The road ahead

ICE modified

Randi is 31, single, and a bon vivant Quebec guy.

Two days after we found out the wheels have started coming off the country’s job market, he sent me this comment: “Just wanted to tell you that all I have been around me at the workplace these days is people who bought condos no more than three years ago, who all hated it, and who have either sold at a loss or are seeing the price of condos on sale around theirs selling for lower than they paid for two or three years ago.”

Montreal, by the way, is the second-biggest real estate market in the country, and it’s in trouble. There’s a 14-month supply of houses for sale. Prices have flatlined. Condo sales are down 10%. And La Chambre immobilière du Grand Montréal is too embarrassed to release its official December stats. Quel dommage. They probably suck.

Friday’s jobs report was a warning shot over the bow of the middle class. Suddenly having the bulk of your net worth in one, expensive, mortgaged (or not) asset is a less-than-happy thought. As I mentioned, jobs matter more than interest rates. They’re even more potent a force than the emotional abuse a house-lusty spouse can inflict. And these days a majority of Canadians admit they’re less than secure their employment will last.

Remember: without adequate jobs, good wages, cheap rates and consumer confidence, there is no robust housing market. How many of those factors can we count on in 2014?

Glad you asked. Here are 10 things that will affect markets – real estate and financial – over the course of what looks to be a watershed year.

Short-term interest rates will stay where they are until the third quarter of 2015.
Given the country’s condo-based, weakening economy with a big trade deficit, routine job losses and debt-drenched consumers, the Bank of Canada’s been forced to punt its plans to raise its key lending rate. This may sound like good news. It’s not.

Variable rate mortgages offer the cheapest borrowing option for almost two years.
VRMs are based on the prime rate, which is based on the central bank rate. So, no change until at least the end of 2015. If you’re borrowing money, short is sexy.

Lines of credit, HELOC rates won’t budge until Bank of Canada moves.
No way the feds are going to risk upping the cost of business loans, given the fragile state of the jobs market. That also means your line of credit or secured house loan is going to stay at near-generational lows. Suddenly lots of people can be in the carry trade. Don’t know what that is? Then don’t do it.

US tapering will be ongoing and put upward pressure on bond yields.
There’s no turning back for the Fed. It will continue to systematically reduce its stimulus spending throughout 2014 as the slow and relentless US recovery inches ahead. The end of the bond-buying program will see prices fall and yields rise, but in an orderly way. So, don’t buy a bond index fund.

Long-term, fixed-rate (five-year) mortgage costs will rise again in 2014.
Banks fund their fixed-rate, fiver mortgages in the bond market, which has nothing to do with the Bank of Canada. These things popped up almost 1% last year and will be higher again by the end of 2014.

Higher bond yields and slowing corporate profits will take enthusiasm from stock markets.
Expect a correction on stock markets, but no crash. In fact, stocks will probably finish 2014 more elevated than at the end of 2013. But no 30% gain. If you missed that in 2013 because you were scared, well, c’est la vie.

Flight to safety and yield will mitigate prices of REITs, preferreds, as returns increase.
Interest-rate sensitive assets like preferred shares and real estate trusts will feel the bond chill, but as yields rise investors will be lured by returns approaching 6%. That will likely keep prices stable, plus you can get a dividend tax credit or maybe a non-taxed return of capital. Sweet.

Net job loss in Vancouver and BC will put downward pressure on real estate sales and prices.
It’s insane to buy a house in Vancouver even when you have a secure, well-paying job. But, whoops, BC is now suffering a net employment loss. Guess what that means?

Falling oil exports not helpful to Calgary housing market after its speculative burst.
Hard to underestimate the impact of fracking on US oil self-sufficiency, plus the dirty-oil campaign now building against the oil sands, or the death of Keystone. Calgary is so Vancouver, circa 2010.

Toronto real estate continue to segment, with condo oversupply and poor sales over $1.5 million
The nation’s biggest housing market is flying apart. Higher-end properties are stacking up, while bidding wars still erupt in the muddled, yuppified middle, and condos slide into a funk of illiquidity and oversupply. If you can sell, this is the year to do it. Surpassed only by last year. Or maybe 2012. Or 2011.

Finally, let’s circle back with Randi and his friends. He has insight on why 2014 is likely the year that condos flounder everywhere, and why so many people in the middle of the market (entry-level detached) have a troubled future ahead.

“Owning a condo is apparently now the equivalent of being a renter in 2010; it’s dirty, amateurish. Where they said “get a condo”, they are all now saying “get a house”. No one’s ego is allowing them to be the chumps who will go back to renting, so they’ll try to move up instead, whatever the costs, even after losing money on a condo.”

It may be a shiny new year. But you still can’t fix stupid.

136 comments ↓

#1 TurnerNation on 01.12.14 at 6:44 pm

[email protected]’s call centre called. They’re offering 2% in a TFSA. Then turning this money around at 3-9% by HELOCs and LOCs. Even the Mob is blushing.

After visiting this blog I’m seeing ads (but I’m a cager!) for the site :

http://www.bikerplanet.com/
“Biker Planet is a biker community for singles who are looking to meet other biker singles”

#2 DR on 01.12.14 at 6:48 pm

lots and lots of comments past few days. hard to keep up.

#3 cmon garth on 01.12.14 at 6:52 pm

At what price Do u buy gold and silver Garth?

#4 Retired Boomer - WI on 01.12.14 at 6:53 pm

Love the picture tonight. Car “slid” off the roadway, while the skater practices with his stick!

Fits the real estate, employment, and investment climate PERFECTLY! Drive carefully always.

#5 I'm stupid on 01.12.14 at 7:02 pm

No you can’t

#6 Entrepreneur on 01.12.14 at 7:04 pm

But, the realtors tell new buyers to buy a condo to get into the real estate market; is this called “sheep led to the slaughter house” or “mass controlled manipulation”. Who other can we trust in buying into real estate besides realtors…mom and dad? How can people sleep at night.

#7 Shpickey on 01.12.14 at 7:09 pm

Eggcellent piece of work

#8 father on 01.12.14 at 7:14 pm

people keep on saying Janet is a dove but who cares, they have Fischer and the rest of the hawks who can vote the opposite and now they say maybe QE did not work and interest rate suppression is not healthy so maybe interest rates might even normalize sooner than later. Is it to early to revise?

#9 zee on 01.12.14 at 7:15 pm

hi

People did not buy houses in the last few years because they had great jobs or there was job security, instead it was low interest rates. I know countless people earning low income with high priced homes. And the average person barely follows any economic news so all of this facts about the economy will not change anything. Mark my word, real estate will go higher and the main driver is low interest rates which will remain for a very long time. A one percent change does nothing and you have seen this with whats happened in the last few months in the real estate.

#10 Jay on 01.12.14 at 7:19 pm

Can the US really let bond yields rise all that much? In 2007, their national debt maintenance was already 400 billion. With over twice the debt they had then, and only a marginally larger economy, with fewer people working full time, it seems like that’s the next crisis waiting to happen.

#11 drydock on 01.12.14 at 7:22 pm

Wow,
Biker Planet rules.

#12 PJ on 01.12.14 at 7:29 pm

I disagree (respectfully of course).

As taper goes on given the horrible fundamentals and staggering debt levels, expect a stock market crash by the second quarter, panic will follow and the Federal Reserve will revise their tapering.

When US don’t buy, China don’t make. So goes Canada, Australia, Brazil, etc. In other words, expect additional job loss and pain.

A diversified portfolio at 7 or 8% return is currently useless as the BOC is devaluing our currency (91 cents US as we speak, and probably more to come). Expect deflation of the things we own, and inflation of things we need.

As money printing goes on, rich people will keep getting richer, the poor getting poorer, more social unrest around the world and more war talk in the Middle East.

I sincerely hope your 2014 forecast is right Garth, because quite frankly, I really don’t like mine. But I don’t think there is a way out of this, and 2015 will be even worse. If there was, Central Bankers would have resolved the crisis by now.

PJ

#13 Tri-Guy on 01.12.14 at 7:31 pm

Chambre immobilière du Grand Montréal is as embarrassed as Manti T’eo

#14 j on 01.12.14 at 7:33 pm

I was wondering if that post about Fortress ever came? I keep hearing about family friends dumping money into them.

#15 KommyKim on 01.12.14 at 7:40 pm

Re: Garth: Flight to safety and yield will mitigate prices of REITs, preferreds, as returns increase.

Won’t that fight to safety (From equities) also mitigate the downward pressure on bonds?

#16 Uh Oh Canada on 01.12.14 at 7:49 pm

Garth,

Will you be hiring a moderator for the blog? I know a few in need of work.

#17 sheane wallace on 01.12.14 at 7:51 pm

there would no tapering, the plans will change and January there would be un-taper.

#18 KommyKim on 01.12.14 at 7:55 pm

RE: #3 cmon garth on 01.12.14 at 6:52 pm
At what price Do u buy gold and silver Garth?

At $400 and $7 respectively.

#19 My thoughts on 01.12.14 at 8:10 pm

I would also like a post on Fortress. Heard a lot about it. Sounds too good to be true.

#20 Stephen Brewer on 01.12.14 at 8:11 pm

“So, don’t buy a bond index fund.”
“Higher bond yields and slowing corporate profits will take enthusiasm from stock markets.”

Sounds like a tough year for investors, despite the returns on REITs and preferreds. How in heck do we make 7% this year?

I said equities will likely finish the year higher. And why would anyone buy a bond index fund? I’m still aiming for 7-8%. — Garth

#21 45north on 01.12.14 at 8:11 pm

PJ: I sincerely hope your 2014 forecast is right Garth, because quite frankly, I really don’t like mine.

that got my attention

#22 Victor V on 01.12.14 at 8:12 pm

Suddenly lots of people can be in the carry trade. Don’t know what that is? Then don’t do it.

In the past, you have stated that it’s shrewd for those that know what they’re doing to borrow, invest and write off the interest. Are you suggesting otherwise now…?

Read it again. — Garth

#23 Joseph R. on 01.12.14 at 8:14 pm

“Falling oil exports not helpful to Calgary housing market after its speculative burst.
Hard to underestimate the impact of fracking on US oil self-sufficiency, plus the dirty-oil campaign now building against the oil sands, or the death of Keystone. Calgary is so Vancouver, circa 2010.”

I doubt so, Garth. The recent investment in Suncor by Buffett shows confidence in the Canadian Oil Sand Industry; as I am sure the news of it spread like wildfire in investor’s circles. Calgary housing is not fuelled by pure speculation but by the recent influx of new workers getting jobs.

The unemployment rate is still 4.6 %, way below the national average of 6.9 %:

http://www.cbc.ca/news/canada/calgary/job-vacancies-in-alberta-outstrip-available-labour-1.2477566

Also, remember the floods of last June and its consequence on the availability of housing in the short-term.

#24 World According To Garth on 01.12.14 at 8:17 pm

Considering Kanada in the Western World:

Pays some of the highest taxes
Has the worst healthcare
Worst education (it’s free where the taxes are the same as ours)
Worst infrastructure
Worst managed govt (BILLIONS in resource royalties and were still broke and charging kids for school? Germany as NO resources)
Worst banking services ( still no debit VISA at the 5 banks like the rest of the planet earth)

Does it really surprise anyone we are LAST to fall in RE? We’re last at everything. But as long as those $91,000 a year govt workers have our back were good right? And just how is that working out?

#25 The 40% on 01.12.14 at 8:27 pm

I finally started my non-cowboy portfolio in my TFSA a couple of months ago and have been pleased with the results. Given the high likelihood of rising interest rates, I and sure others would find a column looking specifically at the fixed-income side of the equation extremely helpful. Thanks for your consideration.

#26 Freedom First on 01.12.14 at 8:28 pm

Thanks Garth, enjoyed your insight today.

Made me think of the # of people who write you to argue with your investment strategy. Makes me think that many people can’t see the fact that you are promoting the safest most conservative and successful style of investing for the long term.

I remember past housing crashes, and how the big investors moved into the most severely affected areas and bought 10+ houses, or 20+ townhouses, as high as 50-100 properties at a time, as the masses were being fleeced. I remember talking to a RE agent, as I bought at this time, who told me she had an investor who asked her to pick 20 good quality houses with features he described in the areas he gave her. She did this, and after she showed him the 20 houses, she asked if he was interested in any of them. He said, yes, I’ll take them all. This is normal, and has recently happened in the States when their market crashed. Follow the money. My point is, the majority of people will do the opposite. This Canadian RE run up is a wonderful example.

The fact is, being balanced, liquid, and diversified is extremely difficult for people to do. Buying any asset at a high price, and selling at a low price is very easy to do. I have seen it played out before, all of a sudden, job gone, house gone, no money, wife and kids gone. It is ugly, and very sad.

Garth, what you have written recently, about Canadian debt levels, Canadians having 85% of their wealth in RE, 70% of Canadians having no workplace pension, 40% of Canadians living payday to payday, 70% of Canadians owning homes, and the # of Canadians who can not come up with only $10,000 cash, etc. is truly frightening. Not to mention the lowest interest rates ever with record high prices and record debt levels at the same time, and yet, people cannot see, that as Canadians, stupid is as stupid does……always, Freedom First.

#27 Bob Rice on 01.12.14 at 8:35 pm

Montreal “in trouble”? Come on? Really? That entire province has been “in trouble” ever since 1960 and Lesage..

Et où habitez-vous? — Garth

#28 Non Smoking man on 01.12.14 at 9:01 pm

#12 PJ , Central Banksters are the crisis.

#29 Bob Rice on 01.12.14 at 9:02 pm

Montreal “in trouble”? Come on? Really? That entire province has been “in trouble” ever since 1960 and Lesage..

Et où habitez-vous? — Garth
_______________________________________________

Au cœur de la reprise économique

#30 Non Smoking man on 01.12.14 at 9:07 pm

Gold is the money of Kings
Silver is the money of Gentlemen
Barter is the money of Peasants
Debt is the money of Slaves

The 16th Century called. You forgot your codpiece. — Garth

#31 Keith on 01.12.14 at 9:08 pm

I hate when people say “it’s different here” and they cite factors which are not different. That said, my question is this In Vancouver, the home ownership rate is about 50 percent, single family homes are daily being torn down and converted to duplexes, and in East Vancouver, there is still no significant supply of single family homes on the MLS at any price. Is it different here?

#32 joe the realtor on 01.12.14 at 9:12 pm

Prices will keep going up again this year. It does not matter if people lose a job or can’t make the mortgage payment as somehow they will survive. Worse comes to worse they will sell for more money. Yes blog dogs people are losing jobs and the economy is slowing down but everything will work out.

#33 Babblemaster on 01.12.14 at 9:14 pm

“Given the country’s condo-based, weakening economy with a big trade deficit, routine job losses and debt-drenched consumers, the Bank of Canada’s been forced to punt its plans to raise its key lending rate.” – Garth

——————————————————-

Exactly. Garth, you’ve been forced to make revisions to your predictions of interest rate hike many times over the last few years. You should just admit that rates are NOT going anywhere for a long, long time. Except for even lower, maybe.

#34 cariboojohn on 01.12.14 at 9:18 pm

Hi Garth.
I have worked for a major steel supplier, in Vancouver.
For over 38 years. At the height of the oil boom 3 years ago.We use to load six, B-train trucks a shift. 100.000 LBs. per truck.All went north to Fort Mac. for the oil fields When the oil price dropped, Loads fell off to maybe two a shift.Union job good money.April 30. is the last shift.
For a 100 year old company. Lots of people .

#35 CK in AB on 01.12.14 at 9:20 pm

What a scary 2014. I’m looking for a rock to hide under.

#36 Smoking Man on 01.12.14 at 9:29 pm

Damn good predictions garth.

Only thing you got wrong, taper, far too many Americans out of work, you can put lipstick on a pig but it’s still a pig.

Disability and food stamp rates still climbing.

#37 Bob Rice on 01.12.14 at 9:36 pm

#9 – ” A one percent change does nothing and you have seen this with whats happened in the last few months in the real estate.”

Maybe 1% isn’t enough to reverse the market, but 2% or more and you’ll see what happens… Many simply won’t qualify – those people you point out who have crappy wages… especially since prices will still rise this year and maybe next…

There is a “perfect storm” brewing, IMO… This could get very ugly…

#38 Bob Rice on 01.12.14 at 9:39 pm

#31 “…50 percent, single family homes are daily being torn down and converted to duplexes, and in East Vancouver, there is still no significant supply of single family homes on the MLS at any price. Is it different here?”

This is simply a function of land value appreciation… if you can get 10 units on an acre and the city encourages “densification” then you’ll see SFH get form down

Someone will one day explain to me why the world’s least populated nation needs to densify…

#39 crowdedelevatorfartz on 01.12.14 at 9:41 pm

Soooooooo, in late 2015 we get to hear all the hitching and wailing when people go to renew their submerged mortgages……..cant wait.

#40 DR on 01.12.14 at 9:42 pm

About “its different this time”

Anyone here know what effect development has on real estate prices?
Last time I checked Toronto was kind of number one in terms of buildings (condo and office) currently under development. In Nhgorth America.

So doesn’t that mean things are different?
Buildings popping up where they didn’t exist before?

Anyone see this before?

#41 quebec economist on 01.12.14 at 9:53 pm

“Flight to safety and yield will mitigate prices of REITs, preferreds, as returns increase.”

Garth I think you must evolve from these old tools for balancing portfolios. Two things have changed since in the last 20 years:

1. Multinational mega-corporation are numerous and stronger and more durable then individual government or nations (i.e. pfizer, mosanto, SNC Lavalin…to name a few)

2. ETF allows you to invest in a whole bunch of the above companies for less than 50$.

Two years ago I evolved my ways of investing (after careful analysis). I no longer hold bonds or REIT, waste of time . My portfolio has 80% in three ETFs (world Heathcare(XHC), world Infrastructure (CIF), world Agriculture(COW) ) . This gives an international portfolio of non-cyclical goods in mega-corporation. The world would have to stop turning for me to loose on this portfolio. In the long run (3years) this will never be outperformed by bonds, reits…Even in the worst of market crashs.

5 years ago these tools did not exist… REITS, Bonds, are today what Mutual Funds and GICs where in the 90s…a waste of time! Stop aiming for 8%, with the above portfolio 15% is the new normal.

#42 Juice on 01.12.14 at 9:53 pm

I second “The 40%’s” request for a post discussing your fixed income allocation for 2014. Having recently purchased XBB (not wanting to choose between bond mutual funds with MER’s upwards of 1.25%), I would like to hear your thoughts. I also have exposure to preferreds and REIT indexes but your comments about bond ETF’s concern me.

#43 Hicksville Alberta on 01.12.14 at 10:01 pm

The dollar is weakening a bit again tonight.

Seems this may be the Goat that will be sacrificed at the altar by TPTB for now at least and thus it may mitigate somewhat for a time the pressure on commodity pricing.

In fact if one wants to keep their Canadian $ then some commodity stocks may need to be included in one’s portfolios.

I dumped most of my remaining Canadian $ on Friday and don’t plan on going back into them for now as this whole Canadian thing is starting to look like a nightmare.

If the lack of liquidity in real estate exacerbates ultimately yielding a significant downward gap in real estate pricing in this world class bloated market we could see a real shxtstorm in the Canadian Dollar as a whole lot of real estate has been secured by highly leveraged debt.

#44 Smoking Man on 01.12.14 at 10:05 pm

I’m going back to school, University of Toronto. Just to write about the experience.

This is how they got the sale. And my money.

The below is their sales pitch. Anyone notice the typo.

I just can’t resist.

The entire purpose of this course is to help authors, agents, and publicistsincrease sales of their
books. To reach that point, you will:

#45 bentoveraying taxes on 01.12.14 at 10:16 pm

Hmmmm…i don’t know man

“Net job loss in Vancouver and BC will put downward pressure on real estate sales and prices.
It’s insane to buy a house in Vancouver even when you have a secure, well-paying job. But, whoops, BC is now suffering a net employment loss. Guess what that means?

Falling oil exports not helpful to Calgary housing market after its speculative burst.
Hard to underestimate the impact of fracking on US oil self-sufficiency, plus the dirty-oil campaign now building against the oil sands, or the death of Keystone. Calgary is so Vancouver, circa 2010.”

Huge gains in civic service job creation and raises of wages , perks and pensions all on schedule…don’t expect the top 20% of the population to stop the steady march into the lifestyle of the rich and famous…. I expect the floor to be put in with taxpayer subsidies of the elite class.

No relenting in speculator HAM and another 300,000 to 500,000 ( inc of families and dependants) imigrants of all classes underpinning sales with dough that was never taxed in Canada…..shucks eh?

Keystone XL is not the keystone of the oil export infrastructure gains we will continue to see. The stealthy oil men have been building a huge alternative by engaging rail. Massive projects are finished (one is the 200,000 bpa Bruddheim station for CUS). The ‘tar sands’ are on schedule to export more oil than ever….regardless of the headline news regarding another boondoogle creation ‘The Great Bear Sea’….bwahahahahahahahahahahahahahaha!!! No wonder the oil and transpo stocks have all doubled this year…while everyones had their head up their green bums. CP Ril alone was up $5.88 on Friday after a run from $78 to $167 in the past 52 months.

My advice is to stop watching the CBC or reading the G&M ……The Toronto Star isn’t fit window cleaning as far as investment advice is concerned.

BTW…for all the non investment doomers…and mayI add the proviso that I invest I do not take socially correct positions……that CDN gold stocks as an index….are up 12% this past week. For all the reasons you mention Garth that the climate will pale in ’14…..that is also an excellent reason to speculate on safe haven issues……surprise…..gold provides that safe haven corner. Not everyone will run to prefs, bonds or remain in cash. And don’t equate Canada with the rest of the world…as the US improves so will the emerging markets…..some already up north of 30% and heading higher….VEE….XEM…..anyone noticing?

#46 High Plains Drifter on 01.12.14 at 10:23 pm

I have a quote from the times of the Roman, Cato.” You shall defend me with your words and I shall defend you with my sword”. Anybody know of any of those deals nowadays?

#47 OttawaMike on 01.12.14 at 10:30 pm

#42 Juice on 01.12.14 at 9:53 pm
Bond ETFs:
Just Google bond premiums. In simplified terms, with this low interest environment- ETF’s and and other buyers have been paying a higher price for bonds than face value.

As interest rates rise, you will find that the prices those ETF’s paid will drop and so will the value of the bond ETF.

#48 William of the North on 01.12.14 at 10:31 pm

Going to Toronto on Thursday. Where’s the best place to buy physical gold and silver? (And apparently Cod pieces…do they make those with gold or silver?)

#49 Terry on 01.12.14 at 10:37 pm

It does look like Canada will diverge in the opposite direction of the USA economic comeback. The 15 year housing value expansion in Canada is now running on vapour. I believe the pivot point has been reached and the slow uneven pullback has started and will last right through to the end of this decade before reaching bottom. This is the peak of prices, this is the top of the market! If you wait any longer to sell you will be realizing continual lower and lower prices each year for the rest of this decade.

#50 Chris on 01.12.14 at 10:38 pm

I have been reading your column for a couple of years now, and I really enjoy how you not only educate people, but are also an excellent writer.

Thank you very much. And what a sense of humour!

#51 Realtor #1 on 01.12.14 at 10:46 pm

So no price correction in the gta for a while. Say it with me everyone “next year”. I bet you wish you bought when everyone told you to. Have fun renting another two years. For some it will be their 6th year renting because of this blog.

Pray for 2010 prices.
Canada bond yields are down, your only hope is job losses – forces people to sell and reduces the amount of buyers. There will was be mortgages under 4% either variable or the 2 or 3 year or the 50/50.

#52 Andrew Woburn on 01.12.14 at 10:51 pm

Is the U.S. economy really about to go boom?

Some thoughts from leading US economists

http://www.politico.com/magazine/story/2014/01/will-the-economy-boom-in-2014-101687.html#ixzz2qF8BqPUM

http://www.politico.com/magazine/story/2014/01/will-the-economy-boom-in-2014-101687.html#.UtNTu55dWzl

#53 BB on 01.12.14 at 10:53 pm

This is a conversation worth reading.

http://www.reddit.com/r/PersonalFinanceCanada/comments/1v1cio/i_am_a_financial_advisor_and_run_my_own_business/

#54 Frustrated Kiwi on 01.12.14 at 11:00 pm

#31 Keith Well it’s the same here in Auckland, and I suspect it’s the same many other places (Norway, Australia, other?). We also had no real price correction and prices continue on up disconnected to any fundamentals. How and when will it end? No idea, it’s one reason I haunt this site. But simple mathematics shows it can’t go on indefinitely.

#40 DR Ireland and Spain come to mind. You should have seen their building booms! The fundamental laws of supply and demand (more supply = lower prices) tend to kick in eventually.

#55 T.O. Bubble Boy on 01.12.14 at 11:01 pm

So – say no to Bond ETFs in 2014… how about inflation-protected? (XRB, etc.)

Once the loonie sinks below 90 cents, won’t inflation kick in (since we import so much from the U.S.)?

#56 Marco Polo on 01.12.14 at 11:06 pm

At least the Realtors are honest about claiming their vocation in each post. Yes, no jobs, low growth, we can all sell overpriced sheds to each other, most of which meet the minimum code needed to keep them up. Lol. This is embarassing.

From a quality standpoint, we live in the third world here. Houses with engineered OSB joists, holding up OSB sheathing on spruce framing. Roof is OSB too. I think the shares in glue companies will go down, thats all thats holding these ‘investments’ together.

Overseas, framed houses are for temporary use. Everyone else lives in solid concrete or structural brick construction, many even have slate or ceramic roofing.

Perhaps after everything has slowed down here, builders making quality, european homes will come out ahead.

#57 Squatter on 01.12.14 at 11:14 pm

#51 Realtor #1
Pray for 2010 prices.
————————————————–
Pray to keep your job.

#58 Andrew Woburn on 01.12.14 at 11:18 pm

#38 Bob Rice on 01.12.14 at 9:39 pm
Someone will one day explain to me why the world’s least populated nation needs to densify…
=============================

It’s so more and more people can live closer and closer to all the cool clubs and restaurants they can’t actually afford to visit. People will endure any amount of pain, cost or inconvenience in the quest for identity (see spike heels, tattoos, body piercings and fixies).

#59 Carpe Diem on 01.12.14 at 11:46 pm

“But you still can’t fix stupid.”

I’ve been saying this all along!!! And I have tried to save upper-middle class idiots I know. They shall learn.

Some good news …

I called my 70-something mom this afternoon and she was in the middle of reviewing an offer for her condo in Montreal! I didn’t keep her on the phone.

It has been a few years, I’ve wanted her to sell. She ain’t stupid but with the correct information, she had to figure things out and sell just-in-time!

#60 Sideline Sitter on 01.12.14 at 11:46 pm

I’m chiming in with the rest… If not Bond ETFs, then what??? Do I let the $$$ sit idly in the bank and wait for bottom? Timing the market is impossible!

#61 Snowboid on 01.12.14 at 11:55 pm

#51 Realtor #1 on 01.12.14 at 10:46 pm…

Certainly a number of realtors posting tonight still stuck in another dimension.

We’ve only been renting for three years in the Okanagan, but based on buying vs. renting it’s no contest. If we had purchased the luxury condo we currently rent we would be behind by $ 82,000.

Adding in mortgage payments, cost of purchase, strata fees, property tax, maintenance and repairs – we are ahead by $ 47,000 over 36 months.

The remainder is interest earned on the proceeds of our Victoria home sale three years ago.

This doesn’t count the fact that prices are down in the Okanagan as well as Victoria – even more of a reason to rent.

Our only regret, not selling and renting earlier. Buying is still a way off for us, we are patient as ever.

#62 Victor V on 01.13.14 at 12:20 am

http://www.thestar.com/business/personal_finance/investing/2014/01/12/as_economy_grows_company_dividends_are_rising_mayers.html

So if the economy continues to roll along and the trend in dividend increases continues, we might expect another year of rewards for shareholders. Here’s a snapshot of three less volatile sectors.

Banks: The Big 5 pay out between 40 and 50 per cent of profit as dividends. In 2013, most raised dividends twice. Royal Bank’s rose 11.7 per cent, Scotiabank by 8.8 per cent and TD, 10.3 per cent, as examples. Analysts see a 7-to-8 per cent increase this year.

Telecoms: BCE has increased its dividend nine times since 2008, with common shares currently yielding 5.1 per cent. Rival Telus increased its payment 13.5 per cent in 2013 and said in May it is aiming for two increases a year through 2016 with a growth target of 10 per cent each year.

Utilities: Pipeline firm Enbridge has grown its payments by an average 12 per cent a year in each of the past 10 years. TransCanada Corp. has increased dividends each year in the past 10 at a 5.5 per cent average clip.

That’s not a bad track record at a time when money under the mattress is yielding about as much as it is in a savings account.

#63 Paully on 01.13.14 at 12:39 am

Realtor #1, don’t count the years. When you can rent for half of what it would cost to carry the house, you just keep renting and let someone else eat the loss.

#64 T.O. Bubble Boy on 01.13.14 at 12:42 am

@ #60 Sideline Sitter on 01.12.14 at 11:46 pm
I’m chiming in with the rest… If not Bond ETFs, then what??? Do I let the $$$ sit idly in the bank and wait for bottom? Timing the market is impossible!
———————————————-

A few ideas for other fixed income investments:
– individual bonds (you can wait for maturity), but only if you are comfortable with the date – ideally something not too far out
– preferred shares
– cash (high interest account, money market, redeemable GIC, etc.)
– low volatility dividend-paying companies
– hedging with an inverse bond ETF like HTD (up almost 20% last year):
http://www.horizonsetfs.com/pub/en/etfs/?etf=HTD&r=o

#65 Tony on 01.13.14 at 12:43 am

Re: #12 PJ on 01.12.14 at 7:29 pm

That’s right ponzi schemes and pyramids don’t have corrections they crash. This is the stocks markets around the world of today.

#66 45north on 01.13.14 at 12:48 am

TORONTO – Jackie Crocker is fighting Hydro One’s plans to cut down trees and move a high voltage power line to her property from the other side of the street.

She’s angry because the existing power line is on her neighbour’s property — and he’s a Hydro One manager.

http://www.ottawasun.com/2014/01/12/hydro-one-plan-crosses-the-line

so the high voltage line goes from the Hydro manager’s side over to Jackie’s side!

#67 Son of Ponzi on 01.13.14 at 12:55 am

A good example of a Richmond realtor:

Don’t miss KINSBERRY! Dlx newer T/Hses just across famous Ironwood Mall, No % Rd & Rec facs nearby. Super for this approx 1560 sf Big size; 3-lvl loverly S-N expos. airy unit. Rare 3-car attach garage. 2.5 full baths, 3 bedrooms & big den. Master bdrm @ quiet rear side. On Main Fl: 9′ hi ceiling, s/steel modern kitchen appls w/gas stove. Cosy elec F/pl. Balc. Lamin wood fl. Qlty granite counters all thru & alarm, b-in vacuum, trendy interior color paints. Esy access to Hwy to (Nth) Vanc & to (Sth) Massey Tunnel. Bal of 10-yr Home Warranty etc. Meas approx.

#68 KommyKim on 01.13.14 at 2:01 am

RE: #64 T.O. Bubble Boy on 01.13.14 at 12:42 am
A few ideas for other fixed income investments:
– individual bonds (you can wait for maturity), but only if you are comfortable with the date – ideally something not too far out

There’s really no difference between holding a bond ETF and actual bonds. Here’s an example:
You buy a $100 bond yielding 5% for one year.
After one year you would get $105 (100 principle + 5 interest)
But lets say, one day after you buy that bond, interest rates double to 10% and the next day the stock market crashes and you need to sell the bond to re-balance by buying more stocks on sale.
No one is going to buy your 5% bond for $100 because they can buy one elsewhere that gives 10%. They will only pay you $50 because $50 x 10% = $5

But you are correct in saying to keep the bond or bond ETFs duration short.

#69 Ronaldo on 01.13.14 at 2:14 am

#38 Bob Rice –

”Someone will one day explain to me why the world’s least populated nation needs to densify…”

Probably because low interest rates and speculation have pushed up prices of land to the point that it is no longer affordable or profitable to purchase a peace of land to build a single family home in the major centers in Canada. Unless your moving to Telegraph Creek.

#70 KommyKim on 01.13.14 at 2:19 am

Got my math wrong on that. It’s should read:
They will only pay you $95.46 because $95.46 + 10% = $105
Time for bed.

#71 Waterloo Resident on 01.13.14 at 2:20 am

Yesterday people were complaining about how the top 1% and CEOs of companies are taking all of the cash and giving workers the breadcrumbs. Well, that’s mostly true. The perfect way out for the MAJORITY of Canadians is this: If the pay is too low, then quit your job and start your own business; become your OWN CEO. (Simple).

First figure out who are the customers of the company that you currently work for, and then if possible, start up a company that can sell to those same customers a similar product. If that’s not possible, then just start up something similar to a popular franchise. Start up a Coffee & Donuts World shop and compete with Tim Hortons.

#72 juno on 01.13.14 at 2:22 am

#9 zee on 01.12.14 at 7:15 pm

I hope your right, that the banks will keep on lending at ultra low interest rates to poor $#$cks who can’t maintain.

This will only make the crash harder when the poo hits the fan.

The should just get rid of credit checks to make the lending easier. (oh I forgot they already did)

#73 juno on 01.13.14 at 2:24 am

Short Canada , 70% of Canadians think like Zee (#9)

I hope he’s hedging his bet right now and leveraging as much as he can

#74 World According To Garth on 01.13.14 at 3:19 am

http://armstrongeconomics.com/2014/01/12/do-government-always-default/

But we got them there fancy puters that them bankers can use to print money…… I mean type in credit out of thin air(sorry Garth) and charge us interest on the credit they invented out of nuthin to keep the ekonomee going so its difrint this time yuck yuck.

#75 Freedom First on 01.13.14 at 3:49 am

#38 Bob Rice

Easy question to answer. Large land mass and a small population, versus small land mass and large population.
To simplify, it is the reason why their transit systems work, and ours is the shit$. More simplified, LARGER area and way fewer $$$$$$$$ to work with. Never mind the unanswered question, the biggie: Energy supply.

#76 Bailing in BC on 01.13.14 at 3:52 am

My job is toast come April Fools day.

Jimmy and Glen (Patterson and Clark) are closing her down.

#77 Keith in Calgary on 01.13.14 at 6:52 am

Sitting here looking out the balcony of my penthouse hotel room in the St. Germain district of Paris (5 ar) . Justhaving a coffee, after enjoying a much needed rest. Spent the last 5 days pounding the streets in what are now apparently none too comfortable shoes.

Yesterday the wife and I took the Eurostar train to London for a day trip……..had fish and chips in the “Hung, Drawn and Quartered” pub…….walked thru Park Lane……..saw all the usual attractions……..then drank a bunch of champagne in the bar car on the way back while clipping along at 300 kmh.

Going to go and see the Picasso museum today, then walk down the Champes de Elysee with maybe a diversion over to Le Bar in the Hotel Normandie before some lunch at one of the many spectacular cafes on the corners of this amazing city.

Was walking thru the Louvre………itself a centuries old comples…….looking at 4,500 year old priceless antiquities sculpted from gold, amongst other things. Tried my best to find the Fiat money exhibit, but I guess they just couldn’t be bothered building another entirely new wing for the thousands of failed currencies that exist.

And people in the real estate industry have the balls to compare Vancouver, Toronto, and even Calgary (LOL !!!) to these world class cities.

#78 Buy? Curious? on 01.13.14 at 6:59 am

Hey! Is Bauer a Canadian company? Oh right, sold to Nike. Selling Out or Cashing in? Leave your morals, ethics and loyalty at the door. Start convinving your folks to start selling their places this Spring and let’s party! Increase Supply because Demand is there! Whooohoooo!

http://www.youtube.com/watch?v=sHL7Cqsg-GY

#79 Macrath on 01.13.14 at 8:40 am

#42 Juice
Agreed stay away from bond mutual funds your just paying some manager to gamble your money in the bond market for an exorbitant fee. If it has to be a mutual fund make it a bond index fund.

Weighted Average Duration (yrs)

The mean duration of the underlying bonds in the portfolio of the fund.

Duration is a measure of the responsiveness of a bond’s price to small changes in interest rates. Bond prices generally move inversely to interest rates.
XBB= 6.76 years
XSB = 2.77 years so it would theoretically decline half of what XBB would decline for a given interest rate increase and be filled with new bonds at the new rate within ~3 years

CLF AND CBO have a 5 year laddered strategy to mitigate the effects of interest increases but have yet to be tested In practice.

You can buy bonds directly and hold them to maturity and get all your money back + interest. They are expensive unless you have a very large megabuck purchase.
http://www.pfin.ca/canadianfixedincome/Default.aspx

Then there is the backwater credit union GIC only sold to accredited Wusses.
http://gicdirect.com/

My dilemma keep or dump XCB

I third “The 40%’s” request

#80 Macrath on 01.13.14 at 9:09 am

#68 KommyKim
There’s really no difference between holding a bond ETF and actual bonds.
————————————————-
The difference is that the Fund can buy a hundred million dollars worth at a time and get a better price (higher yield) than you, unless I am severely underestimating your net worth.

But there is a difference between a bond ETF and a bond index mutual fund. — Garth

#81 torontorocks on 01.13.14 at 9:51 am

#48 WIlliam of the North – Scotia Plaza in downtown TO still has the gold desk where you can purchase.

As for a codpiece, not sure – maybe aren’t we naughty or any number of those types, Northbound leather?

Walmart?

#82 The real Kip on 01.13.14 at 9:52 am

“Hard to underestimate the impact of fracking on US oil self-sufficiency”

Well you must be the only one finding it hard. With US consumption at 8-billion barrels annually, conventional reserves in terminal decline, sky high shale oil drilling costs for questionable amounts of oil, the US will never be self-sufficient.

Not even the American oil industry believes they can extract 8-billion barrels annually from fracking shale. The fact that they are fracking oil in the US is more an indication as to how desperate we are as a species to extract it at any cost.

#83 Ralph Cramdown on 01.13.14 at 10:06 am

Anybody following the former senator Mac Harb story? RBC took a mortgage on his house and gave him money, but he sold 99.9% of the house a few hours later. RBC complains that this is fraud. Probably true, unless he changed his mind about selling the house between getting the money and a few hours later, which is unlikely.

BUT… Why would RBC care? If they’d duly registered a charge on title, it wouldn’t matter whether he subsequently sold the house. Did RBC give him the money BEFORE they registered the charge? Because that would be stupid.

Fast forward a few years, and Mac wants to buy another house. He goes to RBC, tells them he still owns all of the first house, and RBC gives him money again. Sometime later, after finding out he didn’t, in fact, own all of the first house, RBC claims fraud. So apparently, if you write down that you’re rich because you own the Brooklyn Bridge, RBC legal takes you at your word instead of punching a few buttons on the desktop computer to check with the land office.

Remember folks, it’s different here, because our banks don’t make bad loans like they did in the US.

#84 Dude Duderson on 01.13.14 at 10:08 am

My 5 year fixed mortgage is up for renewal in May 2015.

Pretty poor timing really as from everything I’ve read here and elsewhere, we should be into rate increases everywhere by that point.

I’d like to move into a variable rate at some point as I realize in the long run it should be cheaper.

I’m just wondering what the better option will be for renewal, a shorter fixed term rate (2 yrs?) as close to the variable rate I can get at the time, or just signing up for a VRM and accepting that the cost of servicing the mortgage is going up, and budget accordingly while growing my diversified (and liquid :) ) portfolio.

#85 T.O. Bubble Boy on 01.13.14 at 10:17 am

@ #84 Dude Duderson on 01.13.14 at 10:08 am
My 5 year fixed mortgage is up for renewal in May 2015.

Pretty poor timing really as from everything I’ve read here and elsewhere, we should be into rate increases everywhere by that point.

I’d like to move into a variable rate at some point as I realize in the long run it should be cheaper.

I’m just wondering what the better option will be for renewal, a shorter fixed term rate (2 yrs?) as close to the variable rate I can get at the time, or just signing up for a VRM and accepting that the cost of servicing the mortgage is going up, and budget accordingly while growing my diversified (and liquid :) ) portfolio.
——————–

VRM with the flexbility to lock in if/when Bank of Canada rates start moving

#86 :):(Ying Yang on 01.13.14 at 10:22 am

#44 Smoking Man on 01.12.14 at 10:05 pm
I’m going back to school, University of Toronto. Just to write about the experience.
This is how they got the sale. And my money.
The below is their sales pitch. Anyone notice the typo.
I just can’t resist.
The entire purpose of this course is to help authors, agents, and publicists increase sales of their books. To reach that point, you will:

……………………………………………………………………..

Smoking Man seriously this is what I told you a couple of months ago. Go take a creative writing course. Try it; it will open up your mind. Perhaps better than your drugs and alcohol could ever do. My brother “The codester” in Hong Kong took a creative writing course as well. He said it has paid off in $$ when communicating to his co-workers and superiors. Now he runs the programming and IT divisions of a large Asian bank. You can become a very significant and integral asset when people examine your carefully crafted communiqués.

#87 ozy -missing from forecast on 01.13.14 at 10:25 am

missing from forecast is the % appreciation in central Toronto, you know, good and too good areas. Shall we say 10-15% or more, Garth

and the condo decrease, will it be 0-5% ????

#88 Capt. Obvious on 01.13.14 at 10:35 am

“So, don’t buy a bond index fund”

A short duration fund is fine. There is nothing special about an index fund versus holding individual bonds if holding them for long term. In one case interest payments will increase if yields increase, but the value of the fund will decline; in the other you forego higher interest payments and get face value back. Avoid long duration funds and bonds in general if you’re using bonds for the “safe” portion of your portfolio.

#89 Detroit Rock City on 01.13.14 at 10:38 am

What’s all this talk about NOT buying bond ETFs? Every single beginner’s investment book I’ve read over the past 3 months begs the reader to always have one bond ETF in his portfolio to balance the volatility of the equity ETFs. Isn’t it a common ‘couch potato’ strategy? Now what? You saying the rules have just changed? Or is this blog only for hot doggers?
The common man grows tired of the hoodwinking, the swindling, the shenanigans. Is no one at the wheel anymore?

#90 Tony on 01.13.14 at 10:43 am

Re: #84 Dude Duderson on 01.13.14 at 10:08 am

Before ever investing money the first thing you should do is pay your mortgage off first. Unless you’re going to lose your house to the bank.

Amazing. Mortgages are 3%. Balanced portfolios have given 10% over the last four years. — Garth

#91 -=jwk=- on 01.13.14 at 10:44 am

So no price correction in the gta for a while. Say it with me everyone “next year”. I bet you wish you bought when everyone told you to. Have fun renting another two years. For some it will be their 6th year renting because of this blog.

This is our 2nd year of renting a big house for half what it would cost to buy it (after 13 year of condo ownership). We’re having a blast, renting a house has all the benefits of a condo (maintenance free ,no upkeep, etc) with all the benefits of a house, big space, big backyard, etc.

Oh yeah, we used the proceeds from selling the last condo to but houses in the US – 2 @75k each. The rent for those houses covers our rent up here so we don’t actually pay rent. I call it renter arbritage – buy 150k ins assets in one location to pay for 600k asset in another.

Really struggling to see the downside here. We get the same house as our neighbours (whose basement leaked, again, on the weekend) without any of the hassle. More years, please.

#92 Tri-Guy on 01.13.14 at 10:50 am

William of the North on 01.12.14 at 10:31 pm
Going to Toronto on Thursday. Where’s the best place to buy physical gold and silver? (And apparently Cod pieces…do they make those with gold or silver?)

keep driving right by Toronto and go to Jack Hunt Gold and Silver in Niagara Falls New York.

#93 james on 01.13.14 at 11:04 am

#51 Realtor #1 on 01.12.14 at 10:46 pm

Amen to that. 6 years of wasted time.

#94 ☢ ☢ ☢ recharts on 01.13.14 at 11:11 am

I am now catching repeated sales and sales that did not go through.
Here is one in GTA

224 Pinetree Way
Sold: 755000 Contract: 2013-08-13 Sold: 2013-08-13 Posted: 2013-08-13

Couple of months later:
Initial Asking price: 699900
Last asking price: 699900
Sold for: 691000

But of course the initial sale was reported for the stellar month of August.
FY MLS !
☝ (Microsoft does not have the right finger for this but you get the message)

#95 Bdy sktrn on 01.13.14 at 11:11 am

#69 Ronaldo on 01.13.14 at 2:14 am
#38 Bob Rice –

”Someone will one day explain to me why the world’s least populated nation needs to densify……………

Vancouver used up all it,s empty land about 60yrs ago, it has been densifying ever since. Just happening faster now. I,d rather a shovel to the back of the head than have to live way out in langley or richmond. 6 bux toll for a visit from surrey now. Knight st bridge a regular gong show. Many grt reasons for living near dt in van. Densification is just getting started . The new community plans for most van hoods will make the current density look like manitoba,s.

Re the world class paris _ is the inescapable,intense, ever present stink of urine just as bad in the winter as the rest of the year?

#96 Incubus on 01.13.14 at 11:12 am

“Montreal, by the way, is the second-biggest real estate market in the country, and it’s in trouble. There’s a 14-month supply of houses for sale. Prices have flatlined.”

And they keep building more units in run down area!

I really don’t know what kind of moron will buy theses condos?

#97 Holy Crap Wheres The Tylenol on 01.13.14 at 11:16 am

While the rest of the world expects the USA to crash and burn I would like to remind you that expected revenue growth for 2014 is going to run around 3.5 percent. My investor associates in the US are floating a 5 percent escalation thanks to economic improvement. I would be hopeful that that would occur but perhaps that is too optimistic. The past connection between the economy and profit growth suggests the expected economic pick-up could add between 3 to 5 percentage points to S&P profit growth. I would therefore expect QE to fall off shortly as Band-Aids would no longer be required as companies start signaling that they’re ready to spend more on capital expenditures after four years of vigilance while keeping the ship afloat. I have witnessed greater growth within my own company in the last two quarters from my US customers. The fiscal cliff was a bunch of nothing about nothing and the world didn’t come to an end so here’s to hoping for future growth!! Cheers!

#98 Bdy sktrn on 01.13.14 at 11:22 am

Does the sharp drop in 10yr yield (2.85) indicate the taper is on hold?

Looks to be headed right back to 2.5

#99 Herb on 01.13.14 at 11:29 am

#83 Ralph Cramdown,

but Harb was an Honourable Senator and not some average Joe. A banker hardly would question the word of a member of the political establishment. Goodwill is important in business, and you never know what influence they might be able to exert for or against financial institutions.

But now that Harb has been shorn of any political influence, he’s fair game, let the chips fall where they may.

#100 ☢ ☢ ☢ recharts-TO SFH last sales report on 01.13.14 at 11:39 am

When the vibe of the central area is gone (they sold very few properties there):

Sold under:25
Sold over:4
Sold for asking:0

Avg % above or under the Asking price today:-3.66
Avg sale price today:680510
Avg DOM today:31.07
Avg Detached today:719354
Avg Semi today:0

This is what the TO SFH market looked like over the weekend. The under the asking price percentage is calculated based on the declared value. The real number is worse because they do not report the initial asking price, just the last asking price.

#101 Mike T. on 01.13.14 at 11:42 am

The thing realtors don’t realize is that the rest of the world does not think like a realtor.

Also, people who have been renting are getting much further ahead, as long as they bank the living cost difference, that those who bought recently. These references to 2010 pricing are irrelevant. All they are doing is using the emotions of fear and lust to try and make renters feel like they are less-than.

Sounds like a fun way to spend your time…..

#102 ☢ ☢ ☢ recharts-MTD very low sales for Condos in To on 01.13.14 at 11:50 am

So far I have:
Jan 2014 (MTD) Jan 2013 Jan 2012
Sales 416: 94 730 775
Sales 905: 47 321 351

It is almost Jan 15 and they have not sold even a quarter of what must had been sold the previous years by this date.
I know I know, blame it on the weather!

#103 Derek R on 01.13.14 at 12:07 pm

#77 Keith in Calgary on 01.13.14 at 6:52 am wrote:
And people in the real estate industry have the balls to compare Vancouver, Toronto, and even Calgary (LOL !!!) to these world class cities.

Keith, I know London and Paris from way back. In fact I lived in London for a couple of years back in the 1970s. World-class cities as you say. I love to visit them but I’d hate to live in them.

I moved to Calgary in 2003 and I find it far preferable as a living place. It may not be world-class for visitor attractions but it’s definitely up there for living in and raising a family.

#104 Masterofnone on 01.13.14 at 12:29 pm

#38 Bob Rice on 01.12.14 at 9:39 pm
Someone will one day explain to me why the world’s least populated nation needs to densify…

Density = higher tax return per acre for cities.Concentrated services = less cost per resident.

Density is higher profit returns for developers . i.e. 300 to 500 sq feet squirrel cage condos.

Those promoting these high density projects usually live in more rural or suburban homes paid for by the spoils of density.But the sheep are buying into this cluster suck.
Much like the green promoters.Do what I say not what I do.Making a fortune jetting around the world preaching the gospel of green with individul carbon footprints larger than many small cities.

#105 liquidincalgary on 01.13.14 at 12:30 pm

tapering — by mid-summer, the taper will be about 35billion. is this the point at which the long bond will spike?
sounds like the U.S. is in a bond trap

#106 The highway man on 01.13.14 at 12:59 pm

Re #77 Keith in Calgary.
Ha ha. I am tired of hearing Nenshi, Farrell et. crowing about “word class” Calgary…

#107 Ralph Cramdown on 01.13.14 at 1:01 pm

“keep driving right by Toronto and go to Jack Hunt Gold and Silver in Niagara Falls New York.”

Does anyone ask themselves how, when it all goes pear-shaped, gold is going to be such a great store of value and medium of exchange if, even in relatively calm times, one has to drive three hours out of one’s way and cross a frontier to keep from getting ripped off when buying or selling it? I thought Toronto was world-class, like Paris or New York?

#108 Canadians are Broke on 01.13.14 at 1:12 pm

All their money in mortgage payments, taxes and granite. Nothing left over….

http://toronto.ctvnews.ca/boc-survey-shows-businesses-concerned-about-weak-demand-1.1636783

#109 recharts on 01.13.14 at 1:19 pm

Paul Krugman’s warning to Sweden: ‘You have a significant housing bubble’

Nobel Laureate and Princeton University professor Paul Krugman said that Sweden’s central bank should delay plans for interest rate increases to avoid aggravating a significant housing bubble, Bloomberg reports.

A low repo rate would limit risks of falling house prices and allow inflation to erode record household debt levels

“It’s possible, I would even say probable, that Sweden has a significant housing bubble and it does have a high level of household debt,” he he said in an interview in Stockholm after speaking at a Skagen Funds conference.

“But given the borrowing has already happened and where you are right now the household debt issue is only made worse if you raise interest rates. It’s only made worse if you allow the economy to slide in deflation, so at this point what you want is an expansionary monetary policy to offset the risks of a housing decline or of a debt problem.”

I think that this is what is happening in Canada too.
Can anybody explain in layman’s terms what expansionary monetary policy would mean in Canda’s case?

#110 Blacksheep on 01.13.14 at 1:23 pm

The Can $ tanking will take most of the wind out of this long overdue RE correction. Residential building will slow affecting confidence and hurting various employment sectors, justifying a rate reduction. Condos and oversupplied regions will devalue some. Cheaper exports will take advantage of the U.S Mc recovery.

I sold my home five years ago expecting a harsh correction. At this late date, as irrational as it sounds,
I see no significant correction coming. Not with out a 2008 style, shock to the system.

#111 Vernithrax on 01.13.14 at 1:33 pm

Detroit Rock City –> Agree with you there. Garth’s good but so is Jack Bogle. I’m sticking with Jack’s long-term plan, peppered with Garth advice. Garth’s done my portfolio very well over the past two years. But timing or predicting *anything* with markets and investments is foolish. 101 says keep a 40% bond index and 60% equity index and you’ll be cool over time.

#112 Get real on 01.13.14 at 1:51 pm

#24 World According To Garth

Every country has problems but I suggest that you take a visit to some other countries in the world then come back here and let us hear your opinion of this country.

You may then have some appreciation for what you have here.

Alwyn

#113 Save your good advice on 01.13.14 at 1:56 pm

#86 :):(Ying Yang

Save your good advice; Smokin Man is not what he seems to be, methinks.

Alwyn

#114 Network Admin on 01.13.14 at 2:01 pm

> ☝ (Microsoft does not have the right finger for this but
> you get the message)
:) There is a nice unicode character for this:

#115 bdy sktrn on 01.13.14 at 2:13 pm

But timing or predicting *anything* with markets and investments is foolish.
——————————-\

but isn’t a 60/40 just another prediction. too? albeit a diversified one.

#116 bdy sktrn on 01.13.14 at 2:19 pm

air canada 4.5% today after 330% in the past 6mo.

wtf?

is kerosene free these days? people must be buying tkts.

#117 Tri-Guy on 01.13.14 at 2:37 pm

Does anyone ask themselves how, when it all goes pear-shaped, gold is going to be such a great store of value and medium of exchange if, even in relatively calm times, one has to drive three hours out of one’s way and cross a frontier to keep from getting ripped off when buying or selling it? I thought Toronto was world-class, like Paris or New York?

the only good thing to come out of Toronto are the roads out of there

#118 T.O. Bubble Boy on 01.13.14 at 2:48 pm

An overview of Bonds vs. Bond Funds vs. Bond ETFs:
http://www.theglobeandmail.com/globe-investor/investment-ideas/article11875440.ece/BINARY/0511_gi_carrick+%282%29.pdf

#119 recharts on 01.13.14 at 3:45 pm

#114 Network Admin on 01.13.14 at 2:01 pm
> ☝ (Microsoft does not have the right finger for this but
> you get the message)
:) There is a nice unicode character for this:

Yeah it is 1F595 but it seems that it can not be displayed

#120 Hicksville Alberta on 01.13.14 at 3:46 pm

#108 Canadians are Broke

” All their money in mortgage payments, taxes and granite. Nothing left over……. ”

It ain’t just that.

There are no real jobs that pay any kind of living unless you sell out to the bureaucracy and become part of the problem.

Couple that with the “Vig” the governments at all levels suck from your pockets and your mind and your soul plus the monopolistic/ oligopolistic pricing you pay for everything churned out by the new bold corporatocracy in Canada and for the most part your Dinner is Done.

Thus, for me, just ” Tune in; Turn off; and Drop out” and if you are an old fart that actually was lucky enough to accumulate something in the “good old days”, just try to preserve what you have.

If you keep moving around in the bushes trying to stir things up, you just might get picked off by a hunter or if not that, you may make it the highway and well end up like the Deer caught in the headlights of the oncoming traffic.

#121 drydock on 01.13.14 at 4:12 pm

After Seven Lean Years, Part 1: US Residential Real Estate: The Present Position and Future Prospects

#122 Happy Renting on 01.13.14 at 4:22 pm

“So, don’t buy a bond index fund.”

Does the same go for a target maturity bond fund? Assuming you don’t need to sell prior to maturity (and no defaults occur) you know what you’re getting back at the maturity date, regardless of interest rate fluctuations in the meantime.

#123 Smoking Man on 01.13.14 at 4:24 pm

#86 :):(Ying Yang on 01.13.14 at 10:22 am

I don’t need a creative writing course, I finished reading fear and loathing, learned a lot, like putting in double quotes when someone is talking, huge win.

My writers bloc is over, I’m typing like a diabolical mad man.

I’m merging a self-help how to make money into a fictional novel about drunk who forgot his wife at home, unleashed in Vegas selling plagiarizing software to a crooked University prof,who’s oxy addiction needs money and plans on sell it to the ivey league students.

The course I’m taken is how to market it on line, more importantly I want to help the writers that are there.

There crap will never sell unless it has lots of my type mattieral than is usually followed by a gartho

Delete.

To the delight of smoking man post skippers until I’m done, won’t see much of me here.

#124 Toronto_CA on 01.13.14 at 4:26 pm

Echoing what Garth has been saying, everyone has too much debt and isn’t spending:

TORONTO – Early signs from retailers suggest that Canadian holiday sales were nothing to celebrate in 2013 as more shoppers hunted for discounts and retailers slashed prices to move inventory.

Both Sears and Target said lower sales in Canada pressured results in the fourth quarter, a sobering outlook that could be echoed in financial reports from other retailers in the coming weeks.

The holiday shopping season, which includes Black Friday and Christmas, was “very difficult,” said Daniel Baer, a retail analyst at Ernst & Young.

http://www.huffingtonpost.ca/2014/01/10/target-canada-losses_n_4577556.html?ir=Canada+Business#

#125 :):(Ying Yang on 01.13.14 at 4:59 pm

#113 Save your good advice on 01.13.14 at 1:56 pm
#86 :):(Ying Yang

Save your good advice; Smokin Man is not what he seems to be, methinks.

Alwyn

……………………………………………………………………
Life’s but a walking shadow, a poor player, that struts and frets his hour upon the stage, and then is heard no more; it is a tale told by an idiot, full of sound and fury, signifying nothing.
Alas the end…………….

#126 Holy Crap Wheres The Tylenol on 01.13.14 at 5:01 pm

#120 Hicksville Alberta on 01.13.14 at 3:46 pm

Holy Crap Timothy Leary told me to do that back in 67!

Far out Hicksville, peace man!

#127 B Mac on 01.13.14 at 5:07 pm

“Flight to safety and yield will mitigate prices of REITs, preferreds, as returns increase.
Interest-rate sensitive assets like preferred shares and real estate trusts will feel the bond chill, but as yields rise investors will be lured by returns approaching 6%. That will likely keep prices stable, plus you can get a dividend tax credit or maybe a non-taxed return of capital. Sweet.”

While return of capital is not taxable—it’s just your money being returned to you—it causes your adjusted cost base to fall. The lower the cost base, the higher your realized capital gain will be when you eventually sell the REIT.

Of course. And it’s just what lots of investors crave. — Garth

#128 ss on 01.13.14 at 5:07 pm

Just curious, for people who borrowed from HELOC, when is the principal due? or do they just keep paying interest forever?

It’s a demand loan. They demand, you pay. — Garth

#129 economictsunami on 01.13.14 at 6:25 pm

So what’s up with the BDI?

“The shipping index is down 18% in the last 2 days alone (biggest drop in 6 years) and has utterly collapsed over 40% in the last 2 weeks.”

Shipping Costs Plunge as Colombia Disrupts Drummond Coal Cargoes:

http://www.bloomberg.com/news/2014-01-10/shipping-costs-plunge-as-colombia-disrupts-drummond-coal-cargoes.html

Baltic Dry Index Crashes 18% In 2 Days:

http://tinyurl.com/oda4g89

#130 Dude Duderson on 01.13.14 at 6:43 pm

Just as a re: to some stuff above, I live in a part of Canada.. make that Ontario in which my 3 bedroom side split cost me $159k to buy in 2008. I’m in my mid 20’s.

Yes I know, that’s crazy to the GTA crowd, and yes, I’m lucky to have come out of school into good paying secure job in a less crowded, and economically sluggish part of the province.

So yes, I am still paying off my mortgage diligently, but I view my house as shelter, that’s nice to have because I can afford to make it mine at a reasonable price. Roughly 2x annual income.

The local/prov/national economy could take a bad turn and my house could fall in value a fair bit, but the sting will be greatly lessened by the facts that

a) I don’t have all my net worth tied up in the house
b) I’ve continued to put away money into equities (index ETF primarily) using my TFSA
c) I have a fee based advisor that I trust who I have worked out a roadmap with how to keep my portfolio balanced going forward as I get older and my risk tolerance changes.

As Garth mentioned, the ROI has been awesome the last few years in stocks. I’m debt averse, but with the low interest rates, my money can be working better elsewhere, giving me a bigger pot of money in retirement than if I socked all my cash onto this (relatively speaking) small, low cost mortgage.

#131 b mac on 01.13.14 at 7:04 pm

While return of capital is not taxable—it’s just your money being returned to you—it causes your adjusted cost base to fall. The lower the cost base, the higher your realized capital gain will be when you eventually sell the REIT.

“Of course. And it’s just what lots of investors crave. — Garth”

Would you be so kind Garth as to explain the scenario where I want my capital returned, my cost base lowered, and my reportable tax liability increased?

Because capital gains are taxed less than income. — Garth

#132 My thoughts on 01.13.14 at 8:14 pm

#94 recharts. This post made my night. I see more and more of those types of deals in mineola that is heavily populated with realtors. Nice to see lots going for lower dollar amounts. This will make some realtors nervous.

#133 bentoverpayingtaxes on 01.13.14 at 8:22 pm

“Just curious, for people who borrowed from HELOC, when is the principal due? or do they just keep paying interest forever?

It’s a demand loan. They demand, you pay. — Garth”

Hmmm……not exactly…..the HELOC is not an interest only loan…it is not amortized….and yes it is a demand loan…except….the HELOC minimum payment structure ‘demands that 3% repayment on the outstanding balance per month. The borrower has the equivalent of a second mortgage…on top of the mortgage, car lease pmt, taxes, condo fee’s etc…..it all gets pretty hefty when combined.

Depends on the institution. — Garth

#134 Patrick Gunville on 01.13.14 at 8:30 pm

Didn’t anybody notice the US 10 year spike over 3% during the holidays? Also interest rates in China going up? The Bank of Canada can say whatever it wants, everything is really dependent on US bond market, most of which is controlled by China.

#135 Andrew Woburn on 01.13.14 at 9:07 pm

#128 ss on 01.13.14 at 5:07 pm
Just curious, for people who borrowed from HELOC, when is the principal due? or do they just keep paying interest forever?

It’s a demand loan. They demand, you pay. — Garth
=============================
Apparently in the US, HELOC’s are typically interest only for ten years after which they “reset” to full principal and interest payments. According to one US specialist, the surge in US HELOC’s from the pre-recession years is now beginning to reset.

“First, HELOC originations soared throughout 2004. The total for all of 2004 was much higher than the previous record number in 2003. So I am confident that the number of HELOCs resetting in 2014 will be much higher than this year. We also know that the peak year for HELOC originations was 2005 – 4.5 million. Although quite a large number of them were actually refinanced into still larger HELOCs – especially in California – I am sure that the number of HELOCs resetting in 2015 will far surpass next year’s total. We also know that in 2006, HELOC originations declined only slightly from the record of 2005. Data from the NY Federal Reserve Bank shows that the delinquency rate for 2006 HELOCs has been much higher than for those from 2005. Part of that is due to the fact that home prices were generally higher that year and therefore the 2006 HELOC properties are more underwater. It is very likely, therefore, that HELOC delinquencies will soar for those resetting in 2016. By that year, California should be a complete disaster. You had better prepare for what is coming in the next four years with the HELOC resets. Almost all of these HELOCs are second liens. When the borrower defaults on an underwater property with a HELOC, the loan is not simply written down. It is written off as worthless. Some of the largest banks will regret that they handed out millions of HELOCs during the bubble years.”

Why HELOC Resets Will Undermine Any Housing Recovery
http://advisorperspectives.com/dshort/guest/Keith-Jurow-131216-HELOC-Resets.php

#136 live within your means on 01.14.14 at 9:31 am

I know this is not a political blog. Miss Garth’s old blog.

I just watched a YouTube video – https://www.youtube.com/watch?v=YIg_VNUWqME&feature=player_embedded – “1984 in 2013: The Assault on Reason” – Allan Gregg. He was a Red Tory strategist.

I’m a political junkie so am aware of everything he said.

We have no children, but I’m concerned about the younger generation.

I understand Garth if you don’t want to post this on your blog.