The head fake

CAT HANG modified

I’ll say it again. For the housing market to stay robust, you need cheap money, good jobs, good wages and confident consumers. How many of those elements do you figure we have now? Or will in the months to come?

Hmm. Wages increased less than 2% in 2013, while the average house price rose (at least according to CREA) more than 10%. Not so good. As for jobs, we’re now in reverse. Creation of new ones fell two-thirds last year and in December we shed more jobs than Justin Beiber did groupies. This week, by the way, Bombardier punted 1,700 workers (sales are down 19%) as Blackberry announced it’s selling off its Canadian real estate (so long, Waterloo). Consumer confidence? The latest Nanos Bloomberg poll found that 56% of people worry about their job security. No wonder the dollar’s at 91 cents.

I guess that brings us to cheap money. And it continues to be cheap – not as sweet a deal as a year ago, but by historic standards, still in the ditch. In fact, a lot of people got excited this week when RBC trimmed its mortgage rates, making page one headlines. Suddenly the air was thick with realtor emails, blotting out the sun as they rallied virgins for the annual Spring sacrifice. (Other lenders are following suit.)

For the record, RBC lopped 10 basis points (one-tenth of one per cent) from its two- to five-year fixed rates. On a $100,000 mortgage that means each month you can afford an extra package of strawberry-scented condoms. No big deal. But that didn’t stop some people from saying it was great news since it indicates the momentum of rates is down, not up, which will keep the housing market alive.

In truth, lower mortgage rates are terrible news. Here’s why.

Fixed-rate mortgage costs are established in the bond market, where these things are funded. (Variable-rate mortgages, in contrast, are priced according to short-term rates – like the bank prime – which are determined by the Bank of Canada.) Since the beginning of the year, the yields on five-year Government of Canada bonds have been sliding, and are now down between a quarter and a third of a point. That’ a lot in three weeks.

Reflecting that decline, the bank trimmed house loan costs. More fundamental is the reason Canadian bond prices have been rising and bond yields dipping. After all, our bonds usually follow trends established by Yankee bonds, and yields in that country have been on the rise for most of the last eight months as the Fed embarked on its plan of turning off stimulus spending. (That $85 billion a month went into Hoovering up bonds, resulting in high prices and low yields. The program, known as QE, could be kaput by the end of the year.)

But all that changed in the last few weeks.

First came the news our national trade deficit had bloated up like an unfulfilled water buffalo. Then came that miserable jobs report showing employment gains had not only vanished but we were losing 10,000 incomes a week and unemployment in Toronto had rocketed past that of the United States (which we all love to dis). Then the dollar tanked. In the past year the loonie’s lost 10% of its value, which may help exporters but will boost consumer prices and suck up more family income.

This is why money has been diverted into the safety of Canadian bonds and away from an economy which is clearly struggling. So, yields fall. Mortgage rates reflect this. And realtors get aroused by the wrong thing.

Now, there’s some good news in all of this.

A five-year mortgage is currently 3.59% and if you talk suggestively to [email protected], you’ll probably get it down to 3.39%. Variable-rate loans are cheaper, at about 2.6% (Scotiabank is now at prime minus .4%). None of these rates will last, if you believe the overwhelming consensus of economists, and even the elfin deity, F, himself. As the US economy continues to improve and throw off new jobs (and the Fed reduces stimulus), bond prices are expected to drop and yields rise, with money sucked off into equities.

If so, it could well mean this is the bottom. So go variable until it looks like the party’s ending (except at TD – more on that tomorrow), then flip over into something more stable. Just don’t expect to be paying less in two or three years.

Because if you do, also expect to kiss off some equity.

142 comments ↓

#1 Ripped on 01.21.14 at 9:06 pm

Bombardier lays off 1,700 workers today, Montreal gets whacked

#2 TurnerNation on 01.21.14 at 9:08 pm

Breaking news from Long Branch: patrons of South Side Johnny’s are brawling with those from North Side Ronny’s. Survivors were seen west-bound.

#3 Andrew Woburn on 01.21.14 at 9:10 pm

116 T.O. Bubble Boy on 01.21.14 at 1:32 pm

An interesting side note: RBC are calling these “Basel-III Compliant” Preferred Shares. My understanding was that pretty much all Rate Reset Preferreds didn’t qualify as Tier 1 Capital, so I’d be curious to know what wrinkle RBC threw into these ones to make them “Basel-III Compliant”.

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

Most likely the wrinkle is that the new issue is a “coco” bond, ie contingent convertible. If the merde hits the whirligig, your bond morphs into bank equity so that is why it counts as Tier 1. You won’t be pleased but the bank might send you a thank you letter if you’re lucky. This is what a bail-in is supposed to look like in future. Remember that even in Cyprus it proved politically impossible to scoop investor deposits below the deposit insurance limit.

Why would anyone buy a coco? Beats me. The banks need to sell them so I don’t expect they will strain themselves to overinform the buying public as to their unique features. Calling them “compliant” as opposed to “WTF” is not an encouraging start.

In further distressing news, the good folks behind the Basel III initiative have apparently given up on their impudent demand that big banks should have capital to loan leverage of at least 5%. Apparently after strong representations from major international banks, they are going to drop their requirement to 3%. Given that the US is reportedly not happy about this, one can only assume that the European banks are in worse shape than anyone suspected or that their core capital is based on some pretty spongy sovereign debt. Or both.

Basel III compliant bonds face tough sell
http://www.ft.com/intl/cms/s/0/052070d4-f4e9-11e2-b4f8-00144feabdc0.html#axzz2r59bD2Qt

The ‘too big to fail’ problem just got worse
http://www.ft.com/intl/cms/s/0/052070d4-f4e9-11e2-b4f8-00144feabdc0.html#axzz2r59bD2Qt

#4 Ripped on 01.21.14 at 9:13 pm

The Loonie hit 90.91 intra day

#5 Cici on 01.21.14 at 9:14 pm

I’m first!

#6 Canadian Watchdog on 01.21.14 at 9:21 pm

Competition Bureau holds firm in push against TREB

At the heart of the dispute is “historical sold data,” or information about the prices that homes have fetched in the past. That data is important for market participants, and should be made more accessible online, the bureau argues.

Good luck with this one, because when F informs the GG Commander-in-chief that more transparency on the offer side will influence home values to the downside (as more buyers see the house they are looking at was hundreds of thousands of dollars cheaper half a year ago, literally), it also means more risk to banks, CMHC and Her Majesty's assets, which is why the GG will make the call to make sure this one gets thrown out like every other attempt by some crown commissioner who is appointment by the GG himself.

Nothing to get excited about here. You're still Canadians fighting for RE data history while third world countries have moved on from caveman RE systems to open transparent Zillow type platforms.

#7 Smoking Man on 01.21.14 at 9:37 pm

#2 TurnerNation on 01.21.14 at 9:08 pm
Breaking news from Long Branch: patrons of South Side Johnny’s are brawling with those from North Side Ronny’s. Survivors were seen west-bound.
……………………………………………………

LOL

I tryed to write an apology to Garth for my weekend rant and what ever It was I posted. Usually when I go over the wine line, have a fogy recollection. Not last Friday. Friday was way past the wine line.

It was something like this guy……

http://www.liveleak.com/view?i=e32_1390336567

Oh and Garth, yields have been dropping since Aug and I issued a Batman Alert in Sep.

Perhaps this will refresh your memory.

http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/

PS. sorry for Friday…..Sincerely

#8 JO on 01.21.14 at 9:38 pm

Hey Garth, have been renting and plan to until Aug – Nov. Need home. I know you say the best deals are on new homes. We want to stay in Mississauga. What are your thoughts on Georgetown or Milton. Just having a hard time justifying a resale in a good area of Mississuaga even though we want to stay here. Do you think Mississauga will do better long term than a new home in Georgetown.

BTW, talked to a product manager at head office today and word has it mortgage specials will be excellent and extremely competitive. We are currently at 3.59 for 5 yr but if you are nice to us, we can get it down to 3.39.

Cheers
JO

#9 Ben on 01.21.14 at 9:38 pm

“Hmm. Wages increased less than 2% in 2013, while the average house price rose (at least according to CREA) more than 10%. Not so good. ”

Come on Garth. House prices have already detached from wages. We know wages don’t set prices. Jobs don’t either. All you need is rising house prices. Amateur property investors gain equity which they can use to borrow more money to buy more houses. This is how it works.

Read the UK play book. Next up: QE and buying your own bonds to depress their rate and eliminate price discovery. Also changes to pension regulation to force pension schemes to buy government bonds. Plus record low rates plus a collapsing loonie. Finally fiddling the inflation figures to mask rising input costs from abroad which feed into the GDP deflator which shows up as increased growth to the bemusement and then anger of your population.

Oh and lying about immigration to provide a boost to GDP.

They don’t need jobs Garth – the UK is muddling along without them. It’s working great until it blows sky high.

#10 dave f on 01.21.14 at 9:38 pm

7th!! ;-)

#11 Paul on 01.21.14 at 9:39 pm

6 Canadian Watchdog on 01.21.14 at 9:21 pm

Competition Bureau holds firm in push against TREB

At the heart of the dispute is “historical sold data,” or information about the prices that homes have fetched in the past. That data is important for market participants, and should be made more accessible online, the bureau argues.

Good luck with this one, because when F informs the GG Commander-in-chief that more transparency on the offer side will influence home values to the downside (as more buyers see the house they are looking at was hundreds of thousands of dollars cheaper half a year ago, literally), it also means more risk to banks, CMHC and Her Majesty’s assets, which is why the GG will make the call to make sure this one gets thrown out like every other attempt by some crown commissioner who is appointment by the GG himself.

Nothing to get excited about here. You’re still Canadians fighting for RE data history while third world countries have moved on from caveman RE systems to open transparent Zillow type platforms
———————————————————-
Maybe it’s just me but I have not sold a home it 15 years that I have not printed the history and gone over it with every buyer prior to drafting an offer.
Plus all the similar sold and active listings in a one mile radius

#12 yeah Baby Yeah! on 01.21.14 at 9:43 pm

7th!!!!!!!!!!!!!!!!!!!!

#13 Ben on 01.21.14 at 9:53 pm

Ugh reading that news about Bombardier – not good for people who work for them in Quebec. All the best to those who are effected.

#14 TRT on 01.21.14 at 10:07 pm

Bank of Canada may (probably) set a Dovish tone…

Some of my professional friends are already talking about moving to Texas/Arizona?California if the dollar suffers. They will earn more (US $$).

Can you say BRAIN DRAIN II?

What will be left behind? Retirees, Low pay workers, and lotsa lotsa Immigrants, Foreign students, etc.

Wonder who is eventually gonna pick up the health care tab, etc…

#15 cary ohn on 01.21.14 at 10:09 pm

We’re number TWO!
… in the world for unaffordable homes.

Woo Hoo!

from Bloomberg:

Hong Kong, Vancouver and Honolulu have the least affordable housing markets across nine nations in the Demographia International Housing Affordability survey.

The median home price in Hong Kong rose to 14.9 times gross annual median household income from 13.5 times last year, according to the 10th annual report by the Belleville, Illinois-based consulting company. Homes in Vancouver cost 10.3 times income and 9.4 times in Honolulu. Australia and New Zealand were the most unaffordable countries after Hong Kong, with home prices at 5.5 times gross income.

more reading:
http://www.bloomberg.com/news/2014-01-20/hong-kong-vancouver-least-affordable-home-markets-survey-shows.html

#16 Joe on 01.21.14 at 10:26 pm

Just on BCTV
1000 people moving into Surrey BC a month,
most being new immigrants.

#17 zee on 01.21.14 at 10:28 pm

hi

Most of last year, you were telling fixed rates will go up but now they are going down. You kept saying fixed rate products are determined by the american bond market and today you are saying it is the canadian bond market. If that is the case, then why paying attention to what is happening in the american bond market assuming that canada continues to struggle which it will in the coming months.

Read it again. It’s okay to move your lips. — Garth

#18 DRW on 01.21.14 at 10:35 pm

survey on bc.ctvnews.ca asking ” Do you think real estate in Vancouver is a good investment?” Results already going in expected direction but want to see if they follow up tomorrow.

#19 harboursnug on 01.21.14 at 10:37 pm

#16 Joe – 1000 people moving into Surrey BC a month

That’s a year old article

http://www.news1130.com/2013/02/15/surrey-secures-funding-for-four-new-schools/

#20 White Rock Mom on 01.21.14 at 10:37 pm

BC CTV question of the day is:

A survey ranks Vancouver number two on a list of cities with the most unaffordable housing. Do you think real estate in Vancouver is a good investment?

Go to bc.ctvnews.ca to cast your vote.

#21 harboursnug on 01.21.14 at 10:43 pm

#16 Joe – 1000 people moving into Surrey BC a month

That’s a year old article

http://www2.canada.com/theprovince/news/story.html?id=2cf17596-26bb-4fcd-81a7-ce81f8d52bc1

#22 Snowboid on 01.21.14 at 10:50 pm

#11 Paul on 01.21.14 at 9:39 pm…

“Maybe it’s just me but I have not sold a home it 15 years that I have not printed the history and gone over it with every buyer prior to drafting an offer.
Plus all the similar sold and active listings in a one mile radius”

Before purchasing a Phoenix home in 2010, we had all that information before we even spoke to a RE agent!

#23 Smoking Man on 01.21.14 at 10:53 pm

#17 zee on 01.21.14 at 10:28 pm

Only the insane can see the future…….Go easy on limpy

#24 Marco Polo on 01.21.14 at 10:54 pm

Garth,

Towards the last few paragraphs of your article, it almost seemed like a situation was developing between bond yields and economy. I’m a bit confused about money flowing into Canadian Bonds with low yield and a deteriorating economy, with bonds priced in CAD, a falling currency.

Surely a foreign investor would demand higher yields, bond prices fall, interest rates go up, the dollar returns, and a vicious cycle develops on the bond market. Perhaps plenty of inflation.

I don’t see that.

I’m an enthusiastic supporter of Niall Ferguson, and have seen his simmilar predictions of sovereign bond emergencies which never came to pass.

There’s clearly a disconnect between what I see should happen, and what does happen.

#25 Sam on 01.21.14 at 11:05 pm

Garth,

Nothing will happen. Its been years since you have been saying that.. i commend your persistence.

“Nothing will happen.” Sure you want to go with that? — Garth

#26 Snowboid on 01.21.14 at 11:12 pm

Yep, it’s time to hear once again from our favourite RE warriors…

http://www.youtube.com/watch?v=_OEeU5ljhmU

Oh boy, 2014 is going to be a doozy!

#27 Notta Sheeple on 01.21.14 at 11:20 pm

“……Suddenly the air was thick with realtor emails, blotting out the sun as they rallied virgins for the annual Spring sacrifice…..”
=========================

Back in fine form without skipping a beat, almost like nothing happened last Thursday.

Lamb chops must be beating his illuminous head against the wall.

#28 Bob Rice on 01.21.14 at 11:28 pm

On Vancouver housing, don’t how they calculate these findings… Anyone who’s visited Western European cities (yes, even haver the financial crisis) are amazed when they find out the cost of an apartment in their cities… Copenhagen, London, Oslo, PAris, Mucinch, Rome… It cost $3000 just to rent an apartment there, forget buying one!

#29 Notta Sheeple on 01.21.14 at 11:29 pm

“….#7 Smoking Man on 01.21.14 at 9:37 pm..

“…PS. sorry for Friday…..Sincerely…”
=========================

For a while there, I thought SM and Rob Ford where one and the same, until I realized Mayor Fraud would never apologize for moronic behavior.

Well done, SM. Welcome back.

#30 Chickenlittle on 01.21.14 at 11:31 pm

#8 Jo:

I moved to Milton from Mississauga, Jo, just last May.

Pros:
-Everything is close
-There is minimal traffic
-It is pretty safe
-There are lots of country back roads, so you can skip the highways

Cons:
-Decent malls are far
-The town lacks character

Milton is 75% new build. Imagine what it’ll look like in 5 or 10 years! It’ll be one big ghetto.

MIND YOU, my power didn’t go out during the ice storm. There are no trees to knock down, thus no power lines went down.

To summarize, yes, it is growing fast, but they are throwing up horribly built homes that will not stand the test of time.

Either rent like I do, or stay away!

#31 $$$BPOE#1$$$ on 01.21.14 at 11:44 pm

Sitting on the sidelines with a grin, sun on my face and the wind on my back. Vancouver going higher and higher and mortgage rates going down. The house doomers never understood the power of offshore money from around the world and it’s affect on Vancouver. Instead the doomers got hung up on the yellow peril. Offshore money encompasses a heck of a lot more than Asia. Things have never been better. My bet is the American is down in Vancouver at this moment buying. The American must truly be ashamed. Really how wrong for how long can one person be. Vancouver to Infinity and Beyond. Nothing is stopping Vancouver from being the most expensive place in the world. The clueless look at incomes to house prices not understanding whats going on. Everyday is better and better in the Best Place On Earth. Come join us in paradise. Hurry, with limited land and the entire world envious of our beauty and wealth these low prices won’t last for much longer.

#32 $$$BPOE#1$$$ on 01.21.14 at 11:47 pm

This has absolutely nothing to do with the price of housing in Vancouver. It has no relevance whatsoever. Canada could have 50% unemployment rate and Vancouver would continue to soar
******************************************
First came the news our national trade deficit had bloated up like an unfulfilled water buffalo. Then came that miserable jobs report showing employment gains had not only vanished but we were losing 10,0000 incomes a week and unemployment in Toronto had rocketed past that of the United States (which we all love to dis). Then the dollar tanked. In the past year the loonie’s lost 10% of its value, which may help exporters but will boost consumer prices and suck up more family income.

#33 45north on 01.21.14 at 11:53 pm

JO : We want to stay in Mississauga. What are your thoughts on Georgetown or Milton.

so why not just buy in Mississauga? you know the answer – because you would choke on a $600,000 mortgage. If you bought in Georgetown or Milton you would still choke on a $500,000 mortgage.

#34 Kingarthur on 01.22.14 at 12:04 am

This is old but it’s still funny:

Vancouver: Crackshack or Mansion?

http://www.crackshackormansion.com/

#35 Ole Doberman on 01.22.14 at 12:04 am

Gold’s recent rally is interesting, wonder if the Fed will pull and hold the taper stuff. US can be in big trouble.

#36 recharts on 01.22.14 at 12:06 am

Garth ..do you want a hug?
https://pbs.twimg.com/media/BeeZ88HIMAEjAN3.jpg

And here is the above Ninja Cat when not fighting the dog

https://pbs.twimg.com/media/Beh176HIUAAsgSb.jpg

#37 recharts on 01.22.14 at 12:08 am

Cat investor that lost some “equity”
https://pbs.twimg.com/media/BeiaO6NIcAA7Bj_.jpg:large

#38 Uh Oh Canada on 01.22.14 at 12:19 am

Would like to get the blog dogs’ opinion on which stage of the housing bubble we’re at:

Please check out this chart by Dr. John-Paul Rodrigue on asset bubbles and cast your vote. (Personally, I think we’re at the ‘return to normal stage.’)

http://canadianfinanceblog.com/is-the-current-market-a-return-to-normal/

#39 2or3orsometimes7 on 01.22.14 at 12:20 am

What about building your own home? Will construction costs also take a hit when real estate corrects? If the only thing you’re paying for is land, then isn’t that better than renting?

#40 GLK on 01.22.14 at 12:22 am

“Suddenly the air was thick with realtor emails, blotting out the sun as they rallied virgins for the annual Spring sacrifice.”

Oh Garth! You are Good. Damn

#41 Wheezing Musty Basement Dweller on 01.22.14 at 12:26 am

Just watching the Canucks game and keep seeing the ads from befraudaware.ca. They say to report misleading or impossible investment ads. Wouldn’t the Brad Lamb posters for Toronto condos fit the bill? Garth I remember you displayed one a few months ago on your blog. Or maybe Brad doesn’t do those posters anymore? If anyone sees one I would be happy to file the fraud report and support the reasons for doing so.

#42 DR on 01.22.14 at 12:30 am

Garth,

were you, by chance, at Steak Queen last night?

#43 HDJ on 01.22.14 at 12:42 am

Garth, How about a photo of the recovering boss, with his poor leg resting on a pillow? Get well.

#44 Frustrated Kiwi on 01.22.14 at 1:09 am

#28 Bob Rice
First it should be noted that demographia only covers nine countries. Second, however, note that rents and house prices have completely detached in Vancouver (and here in Auckland) so comparing how much it costs to rent a place in Europe compared to here or there is pretty irrelevant. Rents follow incomes – they have to. House prices usually do too but in the current speculative mania where people buy expecting capital gains to cover the miserable yields on rent they have detached.

#45 Going to Switzerland? on 01.22.14 at 1:12 am

Who’s going to Davos next week?

Alwyn

#46 Rabbit One on 01.22.14 at 1:13 am

Garth, best wishes for your fast recovery, you are in hood hands.

Speaking of cheap loan, I still don’t understand why Canadians are so motivated to borrow more when interest rate is low.
Anyone see any news outside Canada, people are borrowing more when rates are low…? Me, I don’t think I ever seen such things.

When rates are low, borrower should reduce loan balance as fat as possible.
Low rates = bad economy going forward & cash is king

When mortgage rate is high, like 26%, it is inflation time, house is likely up soon, and go into additional borrowing will be rewarded later.
(Am I wrong here?)

It doesn’t mean borrowing $1MM is only costs $3,ooo / month, you are entitle to borrow, becasue your economy is now shrinking, right?

One more thing, myself ex-lender, surprised Canadian lender give away exact same mortgage rate for high-ratio borrower, new to credit person, just same as low-ratio,good liquid assets, excellent credit person.
Those “Hi-Risk” borrowers got to placed in higher mortgage rate…..!

Anyways, I know it is all about CMHC, banks take very minimum risks, yes….

Btw, I heard from my broker associate, while big banks are reducing long term rates, they are changing mortgage contract clause (=small letters) these days, they know the market, started protecting their books.
Better watch out.

#47 recharts on 01.22.14 at 1:14 am

#39 2or3orsometimes7 on 01.22.14 at 12:20 am
What about building your own home? Will construction costs also take a hit when real estate corrects? If the only thing you’re paying for is land, then isn’t that better than renting?

That is one of the very few viable solutions these days. Buy a tear down and wait till the unemployment gets high. They you can try to build at a lower price. If you still have a job :-)
I have been thinking a lot about this but I am not sure if I want to fight with the contractors..they tend to do what they like not what they have to do or what you ask them to do.
I have heard a couple of direct experiences that went wrong. Hiring a company giving them the project also might be a a more costly solution ..I have not explored that path yet

#48 recharts on 01.22.14 at 1:43 am

Maybe it’s just me but I have not sold a home it 15 years that I have not printed the history and gone over it with every buyer prior to drafting an offer.
Plus all the similar sold and active listings in a one mile radius

Buddy, if those numbers would be publicly available as they are in New Jersey for instance you would have half of the buyers you normally have. People will be able to see trends and make educated decisions.

#49 recharts on 01.22.14 at 1:44 am

SFH sales for Toronto http://i.imgur.com/PSE995I.png (Jan 21) pressure is increasing , high end sales -25% of initial asking http://i.imgur.com/ZJ4zJb4.png

Note the imbalance between sales of more expensive properties and the sales of less expensive one.

#50 Son of Ponzi on 01.22.14 at 1:50 am

#16 Joe – 1000 people moving into Surrey BC a month

That’s a year old article
———————–
Now it’s 1,500 a month.

#51 Mark on 01.22.14 at 1:54 am

Money flowing into CAD$ bonds = traders don’t anticipate that the CAD$ will remain down for long (bond traders tend to be smarter than the leveraged speculators). The CoT report makes it fairly clear that there is a huge speculative, non-commercial interest against the Canadian dollar. I personally wouldn’t expect the weakness to last very long. Especially in an economy that is now heading into debt deflation. Poloz will have real egg on his face if he doesn’t cut at the next BoC announcement.

#52 Marco Polo on 01.22.14 at 2:06 am

I liked the comments on Vancouver, how its a sure thing. Yes, american investors would love to pay more for an illiquid asset in a foreign country with a falling currency. Yes, Vancouver is the new Tijuana. Lol. What a joke.

#53 juno on 01.22.14 at 2:09 am

Welcome to higher insurance premiums. Oh yes, what happens in the rest of Canada effect the premiums in BC.

Its basic knowledge of how issurance companies run

#54 Marco Polo on 01.22.14 at 2:10 am

Building a home is great, if you have the land, and bought it decades ago. The cost of building is relatively low. Had you bought agricultural land decades ago, and rented it out as cropland to a farmer, the taxes during that whole period would have been low, and mostly covered by the rental.

#55 TRT on 01.22.14 at 2:22 am

Good post Garth. But I disagree on bond yields rising as a result of the taper;

There will be less and less bonds issued per month in 2014 as compared to 2013. So this less issuance and a stronger economy with keep bond yields stable. We will see who is right.

Canada is a nutcase right now. Your ex-Friends like F really screwed it up. On purpose I might add…I’m about to dump the C’s as well.

#56 TRT on 01.22.14 at 2:27 am

#28 Bob Rice,

The Demographia survey excludes about 90% of the world. Only compares USA, Canada, Hong Kong, UK, Australia, New Zealand.

Those cities you mentioned are not included. Mumbai dwarfs Vancouver in square foot land valuation.

#57 Freedom First on 01.22.14 at 2:33 am

Garth, speaking of cheap money is just a reminder to me as to how fast that cheap money can become ultra expensive money. Like when interest rates rise, unemployment happens, or house prices take a dive, just to name a few of the dangers of being unbalanced, undiversified, unliquid, as well as underwater and living in debt poverty. Consequences are always a bit$$h.

Thank you for posting Mr. Ironman Turner.

#58 West Vanner on 01.22.14 at 2:51 am

#17 zee on 01.21.14 at 10:28 pm

As the smoking man said, only the privileged can see the future (aka insane). You know, the ones running the cuntry (sp?). Have you got a new saddle for that dog yet Garth? Last one didn’t seem to work too well…..

#59 TexasTea on 01.22.14 at 2:51 am

#32 $$$BPOE#1$$$

Where’s Vancouver?

#60 Son of Ponzi on 01.22.14 at 3:02 am

Cover on Time Magazine:
Yellen: The 16,000,000,000,000 woman.
That’s soo 2013.
17,000,000,000,000 and counting is more accurate.

#61 Alex on 01.22.14 at 4:30 am

The only thing I know about Milton is that Tiger Jeet Singh lives there.

#62 Onthesidelines on 01.22.14 at 5:02 am

#28 Bob Rice on 01.21.14 at 11:28 pm
On Vancouver housing, don’t how they calculate these findings… Anyone who’s visited Western European cities (yes, even haver the financial crisis) are amazed when they find out the cost of an apartment in their cities… Copenhagen, London, Oslo, PAris, Mucinch, Rome… It cost $3000 just to rent an apartment there, forget buying one!
____________________________________________

You’re completely full of it and don’t have a friggin clue Bob Rice. We are going to be retiring in Europe and have researched rents in a number of cities. In the beautiful, historical city of Valencia, for example, we see plenty of 2-3 bedroom, 1000-1200sq. ft. flats right in the city center historical core in the 600 euro range. That’s less than $1000/month. Did I mention 15 foot ceilings? Oh, and if you want a house, 20 minutes out of the city you can get one with a pool for about the same price.

Do you even have a clue where Valencia is?

#63 World Traveller on 01.22.14 at 5:35 am

Hey, Who knew that Mayor Ford knew another language?

#64 World Traveller on 01.22.14 at 5:36 am

http://thetyee.ca/Opinion/2014/01/15/If-Every-Norwegians-a-Millionaire-Whys-Alberta-in-Hock/

Thanks politicians!

#65 Kevin on 01.22.14 at 6:06 am

Its all so eerily familiar to Irish people.
http://en.wikipedia.org/wiki/Irish_property_bubble
High employment in the construction industry
Low Rates
Rising Prices
Clueless Economists

**Shudders**

#66 Humpty Dumpty on 01.22.14 at 6:31 am

The Buffett Monkey Shake…

Warren Buffett (1) has called derivatives “financial weapons of mass destruction” and (2) has been known to dabble in the occasional high-proof derivatives trade himself. Selling long-dated S&P 500 puts is perhaps the best-known example, though he’ll buy big chunks of bank warrants too if the situation calls for it.

http://www.bloomberg.com/news/2014-01-21/buffett-makes-millions-selling-500-to-1-monkey-linked-derivatives.html

HSBC on the Take…

The deferred prosecution agreement was reached in December 2012 and was approved Monday. The settlement was seen as a record amount to resolve charges that the bank failed to stop billions of dollars in drug money from flowing through the bank from Mexico.

Under the terms of the deal, the Justice Department agreed to suspend criminal charges against HSBC and its US subsidiary for five years if the bank agreed to pay the penalty.

http://www.globalpost.com/dispatch/news/regions/americas/united-states/140121/hsbc-paying-2-billion-drug-money-laundering-cartel

And finally, The Religious Fake….

On Tuesday, police seized some 6.5m euros in bank accounts and real estate, including Monsignor Scarano’s luxury apartment in the southern city of Salerno.

Authorities said the latest charges against the cleric related to “false donations”, which he allegedly recycled from offshore accounts through the Vatican bank.

http://www.bbc.co.uk/news/world-europe-25831234

#67 Randman on 01.22.14 at 6:31 am

Talk about head fakes…

” If ever a chart provided unequivocal proof the economic recovery storyline is a fraud, the one below is the smoking gun. November and December retail sales account for 20% to 40% of annual retail sales for most retailers. The number of visits to retail stores has plummeted by 50% since 2010. Please note this was during a supposed economic recovery. Also note consumer spending accounts for 70% of GDP. Also note credit card debt outstanding is 7% lower than its level in 2010 and 16% below its peak in 2008. Retailers like J.C. Penney, Best Buy, Sears, Radio Shack and Barnes & Noble continue to report appalling sales and profit results, along with listings of store closings. Even the heavyweights like Wal-Mart and Target continue to report negative comp store sales. How can the government and mainstream media be reporting an economic recovery when the industry that accounts for 70% of GDP is in free fall? The answer is that 99% of America has not had an economic recovery. Only Bernanke’s 1% owner class have benefited from his QE/ZIRP induced stock market levitation.”

http://www.theburningplatform.com/2014/01/19/the-retail-death-rattle/

#68 Buy? Curious? on 01.22.14 at 7:08 am

Smoking Man, why are you apologising? You’re anyomous. Garth, doesn’t know who you are unless he can mould head scupltures from IP Adresses like that blind girl in Linoel Riche’s video HELLO. Garth called you “sick”, who cares? Garth makes fun of other people and they don’t grovel. Look at Harper or Rob Ford. Oh, Rob Ford, did you see the preview of his new one-man play about GoodFellas? He’s doing it in a Jamacian accent. I’m sure it will make it’s way to Princess of Wales theatre.

http://www.youtube.com/watch?v=f-80obqClBg

Smokey, we need you here, to keep us guessing, wondering, dumbing things down for us. Stop off at the Lakeshore and Yonge LCBO, sample some scotch and go hard or go home!

Rob Ford is the best! Fordtopia 2014!

#69 liquidincalgary on 01.22.14 at 7:34 am

Garth,

condoms are not ‘scented’…they are ‘flavoured’.

err, so i’m told

#70 liquidincalgary on 01.22.14 at 7:58 am

@ #35 Ole Doberman

currencies do not trade relative to gold. they trade relative to each other.

find another boogeyman

#71 recharts on 01.22.14 at 8:20 am

http://blogs.wsj.com/moneybeat/2014/01/17/earnings-beat-rate-drops-sharply/
Dubious signs of recovery

Of the 52 companies in the S&P 500 that have reported earnings so far, only 52% (27) have reported earnings above expectations, according to S&P Capital IQ, well below the average for the past four quarters of 67%. Eighteen companies have reported earnings below expectations, and seven have met estimates.

A record number of companies issued earnings warnings heading into the fourth quarter’s reporting season. S&P Capital IQ noted that eight times more companies are issuing warnings than positive forecasts, a number that is higher than the 15-year average.

All this could change very quickly. The calendar gets heavy next week, and will continue to be clogged for the next three weeks. IBMIBM -0.88%, VerizonVZ -1.34%, NetflixNFLX -0.40%, McDonald’sMCD +0.16%, MicrosoftMSFT -0.58%, StarbucksSBUX -1.70%, and Procter & GamblePG +0.38% report next week, among a host of others.

But the nastiest surprise could come at the end, when the one sector that has dominated headlines this week starts reporting: retail. A spate of companies have posted weak holiday sales, including Sears, J.C. PenneyJCP -0.46%, and Best Buy. What’s relevant here is that this group, because it operates on a fiscal year that ends Jan. 31 (to capture the full holiday season), won’t begin reporting earnings until some time in February.

#72 Pr on 01.22.14 at 8:24 am

…None of these rates will last….

As a good contrariant, i say: No, its here to last, a full decade.

#73 Smoking Man on 01.22.14 at 8:26 am

Tic Toc………10am creeping up.

All eyes on BOC …..

#74 TurnerNation on 01.22.14 at 9:33 am

Ah but it’s #worldclass here! -30 windchill and 30-year-old streetcars breaking, and we have this guy:

https://twitter.com/MayorRobMarley

Suddenly, a 900k semi in Riverdale makes more sense.

#75 jess on 01.22.14 at 9:47 am

http://www.taxjustice.net/2014/01/20/bahamas-another-captured-state/

…”Units in the as-yet unnamed condo project start at $595,000, comfortably above the $500,000 threshold that entitles you to apply for economic permanent residency – thus ensuring it is attractive to this market segment. Bearing in mind the economic residency provision, it is intriguing that the Bahamas government has been allowing a tax amnesty for wealthy property owners, with the government presumably having been less than diligent in enforcement for some time – or turning a blind eye. One report notes:

“Twenty-one percent of the country’s outstanding real property taxes relate to just 229 properties – 0.3 percent of all assessed – and over 56 percent of arrears are owed on properties valued at over $1 million, a situation the International Monetary Fund (IMF) has described as “alarming.”

#76 Mike on 01.22.14 at 9:57 am

#17 zee on 01.21.14 at 10:28 pm
hi

Most of last year, you were telling fixed rates will go up but now they are going down. You kept saying fixed rate products are determined by the american bond market and today you are saying it is the canadian bond market. If that is the case, then why paying attention to what is happening in the american bond market assuming that canada continues to struggle which it will in the coming months.

Read it again. It’s okay to move your lips. — Garth
———————————————————-

The bond market is global, and as such, every country’s bonds have an effect on the bonds of every other country. The American market is the biggest market for bonds, so it moves global markets. Each country also has other factors (such as employment and general economy) which influences its own bonds independently of the global bond market. The bottom line; a rise in US rates will push canadian rates up. This will continue to be a force in the future.

#77 Shawn on 01.22.14 at 9:57 am

Buffett and Derivatives

Humpty Dumpty at 66 more or less implies Buffett is a hypocrite.

For anyone interested to read, in context, what he said about derivatives, see pages 13 to 15 here, it is all explained in plain language. (crayon even)

http://www.berkshirehathaway.com/letters/2002pdf.pdf

It’s always easy for writers to grab a headline by quoting half a sentence by Buffett when they probably never read the little section of his annual letter whence it came.

If there were no so many uniformed investors, Buffett would never have gotten so rich. He does his best to educate investors…

#78 Tony on 01.22.14 at 10:08 am

Re: #13 Ben on 01.21.14 at 9:53 pm

“Ant farm” sales around the world and counting grains of sand in the desert mean more to me than Bombardier. When are they just going to close up companies like Bombardier and Sears for good?

#79 economictsunami on 01.22.14 at 10:08 am

The Canadian consumer once carried the water for the economy; as this no longer applies, we have pinned our hopes on: business investment, exports and/or the US economy.

The truth of the matter is: low rates and mountains of liquidity only hides true risk and props up the unsustainable.

Emergency low rates, QE and government stimulus was deployed to stop the financial free fall and put a floor beneath.

As rates begin to normalize and excess liquidity is slowly Hoovered up, we still have many long years ahead of us as the economy adjusts.

Ill conceived government policy merely prolongs the lingering outcome of what shape the new economy will eventually look like…

Canada Loses Haven Status as Dollar Doesn’t Spark Exports:

http://www.bloomberg.com/news/2014-01-22/canada-loses-haven-status-as-dollar-doesn-t-spark-exports.html

(The headline is a tad premature.)

#80 Xu Vicky on 01.22.14 at 10:48 am

I’ve heard how Canada have a good real estate market. They must have a stable economy to begin with.

#81 Yanniel on 01.22.14 at 10:56 am

Didn’t you put an extra zero here: “we were losing 10,0000 incomes a week”?

Drugs. Deal with it. — Garth

#82 maxx on 01.22.14 at 10:59 am

“I guess that brings us to cheap money. And it continues to be cheap…”

Relevant as ever Garth. As someone posted earlier, you never missed a beat.

IMHO, society at large, but especially seniors because of a limited time horizon, need a variety of investment options to choose from- even dreaded GICs.

Government and the BOC are aiming full bore at supporting business and business only, especially big business, in hopes of getting the big dollars. With these low rates, they aim to force as many as possible away from cash. They believe that this will produce jobs. Not so fast. Let’s see:

Interest rates at near zero guillotines retail, restaurants, personal care and travel. I talk to as many retailers as possible and it’s getting even uglier out there. Fast.

Every bit of profit possible on balance sheets is sequestered and sat upon by corporations, and not as government would hope, spent- essential/emergency spending excepted.

Smart people reduce, reuse, recycle, repair and refuse to buy more in order to avoid debt and save (oh yes, it is possible to have great quality of life without spraying precious cash everywhere). The rest spend, borrow and spend some more. There is already deep, systemic, negative fallout for the economy at large because of this (the public purse is now at great risk- hence TFSAs and exhortations to save!?).

Smart banks are now very carefully assessing borrowers as good jobs, nay almost any jobs are toasted, en masse, daily, with concurrent ballooning debt.
(Yesterday, an acquaintance said that she was in full panic as her balance sheet just isn’t balancing. She went to an employment center for help with finding a second job and was told, “you should be grateful you even have one”. She is an new Canadian and is now considering returning to her native country).

Many large corporations are in full retrench mode, refusing to spend and bolstering balance sheets with wholesale lay-offs, benefits and pensions reductions and eliminations, as well as ubiquitous off-shoring. This is a growing trend. Where will we be in 5 years? 10? At that point, trailing-edge boomers will also be online with government pensions. What percentage of the boomer cohort will actually be able to retire? Above the poverty line? Well, that large pool won’t be tomorrow’s big spenders.

Last Monday, [email protected] told me that people just aren’t investing in MF and equities because they were so deeply burned during the GFC. They are scared witless and no longer trust the investment industry. Who can blame them? Her personal precious metals fund lost a ton. She has decided not to cash in, but to leave it to her children or grandchildren as that should give the fund time to recover! She feels that the investment landscape is a casino. Wow. This from a bank veteran.

So, whilst this economy-damaging cycle continues to keep money cheap, exports may or may not increase but the domestic real economy will certainly suck, more borrowing will occur with accelerating job loss, and we will be traveling sideways at very best, for decades to come.

#83 bdy sktrn on 01.22.14 at 11:19 am

boc ,hold today, drop tomorrow

http://ca.finance.yahoo.com/echarts?s=CADUSD%3DX#symbol=;range=1d;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The Bank of Canada will not drop rates – unless we are going over the cliff. — Garth

#84 Wheezing Musty Basement Dweller on 01.22.14 at 11:22 am

My buddies in Vancouver who are foremen at a company that digs big holes for condos have not had a lot of new jobs come in in the last year.

But this morning they tell me that all of a sudden lots of big new jobs are getting started and they are rehiring. Good for them and the workers of course.

Confusing considering the overall market and direction? For me yes. I hope the investors end up happy with their returns on these new jobs.

#85 Rational Optimist on 01.22.14 at 11:32 am

30 Chickenlittle on 01.21.14 at 11:31 pm

“My power didn’t go out during the ice storm. There are no trees to knock down, thus no power lines went down.” That pretty much says it about Milton!

#86 Appreciating the sweet humour on 01.22.14 at 11:38 am

#17 zee
“Read it again. It’s okay to move your lips. — Garth”

Priceless

#87 shane on 01.22.14 at 11:43 am

Garth, are we falling off the cliff?

Hardly. But ask me again in June. — Garth

#88 :):(Ying Yang on 01.22.14 at 11:45 am

#7 Smoking Man on 01.21.14 at 9:37 pm

Don’t know what you posted Friday night but it should be included in your new book. Got a title for it. “Shitfaced & Texting for Dummies!”

Smoking Man why apologize for being who you are? We are what we are as the saying goes. Don’t change but become comfortable with who you are.
Bye the way the video was hilarious.

BOC rate unchanged as we expected. Well at least we are the one percenters!

#89 aprilNewwest on 01.22.14 at 11:48 am

#80 -Check the source. Anyone making money of RE cannot be trusted to reveal the facts. They said things were going well in the US when in fact they were not. That’s the name of the game!! Wake up!
Garth my email address has changed.

#90 bill on 01.22.14 at 11:57 am

#32 $$$BPOE#1$$$ on 01.21.14 at 11:47 pm
It is said, bpoe, that the civilized man seeks out good and intelligent company so that by learned discourse he may rise above the savage and closer to God.
Personally, however, I like to start the day with a total dickhead realtor to remind me how wrong the realtors are…. 50 % unemployment in Canada sounds like ‘no canada’ to me.
[sincere apologies to Sir Edmund Blackadder and Lord Percy]
thanks for dropping by!

#91 jess on 01.22.14 at 12:03 pm

Funeral flippers

Ponzi-like prepaid funeral scheme that victimized some 97,000 customers in more than 16 states
The scheme caused more than $450 million in losses, smaller or non-existent death benefits for families at their most vulnerable, and huge profits that lined the pockets of the defendants…

“The company didn’t put all of the funds from customers into a trust or life insurance policy, but instead brazenly altered application documents—i.e., changing deposit amounts, naming itself as a beneficiary, converting whole life insurance policies to term life—and used the money for unauthorized purposes like risky investments, payments for existing funeral claims, and personal enrichment. In some instances, defendants even removed money previously placed in trusts and life insurance policies. And NPS routinely lied to state regulators about its practices.

And if that wasn’t bad enough, NPS also purchased large blocks of prearranged funeral contracts from funeral homes that had previously entered into their own prearranged funeral contracts with customers, falsely telling these funeral homes that the contracts would be rolled over into life insurance policies.”

http://www.fbi.gov/news/stories/2014/january/prepaid-funeral-scam/prepaid-funeral-scam

#92 IM in C on 01.22.14 at 12:09 pm

Garth
Looking at my comment #76 I realize that some readers may think I am trying to be mean to you , or ‘bust your chops’. That was certainly not my intention.

I myself have now entered my 6th decade and discovered that 60 is not the new 50 !

I watched may parents move into their 80’s and saw them realize that physically they could no longer maintain a large empty nest house. More importantly , the emotional need for the house have dimished to the point where they realized it was time to move.

Which leads me to the point I was trying to make. The housing market will not collapse due to financial stresses. These financial effects can and are being manipulated by banks and governments. The housing market will collapse due to good old fashioned supply and demand stresses, namely the baby boomers, – the pig in the python if you will – all having to sell at one time.

That’s okay. You were such a dickhead with your comment that I didn’t post it. — Garth

#93 Ralph Cramdown on 01.22.14 at 12:10 pm

#71 recharts — [quoting the WSJ] “Of the 52 companies in the S&P 500 that have reported earnings so far, only 52% (27) have reported earnings above expectations, according to S&P Capital IQ, well below the average for the past four quarters of 67%. Eighteen companies have reported earnings below expectations, and seven have met estimates.”

So equity analysts have collectively gotten better at predicting earnings, and this is somehow a bad thing? Since there’s no mention of how this year’s profits compare to last year’s, or to share prices, the only real takeaway here is that equity analysts have blown fewer calls. The WSJ probably blames corporations for this “bad news” and behind them, it’s somehow all Obama’s fault.

#94 Sheane Wallace on 01.22.14 at 12:22 pm

CA dollar in real trouble. Where would it go? 0.8?

#95 T.O. Bubble Boy on 01.22.14 at 12:29 pm

@ #81 Yanniel on 01.22.14 at 10:56 am
Didn’t you put an extra zero here: “we were losing 10,0000 incomes a week”?

Drugs. Deal with it. — Garth
——————————-

First he typos a few zeroes… next, Garth will be writing this blog in Jamaican slang like Rob Ford.

#96 Victor V on 01.22.14 at 12:30 pm

The Bank of Canada is warning that unusually low inflation pressures will persist well into 2016 – a new forecast that could further delay future interest rate hikes and send the Canadian dollar lower.

The central bank kept its key overnight interest rate unchanged at 1 per cent Wednesday, or where it’s been since September 2010.

But the clear signal from bank governor Stephen Poloz is that disinflation is his paramount concern, and it isn’t fading any time soon.

“Inflation is expected to remain well below target for some time, and therefore the downside risks to inflation have grown in importance,” the central bank said in a statement.

Bank of Montreal chief economist Douglas Porter said Mr. Poloz is getting what he wants – a lower dollar – without actually cutting rates to get it.

“Suffice it to say that the bank is welcoming the weakening Canadian dollar with open arms,” Mr. Porter said.

#97 Victor V on 01.22.14 at 12:30 pm

And here’s the link:
http://www.theglobeandmail.com/report-on-business/economy/bank-of-canada-warns-disinflation-to-persist-well-into-2016/article16444689/

#98 45north on 01.22.14 at 12:35 pm

Mike: The bottom line; a rise in US rates will push canadian rates up.

exactly what I think

Tony: When are they just going to close up companies like Bombardier and Sears for good?

remember Tony you said: Mississagua and Brampton will be the last two cities in the country to tank.

http://www.greaterfool.ca/2010/09/23/road-kill/#comment-56664

you can sure pick ’em Tony

#99 jess on 01.22.14 at 12:52 pm

41 Wheezing Musty Basement Dweller
regarding those “education apps” ads during hockey

…”As a part of our ongoing financial life skills and fraud awareness partnership with the Vancouver Canucks
http://www.investright.org/

FUNDING
We fund all of these programs through an education fund that gets its money from penalties and fines imposed on individuals and companies that have contravened the BC Securities Act

#100 Smoking Man on 01.22.14 at 1:10 pm

Buy Curious
Smoking Man, why are you apologizing?
…………….
Truth, cause I really have no freaking idea of what I said. What I do know is, typing in that altered state, thought I was making an entry in my book doc, when in fact it was text message to my wife.

But sick is a relative term. But having no reference point to offer a counter rebutall.

An apology was the most sensible thing to do.

And look you guys are talking to me again.

Oh the herd.

#101 Sheane Wallace on 01.22.14 at 1:25 pm

Poloz should go back to year 1 at University to study again basics of economy and monetary theory.
Disinflation means stronger dollar and declining prices! CA dollar tanks, there already is and would be further inflation on everything imported.

Mixing interest rates with inflation when the central banks intentionally:
– underreport inflation – how is your insurance – health car, home, cost of education – tuition fees, food, gas, services costs, do they go up or down?
Of course they go up, the cost of basic necessitates goes up.
– forcing negative interest rates on savers.
– misleading the public (how is disinflation driving the dollar down, why in Europe it is driving the euro, Swiss frank up?)

is stupid.

When the real inflation manifests itself the real shit-show will being and in Canada it would be driven by the week dollar.

Why the hell would one buy bongs (any grade – government, municipal, company) in a low yield, declining currency environment?

Buying foreign high-yield equities nominated in stable currencies (for example in euro) is far better option.

With no buyers or buyers demanding higher returns the interest rates will increase and this will not be Poloz’s call.

#102 Son of Ponzi on 01.22.14 at 1:26 pm

Richmond, B.C. is on a floodplain and in a major earthquake zone.
And yet, they keep on building like there is no tomorrow.

http://www.richmond-news.com/news/richmond-could-be-shaking-all-over-1.797146

#103 Spectacle on 01.22.14 at 1:35 pm

Re #38 Uh Oh Canada on 01.22.14 at 12:19 am
Would like to get the blog dogs’ opinion on which stage of the housing bubble we’re at:

……this chart by Dr. John-Paul Rodrigue on asset bubbles … (Personally, I think we’re at the ‘return to normal stage.’)

My thoughts:
Nice graphs: but….never try to time a market duration or spread, (meaning the ups /downs and duration between them! ) dangers of doing so been Covered here many times by Mr Turner et al.

Re #54 Marco Polo on 01.22.14 at 2:10 am
Building a home is great, if you have the land, and bought it decades ago.

My thoughts:
look at the example of buying an a older Audi car: initial used purchase today, say , $3,000 to $4000, while annual upkeep ( like renovating Or building a new home ) about $1500 to $4500 per year depending on select factors. The cost for used car, or the land may seem affordable, the 2014 build costs are inflated at current days prices.

There is a time to buy, and a time to sell, (and a time to build if you have the capacity to do so). Timing that is an art and science.

My point: if real estate normalizes , going back 10% to 40% ( you pick change and duration) the overall economic environment will bring other related & unwanted effects!

Apology for mini blog,

Thanks too Garth

#104 economictsunami on 01.22.14 at 1:39 pm

With the Loonie hovering around the $0.90 mark why would the BOC feel compelled to act?

Although, since a rate raise in 2010 (Remember? Many were all agog about the faux recovery?) we have stood pat for 26 consecutive rounds to a chorus of over night rate crickets.

Even MC’s forward guidance tightening bias was dumped last October. CIBC states an easing bias is being priced into markets.

Under such conditions, is it any wonder that business investment is mostly mum on future spending plans?

Sure, we’ll goose inflation a bit and add to our export base but nothing sustainably significant.

Just hanging around awaiting on the next bubble… or credit polar vortex…

#105 martin on 01.22.14 at 1:43 pm

Hearing Poloz statement today.

Rates might be going down again.

inflation at risk

He said nothing about a rate drop, nor will there be one, for obvious reasons. — Garth

#106 Son of Ponzi on 01.22.14 at 1:47 pm

How do you “quietly” lower interest rates?

#107 dosouth on 01.22.14 at 1:55 pm

Here’s to hoping what goes up…..must come down.

Vancouver makes it to #2 – again

#108 bguy1 on 01.22.14 at 1:59 pm

I am not clear on one aspect of re-balancing:
1) Set a frequency (ie: quarterly) and only re-balance then
2) Set a threshold for out of balance percentages (ie: etf is over/under by 10%)
3) Combo of 1 + 2?

4) Engage someone who knows how. — Garth

#109 45north on 01.22.14 at 2:09 pm

TexasTea: in response to BPOE’s inane comments

Where’s Vancouver?

best one yet

#110 Paul on 01.22.14 at 2:15 pm

#87 shane on 01.22.14 at 11:43 am

Garth, are we falling off the cliff?

Hardly. But ask me again in June. — Garth
————————————————————
Beep Beep Road Runerrrrrrrrrr

#111 Sheane Wallace on 01.22.14 at 2:20 pm

CA is tanking really hard,
A bet it would be in the eighties (bellow 0.9) by the end of the week against the extensively printed out US dollar…

Wow.
I guess Poloz & Co will get their inflation.

Any suggestion on shorting Canadian bonds? It is really tempting.

#112 Sheane Wallace on 01.22.14 at 2:21 pm

Cd $ is worse than the Yen this year and the Japanese are printing really hard.

#113 IM in C on 01.22.14 at 2:22 pm

Re: My post #93
That’s okay. You were such a dickhead with your comment that I didn’t post it. — Garth

Excellent ad hominem retort!!

Now .. address the point I made in post #93. I would certainly value a well reasoned reply

#114 Spiltbongwater on 01.22.14 at 2:36 pm

He said nothing about a rate drop, nor will there be one, for obvious reasons. — Garth

How about the chances of a rate increase? I have LoC on my townhouse through RBC that is prime + .5. Worried I might not be able to pay the debt if rates go up a bit. Already eating hot dogs and KD on the reg. Drive Purple 08 Honda Fit and want new car soon.

The consensus view is the BoC will not move its key rate for 18 months. — Garth

#115 Oh no! on 01.22.14 at 2:39 pm

Oh no! “Canada Loses Haven Status as Dollar Doesn’t Spark Exports”

http://www.businessweek.com/news/2014-01-22/canada-loses-haven-status-as-loonie-drop-fails-to-spark-exports

#116 chris on 01.22.14 at 2:47 pm

LOL your joking right?? (That $85 billion a month went into Hoovering up bonds, resulting in high prices and low yields. The program, known as QE, could be kaput by the end of the year.)

Like Buzz Lightyear said…’To Infinity ….and Beyond’!!

QE will be largly gone by the end of the year. This has been evident since last summer. — Garth

#117 Smoking Man on 01.22.14 at 2:51 pm

He said nothing about a rate drop, nor will there be one, for obvious reasons. — Garth

Had poloz not done an amazing job talking down the dollar, you would have seen a 1/4 point drop. Guaranteed due to the trade deficit numbers.

We need an 80 cent dollar to keep business here with McWynne…doing so well in the polls.

Two more crap trade balance reports ,the rate will come down….

#118 Sheane Wallace on 01.22.14 at 3:08 pm

CA$ at 0.9022 and counting DOWN!

If I was a retiree on fixed income, saver or bond holder I would surely be mad as hell with the BOC ‘policies’.

Thankfully I am not.

Once the inflation shows and the dollar and bonds face the music then the real fun will begin.

If there are any brains left in these central banks talking heads they need to start increasing interest rates NOW!

Once severe inflation shows up no interest rate increases will help, once confidence in a currency is lost there would be run out of it and it’s derivatives (aka bonds).

If the rate suppression is in the cards for a little while longer all the commodities will simply explode and with them the cost of everyday necessities.

Once people realize what is going on and start spending.. one the velocity of money increases …. then..

Then I know what I rather be holding.

#119 Holy Crap Wheres The Tylenol on 01.22.14 at 3:11 pm

#102 Son of Ponzi on 01.22.14 at 1:26 pm
Richmond, B.C. is on a floodplain and in a major earthquake zone.
And yet, they keep on building like there is no tomorrow.

http://www.richmond-news.com/news/richmond-could-be-shaking-all-over-1.797146

…………………………………………………………………
Its coming so make sure your home is built on granite!

http://globalnews.ca/news/1094328/study-finds-that-ground-shaking-could-be-amplified-in-vancouver/

#120 Sheane Wallace on 01.22.14 at 3:15 pm

117 Smoking Man on 01.22.14 at 2:51 pm

We need an 80 cent dollar to keep business here with McWynne…doing so well in the polls.
…………………………………………………
I don’t think people are getting the picture.
We won’t get any manufacturing or Business at 80, even at 60 cent dollar.

manufacturing (all of it) is long gone and is not coming back.

The only hope are commodities and a STRONG dollar to allow for import of technologies in order to improve productivity as we are not competitive any more. We need to increase productivity, to be like Germany and this is not coming with cheap labour, on the contrary, most people with brains facing conditions of future economic repression will simply move on to greener pastures.

#121 Happy Renting on 01.22.14 at 3:17 pm

#69 liquidincalgary
Best comment of the day. Good timing on the comment number, too.

Garth, the verbal spankings you administer in the comments section are even better while you’re on drugs.

Seriously, hope you are mending well.

#122 Sheane Wallace on 01.22.14 at 3:19 pm

Canada’s economic recovery ‘relatively strong’: PM Harper:

http://ca.finance.yahoo.com/news/canada-39-economic-recovery-39-relatively-strong-39-183333246–business.html

I almost choked on it.

#123 Shawn on 01.22.14 at 3:21 pm

Count Much, IM in C?

I myself have now entered my 6th decade and discovered that 60 is not the new 50 ! (post 92)

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

If you are 60 you have entered your seventh decade.

As far as your comment about houses dropping as boomers sell, I believe Garth has said the same consistently on this blog for years.

Also the rules are Garth responds to only whatever he feels like. He is not our slave, nor even our paid vendor of information.

#124 Future starts now on 01.22.14 at 3:29 pm

#108 bguy1 on 01.22.14 at 1:59 pm
I am not clear on one aspect of re-balancing:
1) Set a frequency (ie: quarterly) and only re-balance then
2) Set a threshold for out of balance percentages (ie: etf is over/under by 10%)
3) Combo of 1 + 2?

4) Engage someone who knows how. — Garth

Or ask google.

Good idea. Take those precious, irreplaceable retirement funds and follow anonymous, generic advice. Just like the wealthy people do. LOL. — Garth

#125 Vito Tamma on 01.22.14 at 3:46 pm

Hi Garth

Sold my house thinking the Market is headed for a big slowdown not a crash. But we will see. The signs are there.
My question is: How does the US Federal Treasury now headed by Yelin
get away with printing 80 Billion a month. With a huge 16 a Trillion dollar deficit the US. They already have. What are the implication of this. To their economy on the next year or two.

Please answer my email
Sent from my iPhone

#126 angela on 01.22.14 at 4:02 pm

QE will be largly gone by the end of the year. This has been evident since last summer. — Garth

and where will the money to pay the maturing bonds come from ?? out of thin air

#127 sault ste marie on 01.22.14 at 4:19 pm

garth
is it cold where you are?
well my tires are frozen to the road outside.
i have been listening to your incredible advice for a few years now. my investments are providing me with a 2-4% gain for 5 years in a row. do you think this is adequate or should i have higher returns?
another thing, here in the frigid north you can get a great house on the water for $300k – and i do mean great house. why don’t people sell their principal home and move up here where homes are cheaper, cleaner air, nicer people and great restaurants are everywhere.
it only makes sense to follow this path. garth i dont understand how families can live in toronto or vancouv er without going crazy. keep up your writings we look forward to reading them.

#128 HD on 01.22.14 at 4:21 pm

#108 bguy1 on 01.22.14 at 1:59 pm

I am not clear on one aspect of re-balancing:
1) Set a frequency (ie: quarterly) and only re-balance then
2) Set a threshold for out of balance percentages (ie: etf is over/under by 10%)
3) Combo of 1 + 2?

4) Engage someone who knows how. — Garth

—————————————-

http://canadiancouchpotato.com/2011/02/24/how-often-should-you-rebalance/

Best,
HD

#129 james on 01.22.14 at 4:27 pm

Great. BoC holding rates for another 2 years at lease. With continued income growth, more upside for RE.

Actually most economists are calling for rates to start rising in mid-2015. And there is no income growth. — Garth

#130 T.O. Bubble Boy on 01.22.14 at 4:31 pm

This just posted in The Toronto Star… Garth, if you need a topic for tonight’s blog, here ya go:

http://www.thestar.com/business/real_estate/2014/01/22/westend_house_attracts_32_bids_sells_for_210000_above_asking.html

A renovated semi-detached house in Toronto’s hot Junction Triangle area has gone for almost $210,000 over asking price in a bidding war frenzy fuelled by more than 32 desperate househunters and a property that many believe was deliberately underpriced.

#131 Wheezing Musty Basement Dweller on 01.22.14 at 4:55 pm

Dear Toronto, thank you for.. a condo market even more interesting to follow than Vancouver’s. Does anyone have suggestions for a website with clean and trustworthy new sales data?

And.. the new video is a blast, personally I don’t see it as an embarrassment to Canada at all. He didn’t actually seem that drunk he was doing an impression shhesh. And obviously he is changing his lifestyle he lost a lot of weight. And he ordered a chicken salad to go, obviously not his normal menu selection at the “Steak” Queen.

#132 DR on 01.22.14 at 5:10 pm

#123 T.O. Bubble Boy on 01.22.14 at 4:31 pm This just posted in The Toronto Star… Garth, if you need a topic for tonight’s blog, here ya go:

and its only January?!

That is “astounding”

I tried to buy a house past few months and no luck.

I don’t see anything slowing down in Toronto.

I was afraid this would sell over asking and I didn’t know it would have gotten this much attention.

Like I said .. its only January.

Realtor sales snare + 30 dumb yuppies = risk. — Garth

#133 James on 01.22.14 at 6:04 pm

Actually most economists are calling for rates to start rising in mid-2015. And there is no income growth. — Garth

Even if rates won’t be rising till mid 2015, what is a quarter basis points per year. Not going to slow down RE. As per income growth, I am sorry but you only have yourself to blame if your salary sucks. Wages are definitely rising, especially in technology and financial industries.

#134 Smoking Man on 01.22.14 at 6:26 pm

#88 :):(Ying Yang on 01.22.14 at 11:45 am

Ha to your book title.

Due to my amazing powers of observation, On the train I noticed females readers outnumber men 4 to 1 when it comes to reading fiction.

My schtic is offensive to chicapoos. However being the genius that I am, I figured out how to get all my crazy on a page, keep their interest, with out offending them. Go to my blog, look at the first pass of a bad Hunter s Thompson attempt.

I will lose 80% of my market right on the spot, now in a few days go back, and see how I re work it. Then I will hook any human thats ever worn stelletos.

No one has to know the author is a depraved llunatic, I will save that for the monster, smoky will be good al the way to the end of story.

Then

#135 Steven on 01.22.14 at 6:31 pm

I’ll say it again. For the housing market to stay robust, you need cheap money, good jobs, good wages and confident consumers. How many of those elements do you figure we have now? Or will in the months to come?

Minimal to nothing. So far this year I have put in 2x 5.5 hour days routering stair stringers. I might get another 2 or 3 days laminating winder boxes and after that nothing for a while. At $15 an hour with variable hours when employed I won’t be buying my first home and starting a family any time soon and I am 53 years old.
If I am any indication Canada and any country like it has had the biscuit.

#136 Son of Ponzi on 01.22.14 at 6:32 pm

#122
Canada’s economic recovery ‘relatively strong’: PM Harper:

I almost choked on it.
—————————-
Harper is an economist, so he must be right.

#137 Son of Ponzi on 01.22.14 at 6:35 pm

#119
It’s coming, so make sure your house is built on granite.
——————
But granite countertops won’t save you.

#138 Son of Ponzi on 01.22.14 at 6:42 pm

#133
Wages are definitely rising, especially in the technology and financial sectors.
——————–
Too bad that most jobs are in the service industry.

#139 recharts on 01.22.14 at 7:00 pm

@T.O

#130 T.O. Bubble Boy on 01.22.14 at 4:31 pm
This just posted in The Toronto Star… Garth, if you need a topic for tonight’s blog, here ya go:

http://www.thestar.com/business/real_estate/2014/01/22/westend_house_attracts_32_bids_sells_for_210000_above_asking.html

A renovated semi-detached house in Toronto’s hot Junction Triangle area has gone for almost $210,000 over asking price in a bidding war frenzy fuelled by more than 32 desperate househunters and a property that many believe was deliberately underpriced.

you are falling for the spring market media campaign

This article is pure B$. According with this heat map i.imgur.com/vK6bAW4.jpg they got nothing but the price of the area. On the other side the author of this article seems to have missed some of the sales at the opposite end of the spectrum http://i.imgur.com/ZJ4zJb4.png (-25% under the asking price!!) . I wonder why

You better pay attentio to the lates news release of TREB. Rental market increased 31% YoY !!! with dropping rents for the last quarter. Now we know where the surplus hitting the market is goingTo bad we can not monitor the rental transaction numbers. I have started monitoring the inventory. I have been seeing a constant supply of around 60 units per day since I started monitoring these, it never slowed down during the holidays season when everything else went down to almost zero.

#140 Shawn on 01.22.14 at 7:09 pm

WANT FRIES WITH THAT?

Ponzi posted:

#133
Wages are definitely rising, especially in the technology and financial sectors.
——————–
Too bad that most jobs are in the service industry.

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

Too funny Ponzi, since financial and technology jobs ARE in the service industry.

What is too bad is that not everyone has a great job. But a lot of people do.

#141 Snowboid on 01.22.14 at 10:33 pm

#109 45north on 01.22.14 at 2:09 pm…

Most of our US friends know where Vancouver is – just across the bridge from Portland.

#142 I love BC on 01.23.14 at 12:47 pm

Garth, when is this market going to cool down. We saw this house and the good thing about this house was that it was near a secondary school. My realtor just sent me an email about it:

http://mlslink.mlxchange.com/DotNet/Pub/EmailView.aspx?r=709928034&s=BRC&t=BRC

I can’t believe this dump got sold over 80K asking price. Not sure how to educate people about their house horniness!