The drug

COMFORT modified

Two days ago when, when the Yankee stock market was shedding 300 points, this pathetic blog’s comment section brimmed with more nimrods that usual telling us why. America is a failed, bankrupt state, markets are rigged and all investors will be Hoovered. And that’s why Canadians cling to GICs and real estate.

Yesterday we had a nice example of that latter. A poor old woman’s lifetime hovel went on the Toronto market and sold in a bidding war. It was uninhabitable, with no furnace, no safe wiring, holes in the roof, windows gone, covered in soot, mould and human waste. The story, of course, was about the house and how it could possibly be worth the $803,000 it commanded. What did that tell us about the real estate market and the yuppie desperados now driving it?

But what about the woman? Yes, she won the lottery – but at a point in her life when it hardly matters, and after living years in degradation and squalor. However if you listen to the house-humpers, the debt merchants and the realtors, she did everything right – buying low, steadily paying off bank debt, making interest payments, building equity, concentrating her net worth in safe residential real estate, then collecting the big payoff. So how could it turn out so badly?

In reality, this may end similarly for legions of folks who are on the same trajectory. Cheap money and house lust have driven property values to the point where it takes more than 100% of net income to afford a home in Vancouver – even with a honking 25% down payment. In Toronto owning any kind of non-condo requires over 70% of net income, and nationally it’s half, according to RBC.

Add in a kid or two, and it’s easy to see why so many couples save and invest nothing. No mystery there. The house ate the money. It’s why the personal savings rate in BC, for example, is negative, and why the province which has the only city in North America where over 70% of all houses are assessed at $1 million-plus, is shedding young people.

Sometimes real estate just isn’t worth it, if you end up being 60 or 80 and have to live in a big, expensive city on the piteous public pension. After all, the taxes on that hovel – even in its unrenovated, prehistoric, Mad Max state – were $4,414 a year. That’s hard to afford when the average CPP and OAS income is $11,200. No wonder there was no furnace, and she poisoned herself on the fumes of kerosene heaters, while the gentrifying, savingless yuppies on each side installed Miele and Wolf.

Whether it’s a house, a stock or a little hill of gold, putting all your money into one thing never works. Real estate is not an investment or a retirement plan. As I try to warn people here daily, this puppy can turn on you in an instant, becoming an illiquid burden which pays neither interest nor dividend, has ever-rising overhead and can shed value as easily as it materialized.

It’s not about shelter and security for your family. Shelter is everywhere. It’s easy to find, whether you rent or buy. What everyone actually needs a whole lot more in their lives is income. Without that, every day can bring suffering and true unhappiness. I cannot imagine the woman who watched young people fight over her Galley Avenue home took any joy in feeling it deteriorate around here. But clearly she felt trapped, perhaps confused and diminished. And poor. I know nothing of her life, but I would have enjoyed helping her. Step one – a decade ago – would have been turning the property into a stream of income that would put here in a safe, clean, social place. There is no reason she lived like a wild, urban animal, simply because that was ‘home.’

Try to learn this lesson. Never put all of what you have in one place. Never borrow your brains out figuring rising values will save you. Never misunderstand risk. It’s not financial markets which flutter for a few days or weeks, but rather the prospect of years without enough cash every month to find dignity.

Our minds have been addled by this housing drug. I spent time this week with a guy in Kelowna who, in his mid-fifties, has “successfully climbed the property ladder.” His house is worth a million, yet he has zero savings or investments. Now he has cancer. In that market his home in currently unsaleable, and he’ll never get the million. “You’re probably right,” he said after our exchange. So he’s decided to borrow $80,000 and renovate. I failed.

Scroll back and look at those pictures again from yesterday’s post. I mean it. There was a time when a promising young woman would give anything to have a nice house.

164 comments ↓

#1 Smoking Man on 02.04.14 at 9:29 pm

Life imitating art. The pics from yesterday…

True story from last night. My room was like the pics.

Still in recovery mode, last night at the cottage across the Niagara river I run into an old business associate, by that time I was already several wines over the line.

Take him into the chairman’s lounge and catch up while sipping on 18 year old whisky. Before you know it, it’s two am.

Man I was hammered, there’s a security guard that sometimes escorts me to the car after a big win and other times to my room when I’m in this state.

Ha OK smoky got your back let’s go. I get to the room my wife’s already counting sheep.
I hit the pillow and I’m out cold. I’m still hung over 15 hours later.

At 4 am my wife wakes me up and says call the front desk. The roof is caving in and it’s raining. Huh, what.. I just shut my eyes. Then a loud boom. A huge chunk of drywall lands on my head.

So I feel for my glasses, like they are going to help. turn on the light, holly crap, did a plane it the hotel.

I call the front desk, hello it’s smoky I’m in room ### I think a plane hit the building, roof is caving in, and it’s raining, my voice raspy mumblish after a long night of drinking and smoking.

She says sir, go back to sleep. Hey lady its pouring rain in my room, we are going to drown. She hangs up. Sluring my words a bit, say to my wife, they don’t belive me.

Few minutes later, hard knock on the door, it’s my buddy security guard

As I open the door he’s says why you causing trouble Smokey . I envite him in. Should have seen his face. All hell was braking lose.

On the waki taki.. Then runs down the hall.

Aperantly a couple in the room above us started filling the jacuzzi then fell asleep or probability past out…. The room had a foot of water security guy tells me.

So we change rooms, I can’t sleep so I go down for a morning cap.

Hit the sack for the second time, then at 8am the phone rings, huge problems at the tax farm.

So I’m trying to resolve over the phone with a dude who’s English not his first. I don’t think I was making any sense at all. After 1000 dollars in roaming charges and 10 coffees later we sort it out.

I’m thinking why don’t I just to an autobiography rather than fiction. It would be way more interesting.

#2 Derek R on 02.04.14 at 9:32 pm

Very philosophical, Garth. And very true.

#3 Piccaso on 02.04.14 at 9:33 pm

LMAO… house-humpers

have to remember that one

#4 sheane wallace on 02.04.14 at 9:38 pm

I think we all underestimate greatly Canadian stupidity. Smoking Man is the only one whose stupidity-meter is close to correct. It is simply incredible, surreal stupidity,

When this thing blows and TSHTF it would be epic.
Much worse than in US.

#5 Muttley O'Toole on 02.04.14 at 9:40 pm

So sad and so true.
I feel for the young and the future.

#6 recharts on 02.04.14 at 9:40 pm

Garth, how about your statement “under 3% rates are gone, never to be seen again”. Currently these rates are available to the borrower from many lenders.

It’s worse than I thought. We had to suffer a 90-cent dollar to get here. — Garth

#7 Dean Mason on 02.04.14 at 9:41 pm

People want an easy answer for their investments and retirement.

Either you have to save a large portion of your income around 35% or more which is very difficult and earn low 2.50% to 3.00% 5 year GIC’s in RRSP’s, TFSA’s or you can save 15% to 18% in RRSP’s and TFSA’s and buy a mix of investments that have more short term risk and hopefully earn 6.00% or more.

You can try to do 50%/50% mix of both but please don’t buy market linked, market growth GIC’s.

ATB Financial cancelled selling them in January-2014 because they are not worthwhile investments.

#8 pinstripe on 02.04.14 at 9:42 pm

It is the staging and including all the appliances that made that house sell.

#9 House Hunter on 02.04.14 at 9:43 pm

Good post tonight. In the home buying process – so much analysis and emotion. I’m left with thinking: give me true market interest rates, not government controlled, and true risk mortgages, not cmhc guarenteed. The rest would take care of itself.

#10 CowtownCowboy on 02.04.14 at 9:46 pm

Truer words Garth…

This entire country needs a wake up call on wealth creation and management. It took me awhile but it is never too late, until it is too late. Save a little, spend a little, live within your means, and try to leave this world in a bit better shape than you found it…or none of this will matter for all that much longer.

#11 Dinglenuts on 02.04.14 at 9:49 pm

Great post, a plea to sanity. Too bad we’re the “crazy” ones for reading the blog.

#12 sheane wallace on 02.04.14 at 9:50 pm

It’s worse than I thought. We had to suffer a 90-cent dollar to get here. — Garth
…………………………….
The government is giving debt addicts free debt.
At the expense of the general public.
We soon will be seeing 80 cents dollar, maybe 70.

What I would hate the most is the bunch of bull sh.tters blowing up the horn on how this will help our manufacturing and exports.

Remember the ‘we have better lending standards and prudent banks’ mantra?

We would be eating sh.t and proudly announce how tasty it is.

Smoking Man, your turn.

#13 prairie person on 02.04.14 at 9:53 pm

You can’t eat plaster. You can’t eat wood. You can’t scarf down granite. You can’t pay for heat with buttons. A long time ago, I worked for a credit rating agency. Every day we filled out reports saying whether people should or should not get credit. Many of these people had small businesses. Usually, we got the request because the business was behind 90 days in paying for supplies. Many of these businesses were done. There was no way to say that they could pay the money owed or, more importantly, the money they would owe if the suppliers extended them more credit. It was not unusual if a business owner committed suicide. Years of long hours, money borrowed from family and friends, money a wife and kids did without. These were hard working, honest, dedicated people doing their best. Lately, with interest rates so low, with bonuses rather than wages or salaries paying the people who lend out the money, saying no has been frowned on, punished. Bonuses depend on volume. What do you mean, you don’t think this guy can pay his bills? Why are you reducing my income? However, credit is like a rubber band, you can stretch it and stretch it but it eventually breaks or snaps back. If you are paying for a mortgage with two incomes and one of you just got laid off (see Garth’s post for the latest list of companies laying people off) even the greediest loans manager is going to have to say bad loan and want money back. Objects in bankruptcies sell for pennies on the dollar. I know, as a sideline, I used to buy them. Great bargains but they do nothing to help the bankrupt. I always shook my head at people saying, “But I paid X for that item.” when they got ten percent, if that. Having seen this side of business, I wish people would pay attention to Garth. Even BMW’s end up at auction.

#14 Paolo on 02.04.14 at 9:54 pm

Very good points.

Masses need to be reminded.

No point living like an animal and getting $803,000 for a lifetime of lack, hardship, and squalor.

Like I said yesterday: Truly sad. Just a sad and pathetic state of affairs.

#15 Van Isle Renter on 02.04.14 at 9:59 pm

You raise a good point about the distinction between “shelter” and owning a house. I have a tough time seeing why high house prices are desirable. If you look at the basics of life: food, clothing and shelter, it is obvious that everyone understands the benefits of inexpensive and affordable prices on food and clothes. Yet they view high shelter costs as somehow a good thing. Foolish.

As John Wayne said: “Life is tough. It’s even tougher when you’re stupid.”

#16 BC_Doc on 02.04.14 at 9:59 pm

Well said Garth.

Here’s to the ant over the grasshopper.

#17 Chickenlittle on 02.04.14 at 10:00 pm

http://www.cbc.ca/news/business/rethinking-the-home-ownership-dream-1.2519201

WaterGuy303
@Trickledown
“Every current homeowner has equity.”

That reply says it all…I almost did a spit take when I read that!
Thanks to whoever (Blooby?) posted this yesterday.

SO….I work at a daycare FOR NOW. You wouldn’t believe the number of people who get subsidy that have well paying jobs. One person works at a big bank selling insurance, another is a teacher and yet they get government help in paying for daycare bills!
Some of the parents pretend to be separated as well.
Their debt load must be through the roof if they need to lie. I’ve had more than one family pull their kids because it isn’t worth paying for two kids to be in daycare.

#18 Sydneysider on 02.04.14 at 10:00 pm

“she won the lottery – but at a point in her life when it hardly matters”

At least she is better off than the old lady who died alone in her Sydney hovel, now worth 800K+, and was not discovered for 8 years.

http://www.smh.com.au/nsw/natalie-wood-the-woman-sydney-forgot-20140204-31ywh.html

#19 sheane wallace on 02.04.14 at 10:01 pm

#10 CowtownCowboy
……………………………
It won’t hep you. The government will come with the house-horny and baby-boomer bills to you and me, the ‘prudent investors’. It hurts to be sane in a madhouse.

#20 Waterloo Resident on 02.04.14 at 10:01 pm

I ‘HOPE’ that this is only just a temporary blip in the markets, I hope this is not a big slide down. Usually when the stock market tanks that means it is the beginning of a recession. And usually 2 or 3 years after that the general economy collapses and so do house prices. Now Canada seems to be stuck in some other UNIVERSE; here house prices only go up and up even when everyone else has lost their jobs. I have no idea what stuff Canadians are SMOKING, but whatever it is I sure hope it stays far away from me.

#21 TheCatFoodLady on 02.04.14 at 10:06 pm

Yesterday’s post was painful to read, as were the photos to examine & yes, I went to the realtor’s site to see them all. I had so many questions, looking at those remorseless reminders of a life gone, somehow, terribly wrong.

I’ll admit, I snickered at some of the tongue in cheek comments about staging, table placement, skylight… but it was an uneasy laughter, born of apprehension about this old woman.

How did this happen? The house clearly was at some point, well loved & looked after. It started as a nice little home. Our old lady may have entered it as a young bride, raised a family there & perhaps grieved there as a widow with few means & a desperation to cling to what she had left – a house containing rooms full of memories.

Unless her story is somehow made public, we’ll never know her life circumstances but with taxes that high & possibly very little to live on, I can understand the neglect. She may have had ongoing or late in life, developed some mental issues. Was she childless? I’d hate to think adult children would leave a parent in such conditions. What about her neighbours? Another case of ‘alone in a crowd’|?

Garth is right in that this is a fate that may await more than a few of us. You may think you have the world by the tail – you’re sitting in a paid off house you think is worth, as in the example Garth gave, a cool million. You think you’re healthy, your job is secure, your family doing well… then life lands a throbbing kick in the cojones & everything you thought you had evaporates or is mired in terrifying, illiquid uncertainties.

Don’t say it can’t be me, it can’t be you… life’s hard knocks can happen to anyone, any time. Amazing how you can mess up a leg taking your dog to the end of the driveway as happened to Garth!

Would you be ready to deal financially? Could you rent or buy the medical equipment needed? If you lose a spouse, can you survive financially?

If not, get your ass in gear because fate is a fickle bitch.

#22 Realtor # 1 GTA on 02.04.14 at 10:10 pm

Buyers are willing to give a greater percentage of their
Disposable income towards a mortgage and yes save less.
When you see prices rise as they did waiting another and
To save for a greater down payment does work. The appreciation of far out paced what the average person could save.
People are renewing at a cheaper rate and carrying costs
Is still relatively low.

#23 Obvious Truth on 02.04.14 at 10:12 pm

Always comes back to simple humanity.

When you have the 42 inch built in and it’s repaired twice for $1500 each all you want is the $800 Home Depot special.

Because it doesn’t matter.

Working less does. Knowing how to help yourself and those you care about does.

Met with another banker today. Young guy. Ambitious. Kept talking about RE in holdcos and financing. What a mess. Who would ever undo that stuff. I guess it’s what sells. Sales pitch is ‘we’re not sure if this is for you’.

Investing in financial assets with simple tax strategies available to almost everyone seems so much cleaner. But debt is easier than saving. Saving is a hard sell.

The mess could again be bigger than i thought. How many pockets of debt might people really have?

#24 piazzi on 02.04.14 at 10:13 pm

Garth,

ypu called weakness in equity market way back in december if I recollect correctly

in your opinion, is it time to go for the DOW (or S&P) or still early?

Build a balanced, diversified portfolio starting with the stuff that’s on sale. There are probably better bargains right now elsewhere. — Garth

#25 Freedom First on 02.04.14 at 10:16 pm

I failed-Garth. No, you did not Garth. But I understand what you meant in saying that. Reminds me how it took years of trying to help people, and having so many more failures than successes, to learn that I could not let anybody control my emotions by their action or inaction.
I know I got very good at it, but I also know that you are excellent at that Garth. It is just another part of the reason that people call you The Ironman.

Re insanity. Yes, it is the reason that Warren Buffett said there has been more money lost in leveraged RE than every other asset combined. To me, RE insanity looks like a communicable virus, as in just the last several years it has financially destroyed multi-millions of people/families world wide. Garth has been providing the vaccination for free on his Blog. Read every post written until today, and you will have immunity. Kindest thing you could do for your financial sanity.

#26 sheane wallace on 02.04.14 at 10:16 pm

#15 Waterloo Resident
…………………………..
It is the fluoride in the water.

A recently-published Harvard University meta-analysis funded by the National Institutes of Health (NIH) has concluded that children who live in areas with highly fluoridated water have “significantly lower” IQ scores than those who live in low fluoride areas.

http://www.huffingtonpost.com/dr-mercola/fluoride_b_2479833.html

My son drinks only distilled water and is 2 years ahead of his grade with easy.
Somehow at 10 I think he is more mature than half of the senior managers that I know and work with.

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

Germany[edit]
Drinking water is not fluoridated in any part of Germany. One experiment, started 1952 in Kassel-Wahlershausen, was discontinued in 1971.[42] The GDR used to fluoridate drinking water in a few cities, but it was discontinued after the German reunification.[1] Fluoridated salt is available since 1992 with steadily increasing market share.

Ontario, Alberta, and Manitoba have the highest rates of fluoridation, about 70–75%. The lowest rates are in Quebec (about 6%), British Columbia (about 4%), and Newfoundland and Labrador (1.5%), with Nunavut and the Yukon having no fluoridation at all

…………………………..
Healthy teeth, no brains.

#27 Vamanos Pest on 02.04.14 at 10:18 pm

For those of you who follow the price-to-rent ratio (discussed previously a few times on this blog), I’m moving, found a 2800 sq ft overlooking a grassy coulee.

Price to rent ratio based on a sale in 2011: 44.4

As a reminder, the ratio is the market value divided by the rent in a year. A ratio under 15 favours buying, while over 15 favours renting. A ratio of 44.4 favours the naming of your first child after your landlord to thank him for his generous subsidization of your lifestyle!

#28 Derek R on 02.04.14 at 10:28 pm

#16 Sydneysider on 02.04.14 at 10:00 pm wrote:
At least she is better off than the old lady who died alone in her Sydney hovel.

Wow! That’s an extremely sad story.

#29 Johnny Canuck on 02.04.14 at 10:29 pm

Very eloquent, Garth. And even empathetic. Both of which belie your crusty public persona.

#30 Roman on 02.04.14 at 10:32 pm

It’s indeed very sad story. How is this ever possible to be practically a millionaire and leave as a homeless, in the greatest city on earth?

And even if it was a business that bought a house for demolition or renovation, and if by some miracle they manage to make money on this project – what a huge waste of resources this will be.

Market will punish everybody who has been sucked into this madness.

#31 Time has come today on 02.04.14 at 10:38 pm

The drug is not what everyone thinks it is, the drug is not low interest rates.

The drug is denial.

The bad tasting medicine is the truth.

The problem now is that there are so very many drug dealers out there and so very few truth Doctors.

#32 Tripp on 02.04.14 at 10:39 pm

“There was a time when a promising young woman would give anything to have a nice house.”

She had it but she could not let it go for reasons that we don’t know. Nevertheless, nobody should live like that in one of the richest countries in the world. It is annoying to be young and poor; it is horrible and tragic to be old and poor. Yes, she sold for 800k, but after living like that for years (maybe decades), does it really matter?

It is worrisome to see our value system. We talk about happiness being a feeling and a state of mind but we measure it in square feet, horse power, megapixels, air-miles, watts or screen diagonal. We don’t know our neighbours’ name and we don’t say good morning to them, but we are talking about “our community”. We forget to genuinely smile. We launch the reflexive “how are you?” but we couldn’t care less about how they actually are. We are proud of a healthcare that barely works. We look down at other people, cultures and countries, US being the favourite target. Some of us really believe that the double double is good coffee and the best homes in the world are made of sticks, compressed sawdust and plastic. We cherish the institution of family but half of our marriages end up in flames; many will get old alone and we will see our kids twice a year, on Easter and Christmas (insert your holy days here).

And of course, it is all Government’s fault.

#33 Smoking Man on 02.04.14 at 10:41 pm

Why have stopped talking about real estate, the markets in general and batman and camel toe.

Truth is I got tired of rubbing sault I am people’s eye balls.
My calls have been incredibly correct, at the time of post. Unlikely.

What has been my theam, The Herd silly.

I’m board of the topic, but as many come here to read the insanity of Smoking Man.

I do have my favorite posters that I enjoy reading.

But to complement you personally is so non smoking man.

Keep em coming….

I need more Vladimir and beach girl.. Where are you guys..

#34 Nat on 02.04.14 at 10:42 pm

The true cost of the housing bubble will be measured in human not financial costs.

#35 Ryan Perich on 02.04.14 at 10:43 pm

housing…can shed value as easily as it materialized.

As much as most of the population believes everything else you say Garth, that last line most people do NOT believe housing loses value over the long term. ever. not anywhere, and certainly not in areas with low rental vacancies and less than 5 % unemployment.

Even given the charts and graphs now widely available since after 2007, people cannot and will not believe housing can EVER lose value for more than a year or 2.
Because…. for the most part, they have been right since the inception of the baby boomers. Even if it dragged on for 10 years of negative equity… forward 10 years after that and it’s 2x or 3x in value, thus you have been wrong…in their eyes, in the past, they were right. but nothing has been brought to this epic proportion of stupidity, lack of savings, debt, and lack of pensions.

#36 John on 02.04.14 at 10:45 pm

TD’s recent report was rather funny.. feels like it was written by an amateur, not an economist at major bank… “affordability in the Atlantic Provinces would remain pretty darn good”. Or this: “existing home prices are overvalued by anywhere from 8% to 60%”, that’s a nice margin of error.

#37 KommyKim on 02.04.14 at 10:46 pm

Garth,

Do you think that emerging markets have hit bottom yet now that the HAM (Hot American Money) is being withdrawn?

#38 will on 02.04.14 at 10:47 pm

Yeah you nailed it again Garth. People are trained to think of RE as an investment but most never realize the gain by selling and putting the tax free capital gain into dividend paying assets. They get attached to their homes. They choose to die in their homes.

The price was wrong, but I’m glad she won the lottery. To those who say the place is a tear-down, I say at least it has the merit of being a fixer-upper. On the other hand, that 6mil. tasteless dumpster in Mississauga truly is a tear-down BECAUSE IT SHOULD NOT EXIST.

#39 John on 02.04.14 at 10:50 pm

In any case, don’t think there will be a major change in prices until interest rates start rising… Instead please write more on investing, ideally with some actionable items, that readers can digest and follow.

I’d have to raise the fee. — Garth

#40 quebec economist on 02.04.14 at 10:51 pm

@#7 Dean Mason

With the great invention of ETF 6% on investments should be history. Over the last 10 years I have made 100% over 10 year in low risk portfolio + 1.6% dividends yearly (100%XSU-etf (actually IWM in the US before XSU was available in canada)) this includes the 16% drop in 2007-2008. Simply the dividend portion of this ETF outplays GICs.

Yes, my low risk portfolio is 1 ETF. Some naive people often say i should diversify? Well exactly, this ETF contains 2002 companies…If this index crashes, then the whole economy is in the shits and I will certainly not win elsewhere. (especially not in big names like mcdonalds, google and apple or in REITS). All you need is 1 ETF.

i choose the Russell 2000 index since its gains have almost always outperformed the Russell 3000.

I have a more aggressive portfolio for higher gains. But that takes some time,research,luck and practise.

Please people if you are making less then 10% when general indexes are above this, please change strategies… 1 or 2 etf are all that is needed. No need to over mix the well diversified indexes…

#41 MrHulot on 02.04.14 at 10:57 pm

Meanwhile…

Greater Vancouver’s real estate rally extends into 2014

Housing sales rose 30.3 percent while benchmark prices climbed 3.2 percent last month as the rally in Greater Vancouver’s real estate market extends into 2014.

http://www.bnn.ca/News/2014/2/4/Greater-Vancouvers-real-estate-rally-extends-into-2014.aspx

#42 carpicker on 02.04.14 at 10:59 pm

Build a balanced, diversified portfolio starting with the stuff that’s on sale. There are probably better bargains right now elsewhere. — Garth

Yellow and mellow is on sale, is that what are you suggesting!?

#43 ozy - beat it, who sais all deserve a house on 02.04.14 at 10:59 pm

beat it, who sais all deserve a house….???

it’s ridiculous, to believe globalization means uniformization….yeah, suckers will be leveled so smart people will profit

the one who have and the ones who do not have

this is realistic economics and not blaming everyone but not the ones that did not want to buy when it was 50% less….

capisce?

#44 Smokin Mad on 02.04.14 at 11:10 pm

I am Smoking Mad about the speculative behaviour of the dumb masses, which is dragging us all down. Prepare for civil war when the housing market crashes and the politicians are looking for more ways to make prudent taxpayers help bail out the irresponsible pigs!

#45 See It Like It Is on 02.04.14 at 11:16 pm

You’ve got it so wrong with old age Garth. Some of the most miserable people in the world are the wealthy growing old. They are absolutely desperate trying to stay young with their botox and plastic surgery and misplaced body worship. It’s sad really. You can never know what will happen in 30 years. All your riches could vanish with war, political unrest, market crashes, loss of health (both physical and mental) and a hundred other reasons. All the truly happy elderly people I ever met lived simple lives in their old age and had loving families. Your children and grandchildren who love you as you love them are the greatest treasure an elderly person can have. My grandfather’s greatest joys were his grandchildren and his bee hives. He had very little money but lived with us in the winter and at the cottage in the summer. He was one of the happiest men I knew. I know of that joy as well, I have six beautiful kids.
Incidentally, my house happens to be 2 blocks south of that wreck you featured yesterday (bought in 2000). You were incorrect in your assessment of the neighbourhood as that truly is the worst house in the BEST area. Absolutely everything is within walking distance. St Joseph’s Hospital, the library, amazing restaurants of all varieties, fresh fruit and vegetable markets, flower shops, variety stores, grocery stores, independent coffee shops (for the yuppies), delis, vets, family doctors, dentists, lawyers and notaries, all the major banks, High Park (3 blocks), Sunnyside (the lake front), churches, toy stores and on and on. This truly is the future and the future is here. Today. Not up and coming.
This has got to be the best neighborhood in the city to raise kids. The little ones walk to school. Just like Leave It To Beaver. Can you imagine?
That is why there is astounding demand for this area from families. We have a vibrant population of children. The schools are bursting. The area is ALIVE! The wrinklies are included and part of the neighborhood. It’s as it should be.
Finally I wanted to bring up a technical point about the housing stock in the area. After the Great Fire of 1849, Toronto mandated solid masonry construction for homes to help control the spread of fires. The houses in the neighbourhood are almost all Edwardian, built in the very early 1900s. The foundations are stone or triple brick and the walls are double brick. There are almost no “teardowns” here. You have a shell that is over 100 years old and in amazing condition. It will still be here in a hundred more. The house will be gutted as would be done anyways with a house that needs updating. What difference does it make if it looks like crap inside? I’m not agreeing with the valuation, but I wanted to clear up the ignorance in regards to the hood. Even the New York Times recognizes what we have:

http://www.nytimes.com/slideshow/2011/10/09/travel/20111009-surfacing.html?_r=0

Thanks Garth for all you do and get better soon!

#46 quebec economist on 02.04.14 at 11:31 pm

If you want safe get Class A Shares of DFN over 5 years you get 8% interest….

#47 Retired Boomer - WI on 02.04.14 at 11:31 pm

It is easy to look at the charts for RE, stocks, bonds, even demographic trends in the past. Anybody can see where we’ve BEEN. The trouble with projecting past performance forward is that involves the future, and that just is not knowable.

Who knew the markets would end 2013 up about 30% (US)? Who knew they were going to fall out of bed a month later? No body ‘knew.’ Some suspected it. History is very insightful, never repeats exactly, but often rhymes.

The story of yesterday’s home was -stunning! The owner an enigma we cannot unravel here. The buyer, perhaps the Greater Fool, but that is yet to be determined.

$4414 in property tax unbelievable for an uninhabitable hovel selling for $803,000. Only somewhere beyond is that possible, only somewhere beyond… really shall I say.

Someday people will get a whiff of reality, and they not like the fragrance. We all need to be grounded periodically, as we tend to drift from reality more easily these days. It can come with a job loss, a slip on the driveway, a diagnosis, a decision to start a new life. A decision to live a different way. So, what’s your reality?

#48 45north on 02.04.14 at 11:32 pm

prairie person A long time ago, I worked for a credit rating agency.

thanks for your post, I read it carefully To succeed at your own business you need to be very good at what you do and you need to be very lucky.

CatFoodLady How did this happen? The house clearly was at some point, well loved & looked after. It started as a nice little home. Our old lady may have entered it as a young bride, raised a family there & perhaps grieved there as a widow with few means & a desperation to cling to what she had left – a house containing rooms full of memories.

those are my thoughts.

#49 quebec economist on 02.04.14 at 11:41 pm

How about DGS on TSX, dividend yields are currently at over 13%… C’mon people! I don’t trade these type of things (I am a venture capitalist) but if you are currently at below 10% please wake up! Safe things exist for you!

#50 Uh Oh Canada on 02.04.14 at 11:41 pm

Garth- this is your most touching, empathetic, and most human post ever. I’m sure having the accident has played a role. Illness/unforeseen accidents will do that to you. I spent a week bedridden in Asia and have never been the same since. It changed my life, as it made me see what should be priority and that life itself- the art of living- is what truly matters.

#51 Rural Rick on 02.04.14 at 11:43 pm

#26 sheane wallace
Yeah distilled water will make you smart! Er.

#52 Longterm on 02.04.14 at 11:49 pm

Compare yesterday’s offering with this. http://noddfachapelforsale.weebly.com/

Ok, it’s in mid-Wales but at 1/3 the price you could ditch the Toronto digs and retire in character and style.

#53 jobs! on 02.04.14 at 11:54 pm

read somewhere that Walmart planing new stores in canada with several thousand jobs?

#54 Steve on 02.04.14 at 11:58 pm

“Real estate is not an investment or a retirement plan”

Lol. Really? Are you telling me that my 4-plex, 5-plex and 6-plex are not a good retirement plan? Maybe not in Toronto… All of them with good positive cash-flow, well located. None of them was overpaid. One of them (4-plex) worths 200,000$ more than what I paid for in 2009. I love those properties and will keep adding more multiresidential properties to my RE portfolio! I’m 35 years old. Between age 42 and 45, I’ll be able to live out of the revenues they generate (though I won’t stop working, but I could if i want to). I don’t really care about the selling price in 25 or 30 years…

#55 gmc on 02.05.14 at 12:12 am

Wow incredible, can’t believe someone paid anything for that shack, that is what a mania is, people are delusional, and it will all turn out bad
like I have stated before, read Charles MC Kay book on
Extraordinary Popular Delusions and the Madness of Crowds
It is fact and history, it repeats itself, south sea bubble, tulip mania, etc.. here we go again, Canadian real-estate…. I have been reading this blog ever since it came out and sold my mortgage back in 2008, a little too early I must say, and Garth call will be on the ball, but the timing was way off, but not due to his error or judgment, it was all about the government intervention, who would have guessed they would have purposely dug us deeper into debt, all of us, CMHC at the hawk for close to 1 trillion, our other debt, 600 billion, bailed out all the big banks in Canada , GMC etc….
This is going to be epic in it’s collapse, I remember the 1980, 80 drop in real-estate.
I believe Garth but sometimes think he is just a little too optimistic on his call, because really nobody knows what is coming next…. and how despite the government will get, I don’t believe all that I read, but it seems to be more factual reading the NET then the mainstream media.
For all the hopeless out there, I am an expat living in a great country, in as afar as no government intervention, a nice house is Approx 25 grand, 22C to 32C most time, food is exceptional cheap, people around me are pour but generally happy, and if there is a down turn, they are already there.
I ended up divorced soon after selling the house, wife couldn’t stand to rent, and lost most of what I build up, but hey, I have a new life , no debt, no mortgage, no mainstream TV, and life is good again, so if you lose it all, pick it up and try it again. I am happy again, not running around like a crazy man trying to pay all the bills, making dead line , taxes, insurance etc……. here medical is awesome and very cheap. Nobody worries about the same things I did back in Canada, and by the way, she might be an Amazonian, but she is 34 and take very good care of me, life great!!!!!
cheers gmc

#56 AfterTheHouseSold on 02.05.14 at 12:19 am

#32 Tripp
“She had it but she could not let it go for reasons that we don’t know”.

The biggest barrier that I see stopping boomers and the elderly from downsizing, is their “stuff”. Four bedroom huge homes, finished basements and garages bursting at the seams, groaning under the weight of mountains of stuff. Cupboards, closets, book shelves, drawers, full to overflowing.

Most, eventually destined for the landfill cause guess what, your kids don’t want your antiquated “prized possessions”. Your royal doulton is the next kitschy toilet brush holder project on pinterest. Besides, your kids homes are already crammed with their own stuff.

What have houses become really, but glorified drywalled storage containers. We are prisoners of our own making.

#57 say it ain't so on 02.05.14 at 12:21 am

professional traders are not buying stocks. they are waiting for the rebound to short them. problem is stocks are so pathetically weak, they can’t even rebound after a 1200 point decline. 13,000 DOW soon…

#58 renters rule on 02.05.14 at 12:22 am

@#39 John

You are a moron.

#59 NotAGreaterFool on 02.05.14 at 12:24 am

Garth earlier in the month you stated you may need to downgrade your outlook for real estate in Canada. What is your viewpoint now?

#60 KommyKim on 02.05.14 at 12:31 am

RE:Instead please write more on investing, ideally with some actionable items, that readers can digest and follow.

I’d have to raise the fee. — Garth

I’m sure the dogs wouldn’t mind you doubling or tripling the fee you charge us now. LOL.

#61 Cici on 02.05.14 at 12:36 am

#1 Smoking Man

You said “I’m thinking why don’t I just to an autobiography rather than fiction. It would be way more interesting.”

I say: “You just did, and you gave it away for free! Have you been into Garth’s medical stash?”

#62 45north on 02.05.14 at 12:37 am

gmc I believe Garth but sometimes think he is just a little too optimistic on his call, because really nobody knows what is coming next

well I just lost 10% on the value of my house when the Canadian dollar dropped 10%. Funny how a lot of people didn’t.

#63 World According To Garth on 02.05.14 at 12:37 am

According to Garth I’m a nimrod. We will see who has the last laugh at DOW 5000 sometime in 2016. Anyone look at Kiev on the internet lately?

#53 jobs! on 02.04.14 at 11:54 pm
read somewhere that Walmart planing new stores in canada with several thousand jobs?

This is where old private sector people will be working to support the govt workers retiring at 55 in Mexico with their $1,000,000.00 pensions. Also so they have money to buy the long long long long list of “not included” in our free (we pay $400 a month in BC) shitty healthcare system in Kanaduhhhhhhh.

#64 Rabbit One on 02.05.14 at 12:38 am

>#21 Catfoodlady

I live West side of Vancouver, most houses sell for over $2.5M.

We can see some houses dark, outdated garden-decos, molded structure visually from outside , just same like the pictures Garth posted.
I am talking about Point Grey, Kits and Dunbar neighbourhood.

Those house are not for sale for at least for last 40 years, so not on MLS or RE agency’s website.
Not included in recent house lust stats.

Too sad, some houses called by neighbours’ kid ” pxx house”.
As Catfoodlady said, it was once decent West side detached family house, now seems no longer affordable, mind you, not to buy, but to just maintain for some owners.

#65 Income flow, wealth stock and reverse mortgages on 02.05.14 at 12:41 am

BTW, we know little or nothing about this woman. Maybe she was a drug addict; maybe she was an invalid with no family. Maybe she could not give up the house her husband died in – or died building. Maybe she spent all of her money knowing that she would have her home confiscated anyway – to pay for her Long Term Care. We do not know.

In retirement lack of income and a growing stock of (house) wealth is often a serious problem for seniors.

Federal and Provincial taxes are based on income (income tax) streams and consumption (HST).

Municipal taxes, on the other hand, are levied on one’s stock of wealth. When you retire the stream of income is usually much smaller, but so is the tax bite.

However, the bite of property tax on a one’s stock of (house) wealth is more severe and retirees have to sell and rent, even if they do not want to do so.

Some municipal tax authorities understand this better than others.

Retirees should avoid taking out a “reverse mortgage” at all costs.

Alwyn

#66 Waterloo Resident on 02.05.14 at 12:42 am

Oh oh, Just found some more news on the current meltdown state of China’s financial system, and it doesn’t look very good. Yup, it’s the big one.

“China About To Plunge Into Financial Crisis”
http://business.time.com/2014/01/28/is-china-about-to-plunge-into-financial-crisis/

Quote: ((( “the secret bailout comes at a time when intra-bank lending rates in China are rising (which means banks don’t trust each other), market volatility is increasing, and the value of risky debt products is plunging.
“Sound familiar? That’s exactly what happened in the run up to the 2008 collapse of Bear Stearns in the U.S. Indeed, says Gao, “the bailout looks very much like the Bear Stearns moment.” )))

#67 World According To Garth on 02.05.14 at 12:44 am

http://armstrongeconomics.com/2014/02/04/corruption-in-government-is-massive-worldwide/

If anyone thinks this is not in Kanaduhhhhhh you like me (according to Garth) are a complete nimrod.

#68 YVR on 02.05.14 at 12:46 am

#40: With the great invention of ETF 6% on investments should be history. Over the last 10 years I have made 100% over 10 year in low risk portfolio + 1.6% dividends yearly (100%XSU-etf (actually IWM in the US before XSU was available in canada)) this includes the 16% drop in 2007-2008. Simply the dividend portion of this ETF outplays GICs.
———————————————————-

Since 2007 the XSU is only up 25%. That is a 3.5% annualized return since 2007. In 2008 it crashed over 55% (not 16%) so at that point you would have lost most of your money in a years time. Actually your investment strategy proves investing in 1 US equity ETF is a poor decision and exactly why you need diversification. You took on huge volatility and risk with a return similar to a 5 year GIC since 2007.

http://ca.ishares.com/product_info/fund/performance/XSU.htm

#69 Steve French on 02.05.14 at 12:48 am

Smoking Man:

What in God’s Holy Name are you blathering about?

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

#70 FutureExpatriate on 02.05.14 at 12:53 am

Watching my daily dose of househunters porn on HGTV, I began to finally get it. Location is everything for young loser drinking couples WHO CAN’T DRIVE because they can’t control their drinking. These loser couples always have to be in an urban neighborhood with lotsa lotsa bars and “nightlife” and close to mass transit. Whole lot of employed alcoholics in the big cities. A real pity. Because who do you think is going to lose their jobs and ridiculously overpriced houses and condos in a downturn first?

#71 KommyKim on 02.05.14 at 12:56 am

RE: #26 sheane wallace on 02.04.14 at 10:16 pm
#15 Waterloo Resident
…………………………..
It is the fluoride in the water

Here’s a great movie for you to watch:
“Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb”

#72 Observer on 02.05.14 at 1:04 am

The story, of course, was about the house and how it could possibly be worth the $803,000 it commanded. What did that tell us about the real estate market and the yuppie desperados now driving it?

Lets get to the heart of the matter. It’s cheap, easily available money that got us to where we are. Policy. They could raise rates and bring the dollar closer to par with the US greenback, thus putting the brakes on import inflation and slowing this house madness at the same time. They have choices.

#73 Waterloo Resident on 02.05.14 at 1:06 am

#26 Sheane Wallace:

A few years ago Waterloo had a referendum to discontinue Fluoridation of the city’s water supply. I fought long and hard to convince everyone I knew how bad it was for people and got them to tell their friends and then they tell their friends. Well it worked, we got the referendum turned around and now there is NO FLUORIDE in Waterloo’s water supply anymore.

Did you know that the Fluoride in toothpaste is NOT THE SAME as the fluoride that they use in water? The Fluoride they use in water is a waste by-product of chemical production and it is not the same as what we get in toothpaste. Go figure. The fluoride used in toothpaste is okay, it doesn’t affect human health, but the stuff used in water does, in a negative way. That was the information I found and gave to others and it scared the crap out of everyone that the poison was being pushed into their drinking water, so they made sure it got removed.

The biggest problem was that there are always those people who have their hands over their ears; they don’t want to hear any news that doesn’t jibe with what they already believe to be the truth. So no matter how much proof I told them that it was bad, they kept telling me to go away and F*** myself.

Here’s some info from this site: http://fluoridealert.org/articles/50-reasons/

Quote: “Fluoride is not an essential nutrient. No disease, not even tooth decay, is caused by a “fluoride deficiency.”(NRC 1993; Institute of Medicine 1997, NRC 2006). Not a single biological process has been shown to require fluoride. On the contrary there is extensive evidence that fluoride can interfere with many important biological processes. Fluoride interferes with numerous enzymes (Waldbott 1978). In combination with aluminum, fluoride interferes with G-proteins (Bigay 1985, 1987). Such interactions give aluminum-fluoride complexes the potential to interfere with signals from growth factors, hormones and neurotransmitters.”

“Fluoride accumulates in the body. Healthy adult kidneys excrete 50 to 60% of the fluoride ingested each day (Marier & Rose 1971). The remainder accumulates in the body, largely in calcifying tissues such as the bones and pineal gland (Luke 1997, 2001). Infants and children excrete less fluoride from their kidneys and take up to 80% of ingested fluoride into their bones (Ekstrand 1994). The fluoride concentration in bone steadily increases over a lifetime.”

“it makes more sense to deliver the fluoride directly to the tooth in the form of toothpaste. Since swallowing fluoride is unnecessary, and potentially dangerous, there is no justification for forcing people (against their will) to ingest fluoride through their water supply.”

“Fluoride may damage the brain. According to the National Research Council (2006), “it is apparent that fluorides have the ability to interfere with the functions of the brain.” In a review of the literature commissioned by the US Environmental Protection Agency (EPA), fluoride has been listed among about 100 chemicals for which there is “substantial evidence of developmental neurotoxicity.”

“Fluoride may lower IQ. There have now been 33 studies from China, Iran, India and Mexico that have reported an association between fluoride exposure and reduced IQ.”

#74 VancouverGoinUp on 02.05.14 at 1:14 am

Very convenient to post irrelevant facts. Percentage of income to buy a home blah blah what nonsense. Has nothing absolutely nothing to do with the Vancouver market. Very convenient to not post the REAL NEWS in the real estate market today. Forget about the 30% rise in sales in Vancouver since last January Let’s get on to reality. It never was about yellow peril. Yellow Peril was for some unknown reason a smoke screen Garth invented. It was about the global market place people. Let’s call it the Red Peril if that makes people more comfortable. Even BPOE admits if the Government allowed what is being proposed in Britain we would see the end of the Vancouver property boom. Rest soundly folks. The Conservative Government will never allow this to happen. Onwards and Upwards
***************************
http://blogs.vancouversun.com/2014/02/03/london-ready-to-restrict-foreign-ownership-will-vancouver/

#75 Trojan House on 02.05.14 at 1:20 am

When most people say they are “diversified” they mean they own stocks, bonds, GICs, mutual funds, REITS, maybe an ETF here or there. But is this truly diversified? In my opinion, no. These investments are all basically paper investments. A REIT, for example, is not owning actual, physical property. To be truly diversified means to hold all the above, but also actual physical real estate plus commodities, including actual physical gold and/or silver, and cash.

But we are brainwashed into believing having an RRSP that may have some investment in a balanced fund plus a growth fund is being diversified. Sure, those funds may hold gold stocks and oil stocks and blue chip stocks but they are just stocks. It is not diversity when all you hold are stocks.

We are also brainwashed to believe to contribute to your RRSP now and get a bigger tax refund which is only really a tax deferral until you hit the time when you have to use the RRSP and unless you transfer it to a RIF, bam, your paying all those tax savings back. And what good is a RIF anyway when you can only put so much money into it which will never be enough to live on??!!

We are also brainwashed into believing getting in debt to buy a house because buying a house is a good investment. You’re told it is an asset. Well, it is an asset – the bank’s. To you it is a liability.

I hate to sound negative but if it sounds to good to be true, it probably is. Governments and banks don’t set up RSP and mortgage lending programs for you to get ahead. They set them up for their benefit – always. If you believe otherwise, then your a greater fool than Garth or any of us.

#76 Vlad the Flotsy Notsy on 02.05.14 at 1:25 am

#33 Smoking Man on 02.04.14 at 10:41 pm — “I need more Vladimir and beach girl.. Where are you guys..”

Mostly, I’m out to lunch but who with is another matter! Haven’t seen BGirl for ages. For your reading enjoyment, Global Warming, Global Cooling and another Polar Vortex cometh, better known as Climate Global Change Tax, as govts. are running out of money; GMO Seeds Good for landfills; Spontaneous Killing The physical body is quite adept at protecting itself, despite our stupidity; Snowden blacked out; Crumbs! EM and Super Vortex Currency. That should keep you going for a moment or two!

#77 Jimmy on 02.05.14 at 1:28 am

“What everyone actually needs a whole lot more in their lives is income.”

What everyone actually needs a whole lot less in their lives is taxes.

#78 raisemyrent on 02.05.14 at 1:43 am

#51 Rural Rick on 02.04.14 at 11:43 pm
#26 sheane wallace
Yeah distilled water will make you smart! Er.

well, distilled water is not safe for consumption, if it is really distilled in the pure (should be only) sense. It pops cells. he probably means filtered in some way. I’m not sure one way or another on the science behind fluroide and IQ, but I am sure fluoride is not a natural ion to ingest on the pretence of dental health.

to sheane, it’s fairly unfortunate that your local water has fluoride. for a sustainable method to remove it, look into reverse osmosis systems for saltwater aquarium enthusiasts. plug that sucker onto the tap and make water overnight onto an empty grocery store jug. or buy water, but don’t forget that water bottling companies are modern terrorists (selling us tap water lol), so buyer beware.

for the rest of us, don’t forget about our other useless (in terms of body) ion: chlorine. as cheap/easy as it is to maintain disinfection through the pipes, it has no business in our bodies. this one is easy though, let water sit overnight (or about 8-10 hours) with ventilation (but covered from debris) and it dissipates.

back to fluoride: green and black tea release it when you steep it too hot (ever got a weird headache right after?) so careful.

Off-topic, but I rarely talk about this jazz (plus I’m able to type again). I hated chemistry in school but it’s eerily lingering and useful (undergrad in civil/environmental eng.)

#79 Kilby on 02.05.14 at 1:53 am

#22 Realtor # 1 GTA on 02.04.14 at 10:10 pm
Buyers are willing to give a greater percentage of their
Disposable income towards a mortgage and yes save less.
When you see prices rise as they did waiting another and
To save for a greater down payment does work. The appreciation of far out paced what the average person could save.
People are renewing at a cheaper rate and carrying costs
Is still relatively low.
_____________________________________________
“Carrying costs is still low” You are an idiot but probably not a realtor, if you are I’m sure you don’t have any repeat clients….

#80 recharts on 02.05.14 at 2:10 am

#22 Realtor # 1 GTA on 02.04.14 at 10:10 pm
Buyers are willing to give a greater percentage of their
Disposable income towards a mortgage and yes save less.
When you see prices rise as they did waiting another and
To save for a greater down payment does work. The appreciation of far out paced what the average person could save.
People are renewing at a cheaper rate and carrying costs
Is still relatively low.

I have bad news for you my friend.
Read this: https://twitter.com/caampceo/status/430824615360098304

#81 takla on 02.05.14 at 2:30 am

the topics these last two day realy struck home for me.After witnessing my mom deteriorate the last 4 months shes finally free of her pain ,passing jan2.My mom bless her soul,was much like this elderly women living on her owe in her semi remote home and relying on her feirce independence to make it thru the tough seasons that northern B.C can throw at you.Her home had been becomeing more rundown yr after yr as her pension money were not enough to keep up with maintenance/tax,s,but she was happy,and doing things her way…

#82 Edmonton Dave on 02.05.14 at 3:01 am

The painkillers you are on have mellowed you out Garth. But seriously, one of your best posts ever. Very true about humanity and selfworth, what has deep value and what doesn’t. Very deep post Garth. Hope your leg heals quickly. All the best.

#83 RockStar on 02.05.14 at 3:35 am

I see that some people are putting all their eggs in the “real-estate-is-bad” basket. This post is right. It’s not going well for them!

#84 Mel on 02.05.14 at 3:38 am

At the end of housing game, most of the rubble will be in front of our Bank of Canada, Governments, CMHC, and most of all financial institutions where profits were insured by a tax payer, and lastly, people who decided in a mass that housing is where their wealth will be created.

It will eventually become a sore state of affairs. Economy that will be ruined first by slowing world economies, our dependents on selling our commodities to the world who have more than enough, and ruined dreams of realizing that most paid too much for a future rotting roof.

Don’t be fooled, if you break the rules in investing by paying too much, you will certainly go broke in the end.
By the way, when you pay too much for something, it should not be called investing. It should be called, ‘ gambling with your own money’.

Lastly, it is quite offensive for a rational mind to have to listen to a Bank how much it takes the average person’s salary to cover their monthly mortgage payments, when it was them, who gave these people tax payer backed loans.

#85 Sean Melvin on 02.05.14 at 3:54 am

has the only city in North America where over 70% of all houses are assessed at $1 million-plus, is shedding young people…..

We ‘young people’ left the BC coast already…..my spouse and I (both university educated) each had to quit full time ‘careers’ when we moved. I believe that many ‘young people’ have already left and/or will continue to do so simply because they refuse to be a ‘greater fool’.

#86 Humpty Dumpty on 02.05.14 at 4:20 am

Never under estimate a Commie…

According to its latest annual defence budgets review, global defence spending will rise slightly to £945 billion this year, after four successive years in which the total fell from just over £1 trillion, its 2009 peak.

Within that, China’s planned spending on its armed forces will for the first time eclipse the combined budgets of Britain, France and Germany. Beijing has set aside £90 billion ($148 billion) for its military, up more than six per cent on last year, continuing its long-running trend of growing defence spending.

American spending – at £351 billion, still the highest in the world – is falling by 1.3 per cent this year, while Britain, which ranks in fourth place behind China and Russia, will spend £35 billion, 3.6 per cent less than last year.

http://www.telegraph.co.uk/news/uknews/defence/10615466/China-and-Russia-help-global-defence-spending-rise-for-first-time-in-five-years.html

#87 Moe on 02.05.14 at 4:54 am

Not suggesting stocks are wrong in general, but indexes give one a (fake) record of performance that cannot be replicated.
Some companies go bust and leave an index over time.
Others get added to the index.
The index itself seems to be 100% invested all the time.
The investor or an ETF cannot replicate this, since both have to swap shares from time to time to picture the composition of the index.
Conclusion – the stock index you look at in the morning (DOW, DAX, whatever) doesn’t account correctly for the failures.

#88 eddy on 02.05.14 at 6:15 am

public talk about bitcoin, Andreas M. Antonopoulos-

http://www.youtube.com/watch?v=GykNHFNdFOg&feature=youtu.be

#89 Grantmi on 02.05.14 at 7:06 am

#18 Sydneysider on 02.04.14 at 10:00 pm
“she won the lottery – but at a point in her life when it hardly matters”

At least she is better off than the old lady who died alone in her Sydney hovel, now worth 800K+, and was not discovered for 8 years.

That would never happen in Toronto.

Mayor Ford and his buddies would have turned that home into a crack house way before 8 years!

#90 Herb on 02.05.14 at 8:15 am

#86 Humpty Dumpty,

are you trying to put yourself back together after your great fall with the manipulated “Military Balance” during the Cold War?

#91 Herb on 02.05.14 at 8:17 am

#77 Jimmy,

I’ll have both, please.

#92 Herb on 02.05.14 at 8:30 am

#71 Kommy Kim,

yes, great reminder. We must protect our bodily fluids! : )

#93 World Traveller on 02.05.14 at 8:54 am

#56 AfterTheHouseSold on 02.05.14 at 12:19 am
#32 Tripp
“She had it but she could not let it go for reasons that we don’t know”.

The biggest barrier that I see stopping boomers and the elderly from downsizing, is their “stuff”. Four bedroom huge homes, finished basements and garages bursting at the seams, groaning under the weight of mountains of stuff. Cupboards, closets, book shelves, drawers, full to overflowing.

Most, eventually destined for the landfill cause guess what, your kids don’t want your antiquated “prized possessions”. Your royal doulton is the next kitschy toilet brush holder project on pinterest. Besides, your kids homes are already crammed with their own stuff.

What have houses become really, but glorified drywalled storage containers. We are prisoners of our own making.

**

You said it, just try having a couple of family members pass away around the same time and on top of the anguish trying to deal with stuff that should have been thrown out years ago. The Salvation army becomes your best friend as well as 1-800 Junk. Never mind cash converters; they have become so picky, it is more of a waste of time. Is that a DVD player without HDMI? errr! no thanks.

#94 jess on 02.05.14 at 8:57 am

Did anyone check to see how many owners that house had?

===========
Sheila Coronel describes how she uncovered a trail of money, mistresses and mansions that helped bring down a former president of the Philippines, and shares her vision for fostering investigative journalism among her students.
Because it was almost impossible to prove bribery, we decided to go after the fruits of bribery instead.
http://www.icij.org/blog/2014/02/capture-popular-imagination

misinvoicing of trade transactions
Smuggling through Trade Misinvoicing Cost Philippine Taxpayers at Least US$23 Billion in Customs Revenue since 1990
http://www.gfintegrity.org/content/view/677/70/

=================
facililation payments
http://www.investopedia.com/terms/f/facilitating-payment.asp
Corruption of Foreign Public Officials Act (CFPOA
http://www.mondaq.com/canada/x/249304/Antitrust+Competition/Tougher+Canadian+Foreign+Corruption+Law+Raises+The+Stakes+For+Officers+And+Directors

=====
“fixers” and the unsophisticated
see libya sues goldman

#95 TurnerNation on 02.05.14 at 9:00 am

Gotta say, they are really pushing this “Agenda 21″/Turn First World countries into Seconds so clearly.

A downtown office building lobby sign: Work better in a sweater.
See they’ve turned the heat down.
Yet we will be paying 20-50% more for hydro (a 150-year-old technology!) in the coming years.
1st World prices, shiver in the 2nd world.

Oh how the elites laugh, in their private jets and 6-star hotels. Shine your shoes sir?

It’s a pyramid. There’s us at the bottom, our elected reps, then several layers of royal families (Brits, House of Saud, and so on) and above. As if these people with more money than god would let our 90k/yr elected rep affect theirs.

Guess whose pic is on our coinage. Guess why Minister Baird stripped our flag off his business cards, favored the royal insignia. Guess why H is kowtowing to Britian’s own creation, that little middle eastern hotbed.

#96 jess on 02.05.14 at 9:14 am

73 Waterloo Resident

https://blogs.mcgill.ca/oss/tag/fluoride/
========

Jimmy said: What everyone actually needs a whole lot less in their lives is taxes.

see tax trick
IBM saved its earnings by moving almost half its employees to the NetherlandsQuartz ‎- 7 hours ago

#97 live within your means on 02.05.14 at 9:42 am

Haven`t yet read all the posts.

#21 TheCatFoodLady on 02.04.14 at 10:06 pm

Loved your post. Sh*t happens in life – physically, financially, & emotionally, to put it bluntly.

As an infant we lived in a beautiful home in Halifax. Dad lost his job or quit due to his principles. He accepted a position in what is now called Le Gardeur in P.Q. off the island of Mtl. There was next to no housing available after WWII. We lived in a shack with bedbugs, a farmhouse with no running water, then a hostel for refugees & finally a WWII house. At the hostel, a Polish refugee family & we shared a common hallway & a bathroom. It didn`t bother we children. Polish mom was so happy as her daughter (same age as I) would learn English. The reverse happened. Young minds are like sponges. We also learned all the Quebecois swear words.

It was very hard on Mom as she had lived a rather pampered life. Parents wanted to retire here by the ocean. We found them a tiny place & sis & I took out a mortgage as they couldn’t qualify. Five of us worked every weekend fixing up the place before they arrived. Mom eventually lived with hubby & I for 4 years. She loved it as she was invited to all the parties on the street. She was involved in community stuff & a very social person. At the time my siblings were supposed to give us a break on weekends. Didn’t happen until she went into a senior’s home. I think of her often.

BTW, I think Garth is a very empathetic person.

Pardon my long post.

#98 Ralph Cramdown on 02.05.14 at 9:43 am

#57 say it ain’t so — “professional traders are not buying stocks. they are waiting for the rebound to short them.”

Wealth accumulators will do better if they don’t try to be like these guys:
http://brokershandsontheirfacesblog.tumblr.com/
The financial industry , and the media it feeds, want you to buy stuff, sell it again, buy some more, keep changing your bets. They earn commission (and ad dollars) and the volatility and volume that the amateurs bring helps the pros (except on ‘hands on their faces’ days).

Be right and sit tight, said one. Most investors would do better if they had a lifetime 20 trade limit, said another.

#99 truth seeker on 02.05.14 at 9:49 am

#45 See It Like It Is on 02.04.14 at 11:16 pm

I also live near the Galley house and was a bit surprised to hear Garth say this was a “dodgy” area. I’ve lived here in the west end for almost 20 years. It’s actually one of the nicest areas in the city, though about 20 years ago, parts of it were pretty dodgy. But now it’s become one of those “trendy urban yuppy / hipster” neighbourhoods that Garth says are a little more solid in their RE values than the rest of Canada.

That said, it’s still shocking when houses such as this Galley house sell for this much. We bought 8 years ago for what seemed like a lot of money at the time, yet now seems like a steal. I still believe prices will come down to reality one day. Each year that has gone by since we bought has been more and more bewildering to me. How can so many young families afford these massive mortgages? It’s like we are all delusional.

I’ve been thinking a lot the past day about this old woman and her daughter who lived in this decrepit house. It really is sad, and could unfortunately happen to many of us who can’t manage to save for our futures, due to higher and higher mortgage payments. Thanks for the insightful and sensitive post today.

#100 say it ain't so on 02.05.14 at 9:52 am

well well well… another POOR economic number this morning. the bad news just keeps coming for the US economy .. it’s stalling.. and soon, will slip back into recession.

bad enough there are no jobs being created in the US.. energy costs are skyrocketing for most Americans this winter. propane shortages in the mid-west, natural gas spiking, oil steady…

the bad news just keeps piling on..

Economists projected 185,000 new US jobs. The actual number was 175,000. You are such an idiot.– Garth

#101 Buy? Curious? on 02.05.14 at 9:53 am

Garth, too bad about the old lady but nothing that a weekend away with a toyboy won’t cure. She can live out the rest of her days getting foot massages. Though I don’t understand the point you’re trying to make. She bought low, sold high and saved and scarificed inbetween.

Anyway, who cares? Driving Miss Daisy scored! What I can’t wait for is Condopocolypse! Did you see this article in the Wall Street Journal?

http://online.wsj.com/news/articles/SB10001424052702304428004579350881672554084?mod=WSJ_NY_MIDDLELEADNewsCollection

They’re talking about how condos could become ovens if the air conditioning ever conks out.

Damn, I’d hate to be a condo owner (or someone from Alberta for that matter).

Rob Ford 2014! Do it, for the children.

#102 Butch on 02.05.14 at 9:56 am

My 2018 correction prediction might just be coming true! Course it might be pushed out to 2020…

#103 Tripp on 02.05.14 at 10:11 am

#93 World Traveller on 02.05.14 at 8:54 am
#56 AfterTheHouseSold on 02.05.14 at 12:19 am

Over a decade ago, when my family and I arrived to Canada, we lived at our friends’ place for few weeks. Great town-houses in an up-scale area on the Rideau Canal in Ottawa.

All their neighbours’ cars were expensive, and most of them were parked on the driveway. I failed to comprehend why would anybody treat their $60,000 Jag or Benz with ice scraping every morning instead of parking them in the garage.

I understood it after some left their garage door open and we saw the mountains of cardboard boxes and stuff inside. Coming from E. Europe where we didn’t have too much, it was one of the newcomers’ cultural shock that I experienced.

Even today it beats me why people get so attached to things that they don’t touch for years. This includes houses, where a guest bedroom is a must, although it is used few nights a year while heating, cooling, cleaning and taxes need to be paid in full.

#104 say it ain't so on 02.05.14 at 10:14 am

#98 Ralph Cramdown on 02.05.14 at 9:43 am

Be right and sit tight, said one. Most investors would do better if they had a lifetime 20 trade limit, said another.
_________________________________________

you’re completely right. that’s why i held my precious metals for 8 years. from 2004 – 2012.

i was also short during 9-11.

there is a time for holding, there is a time for trading.

stocks have peaked. they are going to enter another bear market which will last 18-36 months, and take the DOW JONES down to between 11-13,000

Actually it will the reverse. But thank your bunions for us. — Garth

#105 Ralph Cramdown on 02.05.14 at 10:21 am

Richard Russell’s brain infected by goldbugs!

Somebody quoted Richard Russell the other day, and somebody else asked “Who?”

About 100 years ago, Charles Dow (of Dow Jones & the WSJ, not Dow Chemical) came up with some trading rules; if an index of this list of industrial companies makes new highs, and an index of the railroads that moves their products also makes new highs… bull market, baby!

This theory made good sense in a mainly industrial economy. Whether it continues to make sense in a less cyclical, more service oriented economy with price weighted averages created by an organization that decides to periodically remove and add index constituents is another matter.

Be that as it may, Richard Russell has been keeper of the flame for this form of technical analysis for decades now. If you want a newsletter telling you when to buy and sell on the basis of clear(ish) rules with a long history, he’ll sell it to you.

Alas, his brain appears to have become infected. There was nothing in Dow theory about switching to gold when stock market prospects looked poor; you either shorted the index or stayed in cash. Poor Richard! Here he is two years ago advising to hold gold and wait for a stock market crash:
http://www.businessinsider.com/richard-russell-stock-market-collapse-2012-3
Since then, gold’s down 25% and US markets up about 30% including dividends, so I’m at $1.75 in assets for every dollar he has left on that trade. Can’t use advice like that.

How does your favourite guru stack up? Is he right more often than wrong? Statistically no better than flipping a coin (Cramer!)? Or would you make money doing the opposite of what he recommends (Richard Russell)? Check it out for yourself:
http://www.cxoadvisory.com/gurus/

#106 bizybord on 02.05.14 at 10:30 am

House neurosis: A newly discovered mental disorder. An affliction of both the young and the old; whereby the affected endure poverty and/or substantial debt and are willing to tolerate financial hardship even loss of health in order to possess an asset (house) often worth millions of dollars. Unfortunately, there is no cure. Sadly the outcome of this disease is not pretty, as witnessed in countries like Spain and the US. Young people may lose their home and accumulated wealth. Retired folk live decades with low income and squalor, never to cash in their prize (the house).

#107 amazon girl on 02.05.14 at 10:32 am

Thanks Garth for the post today, no words just tears…

#108 truth seeker on 02.05.14 at 10:32 am

BTW — did anyone see this article from Rob Carrick in the globe?

“Gen Y’s biggest financial decision: Buy a home or save for retirement”

http://tinyurl.com/lktoguw

The Galley house story makes this decision all very visual and visceral. Unfortunately when it’s an abstract and distant choice, as Carrick describes it, most 20-somethings probably won’t listen.

#109 T.O. Bubble Boy on 02.05.14 at 10:35 am

This is why you don’t pile into “hot” tech stocks (or, individual stocks in general). 3D Systems (DDD) opens down 25% this morning:
https://www.google.com/finance?q=NYSE%3ADDD

Who knows – it could be a buying “opportunity”, but this company looks like a serial acquirer where you can’t tell what is organic growth vs. acquisition growth.

#110 say it ain't so on 02.05.14 at 10:47 am

Economists projected 185,000 new US jobs. The actual number was 175,000. You are such an idiot.– Garth
_______________________________________

personal insults Garth. i guess the markets are getting under your skin these days. you must be taking huge losses.

non-farm payrolls peaked in Dec 2007

it’s 6 years later, and the US economy has not created any new jobs since then. we’re still below 2007 levels.

that’s a fact, and the fist time since data was collected, that the US economy has not created an new jobs.

it hasn’t even replaced the old ones lost yet. 6 years later.

the US economy will start losing jobs by the summer. it’s all over for you

#111 gladiator on 02.05.14 at 10:55 am

Garth, sorry for the offtopic, but I have to mention something here for everyone:
Not all reverse osmosis systems remove fluoride – use ones that have an ion exchange resin or activated alumina. Contrary to what’s being said on the web, rev osmosis systems are quite affordable and after I’ve researched this topic into late night yesterday, it’s a must-have in every house that gets fluoridated water. More info here: http://fluoridealert.org/content/water_filters/
Now, I’m shopping for a good system for my household.

Smoking Man: I suggest you go easy on the booze. As they say “Alcohol is happiness borrowed from the next day.”

#112 Tony on 02.05.14 at 11:06 am

Re: #24 piazzi on 02.04.14 at 10:13 pm

If they tell the truth about the jobs report in America this Friday you’ll see just how overvalued their stock market indexes are. Of course you’ll know Thursday afternoon what’s going to happen Friday as the insiders have been right around 90 percent of the time. Only the insiders who know the figures before they’re made public, well their friends get wealthy. I can’t see January being about 100,000 jobs created. The ADP report said 175,000 so I guess the market will sink Friday but we’ll know Thursday afternoon.

#113 Dupcheck on 02.05.14 at 11:09 am

Whoever lets a house downgrade such as the one on the last post of that woman’s should not be owning a home. That is so sad that lust to own something would degrade your lifestyle to that point.

#114 Victor V on 02.05.14 at 11:21 am

http://www.theglobeandmail.com/report-on-business/economy/housing/toronto-home-prices-surge-again-outpacing-family-incomes/article16705392/

Senior economist Sal Guatieri of BMO Nesbitt Burns warned that the price growth in Toronto – as well as houses, condo prices surged 4.8 per cent – could spell trouble down the road.

“After a brief pause, Toronto’s home prices are once again outpacing family incomes, raising the risk of a correction when interest rates normalize (sometime in the next century),” he said in a research note.

That last bit was, of course, tongue in cheek, as he was referring to the eventual rise in the Bank of Canada’s benchmark overnight rate.

#115 James on 02.05.14 at 11:24 am

Give it up Garth. I will be long gone before we see any price correction.

“After a brief pause, Toronto’s home prices are once again outpacing family incomes, raising the risk of a correction when interest rates normalize (sometime in the next century),” he said in a research note.

Source:
http://www.theglobeandmail.com/report-on-business/economy/housing/toronto-home-prices-surge-again-outpacing-family-incomes/article16705392/

Prices surge, sales fall. How much warning do you need? — Garth

#116 :):(Ying Yang on 02.05.14 at 11:27 am

#1 Smoking Man on 02.04.14 at 9:29 pm
Life imitating art. The pics from yesterday…
True story from last night. My room was like the pics.

____________________________________________

Smoking Man whatever room you had I don’t want to be on that floor. Bad Karma. What floor was it on? I will never take it! If that happened to me I would sue them. Girlfriend insists we go back to Seneca soon, I told here that her favorite bar is gone. Her best girlfriend and her always like to sit up there and sip their little girl drinks. Where will she go now, this could be expensive if I have to take her to that bar in lobby. I will have to see if I can book a room this weekend. Every once in a while she wants to go to the USA to gamble. I don’t mind but her and her girlfriend live at Casino Niagara almost every weekend.
Take it easy on the booze Smoking Man, your liver needs to last you another few years or until you write your book. Perhaps this story is another chapter?
P.S. Don’t do a Philip Seymour Hoffman

#117 jess on 02.05.14 at 11:31 am

Flipping the corruption myth
February 4, 2014
TaxJustice Network
has previously challenged the prevailing discourse on corruption; and we have taken particular issue with Transparency International’s Corruption Perceptions Index (CPI), which looks at corruption through a highly distorted prism. In this article published by Al Jazeera, Jason Hickel of the London School of Economics takes up the theme, asking questions such as: “With the City of London at the centre of the global tax haven web, how does the UK end up with a clean CPI?“ Fair point, and one we have posed to Transparency International on more than one occasion.

Read Hickel’s article in its entirety, and note his concluding comments:
http://www.aljazeera.com/indepth/opinion/2014/01/flipping-corruption-myth-201412094213280135.html
Corruption is a major driver of poverty, to be sure. But if we are to be serious about tackling this problem, the CPI map will not be much help. The biggest cause of poverty in developing countries is not localised bribery and theft, but the corruption that is endemic to the global governance system, the tax haven network, and the banking sectors of New York and London. It’s time to flip the corruption myth on its head and start demanding transparency where it counts.

#118 Dan on 02.05.14 at 11:34 am

What a great post Garth! A view from the future…

#119 Not 1st on 02.05.14 at 11:36 am

Garth I fear for people. The couple who bought the $800,000 crack shack look positively sabe compared to the conspiracy nuts you are getting in your blog these days. Agenda 21? Fluoride?

#120 CP on 02.05.14 at 11:39 am

“The shortage of new listings is being blamed for a 2.2 per cent decline in home sales across the GTA in January.”

Riiiiiiiiiiiiight….

http://www.thestar.com/business/real_estate/2014/02/05/gta_home_sales_fall_prices_surge_weather_shortage_of_listings_blamed.html

#121 45north on 02.05.14 at 11:41 am

Trojan House

But we are brainwashed into believing

We are also brainwashed to believe

We are also brainwashed into believing

sounds like a core belief

World Traveller The Salvation army becomes your best friend as well as 1-800 Junk. Never mind cash converters; they have become so picky, it is more of a waste of time. Is that a DVD player without HDMI? errr! no thanks.

I love Salvation Army, next St Vincent de Paul. I put interesting stuff up on Kijiji for free.

Ralph Cramdown Brokers with hands on their faces – pretty funny

Buy? Curious? Damn, I’d hate to be a condo owner (or someone from Alberta for that matter).
pretty funny

#122 paul on 02.05.14 at 11:51 am

Economists projected 185,000 new US jobs. The actual number was 175,000. You are such an idiot.– Garth

WOW LOL

#123 economictsunami on 02.05.14 at 12:06 pm

Stephen S. Roach: America’s False Dawn…

“… That gets to the toughest issue of all – the ongoing balance-sheet recession that continues to stifle the American consumer. Accounting for 69% of the economy, consumer demand holds the key to America’s post-crisis malaise. In the 17 quarters since “recovery” began, annualized growth in real personal consumption expenditures has averaged just 2.2%, compared to a pre-crisis trend of 3.6% from 1996 to 2007.

To be sure, there were indications of a temporary pick-up in annual consumption growth to nearly 4% in the fourth quarter of 2013. Yet that is reminiscent of a comparable 4.3% spurt in the fourth quarter of 2010, an upturn that quickly faded. …”

http://www.project-syndicate.org/commentary/stephen-s–roach-says-that-anyone-trumpeting-a-faster-us-recovery-is-playing-the-wrong-tune

Perhaps both the Fed and investors are finally beginning to realize: 5 years into this ‘recovery’ and after several fits and stops, healing has occurred but there is still a very long row to hoe.

Considering in Canada, we (except those already economically struggling) have yet to seriously begin to deal with our personal/ governmental balance sheet problems…

#124 yo on 02.05.14 at 12:18 pm

Great article on how housing can be a great burden. I went through this with my father in the late 80s/90s. He was flipping houses, made allot of money, then just extended himself so much with the condos and the house in Rosedale than when the market turned, we were trapped in so much debt we had to move out of the house and sell whatever we could. We moved into a crappy apt downtown. Spent the next 15-20 years just paying off that debt. People don’t realize that when they buy houses with so much leverage, the “risk on” trade they put on their lives is very dangerous. I know many people who can’t even go out to eat, but yet have two mortgages and a $800-$1M” house. The lack of houses for sale (usually in economics, high prices mean more sellers coming to balance the market, but not now) is also an indication something is wrong, likely too many people having big credit lines on their houses. It doesn’t make any sense. Its like walking into the woods and not hearing any birds singing. Something is just wrong out there. This is not picking the wrong place to go on vacation, or the wrong car. Those can be fixed and minor, you get it wrong on property – its like financial jail.

#125 Adam Smith on 02.05.14 at 12:22 pm

@gladiator

Good call man, you can also purchase tabletop distillers for about 200 bucks that take everything out. You’d be disgusted when you see how much grime is left on the bottom of that can after distilling 30 or so liters of water. You would not want that crap in you.

Also, Garth, please tell me what you think about the shorting of gold. Paul Craig Roberts shows 14000 gold contracts sold on Jan.30th between 8:21am and 8:47am. 3,424 contracts per minute, 17 times the average per minute of the previous 23 hours. The only reason to dump that much gold that early in the day all at once is to drive down the price of gold since usually you’d want to trickle it in so as not to telegraph your intentions to do so, thus costing you money.

Please tell me what you think this means.

http://www.paulcraigroberts.org/2014/01/30/fed-tapering/

#126 Ronaldo on 02.05.14 at 12:28 pm

#93 World Traveller – re: Stuff

George Carlin said it all:

http://www.youtube.com/watch?v=MvgN5gCuLac

#127 DocInWaitingRoom on 02.05.14 at 12:29 pm

You never want to drink distilled water. Tap water is not ideal either. I myself installed a 6 stage reverse osmosis filter with alkaline filter. Made tap water go from 380 parts per million to 10ppm. Costs thousands to buy from company and install I did it for 280 from usa warehouse install myself. Water tastes amazing best water we drank. Read pubmed (med library of research) to see what drugs and crap are in drinking water. At least we are filtering most crap out now

This is not a reverse osmosis filter, alkaline filter blog. Stop it. — Garth

#128 Ralph Cramdown on 02.05.14 at 12:43 pm

#123 Adam Smith — “Paul Craig Roberts shows 14000 gold contracts sold on Jan.30th between 8:21am and 8:47am. 3,424 contracts per minute, 17 times the average per minute of the previous 23 hours. The only reason to dump that much gold that early in the day all at once is to drive down the price of gold since usually you’d want to trickle it in so as not to telegraph your intentions to do so, thus costing you money.”

That’s funny, because I was in Bizarro World on business that day. The Bizarro Street Journal said that 14,000 dollar contracts were bought in just a few minutes early on January 30th, way above average. The only reason to buy that many US dollars all at once is to drive up the price of dollars. You’d figure the trader would want to scale into the trade to hide his intentions and avoid costing him gold.

But that’s Bizarro World. Every day of the week, the Journal tries to come up with entertaining, if not necessarily logical or factual explanations for “Bob wanted to sell, so he did. And there were enough people willing to buy at about that price that he sold the whole lot.”

#129 I believe that the Toronto Market is correcting on 02.05.14 at 12:45 pm

Here are the numbers with comments
http://i.imgur.com/D2iammM.png

Here are the graphs
http://i.imgur.com/cAZj85n.png

As I said many times they sold more in the upper segments for both SFH (>1M) and Condos(>400K)..

I am really curious to see where this is going

#130 bentoverpayingtaxes on 02.05.14 at 12:45 pm

Reading this post I’m reminded of another twisted firebrand by the name of Fidel Castro. Our system is designed to be predatory….otherwise the doctors and the cab drivers will all live together in hovels and no one will have use for financial advisers….or anything else for that matter. The weak liberal mind can’t break from the idea that every one can be rich at the same time…..Unfortunately….were that to happen T-Shirts would cost $100 and a banana would have to sell for $50 a piece. Our government has decided ( and I know you hate this fact….with the same blissful ignorance that I can prove that dinosaurs and people coexisted after day six of creation) that globalism has introduced our country to forces beyond our control….and rich untaxed unwashed money is flooding in as safe haven insurance displacing resident Canadians in favor of the global diaspora.

#131 Smoking Man on 02.05.14 at 1:05 pm

#116 :):(Ying Yang on 02.05.14 at 11:27 am

14 which is actually 13….

Dude take her there on 14th
opening day of the new bar, it’s spectacular . Bands,Vegas style go go girls,
dance floor. Huge massive TV.

Note if your GF makes 20points on card, just walk into chairmans lounge. AK Losers Lounge..

#132 james on 02.05.14 at 1:08 pm

Prices surge, sales fall. How much warning do you need? — Garth

Sometime in the next century is pretty important though. Wether you like it or not, people will follow the money. The money is in RE at the moment. You can’t fight that trend unfortunately.

Why would I try? Just attempting to save the sentient. — Garth

#133 Victor V on 02.05.14 at 1:25 pm

http://business.financialpost.com/2014/02/05/are-tfsas-a-bad-investment-for-the-average-canadian/?__lsa=ac55-f1bc

According to the BMO report, about half of Canadians are using TFSAs to save for retirement, while the other half are using them as an emergency fund. More than ¾ of the money invested in Canadians’ TFSAs is invested in low risk, low return investments – cash (57%) and GICs (23%).

I’d be willing to bet that many of the Canadians who have cash in their TFSAs earning 1% returns also have mortgage debt at 3-5%, line of credit debt at 4-7% and consumer debt at even higher rates. Holding cash – even if it is growing tax-free – is therefore a losing proposition.

And for those Canadians saving for the long-term, 1% returns on cash are equally disadvantageous as a result of year-over-year price increases (inflation). Even though Canadian inflation is rather low right now at about one percent, cash is just barely keeping up. Contingent on one’s risk tolerance, even low interest rate bonds are a better choice, let alone the higher risk-return potential from stocks.

So while more Canadians are opening and contributing to TFSAs and many are continuing to invest their existing TFSA savings, the big question that Canadians need to ask themselves is if they should be contributing in the first place – or if they should be doing something different with the money that they already have in their TFSAs.

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

And people wonder why sheep get slaughtered. The financial illiteracy across this country is mind-boggling.

#134 Boomer .. Pay taxes !? on 02.05.14 at 1:48 pm

Garth
You have neglected one element of the upcoming perfect financial storm. Gen-X and the Millennials have all stated, through the democratic process, that they will not be paying anymore taxes.
Hey, that’s why we have democracy!

#135 Panhead on 02.05.14 at 1:51 pm

PHEW … sold my 91 year old Pa’s home last night for him on a BUSY street in East Van for $67,000 over asking. Caught a greater fool. This will put him on “easy street” for the rest of his life. He has owned the house since 1953 so the profit is HUGE. It still hasn’t sunk into his head yet how well he really did, but it will. It made it a lot easier to sell his house after reading this blog for a while … some win some lose I guess. Either way he’s laughing.

#136 recharts on 02.05.14 at 1:55 pm

#127 DocInWaitingRoom on 02.05.14 at 12:29 pm
You never want to drink distilled water.

Hey Doc, what is wrong with it?

#137 High Plains Drifter on 02.05.14 at 2:04 pm

We only see one vice in the young here and I shall restate, they are so desperate to do right, they will pay extortion style prices for the foundation of the dream placed in them, by a bunch of rabbit skinners. Now does not seem to be the time to buy, but only if you believe the rabbit skinners have left the hutch.This society is a pay to drink whisky system, custom made for rabbit skinners and that is why I got into the housing gig at the age of 47. Leaving the signing ceremony at the bank with my 1st mortgage, 25 yr., 7.85% int., principle 125k., the nice lady commented, she would bet against. Now, there is a rabbit skinner for you. Ahhhh, 2,000 with the techy thingy a few months away and 9/11 just around the corner and a rabbit skinning bond bubble with strong youthful legs. I wanted to do belated good but becoming a war speculator turned out to be my fate. I am bad but I had a damn good woman standing in front of me, sort of a new face to the world. Meet the new me, wifey, jobby, And my new potential collateral, Unit 101 with 6% of purchase in bells and whistles, courtesy of wifey. This is my retirement plan circa, 2,001.

#138 Muslim only Condos? on 02.05.14 at 2:05 pm

This should be interesting surrounded by Italians and Jews…

http://toronto.ctvnews.ca/video?playlistId=1.1671399

#139 Smoking Man on 02.05.14 at 2:05 pm

Why would I try? Just attempting to save the sentient. — Garth

Sentient = UCC

Saving it for what…..?

I could have posted a link to TREB or BOC or MLS.

What’s the point, wishful bias alive and kicking here.

Downright anger here, no crash, no soft landing. Just steady price gains. Nothing for sale…

#140 Toronto_CA on 02.05.14 at 2:08 pm

“#72 Observer on 02.05.14 at 1:04 am
Lets get to the heart of the matter. It’s cheap, easily available money that got us to where we are. Policy. They could raise rates and bring the dollar closer to par with the US greenback, thus putting the brakes on import inflation and slowing this house madness at the same time. They have choices.”

Oh yes, they could intervene and pull the CMHC out, ask for 10% downpayments and raise the interest rate to stop the Canadian dollar plummet; but the overall economy is already very very weak with sub-2% GDP growth and extra low job growth (December was a massacre).

If you kill the housing bubble quickly, the Cons will be responsible for a massive recession. The economy has to be firing on all cylinders for them to pop the bubble so that we don’t go negative. With 20-25% of the economy dependent on real estate related activity, it just can’t be brought to halt. It has to be cooled or else armageddon.

The problem is it is not cooling, it’s expanding and every time the prices go up the hard it is to cool it down without bursting the bubble.

#141 Bottoms_Up on 02.05.14 at 2:25 pm

#35 Ryan Perich on 02.04.14 at 10:43 pm
——————————————-
Flat prices for a decade in a 2%/yr inflation environment is an effective 18% loss:

1.02^10 = 1.21 (house should be valued at 1.21 but is instead valued at 1, therefore the ‘loss’ is 0.21)

0.21 / 1.21 x 100% = 18% effective loss

It’s a 26% loss in a 3%/yr compounded inflation environment.

#142 jess on 02.05.14 at 2:44 pm

decoupled

U.S. debt-limit increase Keystone XL pipeline

#143 james on 02.05.14 at 3:09 pm

#138 Smoking Man on 02.05.14 at 2:05 pm

What can I say. Some people just won’t listen and admit they are wrong. Life is too short.

#144 jess on 02.05.14 at 3:27 pm

out of all those subprime loans how many were “liar” loans

http://neweconomicperspectives.org/2014/02/finance-refuses-take-akerlof-romer-seriously-looting.html#more-7554

#145 gladiator on 02.05.14 at 3:48 pm

This is not a reverse osmosis filter, alkaline filter blog. Stop it. — Garth

Agree, but that is what makes this blog so addictive: variety of opinions, topics, posters, issues, etc.
We love you, Garth. Thank you for letting us warm our hands at your bonfire. Keep it going – you’ve got a following here.

#146 Detalumis on 02.05.14 at 4:02 pm

Why do you assume she had no income and that’s why the house is a dump, it’s very likely she has dementia. The poorest senior in Ontario with no income would receive $16,588 from OAS, GIS and Gains, then would get another $278 Sales Tax credit, 1,097 Energy & property Tax Credit and $500 Property Tax Grant for a total of 18,463.80 a year.

A senior with their faculties intact would have had a couple of other seniors live in the house and pooled their income and had enough for renovations. It’s very likely Alzheimer’s that caused this situation not poverty.

Yes, all her fault. What was I thinking? BTW, tax credits are not income. — Garth

#147 Aggregator on 02.05.14 at 4:07 pm

#137 Muslim only Condos?

This should be interesting surrounded by Italians and Jews…

Yep. And the next you know, you'll have a cluster of extremists telling locals to burn in hell, like in the UK (must watch), Norway, Sweden, Singapore and everywhere else where mass immigration is rampant.

There's a reason why Angela Merkel said multiculturalism has 'utterly failed', because no one country can meet the needs of a society amalgamated with so many different (and opposing) cultures and religions. From studies I've researched, the biggest issue with mass immigration is adaptability.

But, it appears our taxpayer funded institutions are willing to accommodate new Canadians in order to help them adapt, like this story a few weeks ago about a student from York University whose professor was 'ordered' by the faculty dean and internal human rights centre to comply with the students request to not participate in a group study with woman because his religion forbids him to. I don't recall any special religious pardons back when I was in school.

So know what? A person whose tax dollars goes towards funding the Green Belt myth and subsidizing developers has limited access to a location of interest because they are not Muslim? This is still Canada right?

#148 I am on the same payroll as the Dallas Stars on 02.05.14 at 4:14 pm

‘the US economy will start losing jobs by the summer. it’s all over for you’

I have made a note of this. In the likely event that you are in-correct, prepare now for me to call you on it.

They did not spend 90 billion a month for years for no reason, or to see everything crater

#149 Adam Smith on 02.05.14 at 4:23 pm

@#128 Ralph Cramdown

Although I enjoyed your superman-themed response, I gotta assume you didn’t read the article by the former Assistant US Treasury Secretary.

It’s just strange that anyone would purposely lose that much money by driving down the price of gold by $17 bucks by flooding the market all at once.

#150 -=jwk=- on 02.05.14 at 4:29 pm

sigh, more flouride paranoia! And ban vaccinations too!

Your Quoted study is a joke. To wit:

From the American Academy of Pediatrics, dated 7/30/12:

“Q: Is fluoridated water safe for my children?
A: Yes. The American Academy of Pediatrics (AAP), along with the American Dental Association (ADA) and the Centers for Disease Control and Prevention (CDC), agree that water fluoridation is a safe and effective way to prevent tooth decay.”

With regard to high levels of fluoride mentioned in the study: these high levels are not found in water that is artificially fluoridated. Rather they are found in water sources where the mineral fluoride naturally occurs at high levels. Yes, fluoride, including very high levels of fluoride, occurs naturally in some water sources. Mr. Mercola wants to give you the impression that they are artificially fluoridating water in rural China, an absurdity to be sure. The irony, of course, is that Mr. Mercola, an advocate of “natural health” (see his website, purchase his extensive assortment of “natural” health products), is using studies about naturally occurring high levels of fluoride in water in rural China to scare Americans about low levels of fluoride in their drinking water.

Oh, and this from Mr. Mercola’s website: “The existing medical establishment is responsible for killing and permanently injuring millions of Americans.” If you want “natural” health, please avoid doctors, emergency rooms, hospitals, surgeons, and medicine and instead buy Mr. Mercola’s elixirs!

Kudos, again, to HP’s “Health News” editors.

and…

Some Quotes and comments from that same paper the author references:

The standardized weighted mean difference in IQ score between exposed and reference
populations was –0.45 (95% confidence interval: –0.56, –0.35)
… so the average difference was half of an IQ point.

The exposed groups had access to drinking water with fluoride concentrations up to 11.5 mg/L (Wang SX et al. 2007); thus, in many cases concentrations were above the levels recommended
(0.7–1.2 mg/L; DHHS) or allowed in public drinking water (4.0 mg/L; U.S. EPA) in the United States (U.S. EPA 2011)
… so, the water had up to 3 times the US limit

The estimated decrease in average IQ associated with fluoride exposure based on our
analysis may seem small and may be within the measurement error of IQ testing. However, as
research on other neurotoxicants has shown, a shift to the left of IQ distributions in a popu-
lation will have substantial impacts, especially among those in the high and low ranges of the
IQ distribution (Bellinger 2007).
… so, the difference may be within error limits of the IQ test itself.

#151 :):(Ying Yang on 02.05.14 at 4:42 pm

#131 Smoking Man on 02.05.14 at 1:05 pm
#116 :):(Ying Yang on 02.05.14 at 11:27 am

14 which is actually 13….
Dude take her there on 14th
opening day of the new bar, it’s spectacular . Bands,Vegas style go go girls, dance floor. Huge massive TV.
Note if your GF makes 20points on card, just walk into chairmans lounge. AK Losers Lounge..

_____________________________________________

Thanks for heads up on floor will never go there. She wants to go this weekend. Don’t know if I can get room yet. She doesn’t care if there are dancers, I don’t mind though. Her girlfriend has a room booked so maybe we will share it. Her girlfriend racks up megapoints wherever she goes, Niagara Canada, USA, Las Vegas, Macau. The girlfriends fiance is filthy rich, he rolls large.

#152 polecat on 02.05.14 at 4:50 pm

Reminds me of a talk I once had with a bank lady when I lived in Victoria (2006). Off the record, why do banks loan to young people for 35 -40 years? If they default, cmhc pays it out, bank owns house, resell to greater fool. rinse and repeat, if no default, bank owns the house for 35- 40 years and makes a ton of money even at low rates, which they know will go up eventually. They have time and money on their side, people don’t, would rather buy than invest. They raised the debt service ratio, so almost anyone could get a mortgage. People making half my salary were buying monster houses for 2 adults, dog and maybe future baby but who can afford mat leave or baby sitter for that matter. Beautiful place but people are nuts., not restricted to the island though. Not liking the look 5 years from now. I think it might bring us all down, might have to look at Belize or Uruguay.

#153 Smoking Man on 02.05.14 at 5:15 pm

Gladiator….
Smoking Man: I suggest you go easy on the booze. As they say “Alcohol is happiness borrowed from the next day.”
…………
If that’s the case I have one huge mother of a debt to pay.

#154 maggie on 02.05.14 at 5:18 pm

garth, if i have 350k as a downpayment, am I still a fool to buy a place for 800k?

#155 Blacksheep on 02.05.14 at 5:40 pm

“Prices surge, sales fall…………………-Garth”
————————————–
Shouldn’t this read:

Supply of homes for sale falls, prices surge?

#156 Hillbilly on 02.05.14 at 6:27 pm

Housing prices in Canada will not abate until credit is sufficiently restricted or the last person has bought.

Residential real estate has been gripped by a mania of epic proportions aided and abetted by a completely irrational mortgage insurer in the form of CMHC and complicit bloated governments (at all levels – Municipal, Provincial and Federal) who are ravenous for revenues to feed a bloated and entitled civil service.

They have essentially ruined the country’s competitiveness and structurally changed the future path of prosperity for Canadians into a downward sloping one.

And guess what – they don’t give a shit.
Why would they?
It’s not like Canadians are financially literate enough to call them out on it.

#157 Ronaldo on 02.05.14 at 6:31 pm

#134 Panhead on 02.05.14 at 1:51 pm

”PHEW … sold my 91 year old Pa’s home last night for him on a BUSY street in East Van for $67,000 over asking. Caught a greater fool.”

Nice catch. What kind of bait were you using?

#158 Smoking Man on 02.05.14 at 8:01 pm

#150 :):(Ying Yang on 02.05.14 at 4:42 pm

It was actually 15 got moved to 14. Duh. Having a lot of brain freezes lately. No wonder gambling sucked in the afternoon. I was on 13..

Going Friday night…. Then to buffalo, watch my wife’s cousins band from scottland.

Red hot chilli pipers…

#159 say it ain't so on 02.05.14 at 8:21 pm

#147 I am on the same payroll as the Dallas Stars on 02.05.14 at 4:14 pm

I have made a note of this. In the likely event that you are in-correct, prepare now for me to call you on it.

They did not spend 90 billion a month for years for no reason, or to see everything crater
____________________________________________

i’ll do you one better. if i’m wrong, i’ll never post here again.

they spend $90 B a month for years to prop up the US banks and Mortgage companies. they solved nothing.

the US economy has lost momentum and is starting to roll over. Friday’s jobs number will again disappoint.

6 years and no new jobs. that’s what $90B a month has bought. Payrolls have not even recovered to 2007 levels. first time in the history of tracking payroll numbers they have not exceeded previous pre-recession peak.

they have flushed $90B a month buying US Government toilet paper, praying they can stave off a depression. all it’s done is delayed the pain.

#160 :):(YingYang on 02.05.14 at 8:23 pm

Smoking man you mean Red Hot Chilli Peppers!

#161 maxx on 02.05.14 at 8:48 pm

#21 TheCatFoodLady on 02.04.14 at 10:06 pm

You’re a true asset to this blog…and a great pleasure to read. Thanks.

#162 Gillian YVR on 02.05.14 at 11:11 pm

“It’s not about shelter and security for your family. Shelter is everywhere. It’s easy to find, whether you rent or buy. ”

Garth – reality check. A decent west-side or downtown one-bdrm apt in Vancouver is $1800 a month. Yes. Some come with granite and amenities, some without much at all except location. There are cheaper, yes, but this is at the low end of what a young upwardly
mobile person finds acceptable and will pay for in this market. Which is why they want to buy at any cost, obviously. Their mortgage, taxes and condo fees are almost always less than their monthly rent. And yes, low interest rates are driving the market. And the Fed seems likely to keep them that way despite your warnings to the contrary for the last, what, 10 years?

Full disclosure: I’m a boomer and a latecomer to the condo market in Vancouver (sigh). I’ve owned since 1996 with and hardly won the lottery as far as “riding the wave” goes. Leaky condo in Yaletown, full of drug dealers and mostly offshore owners (equals mostly rentals in the building and no pride of ownership). Then a new condo in 2005 a bit south across the bridge to a wood frame walk-up fixer upper. Yes, it’s appreciated by over 30% since 2005 but I’ve paid 3 assessments in the time I’ve been here to a total of $28K.

Where I’m going with this is? Notwithstanding the fact that I, Boomer, missed out on the massive real estate gains made in the last 25 years, at least I’m with alot of equity. I do feel sorry for young people today, whose entire future is mortgaged in the hope of owning something, anything, and usually nothing more than title to an airspace in a downtown tower where you don’t know your neighbour and don’t want to raise kids. Sad.

Shelter is not so easy to come by in VanCity, rental or owned.

BTW, I’m a regular reader and enjoy your blog, but sometimes you gloss over the details in getting to your point.

#163 Derek R on 02.06.14 at 2:23 pm

#159 :):(YingYang on 02.05.14 at 8:23 pm wrote:
Smoking man you mean Red Hot Chilli Peppers!

I don’t think he does…

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

#164 Son of Ponzi on 02.06.14 at 4:51 pm

Red Hot Chilli Pipers.
They’re from Scotland, get it!