but all it will do is to drive up the price of a vacant lot by roughly the same amount that it reduces the cost of constructing a house. Oh, yes. And put a bunch of construction guys out of work.
The numbers show the wheels are coming off and the real estate industry keeps pumps all is rosy… up uP UP !!
LMFAO
“anyone like xpf? they just raised their distribution and at current prices is like 8% yield.”
The difference between an agressive mgmt style ad passive is obvious between these two top choices…The ZPR for ex offers only a 4.6% yield holding the same issues…..the difference is the trade. XPF is a gem among preferred ETF offerings. However I would still encourage anyone with an IQ above 60 to look at trading equities…..seasonality is an obvious place to start….http://www.timingthemarket.ca/techtalk/. Far better than average returns…..with much the same beat as any ETF.
And yes….it is a bit of a joke that gov is trying to fiddle the job loss numbers with civic service hirings and temporary foriegn workers…….it still means for an ugly time on Main Street Canada.
December Job Numbers
I would not fret too much about one month of bad numbers. Here’s why: (Based on United States)
It has to be inherently difficulty to calculate a tiny change in a large number. Whether it is 74,000 jobs or 200,000 jobs is a difference of about 0.1% of total jobs. There is no way they count the jobs (like 150 million in the U.S) they try to count the change through payroll tax forms or something and I question how accurate or timely.
Even if that is accurate they ALWAYS seasonally adjust such numbers. Now that cannot possibly be accurate, that is not a count at all, that is a smoothing exercise. I am sure the seasonality in reality varies each year but seasonal adjustments have to use some averages. I would think there could be large errors introduced here.
The December unemployment rate went down considerably in the U.S. in December (7.0% to 6.7%). Now this number has its own counting errors and seasonal adjustments. But this number paints a rosy picture while the jobs number was weak. Which is correct?
So again I would not fret about one month of inherently estimated job numbers.
But you know the way people think. Those of us who already thought the U.S. was improving will explain away the December job numbers. Doomers and worriers will say aha, it proves their case.
A little anecdote about the new build condo situation:
I went to a commercial glass supplier yesterday and picked up some mirrors for installation in my house. I struck up a conversation with the 2 middle aged glass biz owners who told me about how they were getting work from purchasers of recent built condos in Ottawa’s west end.
It seems the minimum code standards on the glazing are so lax that these clients have been having a second complete set of windows installed within the unit to mitigate the cold and condensation.New school construction is also beginning to widely adapt large glass curtain walls to the chagrin of energy efficiency and longevity.
With that recent high profile fire in Kingston’s core involving a 6 story wood build(!?!), we need to have some serious debates on building codes for these future vertical slums that are blighting our cities.
150 World traveller et al re CMHC and China. Why can this not “end well”? From what I see in the link, there is no additional risk to CMHC or cdn taxpayers. They are merely helping cdn companies to get contracts in China. We dont even know if they pursue this actively or
passively. What is the problem?
With a low dollar how long would it take for inflation to kick in? Asset deflation could be occur because of our economy, price of ‘stuff’ could inflate due to low dollar.
Yesterdays headlines (I will admit generally not a good source) said Canadians have less free $ than ever for investments and to buy ‘stuff’.
This is gonna take awhile to unwind isn’t it……
Oh yes and further to my last post on building codes, the developer who built the condos that need second window layers is the same one who is responsible for the $250 million makeover of historic Landsdowne Park in our core.
The philanthropic family that runs Minto should just consider constructing decent buildings instead of low spec junk. Now that would be real civic philanthropy.
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/is-renovating-your-home-an-investment-or-conspicuous-consumption/article16244278/?cmpid=rss1&click=dlvr.it
Renovating your home, investment or just conspicuous consumption
# 131 Debt free
Businesses expense their Telco bills and get HST rebates. Businesses don’t vote. I am not a Harper fan; but you are dialing the wrong number on this one.
Canada’s future oh so bright. With a blood leaching public sector, taxation through the roof and a private sector that is both being financially crushed and is quickly disappearing. Most Canadians need to be paid nearly 250% more than the average American just to barely keep their nostrils above the waterline, let alone have savings and RRSP’s maxed out. I wonder, which country would you choose to set up your next business venture?
Hmmmmmmmm
http://www.troymedia.com/2014/01/11/more-benefits-of-paying-off-your-mortgage-before-investing-in-rrsps/
“Life is easier with nothing to invest”
Premium financiar advise folks!
Financial*
THIS VIRUS’ GOT LEGS…
While we run to the clinics as the ‘flu “situation” works its way through Canada, there is another virus worthy of our rapt attenton: the debt virus. And this bad boy is a real “killer”.
All of you who are smugly and happily stoked up on the stuff are about to meet your credit-overload-maker.
Pay close attention to today’s message from St. Garth of “Holy Crap!”
He describes in painful hard-to-argue-with detail what happens to a civilization whose overwhelming numbers of citizens trade daily on greed and ignorance in the hopes of achieving riches by borrowing other peoples’ money without having to actually sweat bullets to get that wealth themselves one buck at a time.
Now, while you’re re-reading Garth, it is also worthwile looking south to the US.
Debt’s still ALSO the problem there, about which I take issue with Garth. The US economy is NOT IN GOOD SHAPE. We are looking at piddling job creation (the bad weather is apparently to blame!) and historically low job participation rates.
There is more bad news.
The average family US annual income is about $28k. Their annual poverty income is about $24k. New jobs being created are mainly of the low income type.
In past decades (’70s and ’80s that I remember) that situation usually presaged higher-paying jobs later on. BUT NOT NOW. Not happening.
The US economy is pumped up on printed money whose worth declines daily in the really big picture.
We’ve had economic dross world-wide since 2008. Things are not getting better.
It’s all a chimera.
We can thank central banks’ low interest rates and currency wars for this endless awfulness.
Here in Canada, watching our economy collapse is like watching a plane crash. It’s heart breaking. You know there are already casualties. The screaming is only just starting.
We can blame F and so on. But he was only trying to survive 2008 and his policies, which looked successful then, but now are dust.
He failed.
All central bankers and finance ministers have failed.
When interest rates finally kick up, the whining out of my city, and neighbouring municipalities, especially Oak Bay (with its new smear of faux “rich” of government working stiffs and some others carrying massive debts) will be similarly loud and long. Or quiet and desperate.
Should be quite the show-n-tell.
A virus indeed. But it is needed to clear the system to re-establish fiscal and monetary credibility.
#148 Jane24 on 01.11.14 at 3:01 am
True, Toronto is no London, they actually have a proper transit plan, cycling lanes and it is a true global city. Toronto had it’s chance but decided condos condos condos was a better choice of action.
We reap what we sow.
#172 kilby on 01.11.14 at 11:10 am
The Harper boot lickers are the most disgusting pond scum to come out of this once great country.
The great story
In the run-up to the Great Recession, accountability journalism saw the story that access journalism missed:
http://www.cjr.org/feature/the_great_story.php
Why did Ontario lose all them jobs?
Didn’t McGuilty promise us jobs galore if we adopted the HST a few years back? I remember him telling his flock that the HST would create 300 000 jobs in 10 years and that businesses would have the incentive to hire folks to work. Almost 4 years in the HST era here in Ontario and we have a net job deficit since 2010.
“Within ten years, Ontario will benefit from an estimated 591,000 net new jobs.”
Source: http://www.fin.gov.on.ca/en/economy/ltr/2010/ch4.html
Every year ,1% to 5% of people go down the memory hole.The prevailing rules are if you can not deal with it you join them. What matter ,common mass grave or headstone? I am 25% as well off as some of Garth’s sad sack crybabies and I would gladly start out in a liferaft with any of them. I will have an oz. of gold under my tongue.
Ok let me try to resend the post. The last one got lost in the ether.
________________________________________
When picking up a cut mirror at a commercial glass supplier yesterday, I struck up a conversation with the 2 middle aged owners. It seems that they have been getting calls from new build condo owners to install a second window wall within the units.
The minimum spec glass installed cannot withstand the cold and condensation of Ottawa weather.
New build schools are also starting to integrate large curtain wall panels of glass to the chagrin of energy efficiency and longevity.
We need a serious public debate on the building standards for condos and stop blighting our cities with future vertical slums. The recent 6 story Kingston wooden tower fire is another example of what to expect.
The developer who built the condos that need second window layers is the same one who is responsible for the $250 million makeover of historic Landsdowne Park in our core.
The philanthropic family that runs Minto should just consider constructing decent buildings instead of low spec junk. Now that would be real civic philanthropy.
Damn, now BC has to get rid of their license plates. Norway is considered the best place on earth. Maybe we could sell the plates to Norway and they could change BC to norway with a post-it
http://www.huffingtonpost.com/2014/01/07/norway-greatest-place-on-earth_n_4550413.html?utm_hp_ref=canada-travel&ir=Canada%20Travel
# 209—High plains Drifter. I am laffing my head offf. Keep up the great work.
Look at the creative “energy conservation” methods being employed lately (all allegedly of course)
http://www.torontosun.com/2014/01/10/scarborough-homeowner-headed-to-court-over-toronto-hydro-bill
Dear Garth-
Great Post here. Statistics do NOT look encouraging.
They can change. HOW they change is largely up to the attitude of the citizens of your good country.
WE also had that bleak moment. Most changed at least some of their attitudes, and habits, and maybe, just maybe we will escape our problems, too.
My sincere hope is it will not be a grotesque and painful as our ended love affair with RE has been
yesterday my main concern was the cataclismic fall in the CAD, and I immediately thought of your great blog…
Calculated in USD, the Canadian real estate fell, wholesale, actually a lot , about 10 % since January last year!!!! And by the looks of it, more to come…
Low Dollar to cause inflation?
“X” at 196 asks:
With a low dollar how long would it take for inflation to kick in?
***************************************
I’d guess about just as long as took for all that deflation to kick in when our dollar went from under 70 cents to nicely over par. Remember all the prices drops then and how most Canadians said they felt far richer and felt they had gotten about 43% raises? (Which they did, measured in U.S. dollars) Neither do I.
So it might be a while. Fact is most of our spending goes to cover goods and services provided and made in Canada, so no inflation there. Yeah we spend some on imports, but it’s not that much of our budget actually.
I figure a 10% drop in the dollar could lead to maybe 1% added to CPI
This one’e for you Smokin’ bud.
http://jezebel.com/men-killed-masculinity-all-by-their-big-strong-selves-1498667600?utm_campaign=socialflow_jezebel_facebook&utm_source=jezebel_facebook&utm_medium=socialflow
Blames the feminization of America on the capitalist economy that men of the twentieth century built and profited from by shipping jobs that require traditionally “masculine” qualities overseas.
#146 saskatoon
I wasn't aware of CMHC offering private sector assistance in foreign countries. All I know is that they keep saying taxpayer risk and the crowns operations should be reduced, yet every year that goes by the giant squid's tentacles spans out even greater along with liabilities swelling to new record highs.
It all goes back to a report conducted by the University of Calgary titled The Role of Crown Corporations in the Canadian Economy, that concluded:
So if CMHC agents, as in employees, are not agents of the crown (government), then who are they working for and is there any conflict of interests with regards to private sector and NGO programs who benefit from taxpayer's money?
The reduction in Labour Participation Rate (of the cohort of older employees) is also because the Baby Boomers are retiring.
On average 412,000 BBs were born in Canada for each of the 20 years from 1945-65 and they are now dropping out of the labour force.
Alwyn
@204 Victoria Tea Party
There is more bad news.
The average family US annual income is about $28k. Their annual poverty income is about $24k. New jobs being created are mainly of the low income type.
==================
I`m not sure where you got that number from.
According to the US Census Bureau:
Median household income fell slightly to $51,017 a year in 2012, down from $51,100 in 2011 — a change the Census Bureau does not consider statistically significant.
That paints a considerably different picture than your posted `fact`.
Smokie, how about “salarys are for loosers”?
With exactly this spelling.
There is no evidence to support the ‘huge swaths’ statement or that this has impacted overall market valuations. Citing a TV show as a source is lame. — Garth
But it supports the fact people flock to SFH. 1M SFH will be the norm. You can’t fight the herd. Toronto proper is rich.
#171 Ralph Cramdown
I don’t disagree with much of what you wrote. However, you appear to have totally missed my point. Which is that the current green shoots are built on the biggest misallocation of capital in human history. Are there no consequences associated with printing a trillion per year? In your mind, is it even happening?
#215 Dan
Well being we don’t buy our homes in $USD it’s pretty much irrelevant. For the average Canadian the only issue re the drop of the $CAD is traveling into the US will be more expensive. Here at home..not really a big deal.
#210 Ottawa Mike,
your last post got through just fine, although in two parts. And I thoroughly agree with you.
The Minto owners and their partners are as philanthropic as anyone else: make a bundle by whatever means, then give a bit back to the community, hopefully as a tax deduction, or in any case, as an expense in buying good will. Why heck, you could even lose money on a football team for a few years if the City builds the stadium for you and gives you half of Lansdowne Park for development for 40 years.
Building good houses instead of “communities” is not nearly as lucrative. And, as two courts found, a dumb decision by city councillors is not against the law, no matter how dumb. Voters can punish them in the next election.
#176 Detalunis –
”The problem is the wages for these jobs are unsustainable, you can’t have a country where 50% of people earn less than 30K and then pay 100K for the public sector, sooner or later the whole thing implodes.”
Sounds like Greece.
#24 Weenerman on 01.10.14 at 8:39 pm
” What job losses? According to the commercials, Canada’s Economic Action Plan is creating tons of jobs for female mechanics.”
Yes and apparently jobs in Saskatchewan for Filipino IT grads. It boggles the mind that the economy can shed 10,000 jobs a week and yet we import labor as apparently our own young people do not need, or are not qualified for a decent paying job in the computer field. The air must really be different in Saskatchewan.
#171 Ralph Cramdown
Yes, you can see what has happened in the past. The future, no. Your post is not intelligent, it is foolish and condescending.
#210 Ottawa Mike
In Ottawa you have Minto. In the GTA we have Mattamy. I think you have Mattamy in Ottawa too, according to the advertising on the boards at the CT Centre.
#155 gtrz4peace on 01.11.14 at 5:26 am
That is happening because there are very powerful interests vested in destroying what remains of a middle class, and it is being done by policies directed from the top down.
====================================
I have often heard this argument but I have never grasped how the cigar chomping capitalists benefit from crushing their main customers. There were many psychopaths in history who preferred domination to prosperity, but that doesn’t seem to fit the so-called banksters.
Another view is that we are still in the early stages of the transformation of society by computers and global trade. The middle class is not so much being eradicated as spread around the world. The unfortunate corollary is that many unskilled North Americans are falling out of the middle class and not even the reshoring of manufacturing will help much.
Pessimists see the worsening employment numbers as a sign that “they” are falsifying the economic recovery numbers and so North America must inevitably crash. I see it as a sign that the day of the full employment of all the willing and able-bodied is over. The economy is actually sputtering along but just doesn’t need as much labour or the same mix of skills. This is a huge and growing socioeconomic problem but the market will not solve it. Any stable solution will have to be political. It’s time to stop using 1970 as an economic benchmark and take a serious look at what 2070 will bring.
I am thoroughly entertained by all the love on here for Smoking Man and his upcoming tome.
How about the title: We dont ned no edukatiun OR
Teechers leaf those kids alon?
Turner should get a piece of the action($) for promotional considerations if it ever publishes.
Hi all.A good read on how things unfolded in the US and what can be done to perhaps prevent it from happening again is The Subprime Solution by Robert Shiller.Picked mine up at the public library. Enjoy
Possible title for your new book Smoking Man:
”I Yoost 2 B A Trak Shikshir”
#222 CrazyCanuck
My “income” source comes from an article published on Alt-Market.com, written by Dr. Paul Craig Roberts (January 6, 2014).
Here is the segment the figures came from:
“…According to the official wage statistics for 2012, forty percent of the US work force earned less than $20,000, fifty-three percent earned less than $30,000, and seventy-three percent earned less than $50,000. The median wage or salary was $27,519. The amounts are in current dollars and they are compensation amounts subject to state and federal income taxes and to Social Security and Medicare payroll taxes. In other words, the take home pay is less.
To put these incomes into some perspective, the poverty threshold for a family of four in 2013 was $23,550.”
CC, even if your figures are more accurate (from the source you use), a $50k-plus annual “family” income in the US, when further savaged by Obamacare, is STILL peanuts.
Many American bloggers have been pointing out for years that the Empire cannot restore itself to its former “greatness” unless and until pay rates rise to allow widespread prosperity to come back. It is not coming back. Since 2008 it’s been bloody dreadful down there.
So, my original thesis stands: the US is in serious economic trouble and it’ll be all nicely fixed up shortly after Hell freezes over.
BTW: Another blogger you might consider is James H. Kunstler a Leftie-Libertarian-driving-his-own boat type of chap. He is an excellent and vivid writer and a prolific and competent auther. Most interesting.
#209 High Plains Drifter
re: previous posts
You got a Cormac McCarthy thing goin’ on cowboy. Tip of the hat to you.
When people worry about employment, it’s irrelevant how cheap mortgages are, or might become. Granite doesn’t matter. Or moving up. Or what your girlfriends say. Or the Remax guy. All that scared people care about is retreating to safety.
I remember reading on the housingbubbleblog (US) “it was as if a light switch was turned off”.
much of my extended family own houses in the outer burbs of the GTA. Only one has a clue about what is to happen. I’m not going to bring it up.
Bob Rice: Klein’s a commie that’s bad
Ottawa Mike: I struck up a conversation with the 2 middle aged glass biz owners who told me about how they were getting work from purchasers of recent built condos in Ottawa’s west end.
I watched the CBC documentary “Condo Game”. The most alarming thing was the notion that the condos are not fundamentally good buildings. In the documentary the Ontario Municipal Board is blamed for frustrating Toronto City Council who wants to have standards of livability. makes sense to me.
Is the deity F. contemplating the economics of legalizing marijuana http://apina.biz/112346.jpg , as a quick solution to the economic mess he helped create?
I’m hoping that the falling dollar will provide buoyancy for our indebted “behinds” . The trends towards “Dollar Store” “Value Village” and the like are indicative that something delusional is upon us. Makes Shakespeare’s “Macbeth,” look whimsical.
tea party
the usa is Not in as such bad shape as you think
The $17 Trillion Delusion: The Absurdity of Cutting Social Security to Reduce the Debt
Saturday, 11 January 2014 09:11
By Marty Wolfson, Dollars & Sense | Op-Ed
http://truth-out.org/
It’s picked, book name, thanks for all the suggestions dogs
Mississippi Stud
Ps, I’m killing it again.
#223 Basil Fawlty
#228 Freedom First
The funny thing about your comments is the lack of understanding a US rebound. The S&P 500 is up 30 points, or 40 if you own it in USD. Fact.
Since no-one has a crystal ball, why diss? Diversified investors take profit, re-balance. What issue????
Doomsters get screwed every time since they buy on the wrong side of the trade. Bears are so predictable!
#172 kilby: “Don’t know how many of you saw “Power and Politics” yesterday…I just caught a few minutes of an MP named Mark Adler, I didn’t know whether to laugh or cry.”
*************
I understand the ‘cons’ are already on the campaign trail. They have their work cut out for them. This is the start?
#223 Basil Fawlty — “The current green shoots are built on the biggest misallocation of capital in human history. Are there no consequences associated with printing a trillion per year? In your mind, is it even happening?”
Now me, I’d say the big recent misallocation was BEFORE the crisis hit, and was, in fact, a cause of it. Oodles of dollars and Euros were sloshing around, and their owners were demanding 5% yields for double A or triple A credits. Too many entitled rentier lenders, not enough high quality borrowers. So the lenders suspended disbelief and convinced themselves that with the Bundesbank now running things, Spain, Greece, Ireland and Portugal were nearly as solid a risk as Germany. And that even if Cleetus and Peggy Van Damme from Arkansas aren’t quite prime, the mezzanine tranche of a security holding a hundred equity tranches of mortgage pools full of borrowers just like them was, even if the country was collectively spending 104% of its income. And that a Euro deposit in a Cyprus or Iceland bank paying 5% was rock solid even if the going rate elsewhere was 1%. The really smart guys levered up. Why make 5% on a pile of shit if you can make 9% on a leveraged pile of shit?
Housing got built, on both sides of the Atlantic, more to satisfy the demand for investment grade debt than to keep the rain off people who’d otherwise be living rough. People bought summer places, places to flip, places to rent to people who were too dumb or credit challenged to buy their own. Mistakes were made.
Come the reckoning, everybody panics, many find themselves unemployed or bankrupt, and consumer demand goes down. Investors, believe it or not, become even less enamoured of stocks and more desirous of IG and government bonds, bidding them all the way up to negative yields in some cases.
The Bernank, he says “oh no you don’t. You’re not sitting around for the next five or ten years collecting fat rent money on government backed debt.” So he starts buying it back, exchanging little green pieces of paper that pay zero for big embossed pieces of paper that pay 2-3%. The US government now has LESS debt outstanding, and pays bondholders LESS in interest every month. Does this stop the “US debt can never be repaid” crowd? Of course not. But they’ll need to find somewhere else to park their dollars for yield or to counter inflation.
You ask if there’s consequences. Well, investors need to find somewhere else to earn a yield on $1T+ of US dollars. While the getting is good, Verizon sells $49B of bonds, and Apple issues $17B — 7% of that $1T soaked up in just two deals. I’m doing my part, borrowing money that I wouldn’t if rates were higher.
I’d hope it would involve a self-examination by the “this is printing money, and printing money causes inflation” crowd. But no such luck so far.
#193 Shawn: “But you know the way people think. Those of us who already thought the U.S. was improving will explain away the December job numbers. Doomers and worriers will say aha, it proves their case.”
***************
The recovery is going to be long….and it’s going to be slow. Why can’t people accept that?
Yes, the 15% correction you predicted is too low. Deutsche bank said Canadian RE is over valued by 60%.
Conspiracy theories are funny. But they rarely adequately explain anything.
Any process which cannot be seen or simply explained seems like the work of a conspiracy. That does not make it so. The economic system is so intricate and castly complicated, even a relatively tiny group of people acting in their own self interest can have wide ranging effects. It’s just ripples in the pond interacting. If you believe in such conspiracies, you must also believe a government has the power to effect any end which it desires, which is ludicrous when you look at the evidence before you of government actions.
It is also interesting how these conspiracies only come up when things are not going well. When the economy was “booming”, there were no conspiracy theories to explain it. But when things are bad, suddenly someone else is keeping you down. Prosperity is right (and A right even), and is the earned result of your hard work and skills. But an economic malaise is clearly somebody else’s doing.
Get a grip. No one is out to get you.
@ #72 Smoking Man
—————————————————————————
How about “Wish you were beer”?
#231 OttawaMike on 01.11.14 at 6:25 pmI am thoroughly entertained by all the love on here for Smoking Man and his upcoming tome.
How about the title: We dont ned no edukatiun OR
Teechers leaf those kids alon?
Turner should get a piece of the action($) for promotional considerations if it ever publishes.
……………
It ain’t about the money, hell I’ll split the loot with my 26 fans.
It just would be a mother of an achievement for me.
What comes natural to most is a wall higher than the cn tower to me. I really sick at the technicals, but won’t let anyone compromise my art.
So I’m going to try and pull it off, f-d up as it is.
The temptation to get a copy writer to fix 10 years worth of effort is huge.
I’m not going to do it.
The literature world pissess me off, skilled word smith’s kissing each others asses when they discover a word that haven’t been used in 100 years.
The book is ready to go to publication, but after reading fear and loathing in Las Vegas.
I got to make it better.
There can be only one.
Garth, you know the writing business, is there a convention where I can go observe these cowards, the politicly correct grant sucking spineless poor excuses of writers hang out.
I need more real life losers to attack. I’ll even settle for PhD English teachers convention where my goal would be to bed one of the highly ranked female celebrities.
Even with my bald head and gingivitis yellow teath, and a Mr happy that’s lost focus, and purpose.
Challenges is what makes life worth living.
To Andrew, and thanks to anyone else commenting on my comment — PLEASE READ THE WRITINGS OF ROBERT REICH, NAOMI KLEIN, PAUL KRUGMAN, etc.
This is not “doomer” theory “ignoring” a recovery. I grew up in the US and now see what is happening in Canada.
Someone said that what is happening in the US (and soon to happen here) cannot be happening because “what do the corporations gain from destroying the middle class, their customer base?”
The answer to that is “THERE WILL ALWAYS BE A CUSTOMER BASE.” It’s like the kids’ game “wack-a-mole” — these are multinational interests who are concerned with profit and if India and China’s middle class are on the way up but North America’s is on the way down — it matters little. As long as the overall profits and mathematics remain. There’s always some market coming up, and some going down. Isn’t that how investment theory works? Buy low, sell high, etc.?
Again, the work of the respected economists listed above is enough for you to get started and see what is in store for Canadians too.
And it doesn’t mean you’ll all be throwing nuggets of gold around for toilet paper. All that doomer stuff is crap too. It just means an overall lowering of the quality of life, and whether you are a Garth-investor-renter-saver or a spender, you will be affected. People you know and love will be affected.
Obviously better to be liquid, but there just isn’t any bunker or island far enough to insulate you when the corporations you invest in and support poison the water you drink too. Or the ocean next door.
In that sense, the growing consolidation of corporate power over government becomes more concerning.
Uneducated criminal realtor scum have destroyed Canada financially. Canadians and Canada is on its way to economic ruin. People losing jobs will lose their houses as they can not borrow more or find work. Good job realtor scum good job. It’s sad there are a few good realtors.
#228 Freedom First — “Yes, you can see what has happened in the past. The future, no.”
If you think predicting the future is hard, you’re trying to predict the wrong things, or you’re reading the wrong research. I try to avoid predictions of low probability events, or those that involve timing.
Easy predictions:
– if you lend money at 3%, that’s the best you can do, unless you can later find somebody who wants to make that same loan at 2.5%
– almost everybody who paid their bills this month will pay their bills next month
– people will continue to buy ketchup, razor blades and car insurance
– over the long term, the stock market goes up. Just about everything goes up because of inflation, but the stock market goes up by more
– the more diversified you are, the less a single bad prediction hurts
– Tesla’s got further to fall, and bitcoin’s going all the way to zero, eventually
Hard predictions:
– gold will go to $2,000 within two years
– Canadian housing is going to crash this year
– This fund, which holds a bunch of things paying 4-5% and uses no leverage, will keep paying me 8%
– Herbalife will be investigated as a pyramid scheme
– My neighbourhood will hold its value in a housing bust
#9 Dr. Bob on 01.10.14 at 8:20 pm
This is just the beginning. Wait till interest rates start to rise.
Doctor, thanks for demonstrating your less than elementary grasp of economics.
#13 Dr. Bob on 01.10.14 at 8:23 pm
What the hell do we need another 18,200 government employees for??? What a waste of money. It takes 60,000 tax payers to pay there wages!
Doctor, thanks for demonstrating your less than elementary grasp of grammar.
Michel (157), yes that must be because Manitoba is so desperately short of serviceable land that could be used for housing. Lol!
#218 Canadian Watchdog
it sounds like cmhc “employees” work (indeed) for the government, but any business this organization conducts through private ‘agents’ (like in china) is not considered governmental (?).
it makes one wonder the extent to which our electoral system (still) represents the interest of the people–and why the heck these connections are happening, and who these connections truly benefit.
i would think (that somehow, some way) it has something to do with these guys:
http://www.ceocouncil.ca
by the way, thanks for all your posts; you have taught me (and i’m sure many others) quite a bit.
Dollar Stores and Value Village
Geogar at 238 says: The trends towards “Dollar Store” “Value Village” and the like are indicative that something delusional is upon us.
******************************************
I don’t think I have ever been in a Value Village, but I know a bit about Dollarama.
When dollar stores first came around I dismissed them as junk stores and figured no way they can make a buck. I was dead wrong.
Dollarama is not the smelly junk store I imagined. It does not sell surplus junk that manufacturers needed to clear out.
Dollarama cleverly went to China and had $3.00 items manufactured for 60 cents landed at the store and sells for a $1.00 with a surprisingly large markup. Now they have $2 and $3 items as well.
Quite simply, Dollarama out smarted the likes of Zellers and Wal-Mart and the grocery stores as they became the most efficient (and therefore lowest cost) provider of a large selection of everyday items. Absolutely brilliant. Their IPO just a few years ago was at $17.50 and today those shares are $85.
People don’t shop at Dollarama out of desperation. They shop there for the excellent value on an assortment of everyday items.
Don’t knock dollar stores till you try them.
#136 not 1st on 01.11.14 at 1:00 am…
Funny, but a cement dispenser that builds a shell cannot be realistically called a 3D printer that creates a home!
Robotic sure, but where do they get off calling it a 3D printer?
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#167 Grantmi on 01.11.14 at 10:42 am…
Boat story is exaggerated, but not the shootouts between cartels and the Federalis in the last month in Sonora and Baja.
The drop in the CAD was anticipated, so we don’t worry, besides every penny drop in CAD increases the value of our US winter home by $ 2300.
Glad to see the pineapple express is warming up Canada, maybe us too as 24C forecast for Phoenix next week. It will be perfect weather for my favourite car carnival – Barrett-Jackson.
TV coverage is poor this year with the demise of Speed Channel, but if you see a 60ish, greying old guy with beige shorts, a Hawaiian shirt and a ‘Georgia Strait’ (okay it’s old) ball cap bidding on 1960s Lincoln Continentals – that’s me!
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#234 VICTORIA TEA PARTY on 01.11.14 at 7:27 pm…
“…a $50k-plus annual “family” income in the US, when further savaged by Obamacare, is STILL peanuts…”
Not when you consider the cost-of-living is about 30% less (Arizona example) fuel is currently 81.7 cents US a litre, an average 4 bd/2 bath 2000 sq ft family home in Phoenix is $ 250,000, most mortgage interest is tax deductible, etc.
Talking to [email protected] (US version) yesterday, they are working under new mortgage qualification rules as of Jan 1st, so they expect the real estate market to level off from the large increases in the last 3 years as fewer folks will qualify.
Nonetheless, Phoenix is the busiest we have seen it in 4 years – certainly seems like a boom to me.
#223 Basil Fawlty on 01.11.14 at 5:13 pm
very interesting read. and all that from 33yro…
“The deep irony is that all those people calling for an end to inflation (and usually a return to a gold-like standard) because of the evil erosion of money, have lived their entire lives in a period of unprecedented monetary stability. Money is so stable nowadays that it sort of looks like a store of wealth, enough so that people get incensed that the state would dare allow inflation to affect it. The reality is that the current system has resulted (in some parts of the world, by far not all) in fairly steady and predictable inflation for almost a century.”
http://swombat.com/2014/1/10/money-and-wealth
I own a pawnshop and you just made my 5 year business plan look very profitable!!
Hit the nail on the head with this post by laying it out, for anyone with common sense to see time to be RACHINSKI, which means think, spend with thought and purpose.
Great post
Gawd, this must be the most depressing lot of writers to date,and now Smoking Man describes his gingivitis, yellow teeth, and droopy you know what…and I pictured him as a stud, sigh.
Finished with the gloom and doom, going to munch a box of left-over Christmas bonbons,and watch a happy movie.
#146
get a grip. No one is out to get you.
——–
Said the naive Antelope.
Overheard an awful story from this poor girl at work this week. She works along side me, although in a casual position, and was talking about how the casuals were not getting many hours anymore. She is scheduled to work 8 days this month. Other casuals were looking to move out of province or to Edmonton, which should give you a hint as to which major city this story comes from.
Anyways, she announces that moving is not an option for her because she just bought a house! I hope she didn’t look in my direction because I’m sure my mouth was agape! Didn’t get any details other than her parents helped her out, so I assume they probably gave her the down-payment and expected her to make the mortgage payments, rather than throwing her money away on rent of course. Typical boomer parents eh.
Poor girl just graduated last year and is already saddled with a mortgage thanks to her parents. Can’t imagine why they thought a mortgage was a good idea for a casual position with no guaranteed hours.
#256 saskatoon
There is no electoral system for crown agencies. The person who appoints is the Governor General with the advice of the Prime Minster. As for transparency, even MPs and Senators have no right to CMHC's books or classified information. It was stated during a committee meeting last year when a few Senators asked OSFI if they would be providing any additional (audited) figures on CMHC. An OSFI representative replied that the most they'll get is the same annual report released to the public. That's it.
Most don't realize CMHC is a market maker for housing. Insurance-in-force and guarantees-in-force now account for about 65% of GDP. This number is completely absurd knowing that CMHC is levered somewhere around 20:1 (on-balance sheet). Without a constant expansion of insurance or MBS issuance, the whole market goes kaput — home prices decline and then goes asset values held by CMHC and lenders. So, the best thing to do in order to boost effective demand is more of the same. Where do think the bulk of 2013 sales from? Right here. Subprime securitization baby. Works every time, until it doesn't.
It's inevitable. F is going to have to either lift CMHC or Genworth's limit, and/or increase annual MBS guarantees from $85 billion to whatever. They'll just say we have to adjust the limit to economic growth. And that will be that.
What I had realized in 2013 (thinking H and F were serious to reign in CMHC) is that our government will do what every government always does, and that is to keep kicking the can by creating some other program or acronym named vehicle to divert liabilities from investors and the public.
Ottawa is playing with fire (their AAA rating) by using CMHC's balance sheet as a proxy for bond issuance. This has caused some confusion on the international stage as even the Bank of International Settlements doesn't recognize CMHC as a sovereign agency of the Government of Canada. PDF This could make them vulnerable to a nasty margin call on derivatives or whatever over-the-counter trades CMHC is engaged in.
Moreover, that covered program (administered by CMHC) recently passed into law to help Canadian banks' access cheaper borrowing costs for mortgages just fell into the dump as the EU has now deemed covered bonds below tier 1 liquidity. You can bet your ass banks will be crying for cheaper funding and more insurance, or they just won't lend. Period.
Lastly. We're at defining point as F's surplus target is about to go negative as he realizes that all this time it was government spending and increased liabilities that has driven economic growth. Now they can't stop spending and increasing liabilities because it is correlated with economic growth.
so expect more of the same. Nothing will change until they lose control.
As a Canadian expat who gets paid in currency fixed to the USD, I have very much appreciated the 10% effective pay rise over the last few months. It wasn’t as much fun buying CAD when it was 1.02 to the buck.
Someone posted that people will have to re-train and go where the work is. Hint: in a global economy, that may be somewhere else on the globe. I’m not suggesting everyone will be able to relocate and get rich, but it certainly isn’t helping by chaining yourself down with mortgage debt.
As someone living outside the fishbowl looking in, the economics of Canada look increasingly ludicrous. I’m no doomer, but there will definitely be some sort of reckoning. Whether crash or slow correction, it will be interesting to watch it unfold.
#250 gtrz4peace on 01.11.14 at 10:24 pm
To Andrew, and thanks to anyone else commenting on my comment — PLEASE READ THE WRITINGS OF ROBERT REICH, NAOMI KLEIN, PAUL KRUGMAN, etc.
Someone said that what is happening in the US (and soon to happen here) cannot be happening because “what do the corporations gain from destroying the middle class, their customer base?”
==============================
I simply don’t buy that global corporations would intentionally trash key parts of their global market. However I accept that they may take us to the same place by blindly pursuing their own short term interests in a manner unregulated by government.
It is hard to dispute that the overbearing influence of big money puts the US at risk of eventually sliding into a fascist tyranny. That JP Morgan is being fined up to $20 billion for corporate misdeeds but not one executive has yet been charged with anything says it all.
Starting in the eighties, the power of computers to centralize control in fewer hands sprinted far ahead of the power of society to control the process. The good, grey captains of old-fashioned business were shunted aside by the dazzling power of quants to create apparent wealth out of binary digits. Regulators were left in the dust by technology and by politicians who claimed the market could rule itself in everybody’s interest. Even senior managers found they had lost control as evidenced by the “London Whale”. Hopefully the Great Recession and its aftermath will bring back some balance. Hopefully the environmental movement, for all its shortcomings, represents a growing view in society that there is more to life than toys and profits. Hopefully a new generation will be shocked into living within its means.
#176- The fact that government workers make higher wages than private sector is due to the fact that CEO’s now make Millions and pay workers bread crumbs left over. Government jobs have plugged along, it’s time that we stop paying the top 1% 99% of the money, private sector wages would go up and catch up to government wages.
I have come to the conclusion that while your blog is worth reading, the comments are not. Mostly illiterate, anti-social whackjobs.
#251 realtors are scum on 01.11.14 at 10:27 pm
Uneducated criminal realtor scum have destroyed Canada financially. Canadians and Canada is on its way to economic ruin. People losing jobs will lose their houses as they can not borrow more or find work. Good job realtor scum good job. It’s sad there are a few good realtors.
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Really! uneducated Realtor’s are bringing down Canada I guess they smarter than you think so much power to so few.
Great article here about why the rich get richer in a slow growth economy. Just like Garth says, the rich have investments, the rest have a mortgage. Free exchange: All men are created unequal | The Economist http://econ.st/1gq5wU3
#268 shirleyujest
“Judge Not Lest Ye Be Judged!”
The trouble with predicting the future is guessing how people will react to changes. If all I had to do was guess what people would do tomorrow, I couldn’t fail with investing. I tend to think two years or more out so many failures lie in my wake. I believe human behaviour hasn’t changed in the last 5,000 years so I can use history as a guide post but technology can make such observations useless (cheap energy and machines to exploit it). The thing I notice throughout history is that people like to scarf the buffet table when they are first – I use it as a life analogy. There is little consideration for the people behind them. I believe the best decisions consist of compromise on both sides (neither gets their dreams) and leaving something on the table for those behind them. Too often I have seen one last item remaining to cover the greed of those before – if you take it, you are branded as the one being selfish.
I like RC’s comments. If you are curious, N.B. means pay attention because this is important. I do appreciate that people are allowed to post opinions on this blog and are moderated with the decency of respect for others being paramount. Who knows what is right or wrong in the long run? I certainly don’t sweat being wrong in the short term and use them to improve my future performance. Mind you, I don’t like being ridiculed for being wrong and being held up as an example as to what can happen to someone didn’t follow the herd consensus.
I think Canada has only delayed the guide path of the US economy. We are in for a future of stagnant RE and low growth. I feel sorry for those whose debts are more than 50% of their total assets. Asset values fall or rise on their own, but debts don’t. Debt as master is evil.
Julie @ 183 – I liked the reference/link.
Ps. I read that overall Calgary property assessments are up – hopefully my property tax bill increases less than 10% – cold comfort.
Apparently, none of us will be able to afford homes in ten years time. Apparently.
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/in-2024-all-homes-will-be-dream-homes/article16246770/
Is Rob Carrick being funded by CREA these days?
#234 Victoria Tea Party – I agree with your synopsis. Back in the old days, U.S. manufacturers sold to who? U.S. consumers. They needed these consumers to buy their products. These U.S. corporations are now multi-national, selling a greater percentage of their products overseas than at home. The U.S. consumer is no longer as important to them. (Of course, their overseas markets are now imploding as well – good luck with that!)
There is a lot of talk about raising the minimum wage in the States, but of course that will only help for a short time. It’s no panacea, because eventually that extra money is just inflated away. What’s got to be stopped is the excessive printing of money, which causes inflation.
“Now the other interesting point is that whether you have inflation or deflation, in terms of current productive output and earnings, is immaterial. All the person in the economy cares about is purchasing power per unit of productive work they perform, not how you denominate it. Of course those who save would like deflation and those who are in debt would like inflation.
Causing monetary inflation, incidentally, is functionally identical to counterfeiting from the standpoint of anyone who has saved a portion of their economic surplus, and since counterfeiting is illegal anyone causing or conspiring to cause said monetary inflation should likewise be locked up.”
http://market-ticker.org/akcs-www?post=226951
“Are there no consequences associated with printing a trillion per year?”
I’ve been thinking a bit more about this. How much IS a trillion dollars a year in the context of the US economy?
The value of all privately owned real estate in the US is at least $41.1T, so if every dollar of $1T went into that asset class, it’d increase by 2.4%. I don’t think this includes RE owned by financial corporations, so maybe add in some REO, bank branches and head office towers. Source: http://www.slate.com/blogs/moneybox/2013/12/20/value_of_all_land_in_the_united_states.html
US Gross National Income for 2013 must have been more than $16T ($15.9T in 2012), so if the $1T was distributed according to income, everybody would get an extra 6.2% of one year’s income. Distributed per capita, $1T is about $3,000 per US resident.
I think US stock market capitalization at the end of 2013 was about $24.6T, so if every dollar of $1T went into US equities, they’d go up by 4%. I took 2012 market cap numbers from the World Bank and added Vanguard’s VTI’s 2013 performance minus its dividend yield.
At 2013Q1, the US bond market was about $39T, so if every dollar of $1T went into US bonds, they’d rise by 2.6%. Source: http://en.wikipedia.org/wiki/Bond_market#U.S._bond_market_size
But wait! The Bernank injected the cash by buying US bonds. He took $1T of bonds out of the market, while adding $1T of cash. Investors want, in aggregate, to have x% in bonds, y% in stocks and z% in cash. The prices of stocks and bonds will adjust until those percentages are satisfied.
We can’t really just add these three market sizes to get the size of US private wealth because they overlap: Some of the bonds are for mortgages against some of the real estate, and some of the equity is in companies that own real estate. Some of the money undoubtedly went to foreign real estate, stocks and bonds, Rising asset prices likely attracted investment from abroad, but those investors would have had to borrow or buy US dollars in order to invest, unless they already had stacks of US currency sitting in a vault.
So based on the above, how big an effect does $1T a year have? How would you divide it up among the asset classes that some people claim are in a bubble?
excellent read, but bad title… guess there is always someone to blame
http://www.salon.com/2014/01/04/how_baby_boomers_screwed_their_kids_%E2%80%94_and_created_millennial_impatience/
#117 Canadian Watchdog – Temporary Foreign Workers, taking jobs from Canadians.
“As hundreds of pipefitters and welders arrived at Husky Energy’s Sunrise project for their weeks-long shifts, a company spokesperson told the crew of approximately 270 this would be their last.
Their replacements? […]
Over the next 30 days, dozens of temporary foreign workers from Mexico, Ireland, Portugal and Italy were arriving at the site 60 kilometres north of Fort McMurray, waiting for turnover.
By Sept. 27, the original workers —all contractors with Toronto-based Black & MacDonald— were gone.”
http://www.fortmcmurraytoday.com/2013/10/07/canadian-employees-replaced-with-temporary-foreign-workers
#268 shirleyujest on 01.12.14 at 8:41 am wrote:
I have come to the conclusion that while your blog is worth reading, the comments are not. Mostly illiterate, anti-social whackjobs.
Welcome to the blog, shirley. I can see that you’re going to fit in just fine!
#24 Weenerman on 01.10.14 at 8:39 pm
What job losses? According to the commercials, Canada’s Economic Action Plan is creating tons of jobs for female mechanics.
……………..
LOL
#277 backwardsevolution on 01.12.14 at 12:15 pm
Re: Foreign workers in Ft. Mac
Thanks for that link although it goes back to Oct. 2013.
Having dealt with that Cnd. contractor as a contract administrator, I can tell you a couple of things.
-The work is generally top notch, they employ the best trades and engineers.
-The company’s management has earned a reputation for taking advantage of the client by exploiting every loop hole with spurious and questionable extra charges after the contract is awarded.
While it is despicable to allow temp. foreign workers to take those jobs, I believe there is more to that story than meets the eye.
CMHC
Canadian Watchdog at 264 said:
Most don’t realize CMHC is a market maker for housing. Insurance-in-force and guarantees-in-force now account for about 65% of GDP. This number is completely absurd knowing that CMHC is levered somewhere around 20:1 (on-balance sheet).
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I agree CMHC is highly leveraged. Some years ago I checked and as I recall it was closer to 50 to 1. I phoned CEO Karen Kingsley and asked her what the equity ratio was and she talked about risk weighted and it depends and could no even give me a figure.
In any case that has all worked out perfectly fine in fact since mortgage delinquencies have remained ultra low.
But insurance in force and in force guarantees most certainly does not “account for about 65%” of GDP. The insurance in force is not a component of GDP. It may “amount” to 65% of GDP but it does not and cannot account for 65% of GDP.
Your claim seems alarming but how do we know the proper relationship of CMHC insurance in force and guarantees to GDP if indeed there is any proper relationship?
#268 shirleyujest on 01.12.14 at 8:41 am wrote:
I have come to the conclusion that while your blog is worth reading, the comments are not. Mostly illiterate, anti-social whackjobs.
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Just skip past all of Smoking Man’s posts and it gets much better :p
#277 backwardsevolution on 01.12.14 at 12:15 pm…
Interesting article, according to their stats there were “…338,189 temporary foreign workers living in Canada as of Dec. 1, 2012…”
At the same time in the US there were 612,000 TFWs.
Canada
Population 35 million, 338,189 temporary foreign workers
USA
Population 313 million, 612,000 temporary foreign workers
Ratios seem a bit off for Canada, appears to be a sellout of our country at the expense of existing workers, who contributed far more to the economy than TFWs ever will.
Wow, all those job losses. I guess that’s what these complete idiot, poor excuse for economists mean when they talk of a coming labour shortage. If you believe there’s a labour shortage, I’ll sell you some Nortel shares for the dirt cheap bargain price of only $1000 a piece!
#281 Shawn
But insurance in force and in force guarantees most certainly does not “account for about 65%” of GDP. The insurance in force is not a component of GDP. It may “amount” to 65% of GDP but it does not and cannot account for 65% of GDP.
Guarantees can be viewed as an indirect component of GDP because lenders would have never issued the current amount of loans if the government didn't insure it. If the government increases its mortgage liabilities, lenders lend more, in turn giving households the ability to consume more goods today with their future labour (GDP).
how do we know the proper relationship of CMHC insurance in force and guarantees to GDP if indeed there is any proper relationship?
An oversimplified way is by looking at total IIF and GIF as a percentage of total household debt and its ratio correlation to home prices.
1996 30.1% $150,822
1997 35.3% $154,616
1998 38.0% $152,366
1999 40.8% $158,030
2000 44.5% $164,091
2001 48.1% $171,858
2002 51.3% $188,138
2003 52.6% $207,111
2004 54.0% $226,337
2005 56.2% $249,311
2006 56.8% $276,959
2007 57.9% $307,265
2008 64.4% $305,021
2009 69.6% $320,333
2010 71.7% $339,049
2011 74.4% $362,716
2012 73.9% $363,740
2013 72.5% $362,818
Correlation: 0.957786687 Convinced?
#274 backwardsevolution — [quoting] “Now the other interesting point is that whether you have inflation or deflation, in terms of current productive output and earnings, is immaterial. All the person in the economy cares about is purchasing power per unit of productive work they perform, not how you denominate it. Of course those who save would like deflation and those who are in debt would like inflation.”
Boy howdy, you can take that economics lesson to the bank — if you’re the guy who sits in front of the train station offering to write passersbys’ names on a grain of rice, whose capital investments are a stool, a pen, a magnifying loupe and a very small bag of rice.
For the industrialist who wants to build an automotive assembly plant and those who want to risk their capital in debt or equity alongside him, things are a little bit different. The “savers” say that they’ll need a higher rate of return (interest rate) or a greater margin of safety (lower debt to assets) since they don’t stand to lose 2% of their fortune per year if they do nothing. Why risk capital if wealth is preserved merely by doing nothing? Equity investors won’t be found. Why risk stable capital instead of lending in a bond market with greater margins of safety and higher interest than today’s? The entrepreneur says “I could have made this work with 3:1 leverage and a 6% blended cost of capital with 2% inflation, but I don’t have the resources to do it at 2:3 and a 4% cost of capital with no inflation. So we all continue to ride bicycles.
Bub, if you or the bloggers you worship want hard money, there’s nothing stopping you from calling or webbing up your broker or walking down to your local hard money dealer and exchanging your hard-earned easy money for the hard money you prefer. And refer to NoName, who will point you in the direction of more enlightened bloggers.
#268 shirleyujest on 01.12.14 at 8:41 am wrote:
“…Mostly illiterate, anti-social whackjobs.”
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We be illiterate and anti-social loosers? What your point is?
This not end well.
Look, with 20/20 vision in the rear view mirror.
This mess comes down to one cause, elected MP’s of the reform/conservative persuasion. That’s right Canada, you did this to yourselves. You let a cabal of scared sociopaths ruin your country by throwing the largest debt party in the country’s history.
When the Re/Cons should have throttled back in 2008, they knowingly hit the gas. They did this for 6 more years in power. Your lives will be changed forever because an infinitesimal percentage of the Canadian population decided that what they needed to do was to apply their genius to the career of the country.
Well we all know what happened to Challenger.
BOOM!!!!!
Yah! ………… but look at the bright side ….. ummmmmm never mind.
DELETED.
#282 Fed-up on 01.12.14 at 2:01 pm
Ha, skip my posts, no one does. Even you.
#281 Shawn — “I agree CMHC is highly leveraged. Some years ago I checked and as I recall it was closer to 50 to 1.”
All insurance companies are highly leveraged, which is why the difference between slightly above-average underwriting and investing ability and slightly below-average inderwriting and investing ability is the difference between Uncle Warren and Confed Life.
Every line of insurance is different, though. Mortgage insurance: If they write a $950k policy on a $1M house, they put that on the books as $950k of insurance in force, right? But to pay out $950k, the value of that house would have to go to almost zero, and the owner would have to default. This could happen, but insurance is all about the law of large numbers. Say 5% defaulted, and the loss was 20% of insured value. This represents horrendous losses, because most peoples’ houses have gone up since they bought them, so that’s down 20%+ from the purchase price, not current value.
Not to pick on you, Shawn, just hooking onto the most recent comment.
Wow 289 comments so far and counting.I think Garth hit a nerve!!!
BC Job Losses, 2013
Over the year, a net loss of 4,400 jobs
Most of the damage was done in the last 6 months, with a net loss of -11,600 jobs.
2013 Breakdown
Jan -16,000
Feb +19,800
Mar -14,800
Apr +9,500
May -300
June +8,900
July -11,700
Aug +6,200
Sept -5,400
Oct -5,300
Nov -8,200
Dec +12,800
Further breakdown shows (1) recent trend to jobs being lost (2) full-time jobs being lost with conversion to part-time work
Month F/T P/T
July +6,100 -17,800
Aug -9,800 +16,000
Sept +2,900 -8,200 (<- return to University?)
Oct -11,000 +5,600
Nov -4,500 -3,700
Dec -10,300 +23,100 (<- Christmas?)
NET6MO
-26,600 +15,000
The bottom line is BC is not an economy that is producing jobs or producing reliable, good paying jobs. In Vancouver the lack of jobs being produced is probably partly due to the high commercial rent costs associated with owning a business. There are a lot of shops routinely closing on major Vancouver streets.
Economy is staying afloat, that is it. It is not an environment that justifies 10% or even 4.4% yoy housing gains, as the Royal LePage predicts for Metro Vancouver in 2014. Note that after the December jobs report, because the realtor prediction was laughable Cameron Muir went out and corrected his buddies by saying RE in Vancouver would only rise "1 or 2%" in 2014.
Real estate experts cautious about Metro Vancouver's predicted 4.4-per-cent price increase
http://www.vancouversun.com/business/Real+estate+experts+cautious+about+Metro+Vancouver+predicted+cent+price+increase/9369906/story.html
What is he going to say, no we think it will drop? LOL
And who knows where their numbers are coming from. They are probably using their index Frankenumbers, but the public will think these forecasts are averages.
The rental increase for 2014 in Vancouver is 2.2%.
Note in 2007 BC was running about 4.4% unemployment for 2 years pre-2008, it is now 6.6%. It peaked at 7.8% in 2009. Over 2013 the rate ranged from 6.3 – 7.0%. In other words this is hardly a recovery to the days of old. This means current house prices are fabricated and more dependent than ever on new debt being issued.
Yet as we can see with many taking the Patullo bridge to commute to work instead of the $6 round trip a day Port Mann, people are increasingly stretched. The pocket book hit for commuters driving 50 weeks a year 5 days a week is $1,500 by the new toll. Yet if they take the Patullo to get around it, chances are they will waste gas and add an extra 20 minutes each way onto their trip. This is just one example of how stretched people are living here.
Then there are relatively large increases to BC Hydro, Ferries, transit fares, and property taxes for example.
Info is taking directly from BC Labour Force Statistics
I have absolutely nothing in common with my friends anymore. All they talk about is their homes. I can sit there and listen to them blab all night about their hardwood and their lawn maintenance. Blah blah blah. They have become so boring. Or is that what being an adult is all about?
224 John
In economics there are no insulated developments. The drop in CAD acts like Keynes ‘ multiplier effect on housing prices: Lower CAD means Canadians will pay MORE for most of our US imported groceries et al, ergo less money for housing/RE investments. The same lower CAD means the international RE investors who deal in USD, will likely induce them to reduce their exposure to Canadian RE, fact exposed in great granularity by Garth (this will likely produce the largest multiplier).
Certainly the lower CAD means higher profits for Canadian exporters, ceteris paribus, but
they may not be eager investors in RE.
Since most Canadian mortgage issuers raise funds on INTERNATIONAL markets, i e USD, a drop in the CAD will lower their funding and a 10% drop may mean already losses. (Canada has a NEGATIVE savings rate, thus is NOT a source of funds for mortgages…China is. ME countries, some BRICS now)
From the supply-demand perspective, a decrease of a country’s currency rate means a lessening of the country’s products ‘attractiveness on international markets…opposite of what happened during CAD appreciation 2003-2007. And since 2003 -07 were boom years for RE, probably now this trend will reverse.
These effects act in correlation and a 10% change in the exchange rate may imply a 50% less profit for an investor in Canadian RE which BORROWED IN USD (most institutionals)
#264 Canadian Watchdog
thanks for the info.
here’s a question:
will the pending cmhc crisis ultimately be the result of ignorance, indifference, or is it rather the offshoot of an intentional, diabolical genius?
for canadian watchdog et al:
what you said about members of cmhc being ‘appointed’ rather than elected…got me curious.
who actually are these appointees?
well, here they are:
http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_004.cfm
unbelievable (?) that many cmhc directors include chief operating officers of giant (private) home corporations (like mattamy, for example), a private home renovation company exec. (plumbing), a former goldman sachs employee, a member of trilateral commission…etc.,etc.
i guess it is not surprising that these are some of the people largely responsible for pushing cmhc into possible crisis mode (on the backs of average canadian taxpayers).
what a fascinating state of affairs.
@ Ralph Cramdown
i am more similar to you than you think.
http://i41.tinypic.com/2nkpf5u.jpg
#296 Dan
Blah, blah, blah
‘for the average Canadian”…
Today there are 8 listings in Leaside, one is under a million and it’s on Eglinton. Yes is seems like only yesterday ( it was 2010) when you could buy a Leaside bungalow for $650. That giant sucking sound is the sound of the dollars being sucked from our pockets. The house values are the same, our dollar is being debased.
Note to self.
Sleeping monster OK, wide awake, taboo.
Got It.
Smoking Man please read Garth Turner’s Helpful Reminders at the end of comment: try to submit once and stick to the topic (or subject to banning).
Hopefully a lot of small buinesses will open up with all those unemployed; have to put their thinking cap on in order to survive. Consumers should shop at a small business at least once every week to support your community. Stick to your morals and only then we will prosper. (Politicians need to amend to this rule also.)
#301 eddy on 01.12.14 at 5:50 pm
Today there are 8 listings in Leaside, one is under a million and it’s on Eglinton. Yes is seems like only yesterday ( it was 2010) when you could buy a Leaside bungalow for $650. That giant sucking sound is the sound of the dollars being sucked from our pockets. The house values are the same, our dollar is being debased.
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Hey Eddy
The one on eglinton is just for the lot there is no interior,No showings walk the lot,
Nice photo thou
#291 Smoking Man on 01.12.14 at 3:41 pm
#282 Fed-up on 01.12.14 at 2:01 pm
Ha, skip my posts, no one does. Even you.
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I skip all of them as well as do many others I’m sure, just accidentally caught this one as it was so short…
#291 Smoking Man on 01.12.14 at 3:41 pm
#282 Fed-up on 01.12.14 at 2:01 pm
Ha, skip my posts, no one does. Even you.
____________________________________________
I skip all of them as well as do many others I’m sure, just accidentally caught this one as it was so short…
Count me as a SM post skipper. I read some in the beginning, but most are hard to comprehend. While at first they were mildly entertaining, it’s just boring me now.
I live in Edmonton. I don’t see Alberta having a crash like the rest of the country. House prices are higher than I’d like here, but there are lots and lots of high paying jobs it seems.
I see more of an issue of people falling into two classes here, the haves (where each spouse makes 100k+ and there are an absolute ton in Alberta) and the have nots (those who make 50-60K)