Smarts

BICEPS modified

So yesterday we talked about how Canadians are debt piggies and, since their housing market imploded, Americans have been paying it off. This is not a sexy topic because nobody here cares. Debt’s now as normal as see-through yoga pants or Justin Beiber being arrested. Like I said, it’s a lot easier to blame shadowy Chinese dudes for $1.6 million bungalows in East Van or North Toronto than your idiot relative who just emptied his RRSP and borrowed his buns off buying half a house so he can move in with bugs.

I don’t suspect this will change, nor will the efforts of people to justify buying houses when they’ve never been so expensive. Yesterday I spoke with a guy who got his PhD in economics two years ago and is looking for financial help. He has $75,000 in assets and $58,000 in debt. “What’s your goal?” I asked, amused. “I’m saving to buy a house,” he said. “Something affordable, like $500,000.” Hormones, 1, education, 0.

The astonishing part is that he’ll probably score a mortgage at one of the banks or brokers, and think he’s now ‘investing’ in himself, paying interest instead of rent.

Another smart guy, now renting in downtown Toronto, wants a $1.6 million house in the west end. I explained by owning it with a $500,000 down payment and a million-dollar mortgage he’d face an effective 100% increase in occupancy costs (he now pays $4,000 a month). To break even after five years he’d have to sell for $1.7 million, and yet in 2019 you can be assured mortgage rates will be double they are now, and housing far more unloved. (Even so, at 6%, a five-year mortgage would still be historically cheap.)

He’s not buying it – my argument, not the house.

He questions the ability of financial assets to perform over the years ahead, thinks rising mortgage costs don’t matter to people buying seven-figure houses and, “I expect low interest rates to continue.”

See what I mean. Even a $1,000,000 mortgage is not enough these days to deter people from lusting after real estate. They convince themselves housing will endlessly appreciate, that emergency interest rates won’t budge, returns on other assets are unpredictable and risky and the status quo will be largely intact. It’s the recency effect gone rampant – when people grow convinced what just happened will dictate the future.

(By the way, a $1 million mortgage at current cheap VRM rates costs $4,800 a month, takes $284,500 in payments over five years and is reduced to just $855,000 by renewal. Chances are then a five-year will be around 6%, bringing a monthly of $5,500, even on the reduced amount – on a home quite possibly worth less. Along the way, you must factor in the lost earnings on the $500,000 in equity, plus property tax, insurance, maintenance and the substantial costs of both buying and selling.)

I love real estate as much as the next guy, but intelligent people like these should understand the overwhelming risk of buying an asset at the top of the curve. The US housing market did not spiral out of control only because Oakies were getting sub-prime loans to buy McMansions in Florida, Wall Street crooks were securitizing vats of crap mortgages with bodies floating to the top or too many borrowers took out loans with reset interest rates (just like every mortgage here).

Instead too many people borrowed insanely because money was cheap, rules were lax, everyone was doing it, prices were rising fast, and the government had a pro-housing agenda. Yep, just like here. But when debt levels finally did scare people, the economy slowed measurably and house prices started to decline, there was no stopping the correction. Millions of people who had never speculated or gambled, and just bought houses for their families, awoke a year or two later to the grim reality that they owed more than they owned. Because while equity rises and falls with market conditions, debt does not.

But, whatever. Nobody cares. This blog is a piddle into the teeth of a hurricane. In time millions will learn how putting all  their net worth into one asset, then piling on three or four times in debt, was one of the worst ideas they ever had.

Or, I could just be a fool.

217 comments ↓

#1 Exurban on 02.11.14 at 7:03 pm

Nobody cares. This blog is a piddle into the teeth of a hurricane.
Your message of diversification and investments that pay you to own them is getting through to some people. IMO it would help if you acknowledged the role of offshore money and massive immigration, but you can never get through to most. In the words of U.S. auto executive Bob Lutz, describing how blinkered thinking has always plagued organizations :

Groupthink rules; most people feel comfortable with it. Sadly, in the kingdom of the blind, the one-eyed man has a tough time ruling. Everyone is busy trying to take that eye out.

#2 Saskatchewan Skeptic on 02.11.14 at 7:06 pm

FIRST!!

#3 East kootenays on 02.11.14 at 7:10 pm

Good post Garth, thanks as always!

#4 Robbie on 02.11.14 at 7:11 pm

You’re right, Garth but rose-coloured glasses seem to plentiful these days. I note that many residents of Pompeii ignored the many warning signs Vesuvius gave, prior to the eruption…they paid the price! Ignore the signs for declining Real Estate values at your peril. That said, declines in values have been going on for years in some parts of Canada and where I live (Greater Victoria area) the prices are back to around 2005/2006 price levels for most properties. Ah well, it’s different in Toronto….right??

#5 T.O. Bubble Boy on 02.11.14 at 7:16 pm

hmmm… sounds convincing, but I’ll need to try a few more:

$500k house with no other assets = bad idea for broke guy

$1.6M house with $500k down = bad idea for rich guy

but…. how about:

$25.8M house that isn’t even finished yet!
http://www.barrycohenhomes.com/listings/47576/moreinfo

#6 T.O. Bubble Boy on 02.11.14 at 7:19 pm

Or, how about $1.72M for a stucco palace on a 20ft lot?
http://www.realtor.ca/propertyDetails.aspx?propertyId=13996756&PidKey=-2102434529

One of these has to be a good idea, right?

#7 Happy Renting on 02.11.14 at 7:22 pm

At least the PhD in economics amused you. Sometimes you have to either laugh or cry.

(What school did he attend or where is he teaching? Not going to send my kid to that uni.)

#8 Waterloo Resident on 02.11.14 at 7:25 pm

YOU CAN’T FIX STUPID.
– STUPID IS AS STUPID DOES.
— Life is hard, Its even HARDER when you’re Stupid.

#9 Silent the people on 02.11.14 at 7:32 pm

Good story! I hope this ends well!

#10 John Mc on 02.11.14 at 7:37 pm

Recruited Smoking Man to help out with the blog?

#11 mac on 02.11.14 at 7:37 pm

Fiiirst to tell you you’re wrong today!

#12 Paul on 02.11.14 at 7:37 pm

This is was a lesson from the nice lady at the bank BMO, I had emergency account sitting in a G.I.C $10,900 give or take that I was told fully cashable did not read the fine print but it’s the bank right.? Trouble is open on the anniversary so they are attempting to give me $10,400 a $500 penalty because I did not redeem November 2013 the interest on it is 1.02 the new rate is 1.03 so they want me to pay approx. 5% penalty on .01% interest differential for the next 10 months just to get me funds back or leave till the next open day in November. Let the games begin they will have a very pissed man in the morning??

#13 Fabes on 02.11.14 at 7:38 pm

I don’t think you’re a fool.

#14 Rob on 02.11.14 at 7:38 pm

Wouldn’t it be a tad ironic to see F and the boys finally balance the budget in 2015 – just at the time that the RE market bubble finally goes down the tubes. Wonder where they’d spend their vote getting bucks then, eh?

#15 Spiro on 02.11.14 at 7:38 pm

Wow I can afford a $1,000,000 home thanks for the math Garthski

#16 houses to the skY! on 02.11.14 at 7:39 pm

Garth, just like you have said time and time again, the feeding frenzy on home purchases continues because of the parents.
I had an hour long conversation with my father who truly believes it is different in Toronto. When you guy a house, who cares if the market goes down, the house is worth more in the future anyway!… Right, but when you apply that same logic to the market and how the market can return more…. Well that’s too risky.

Oh, don’t get me started on being leveraged 10 to 1…. His response, what’s leverage? Right, when you buy a house and get a mortgage, you are okay with leveraging yourself with more than 10 to 1 on your assets – if not more in some cases…. But you would NOT DARE do that in the stock market because the stock market is too risky……

My sister believes this rubish too.

The true logic: Because he bought at a time when home prices were quite low, in an area that hasn’t ever really suffered massive devaluation, he firmly believes that housing is the way to go.

#17 TJ on 02.11.14 at 7:40 pm

You’re a good man Garth. You can’t save people from themselves.

#18 TnT on 02.11.14 at 7:43 pm

Real estate 10
Garth 0

Sorry Garth, you seem to be missing a key piece of data in your calculations which has skewed your predictions for years…. Government, RE cartel and the Banks know what it is and they played the game perfectly.

I use to be sure it won’t end well but now I’m not sure if it will ever end.

#19 TurnerNation on 02.11.14 at 7:45 pm

Gnomenomics came out today.

#20 Last Chance on 02.11.14 at 7:45 pm

FIRST

#21 kitchener on 02.11.14 at 7:50 pm

Good news: another perk for wealthy immigrants removed…

“The second change, which was a surprise to everyone, was the instant elimination of what was commonly referred to as an immigration trust. These trusts were often set up offshore by wealthy immigrants moving to Canada as a way to shelter investment income from Canadian taxation during their first five years of Canadian residency, under a special tax exemption for non-resident trusts…”

http://business.financialpost.com/2014/02/11/canada-federal-budget-2014-targets-wealthys-tax-shelters/

#22 Daily reader on 02.11.14 at 7:51 pm

Having read this blog to my family for the last year or so, I am so excited that my daughter is using it to help her friend understand tv at this is not a time to buy a condo. One at a time Garth. Thank you.

#23 Canaan on 02.11.14 at 7:53 pm

You are no fool. I am concerned about the amount of pain coming to people over the next decade or so. It is going to be unpleasant. I just don’t get why people don’t understand why people don’t understand the implications of outrageous housing prices and taking on such large mortgages. Frankly, I don’t think the majority of people know how to calculate what their future mortgage payments might be if rates increase.

#24 IVoteIndependent on 02.11.14 at 7:53 pm

What is “safe stuff” these days? If interest rates are guaranteed to go up, bonds are guaranteed to go down. What to do with cash, today?

#25 Vancity D-man on 02.11.14 at 7:53 pm

Forget the house, follow Garth’s guidelines and invest the 500k. Then rent a cheaper place for 1500-2000 per month and further invest the difference. You can thank Garth in 20 yrs when you can retire early.

#26 DocInWaitingRoom on 02.11.14 at 7:54 pm

Im not sure who taught these people in school and home. Sure if earnings are 250k go for a nice huge home at 900k in a wonderful area with high efficiency and a good build. But if you are making 50k, then why are you over extending to buy garbage at 900k?
I have been burned buying things for 5 bucks and at the dollar store but to get screwed for 40 years and jeopardize ones credit and livelihood scary stuff

#27 Derek R on 02.11.14 at 7:54 pm

Nope. You’re absolutely right. People obsess about public sector debt all the time. But they’re worrying about the wrong thing. Private sector debt is the BIG problem. It dwarfs public sector debt. And when it gets out of hand, as it has, trouble soon follows!

#28 not 1st on 02.11.14 at 7:58 pm

“…since their housing market imploded, Americans have been paying it off”

—-

There is no evidence they have been paying it off. Deleveraging isn’t the same thing as paying down debt. Many opted for bankruptcy or just took a capital loss on the sale and then recouped that loss on their taxes.

#29 Jeremy on 02.11.14 at 8:00 pm

First to say first!

#30 Forzudo on 02.11.14 at 8:01 pm

Makes you wonder when the banks will actually start looking into the figures placed on mortgage loan applications.

#31 chopper on 02.11.14 at 8:04 pm

Another great article Garth. Just hope people will listen. Houses are selling like hot cakes in Mississauga.

#32 Jeremy on 02.11.14 at 8:04 pm

It will take an economic recession, with double-digit unemployment, for personal debt to go out of favor.

If the general population favors renting over owning, the cost of rent may rise if vacancy falls, making the advantage of renting less certain.

#33 Smoking Man on 02.11.14 at 8:10 pm

#10 John Mc on 02.11.14 at 7:37 pm

Recruited Smoking Man to help out with the blog?

It’s coming, but today’s topic and sign worthy of an essay.

Be back shortly. I kind of hate garth, I’m trying to focus on the book then he Bates me with pic like that.

Damn

#34 Obvious Truth on 02.11.14 at 8:13 pm

Theses things are all self correcting. Markets don’t care where the the average Canadian thinks rates will be. My experience tells me they will largely follow the US and be dependent on many things. And Im pretty sure the US ten year cares not about Canadian housing.

#35 Victor V on 02.11.14 at 8:14 pm

http://www.theglobeandmail.com/globe-debate/a-boring-budget-unless-youre-a-senior/article16809511/

Meanwhile, over on the spending side, one suite of programs dwarfs all the others. Over the seven years from deficit to surplus, elderly benefits will jump by about $14-billion to $54-billion – from 16 to 19 per cent of total federal spending. Spending increases on the elderly will outstrip growth in all other programs.

A million more people will become seniors from 2013-2014 to 2018-2019. Canada’s elderly population will grow by 3.5 per cent a year (to reach 6.4 million) while government spending on them will rise by 5.3 per cent.

By contrast, those who fight for more money for children (Daycare? An enriched Child Tax Benefit?) should note that benefits for children will increase by $800-million over this seven-year period, compared to about $14-billion for the elderly. Demography drives budgets, regardless of what governments do. Seniors vote. Children don’t.

#36 ptolomy on 02.11.14 at 8:14 pm

Garth for some time you have been demanding proof of the so called ‘yellow peril’.

Yesterday I posted the following links to your site with the data you have been requesting, but you prevented them from being shown. Why?

Those links again are..

http://blogs.vancouversun.com/2014/02/10/is-vancouver-ready-for-influx-of-up-to-45000-wealthy-chinese/

With chart comparison..

http://www.scmp.com/news/world/article/1423370/exclusive-vancouver-facing-influx-45000-more-rich-chinese

That link has been posted here ad nauseum. It proves nothing about Van house prices. — Garth

#37 gladiator on 02.11.14 at 8:16 pm

Garth, it seems in Canada trees grow to the Moon. What seemed overpriced housing a couple of years ago now seems ridiculous and will become even ridiculous-er to the point of insane and beyond.
I remember 5 years ago speaking at a house-warming party with a like-minded acquaintance about house prices being crazy and agreeing that they normally should go down. That was 5 years ago! Houses in Toronto added at least another 30% since then! The last few families that I knew were renting just gave up and bought houses in the burbs in the last 1.5 years. I am the last mohican renting and a black sheep of course.
I lost all debates on housing and don’t even get into those because all my (supposedly) rational arguments are ignored and rightly so – just look at what’s happening. Low rates, HAM, Iranians, parent-financed downpayments, cash-back mortgages, liar loans, and many more things that, in a way or another, keep fueling this madness.
I gave up on waiting. I will not buy anything because I invest my dough in real businesses (not stock/bond markets) and because I am very seriously considering leaving Canada.
When you leave in a madhouse, you either get mad, or you leave. I treasure my sanity.
–end of rant–

#38 Victor V on 02.11.14 at 8:16 pm

http://www.theglobeandmail.com/news/politics/flaherty-delivers-federal-budget/article16788927/

Public servants will make a significant contribution to Ottawa’s return to balance as Ottawa plans to make current and future government retirees pay 50 per cent – up from 25 per cent – of the cost of the Public Service Health Plan. The move will provide a $7.4-billion improvement to the federal bottom line over six years.

The public-service changes account for the largest boost to Ottawa’s fiscal projections in the 2014 budget

#39 gladiator on 02.11.14 at 8:17 pm

sorry, should have been “live in a madhouse”

#40 not 1st on 02.11.14 at 8:17 pm

Would it have been so hard for F to make a simple statement in the budget today that too much disposable income is going to debt servicing, both household and consumer purchases and then take some moderate steps to rein it in.

Nothing earthing shattering has to be done, just raise mortgage rates by .75% and increase the GST by 1%. That little tinkering wouldn’t hurt the overall economy but would rein in the hornies.

Otherwise its 1980-82 or 1989-91 all over again eventually and I am sure the feds don’t want that, or else they are just trying to keep the illusion going until 2015.

#41 Not sure what to believe on 02.11.14 at 8:17 pm

Garth can you comment on this…

http://blogs.vancouversun.com/2014/02/10/is-vancouver-ready-for-influx-of-up-to-45000-wealthy-chinese/

The 48th time it’s been posted. Now irrelevant. — Garth

#42 Ralph Cramdown on 02.11.14 at 8:18 pm

“I expect low interest rates to continue.”

I’ve got theories, too, but I wouldn’t bet the farm on them.

#43 Joe Average, Vancouver on 02.11.14 at 8:19 pm

“But, whatever. Nobody cares ” – Garth, stay positive. Sometimes coming to your blog is like arriving at Noah’s Ark. Change is here for those who care to listen.

#44 DocInWaitingRoom on 02.11.14 at 8:23 pm

Economics supply demand

Demand is definitely down…
http://www.cbc.ca/m/news/#!/content/1.2530605

#45 Bryn on 02.11.14 at 8:24 pm

It’s definitely worth it Garth.

Over the past several years I’ve been reading your articles. I was oh-so-close to pulling the trigger on a mouldy crack shack in Vancouver. Thankfully sage advice like yours prevailed. Since that time I’ve more than doubled my savings, we upgraded to a much nicer rental for only a couple hundred a month more and I’m happy where I’m at. I have a future plan that includes an income stream and sensible investments. Thank you!

#46 Andrewski on 02.11.14 at 8:24 pm

Sat in on a Questrade “seminar” today & was amazed to hear other “investors” wax poetic on how real estate has made them lots of money (no $ invested elsewhere) & how (they feel) the RE market will continue to provide endless returns! Wow!

#47 Scott on 02.11.14 at 8:25 pm

Lately I’ve been looking at real estate in Calgary. I currently own and am thinking of making a change.

There seem to be quite a few listings for court ordered sales. The odd thing is that they’re only a non-possession 1/2 interest in the property. All the copy in the ad is …great investment opportunity etc etc.

How does this make any sort of financial sense?

#48 Not sure what to believe on 02.11.14 at 8:26 pm

Opps…I see that this is being scraped in the budget today…

http://blogs.vancouversun.com/2014/02/10/is-vancouver-ready-for-influx-of-up-to-45000-wealthy-chinese/

#49 Julie on 02.11.14 at 8:27 pm

We recently moved into a larger home in Toronto. We closed on the new home a few weeks before the closing on the old home and the bank simply added the cost of the new home to our existing mortgage. When we closed on the old home, we paid off most of the mortgage on the new home. However, before applying those funds to our mortgage, the mortgage broker at our bank tried hard to talk us into buying a cottage or vacation property since we could afford to carry the large mortgage. We hate debt and have zero interest in a second home, so we declined, but given what I’m reading here, we’re probably in the minority!

#50 Daisy Mae on 02.11.14 at 8:33 pm

“Instead too many people borrowed insanely because money was cheap, rules were lax, everyone was doing it, prices were rising fast, and the government had a pro-housing agenda. Yep, just like here.”

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

Yep, just like here. The federal government, the banks, greedy and suspect CREA and their associates, naive people following blindly — no one is learning a thing.

You’re not a fool, Garth. You’re the only one with any foresight and sense. Unfortunately, you can’t fix stupid.

#51 princess airhead on 02.11.14 at 8:34 pm

I note you hate any suggestion of HAM, but with the Canadian Government collecting records on this fact, the Government of China commenting, Vancouver Sun articles providing details and many other sources, what is you’re position on who and why so many groups are liars and only you have knowledge of the truth?

Of course offshore investors buy Cdn real estate. They just don’t make the average Van SFH cost a million. You did that. — Garth

#52 Smoking Man on 02.11.14 at 8:35 pm

Or , could be a fool-Gartho

You’re not a fool, not even close but you lack vision and anticipation. something a guru code smith has to live with everyday. Anticipate how users might f-k things up, plan for it, look at all possible outcomes.

I believe central banks the world over have a secrete little agenda. Inflate the massive debt away, amazing how they are all talking about raising min wage at same time.. Which will lead to higher prices, more money in peoples pockets as they demand more money. Sparking growth, and demand, more jobs, then when the time is right, bring the rates back up and they get to play Bankster again with out the fear of decapitation.

Assets like real estate will be good. stocks will be good, Reits will be good. Zillionairs who have taken there loot out of play hoping things to get worse to vulch will get crushed unless they put the loot into play.

And we get to play monopoly for a bit longer.

The alternative, when the herd circles the kings castle, the king either gives them more than cake, or start a war with another tribe.

As far as the schooled being smart, that’s subjective.

#53 Hillbilly on 02.11.14 at 8:46 pm

It doesn’t seem to matter who you speak to these days, from those who should be financially literate (Phd in economics, what a joke) to those who can’t balance a cheque book, they all KNOW that “real estate is always a good investment”.

It is doubtful that this line of thinking shall change with the majority until there is an event or events occur that causes reality to trod rudely upon their fervent beliefs.

This is indeed a mania without parallel in my experience in Canada and certainly a greater and more widely followed one than even Nortel and the NASDAQ ‘miracle market’.

I am really not sure anymore as to how this story ends.

Anyone have any cogent ideas?

I’m fresh out !

#54 Daisy Mae on 02.11.14 at 8:50 pm

#23 Canaan: “…people don’t understand the implications of outrageous housing prices and taking on such large mortgages.”

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

They don’t care if they ever pay off the mortgage. All they care about is making the monthly payments. This is the mindset of many. Of course, they haven’t factored in low wages, job instability, ongoing maintenance….sad.

#55 Realtor # 1 GTA on 02.11.14 at 8:54 pm

Exactly my point – More people are willing to more of their earnings toward their mortgage.

6% in five years ? They will just go variable and get it
Around 4% ( prime minus one)

If you think interest rates is your answer then you will
Need to wait three more years before they go north
Of 4%
The Feds have tapered twice and no reaction
From bond market

#56 Victor V on 02.11.14 at 8:55 pm

http://business.financialpost.com/2014/02/11/federal-budget-2014-ottawa-plans-boost-for-small-banks/

The professor thinks the bigger news in the budget documents might be hidden in a reiteration of tightening of rules on CMHC.

Ottawa noted again it will make CMHC pay guarantee fees to the Receiver General to compensate the government for mortgage insurer risks – something private mortgage default insurers must already do. CMHC’s annual issuance of portfolio insurance is also being lowered from $11-billion to $9-billion.

“They are capping a whole bunch of lines of business,” said Mr. Lee. “I think they have a plan for CMHC which they haven’t disclosed yet. They are either going to shrink CMHC incrementively or prepare it for privatization.”

#57 Ret on 02.11.14 at 8:57 pm

Oh no! Civil servants will have to pay $550 a year rather than the $261 a year they now pay for their gold plated medical benefit plan in retirement. If that is 50% of the cost of the plan, please tell me where I could buy that plan in the open marker for $550 x 2= $1100.

The numbers are in this link:

http://www.thestar.com/news/canada/2014/02/11/changes_in_federal_budget_take_aim_at_public_servants.html

#58 Daisy Mae on 02.11.14 at 8:57 pm

In spite of the fact you’re in pain, on meds, incapacitated, and frustrated…you carry on. It’s unfortunate that you have to listen to people who must contradict just because they can.

#59 Hillbilly on 02.11.14 at 8:58 pm

comment # 52 Smoking Man

Possible, except minimum wage people don’t buy houses or spend past necessities. In fact increases in minimum wages will probably only make that economic class barely solvent again.

I do agree about the central banks wanted to stoke inflation though, it is the only way to minimze the large debt burden that haunts every nation except a few today.

Also agree (if that was your point) that rates don’t get raised until inflation is rampant.

Only thing that doesn’t make sense to me in your theory is with such an oversupply of labour and spare manufacturing capacity, how do they reverse those deflationary forces to ignite inflation. Can;t stoke wage inflation unless you have a tight labour market I’m thinking.

What say you?

#60 Daisy Mae on 02.11.14 at 9:01 pm

#29 Jeremy: “First to say first!”

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

How old are you?

#61 ptolomy on 02.11.14 at 9:01 pm

That link has been posted here ad nauseum. It proves nothing about Van house prices. — Garth

That’s interesting because those two articles just came out this week.

Also the articles prove high demand, from foreigners, for canadian (mostly Vancouver in this example) real estate. To shrug it off as proving ‘nothing’ is a mistake.

#62 pinstripe on 02.11.14 at 9:12 pm

#53 Hillbilly

I am really not sure anymore as to how this story ends.

Anyone have any cogent ideas?

I’m fresh out !

———————————————————-

The same words were echoed 50 years ago, and the same words will be echoed 50 years from now.

There are those that Can Do, and there are a lot more that Can’t Do regardless what is presented on the platter.

The Smart Ones are Rich, and the rest are Poor and will always be POOR.

#63 Christopher Mewhort, EA on 02.11.14 at 9:15 pm

#28 There is no evidence they have been paying it off. Deleveraging isn’t the same thing as paying down debt. Many opted for bankruptcy or just took a capital loss on the sale and then recouped that loss on their taxes.

———————

No ordinary or capital loss allowed on sale of home. Sorry. Next.

Christopher Mewhort, EA

#64 Foollip on 02.11.14 at 9:16 pm

Amazing how stories about the peril of HAM continue to be published at the same time as this;

“It appears that Canada’s Immigrant Investor Program (IIP) will be no more.

Up until 2012, the IIP offered 2,500 visas a year to affluent foreign nationals — mostly from China — who simply invested $800,000 into Canadian government coffers for a period of 5 years.

The popular program, however, was suspended in July 2012 due to excessive processing backlogs.

Now, according to the Globe and Mail, Finance Minister Jim Flaherty will announce — as part of Budget 2014 — that the program will be shelved for good.”

So which is it? 52,000 rich Chinese just waiting to bid on moldy houses in Richmond or 0 actual IIP immigrants since 2012 and none in 2014?

#65 Daisy Mae on 02.11.14 at 9:18 pm

#53 Hillbilly: “It is doubtful that this line of thinking shall change with the majority until there is an event or events occur that causes reality to trod rudely upon their fervent beliefs.”

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

It’s coming…

#66 Smoking Man on 02.11.14 at 9:22 pm

#59 Hillbilly on 02.11.14 at 8:58 pm

What did you miss uncle Jed,

Once inflation is sparked, rates are keeped low, idiots like me who have far to much vulture chips on the sidelines, fearing that inflation will eat away at my slave ownership credits, naturaly I will put it into play and invest , that creates jobs.

And the banksters can remove their titanum neck ties for more comfortable silk.

#67 For my next trick, I'll need a volunteer from the audience on 02.11.14 at 9:27 pm

#19 TurnerNation on 02.11.14 at 7:45 pm

Gnomenomics came out today.

—-
Harpo constantly harps on that he has a degree in economics, i know for a fact that Tavistock
doesnt even have an economics dept.

Mythematics

Voila! Poof!

“Thank-you, and for next number I’d like to sing Hey Jude”

“Goooood Night Ottawaaa, I love You too”

#68 mortgagebrokeron on 02.11.14 at 9:28 pm

Garth how about a column about how demographics will impact the real estate market and also interest rates. With boomers not wanting to borrow money and wanting to cash in the equity in their homes eventually. Won’t this keep interest rates low??? not talking about the fixed rates, but the bank of canada rates?
I remember reading pig and the python and boom bust echo. Those books really influenced my view of the real estate markets long term future underperformance…. this due to the low birth rate/ replacement rate.

#69 Chickenlittle on 02.11.14 at 9:31 pm

42 Joe Average:

“But, whatever. Nobody cares ” – Garth, stay positive. Sometimes coming to your blog is like arriving at Noah’s Ark. Change is here for those who care to listen.`

————————–

Ha! I was going to mention Noah as well! He preached the flood for 120 years…and then it happened.

Same as Garth. He is a modern day Noah, beard and all. How many people have said it`ll never happen…and then….

35:Victor V:

Please don`t mention daycare! We asked the kids (2 to 3 year olds) what they liked doing with their parents. Most of them said they liked it when their parents pick them up from daycare! Other popular answers were reading together, making a snowman, and playing games. So sad that a kid is there from 6:30 am to almost 6 pm, goes to bed at 7:30, and spends more time with me than at home. And people lobby for more money for daycares. The kids themselves would lobby for more time with mom and dad…that`s what they want the most!

#70 Cheryl on 02.11.14 at 9:33 pm

RBC publishes a quarterly report on housing affordability. One statistic sticks out like a sore thumb about Scamcouver is that anyone in that city will need 83% of their median household income going straight to a mortgage. We haven’t talked about property taxes, heat, electricity, groceries, water, strata fees, vacations, child care, entertainment. 83% goes straight to a mortgage???? It’s time to short Vancouver (Scamcouver) and leave that shithole for the rich people so that they can “feel” rich.

#71 jess on 02.11.14 at 9:41 pm

transparency and accountablity challenge

Better Markets Files Lawsuit Challenging the U.S. Department of Justice’s Unlawful, Unprecedented and Unilateral Agreement Granting JP Morgan Chase Blanket Immunity In Exchange for $13 Billion

http://www.bettermarkets.com/reform-news/better-markets-files-lawsuit-challenging-us-department-justice%E2%80%99s-unlawful-unprecedented-

#72 Mark on 02.11.14 at 9:44 pm

Continued from yesterday, and in response to:
#165 Realtor # 1 GTA

What’s really really embarrassing is being a realtor who doesn’t know the difference between a renewal and a refinance. Or convincing clients that they will be able to renew for the same monthly mortgage payment in 5 years when rates are higher. While you’re at it why don’t you calculate for them how much interest they will be paying as t approaches infinity if they perpetually refinance to a new 30 year term every 5 years to keep their mortgage payments the same (hint: It’s a really really big number). If you don’t remember the formula, just dust off your grade 9 math book and crack it open.

#73 Stuart on 02.11.14 at 9:47 pm

down here in St Petersburg FL in my rented condo on guy says he bought a small one 430sq for $227K and one just sold for $100K and the beachfront $1M ones can be had for half the price.

#74 Nemesis on 02.11.14 at 9:47 pm

@Ralph/#42

“I’ve got theories, too, but I wouldn’t bet the farm on them.” – Ralph

Indubitably… it’s risky. But there’s nothing quite as exhilarating as putting the courage of one’s convictions to the ultimate test. Agreed, in the category of, “Please don’t try this at home kids.”

And now to AuldPol’s challenge… tonight’s CinematicThematic retort to Smarts/Education/Biceps can be summarized in just TwoWords:

Michael Bay.

Or if you prefer, SaltyDogz…

Pain&Gain [the ampersand doesn’t count, natch]

http://youtu.be/HvMsuONpTLo

Enjoy [MPAA: MatureAudiencesOnly, SmokingMen with ParentalAccompaniment @ Management’sDiscretion]

#75 Paul on 02.11.14 at 9:59 pm

#60 Daisy Mae on 02.11.14 at 9:01 pm
#29 Jeremy: “First to say first!”

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

How old are you?
——————————————————————-
Daisy Mae. You looking for a date. Lol

#76 mrbcs on 02.11.14 at 10:04 pm

I kinda wish stupid was painful.

Only problem is, I’d never get to sleep for all the noise around me :-)

#77 Smoking Man on 02.11.14 at 10:05 pm

The final re write will take place in Arazona next week.

Going to a motel in Yuma. I will have rattle snakes and no iternet I hope. I will find a local and hire him,her to bring me one shot of Jack every hour to stay in the writing sweet spot.

I can’t be trusted with a bottles on my own, I will kill them, hire up short term rentals and this book will never get done.

Dropping the wife and her sis in vegas with 50k hopfully that lasts her 7 days getting me, a hunter s thompson wothy auto and doing this desert trip into madness.

Never in my life have I so been this passionte obout anything.

And To my buddies at CSIS that have been shodowing me, because of keysme. You have made my book boys..Don’t worry names will be changed.

But your amature tactics will be exposed.

So next week starting tues, you don’t see me. You should all know I still love you all. Fans and enimies alike.

#78 research on 02.11.14 at 10:15 pm

“…Now irrelevant. — Garth”

Irrelevant due to this?

http://www.scmp.com/news/world/article/1426368/canada-scraps-millionaire-visa-scheme-dumps-46000-chinese-applications

#79 -=jwk=- on 02.11.14 at 10:20 pm

@ #5. good one. The realtor is only looking at a 1.4M commission, for that piddling amount I wouldn’t take more than one picture either.

#80 Cow Man on 02.11.14 at 10:29 pm

Sir Garth:
You sound discouraged this evening. With the beat up limb and all it is understandable. At least it is better than when it was just you and Kim Campbell left to hold the bag in Ottawa. It could always be worse.

#81 Smoking Man on 02.11.14 at 10:37 pm

Oh and also you Garth, this Pathetic blog will be mentioned at several points in the plot, how can I not give it honorable mention.

You never band me in spite of those absolutely insane posts you deleted.

More designed to freak out those men in black whothe hang on every key stroke I write..

You’re enabling helped create this monster in Vegas…. Now Yuma….

When this book becomes an over night best seller, just think those deleted post turn to gold.

If you must, keep half, the rest to the homeless…. Encourage them to buy booze.

After the trip, and a find a sucker at University of Toronto to fix the technical errors, I will throw a book launch at Seneca, booze and food on me.

But only for those that post here.

#82 Shawn on 02.11.14 at 10:39 pm

Head Shot

On Jan 28 we were treated here to a horrible picture. A head and Shoulders Shot of the Canadian dollar purportedly predicting the Canadian dollar to keep falling.

All aboard technical traders who like to Buy high and sell low – time to sell your Canadian dollars, said the head and shoulders voodoo (I mean analysis).

Oops the Canadian dollar has risen most days since then.

Always ignore all forms of technical (so called) analysis). It’s neither technical nor analysis. It’s tea leaf reading.

The chart was generated by professional Forex analysts at BNS. I’m happy you’re smarter than them. And everybody. — Garth

#83 gladiator on 02.11.14 at 10:45 pm

Debt to income and debt to disposable income… I see 163% for Canada in both, but why are graphs for the US show different values?

http://www.greaterfool.ca/wp-content/uploads/2014/01/chart.png?8f4c78

vs

http://www.greaterfool.ca/wp-content/uploads/2014/02/CHART-modified.jpg?8f4c78

The first one shows a much dire-er picture.

#84 Shawn on 02.11.14 at 10:49 pm

Cashed my TFSA

Cashed my TFSA to pay off all debt and have none. RRSP is so bloated that TFSA is piddle.

Will fill up TFsA in future. This is a problem really, TFSA is too accessible.

#85 Steven on 02.11.14 at 10:51 pm

“Something affordable, like $500,000.” Hormones, 1, education, 0.
IQ and common sense,0

#86 Axxman on 02.11.14 at 10:54 pm

People are borrowing to keep their existing debt current. This is why total debt is increasing and delinquencies are decreasing. This simple relationship has gone virtually unnoticed – which is why the IMF recommended a macroprudential regulator in their recent FSAP report.

I can’t begin to express how violently explosive this could be under certain conditions.

#87 Tripp on 02.11.14 at 10:54 pm

#5 T.O. Bubble Boy

The sawdust palace has 5(five) bedrooms and 15(fifteen) bathrooms!

Great design for the crappy times ahead.

#88 PeterfromCalgary on 02.11.14 at 10:56 pm

What worries me is that most of this mortgage debt is insured by the CMHC (Canada Mortgage and Housing Corporation). This means if debtors stop paying the tax payer is on the hook for these mortgages. By tax payer I mean me! Yikes!

#89 Vancouver GoinUp? on 02.11.14 at 11:01 pm

This story has traction. Predictions of 80 to 90 Percent drop in Sales West Van.Of course this blog says it means nothing. Listen to what a Realtor and Immigration Lawyer has to say. SELL SELL AND SELL TIL ITS ALL GONE. From CBC
In West Vancouver, real estate agent Clarence Debelle is still receiving offers from mainland China for luxury property, but he’s concerned the end of the investor program will have an impact on the local economy and the high-end housing market.
“I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself,” said Debelle.
“Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”
Immigration lawyer Richard Kurland agrees.
“When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that’s down,” said Kurland.

#90 Drill Baby Drill on 02.11.14 at 11:08 pm

Dear Pathetic blog. Care to talk about HAM after todays budget ? Van realtors very concerned after todays Peckerhead s announcement.

#91 X on 02.11.14 at 11:09 pm

Until low rates end, I can’t see this market ending. Sadly. As prices are beyond what most can afford, or will be able to. They just haven’t realized it yet.

I do hope the RE market sputters out before rates go up, but am doubtful. Am equally doubtful any governmental changes will occur to deter RE consumption either.

#92 Happy Renting on 02.11.14 at 11:10 pm

#75 Paul on 02.11.14 at 9:59 pm
#60 Daisy Mae on 02.11.14 at 9:01 pm
#29 Jeremy: “First to say first!”

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

How old are you?
——————————————————————-
Daisy Mae. You looking for a date. Lol

==========================
No, Paul. I’m convinced Daisy Mae is secretly Dorothy. Loyalty to rival Bandit’s. It’s cute, though, because Garth deserves it.

#93 omg on 02.11.14 at 11:13 pm

The Myth of California HAM

I spent a far amount of time in Southern California in 2002 to 2005.

During that time there were sporadic media frenzies about super wealthy Asians dumping money into RE. Supposedly Chinese billionaires would even helicopter around and choose property to buy from the air. Radio call-in shows were full of “HAM” haters ruining neighbourhoods. Ultra high-end areas like Malibu had grassroots organizers trying to get the state government to pass residency laws.

Well whether idea of HAM loading-up on Southern Cal real estate was a myth or reality it did not help once the great meltdown happened. Either the HAM did not exist or its effect was overwhelmed by market forces.

If there is HAM in TO and Vancouver they are playing at the margins of the market not driving it. And once the market starts to leg down, if they do exist, they will move onto better values elsewhere, maybe even SoCal.

#94 Grantmi on 02.11.14 at 11:14 pm

#89 Vancouver GoinUp? on 02.11.14 at 11:01 pm

This story has traction.

Where’s the link??????

#95 quebec economist on 02.11.14 at 11:14 pm

I have a solution for y’all:

People from toronto, If you want an affordable house or those from vancouver who no longer want to see rich immigrants…comme to Montréal. Pauline Marois is likely to win a majority gov this spring and bring Québec to a referendum! Yahoo…cheap houses and immigrants are illegal unless they look and speak like a true Québecois, Vive le québec! I just hope she keeps TFSAs…

#96 lawboy on 02.11.14 at 11:20 pm

#64

No new investor applications have been accepted since 2012, at which time there was the 45,000 or however many waiting. A few thousand got processed over the last two years, but they mostly just waited. Until now…

#97 Walter Safety on 02.11.14 at 11:20 pm

Friends east Toronto bung has 7 offers coming in tonight.
At least that’s what the realtor thinks .We will see ,house is listed under 500k.
Friends are getting out of town . Report tomorrow .

#98 Grantmi on 02.11.14 at 11:21 pm

Never mind.. Found it!

Canada scraps ‘millionaire visa,’ sends B.C. property market reeling – British Columbia – CBC News http://bit.ly/1oi6WVr

#99 Victor V on 02.11.14 at 11:26 pm

Cliffs to slash mine spending in Canada, cut 500 jobs

http://www.theglobeandmail.com/report-on-business/cliffs-to-slash-mine-spending-in-canada-cut-500-jobs/article16815651/

#100 Roy on 02.11.14 at 11:28 pm

Canada scraps ‘millionaire visa,’ sends B.C. property market reeling
http://www.cbc.ca/news/canada/british-columbia/canada-scraps-millionaire-visa-sends-b-c-property-market-reeling-1.2533006

Realtor: “Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”

#101 Scully on 02.11.14 at 11:33 pm

Smoking Man…put me down for a copy of your book. Oh, and hurry up – I’m not getting any younger!

#102 Smoking Man on 02.11.14 at 11:35 pm

The force is with me should have been the first line…..

Force, where the hell did you go. You embarrassed me. Why last.

Technology, thumb typing in thinking.

Oh my god, JD going down like fat girl time shifted six months forward from a hard stint at want watchers.

AL right good night dogs, garth, CSIS. fans, and foe…..

#103 gmc on 02.11.14 at 11:38 pm

wow what $500 000 can buy in a Place like Thailand, I live in Ubon east of Thailand, not much tourist, great place, summer all the time, food dirt cheap, great highways, looks like everyone has a new car/tuck, and lots of Harley curing around , no helmets!!!!!!!!.
I rent a new modern place, $1000/6 months, ac/ modern , very nice, own drive way, it is easy to start a business here, all store we have at home are here, dairy queen , bugger king, McDonald etc, but also many many great Thai food restaurants and other nations food here, new trade deal going on between five countries, Thai/Burma/Laos/Vietnam/Cambodia, no visa , free trade between countries. Tis place is growing like crazy.
Ubon has nicer malls than we have in Canada, not all goods come from China, therefore good Thai quality.
The medical system here is awesome and cheap, very modern and professional, many come for medical holidays, never worry about getting sick and losing it all here if on holiday or resident, not like the USA, don’t wan to get sick there, I went to the dentist, very modern and professional, $15 for cleaning and check up etc…. $150 for root canal and awesome roads, no speed limits on the highways, most major roads here double lane, no speed limit signs. cool and beer is very cheap….
wtf why would you risk it all on a high price real-estate, truly people have gone mad.
gmc today sunny 32C
hahaha

#104 Smoking Man on 02.11.14 at 11:46 pm

Why is being hammered so looked down apon, flying in formation with hippos at 30000 feet, I got wings, they have little feet trying to stay afloat.. But as much as I try, I can never get the lead spot.

Maybe is more fun being an observer down wind.

#105 Scully on 02.11.14 at 11:46 pm

#89
I really don’t think that’s the case. You all seem to think this is all coming from new HAM. A lot of it is coming from immigrants and Canadians who are speculating just as Garth says. A lot of them are leveraging too. I guess only time will tell whether this has an effect or not but someone posted earlier here that the program was halted in 2012 due to backlog and is now being permanently shelved. To me that points to speculation with the help of low interest rates. Just a thought.

#106 Uh Oh Canada on 02.11.14 at 11:48 pm

Had a ride through Toronto today and was amazed at the number of condos still being built. Question to our GTA blog dogs- did Rob Ford’s administration have anything to do with the condo hysteria? It occurred to me that those condos would rake in a lot of property tax income that would benefit city council.

#107 Fiona on 02.11.14 at 11:50 pm

My plan was to save this year and buy a place near a local college for approximately $290,000. I was hoping to rent the basement out to students to help with the mortgage. I was really looking forward to buying this Summer, moving in my August. I have doubts now, serious doubts. Everywhere I look people are being laid off and can’t find gainful employment. Others seem to be drowning in debt, struggling to make minimum payments. I am slowly realizing that my dream of purchasing a home this Summer is going to have to be put on hold. I have zero buyer confidence right now, not just because I read this blog daily, but because I see proof of a recession everywhere I look. When I attempt to bring this up with friends or co-workers they quickly change the subject. Some days I feel like shaking these people out of their denial.

I have a secure job and am confident that I could afford a home without a problem, however I do worry that the interest rates will rise and ruin me.

#108 Ferrari321 on 02.11.14 at 11:57 pm

http://ca.news.yahoo.com/blogs/canada-politics/tories-nix-immigrant-investor-program-budget-2014-report-155024280.html

Game over HAM?

#109 Jon B on 02.11.14 at 11:57 pm

My biggest concern is not so much that real estate values will decrease eventually, but the inevitable contribution to the further unraveling of the middle class. If debt maintenance becomes a serious problem for large numbers of indebted people the social impacts will be huge. Then I believe these social problems will become everyone’s problem. Going down the path we are on now leads me to think the rich will get richer and the heavily indebted poorer.

#110 Butch on 02.12.14 at 12:04 am

“yet in 2019 you can be assured mortgage rates will be double they are now”

Well, I would have thought the same about 2014 in 2009.

So far, it hasn’t come true.

#111 45north on 02.12.14 at 12:05 am

I expect low interest rates to continue.

just a very quick glance at Flaherty’s budget. he’s saying to your PhD “screw yourself”. Did he make any promises about interest rates – no. Did he promise that house prices wouldn’t fall – no. Did he announce a new program to promote higher levels of debt – no.

A story: After 25 years in the civil service, A had not applied himself, had taken every sick day he could. B although a little rough had thrown himself into the challenges of the job and had in fact reached a high level of technical competence. Walking down the corridor one day A says “I’m going to really apply myself and B you’re going to help me right?” B says “sure”. translation “go screw your self”

#112 High Plains Drifter on 02.12.14 at 12:07 am

I never see any number crunchers give a value for a houses ability to be to be collateral for new ventures. How can a gambler bet the house if his name is not on the title of one. Also, can not make interest rate bets if you do not have a mortgage. Man with house payment becomes monster at work and sees life as do or die. I was a nice enough fellow til 47, then Mr. Nice Guy was replaced by the “Home Owner”(mortgagee). We shall see how a proper interpretation of historic bond bubble can shave years off tedium of working for money by the hour. Our foundation stone is “safe as houses” collateral.

#113 BG on 02.12.14 at 12:21 am

Although I think your advice is sound Garth, I’m not trusting anybody’s previsions.

I try to build a diversified portfolio because I cannot tolerate the risk in real estate. That’s pretty much it.

And I don’t trust technical analysis . I read a book on it and it almost felt like learning voodoo or black magic.
I’m more interested in the modern methods (machine learning and this kind of stuff).

#114 Ahead of the pack on 02.12.14 at 12:22 am

Some people believe they will be able to sell their house quickly and get out with their profits before anyone else, when higher interest rates come.

Those same folks likely believe that their financial adviser will call them first when an urgent buy or sell opportunity arises.

Alwyn

#115 ILoveCharts on 02.12.14 at 12:30 am

The bears deny the HAM. Now the bulls have turned into bears because of the HAM. I’m getting a craving for meat. I think I will have some poultry.

#116 crowdedelevatorfartz on 02.12.14 at 12:30 am

@#38 Victor V
EXCELLENT NEWS!
The first of many Federal gov’t clawbacks on gov’t employee pensions……
Provincial and Municipal govts take note…………
1st its health care benefits……next…….?

#117 crowdedelevatorfartz on 02.12.14 at 12:32 am

But then again I predicted this yesterday so, I’m not surprised…….
:)

#118 Midnight mint on 02.12.14 at 12:38 am

Hey Garth,

Do you think that the wrinklies will ever sell their homes, lowering the prices of real-estate? Or are us Gen-Ys screwed anyways? My sister tells me that prices are high in Regina for what you get, but it’s still affordable, so I should buy in Calgary…

#119 MagnumMtl on 02.12.14 at 12:43 am

fool me once, strike one. Fool me twice… strike three!

http://www.youtube.com/watch?v=qYA2goBuuCQ

#120 dosouth on 02.12.14 at 12:44 am

Well Garth part of the “Armageddon of HAM” may now be coming to fruition – sort of….

Canada scraps ‘millionaire visa,’ sends B.C. property market reeling

#121 dosouth on 02.12.14 at 12:48 am

Holy cow. It didn’t take very long for the headlines to be changed by CBC. Within seconds of my last posting the headline changed before my very eyes from –

“Canada scraps ‘millionaire visa,’ sends B.C. property market reeling…”

to

“B.C. property market hazy after ‘millionaire visa’ scrapped…”

Spin doctors already working overtime – woohoo!!

#122 Spectacle on 02.12.14 at 12:57 am

Thank You Garth.

Re: #53 Hillbilly on 02.11.14 at 8:46 pm

……….until there is an event or events occur that causes reality to trod rudely upon their fervent beliefs.

I am really not sure anymore as to how this story ends.

Anyone have any cogent ideas? I’m fresh out !

1) you write with genuine ability, it follows that you will find answers of significance!
2) as the Buddha once wrote, ” be a light unto yourself”. He probably would have read Garth nightly too, but I digress…..
3) reality has earnestly begun to trod so rudely , much more to come. If you want to see a blinding light , read or youtube about agenda-21 by Rose Koire. ( I don’t link away from Garth’s blog.)

Share your insights & thoughts on Garth’s site Bill.

#123 Freedom First on 02.12.14 at 1:01 am

Well Garth, a fool and their money are soon parted. You’re good Garth, and on top of being financially sane yourself, you have helped, and are helping more people to not become fools themselves, and without a leg left to stand on:)
Hope you’re feeling better!

Rich people own assets, and poor people have debt. Very very very few people are able to leverage their way to wealth. However, many many many people leverage their way to bankruptcy.

#124 Republic_of_Western_Canada on 02.12.14 at 1:06 am

#24 IVoteIndependent on 02.11.14 at 7:53 pm

What is “safe stuff” these days? If interest rates are guaranteed to go up, bonds are guaranteed to go down. What to do with cash, today?

* identify some high-cap U.S. stock with lots of open interest which will crash or skyrocket at some point. Put a strangle on it using some options series about 5 months out. You’ll only lose if it goes sideways. TWTR seems to recovering nicely – maybe wait awhile for it to recover like something out of 1999, and wait until investors start to get nervous again about the fact a skyrocketing multi-billion-dollar stock has never made a dollar of profit and probably never will. AAPL might also be due for another dump in the medium term for whatever reason – imagine what would happen if marketplace sentiment swung from iPhones back over to Blackberrys, taking BB from 10 bucks to 500… (Hey, I remember when AAPL was a 9-dollar stock and managed by a sugar-water salesman).

* find some of the remaining 6+% Cdn preferreds out there with redemption dates in 2015/16 and buy on the dips. Rate-reset prices have already been mostly killed, from approx $25 face down to the teens. Interest rates will of course go up, but relatively mildly in 2014, so further step-decreases in rate-resets until next Christmas will be much less severe than they were in 2013. Then those will either be redeemed at par ($25) or reset to 5-yr bond interest +2-4%. Either way, a doubling of the original capital outlay after 18 months on top of a dozen 6+% dividends, or a reset down to say 5.5% ain’t that bad. (P3 rating). Not sure what will happen to the market price of a $15 (par $25) preferred stock’s replacement on the reset date, but you don’t necessarily have to be there if you’re nervous about it. Sell a couple months before.

* buy 5.5+% perpetual preferreds on the dips and hold until you start smelling serious indications of interest rate increases. Ol’ Yeller today indicated further tapering is warranted, but too many disgusted/disaffected laid-off workers are out there to deliberately hike interest rates anytime soon. Not sure there’s anything out there for the bond market to really have a cow over in 2014. Certainly not an energy shortage.

* wait for another general correction (or an extension of the last one a few days ago if that’s your philosophy ) and lean heavily on put writing of several large-cap U.S. stocks which have lots of open interest. At maybe 10% out-of-the-money.

* mix-and-match with a smattering of beaten-up resource stocks like ABX, K, POT, CPG with your cigarette money.

* short the heck out of Dow Chemical at 50 or thereabouts if it looks like their perverted little scheme of issuing securities to fund share buy-backs to pump up their share price over a threshold of 53 to get better funding rates doesn’t look like it’s going to work out.

#125 Cici on 02.12.14 at 1:07 am

Fool? Uhh, NO!

You are the intelligent minority :-)

Don’t give up Garth…you may only save a few, but it’ll make a small difference.

Hope you are healing well and quickly!

#126 James on 02.12.14 at 1:39 am

Of course offshore investors buy Cdn real estate. They just don’t make the average Van SFH cost a million. You did that. — Garth

Can’t speak for Vancouver or other banks but a friend of mine in Toronto works at Scotia in residential mortgage business. They don’t publicize it, the foreign investment in condos is in the high 50%.

#127 joblo on 02.12.14 at 1:46 am

SM why Yuma?
That drive is mind numbing thru dessert. Bleak.
Lotsa old airsteams, broke down trailors out in middle of nowhere. Grim.
Will kill creative.
Gonna need more than JD to get groove back.

#128 Gary M on 02.12.14 at 1:59 am

“Canadians are debt piggies and, since their housing market imploded, Americans have been paying it off.”

Not quite. In fact, two-thirds of this “deleveraging” is from defaults on mortgages and other loans. Link: http://www.mckinsey.com/insights/economic_studies/working_out_of_debt

#129 raisemyrent on 02.12.14 at 2:04 am

#84 Shawn on 02.11.14 at 10:49 pm

You’re right, it does lend itself to being cashed from time to time if one is not careful. Garth’s baby was renamed by F precisely to hide its powers.

Cheers for being debt-free. Make sure you leave those RRSPs alone (and check what’s in them) and have fun filling the TFSA back-up.

btw it’s raining in Vancouver for a change and that is not sarcasm

#130 JohnnyO on 02.12.14 at 2:18 am

Another article to throw on the pile…

http://www.cbc.ca/news/canada/british-columbia/b-c-property-market-hazy-after-millionaire-visa-scrapped-1.2533006

#131 Hatchel on 02.12.14 at 2:46 am

Watch listings explode in Vancouver, sales will fall, prices will follow and the tide will turn. Enjoy the show!

#132 blase on 02.12.14 at 2:52 am

Can I put to rest the belief that “houses used to be cheap”.

Houses didn’t used to be cheap. Houses have rarely, if ever, been cheap.

Looking backwards 10,20,30 years, they appear to be cheap because the current prices have gone up due to inflation.

The same thing can be applied to stocks.

Now, with rates being as low as they are, that makes houses less expensive than they appear.

But people will only realize that when rates return to normal.

#133 VancouverTanks on 02.12.14 at 2:58 am

Immigration lawyer Richard Kurland agrees.
“When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that’s down,” said Kurland.

To paraphrase the immortal Kent Brockman:

“and this reporter thinks it’s about f#$#ing time.”

#134 David McDonald on 02.12.14 at 3:22 am

Being in hospital is enough to make anybody a little depressed. Soon it will be spring and things will be looking up. I for one have learned a lot from you and the other blog dogs. There is no way I would call you stupid even if all your predictions about real estate turn out wrong.

No matter how fine the analysis, all a prediction can do is change our a priori probabilities about the path we are on. We act based on those probabilities. The bottom line can be used to judge performance when all is said and done but the bottom line is a bad measurement of the quality of past predictions. Randomness rules our lives and can make a wise man appear foolish.

#135 World According To Garth on 02.12.14 at 4:13 am

Many PhDuhhhhhs like this are profs at universities. Your tax dollars at work. I met one last year before we moved to Chilliwack. She also had a PhDuhhh in economics but did not know anything about what she taught. Scary.

————————————————

Happy Renting on 02.11.14 at 7:22 pm

At least the PhD in economics amused you. Sometimes you have to either laugh or cry.

(What school did he attend or where is he teaching? Not going to send my kid to that uni.)

#136 SofaKing on 02.12.14 at 6:19 am

You’re almost there Garth! Capitulation that is.

Only then will the market correct. Right now you have too many factors going against your thinking.

CMHC, Government, Banking cartel, Government, Media, Big Media, more media, Government, CREA, more Government, etc,etc,etc…

I’m wondering? Are you THAT much of a masochist!?

#137 SofaKing on 02.12.14 at 6:23 am

@ #70,

Sheryl, we already have. They’re called HAM.

#138 SofaKing on 02.12.14 at 6:43 am

@#81 – Smoking

Hey numbnutz… Knowing an alki such as yourself, you can keep your half-watered down scotch and chinese made M&M hordeuvres, that’s helping create more HAM, for yourself.

That book launch of yours, foggetabout it!

#139 JWD on 02.12.14 at 6:53 am

Dear Vancouver,

Best of luck with the impending house correction. I hope you have enough flex in your monthly budget to hang in there when this debt storm reveals itself. When interest rates rise at the same time prices start to fall, we’ll see who is still wearing clothes when the tide turns.

Sincerely,

Your mortgage.

#140 Fortune500 on 02.12.14 at 8:00 am

CNN is reporting to me overseas that the Canadian investor program is officially dead in the water. They are saying 65,000 pending applicants are now being denied and funds returned. 70% are Chinese applicants.

http://money.cnn.com/2014/02/12/news/canada-chinese-immigration/index.html?iid=s_mpm

Garth, do you think this will have any significant symbolic effect? Regardless of your take on the reality of HAM, it would appear that both MSM and Johnny Canuck are going to have a harder time convincing themselves that rich foreigners are on coming over the horizon to make housing-central retirement dreams come true.

#141 jess on 02.12.14 at 8:08 am

hybrid tax treatment across borders (australia)

AGLC3 Citation: Miranda Stewart, ‘How a Major Bank Succeeded in International Tax Planning, Got Cheap Capital and Paid Less Tax: Mills v Commissioner of Taxation’ on Opinions on High (8 February 2013) .

Professor Miranda Stewart is Director of Tax Studies and Associate Dean (Engagement) at the Melbourne Law School.

http://blogs.unimelb.edu.au/opinionsonhigh/2013/02/08/stewart-mills/#more-343 ‘hybrid’ tax treatment and as the OECD identifies, it’s a challenge for tax systems.
http://en.wikipedia.org/wiki/Dividend_imputation

http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2013/062.htm&pageID=003&min=djba&Year=&DocType=
http://www.oecd.org/tax/beps.htm
==================

The new OECD report on Addressing base erosion and profit shifting (BEPS)
http://oecdinsights.org/2013/02/13/beps-why-youre-taxed-more-than-a-multinational/

THE DARK SIDE OF TRANSFER PRICING: ITS ROLE IN TAX AVOIDANCE AND WEALTH RETENTIVENESS
Abstract
Prem Sikka of Essex Business School, co-author of a paper on The Dark Side of Transfer Pricing, claims that “Ernst & Young alone employs over 900 professionals to sell transfer pricing schemes. The US tax authorities employ about 500 full-time inspectors to pursue transfer pricing issues and Kenya can only afford between three and five tax investigators for the whole country.”

This paper seeks to draw attention to the dark side of transfer pricing by examining its role in relation to struggles over the distribution of economic surplus. Its purpose is not to advance an alternative theory of transfer pricing, or offer interpretation of complex legislation and the case law relating to it, or even to develop some new conceptual categories for its analysis. Its more modest ambition is to intensify attention to a key area of accounting practice and policy that is largely invisible to students of accounting and of seemingly low priority to the media, politicians, regulators and corporate critics. It relies upon publicly available information to provide illustrations of transfer pricing practices.

http://www.essex.ac.uk/ebs/research/working_papers/WP2010-1%20-%20PSikka%20Transfer%20Pricing%20Paper.pdf

#142 JL on 02.12.14 at 8:31 am

I own a $300,000 condo in Calgary. Great location, good building, I’m on the condo board its fairly well managed built in the 1980’s so isn’t falling apart and they knew how to do a building envelope back then. Two bed, two bath, 1000 square feet with underground parking and storage.

Live with the girlfriend with a cat and a small dog. Space works for us for next few years.

Mortgage is $185,000 (just renewed with a 3.34% for a 4 year term, 20 year amortization).

Condo fees are $400, taxes are $150, maintenance is maybe $25-$50 per month (including replacing an appliance every few years).

Mortgage payment is $1130 for a total of $1730 per month.

Rents in the building and in comparable places are $1850 per month (assuming I could find a landlord that will take my cat and dog – but let’s assume I can rent a place).

Rent vs owning is $120 more to rent, and let’s ignore inflation in rents and inflation is condo fees and taxes (however, inflation in rents will be higher as its on the whole $1850 vs on $550 (fees and taxes).

So I’m in the whole $1440 per year renting and risk losing the place if landlord decides to sell or whatever (but I’ll ignore life style factors and just look at the money).

$1440 per year invested at 7% is worth $6400.

Mortgage pay down in 4 years is $32,000.

So owning generates me $32,000 in reduced principal and $6400 extra in the bank.

Selling now gives me approx. $100,000 to invest today. In 4 years at 7% is $131,000 (but not after tax, I would be able to shelter about half the $100,000 in registered accounts). But taxes will still only be maybe $4,000. So call is $127,000.

So $31,000 in investment returns by freeing up the $100,000 in capital to invest vs $6400 in the bank and $32,000 in paydown by owning for $38,400 total.

So owning vs renting is not a clear cut decision in this case. If prices fall by 5% over the next 4 years, which is possible then I’ve just lost $15,000 in equity and now renting is worth $7000 more than owning. If prices rise 5% over 4 years, also very possible then owning is $23,000 better than renting.

If prices are flat owning is better, if prices rise by any amount owning is even more better, if prices fall 5% or more renting is better.

Take it out 10 years and I’m still ahead owning this condo even if prices are flat. And flat prices for 10 years with inflation of 2.5% is the equivalent of a 25% drop in real terms on this property. That’s the absolute most Garth is calling for, so what’s so bad about owning? Can certainly make an argument that renting is better, I just ran the numbers, but Garth acts like its so unbelievably tilted in favor of renting that everyone is crazy.

#143 economictsunami on 02.12.14 at 8:32 am

From a surplus, to a revenue knockdown and shovel ready spending binge.

Canadian governments: Creating artificial crises, then kinda solving them; since 1867.

This has been a Canadian Vignette brought to you by Canada’s Action Plan…

Everything You Need To Know About The Government’s New Budget…

https://businessincanada.com/2014/02/11/canada-budget-2014-jim-flaherty-stephen-harper-economic-action-plan/

#144 G Man on 02.12.14 at 9:17 am

Wisdom beats knowledge. Always.

#145 Condo Minion on 02.12.14 at 9:44 am

Hey, is this Garth’s transgender alter ego, “Joyce”?

She invested in a condo and gold (what could go wrong?)

Not happy :(

http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/living-in-retirement-im-sorry-i-ever-downsized-to-a-condo/article16798491/

This suggests that perhaps there won’t be such a flood of retirees into all those shoddily built condos after all……

#146 maxx on 02.12.14 at 9:45 am

“But, whatever. Nobody cares. This blog is a piddle into the teeth of a hurricane. In time millions will learn how putting all their net worth into one asset, then piling on three or four times in debt, was one of the worst ideas they ever had.”

“First they ignore you (happened), then they laugh at you (happened), then they fight you (happening), then you win (beginning now)”.

#147 thinker on 02.12.14 at 10:12 am

The real questions?

1) Garth can you do a survey of what people think a house cost to run – forget the tax, etc. I mean everything from pipes to plugs, reno’s etc…Is it worth 2%, 3%, etc of the avg house price of the life, etc?

2) You keep repeating that takes almost all income to afford the avg house for the avg chap, basically the numbers say a family can’t really eat. Well, those numbers have been high for awhile now – either everyone is lying on taxes, has a few immigrants living in the basement or getting money from offshore/mom/dad, but please make up your mind on this. The ratio means nothing.

3)The whole GIC thing – Canadians are conservative, this will never stop. They prefer it, it’s a way of life.

4) Whatever happened to Ben Rabidoux? He was a clown anyway

5) Weak Jobs – can’t pay mortgage, forced to sell, we all agree this is the really the only way to cause prices to move down fast – 1) the housing charts have always been higher over the last 100 years, over the long run you can’t argue it’s been a bad thing to own, it hasn’t, neither have stocks. Why do you think it will change? You keep pointing to housing in the US, so what? The prices are coming back and after 5 years seem to be ok – as a Canadian, if the US is mapping it for me, then I might have a 5 year downturn but then things seem to perk up (why are you not looking at that) – houses don’t have margin calls

6) Renting a home or Renting Money from a bank is the same thing (mortgage) but I also given a chance to make or loss on the property with the mortgage – over the long run, that upside gain value seems to have worked out just fine

7) Have Canadians just gobbled up forward growth? What is your thought on house prices actually doing nothing for 7 years? Was it then really all that bad to buy over renting?

Thanks – hope you heel well

#148 RVP on 02.12.14 at 10:15 am

It’s not just Vancouver’s real estate market that is reeling. I am reeling over the Conservatives scrapping of the immigrant investor program. Like, can I actually believe what I am reading? The Conservatives are actually trying to prevent rich immigrants from coming over here and not contributing and pricing local people out of their own communities? Like, the Conservatives are actually doing something in the public interest of ordinary Canadians? Like, the Conservatives actually know that Vancouver exists and don’t base all their policies on what’s good for Alberta/Toronto? So many people were saying that the Conservatives would never do anything about HAM because it’s really only a significant problem in Vancouver and Vancouver doesn’t vote Conservative so the Conservatives just care about Alberta and Toronto. Well so much for that. This is almost too much to believe. As if that weren’t splendid enough, the Conservatives are also putting an end to tax shelters for immigrants with that immigrant trust being eliminated. Like, what is going on here??? I thought the Conservatives loved rich immigrants and would only want more. If the Conservatives keep this up, I may actually have to vote for them! I am a left winger who has never voted Conservative–ever! But boy do I ever like what they did yesterday! I can’t remember the last time I liked something the NDP did.

#149 NoName on 02.12.14 at 10:17 am

no beer for rich wannabee canadians…

http://www.foodworldnews.com/articles/5140/20140211/team-canada-s-beer-fridge-accessible-canadian-passports.htm

#150 fixie guy on 02.12.14 at 10:21 am

“He has $75,000 in assets and $58,000 in debt. …..The astonishing part is that he’ll probably score a mortgage at one of the banks or brokers….”

Why do ‘banks or brokers’ take that kind of client? Government guarantees, the source of our housing bubble in a nutshell.

#151 Holy Crap Wheres The Tylenol on 02.12.14 at 10:23 am

#81 Smoking Man on 02.11.14 at 10:37 pm
Oh and also you Garth, this Pathetic blog will be mentioned at several points in the plot, how can I not give it honorable mention.
You never band me in spite of those absolutely insane posts you deleted.
More designed to freak out those men in black whothe hang on every key stroke I write..
You’re enabling helped create this monster in Vegas…. Now Yuma….
When this book becomes an over night best seller, just think those deleted post turn to gold.
If you must, keep half, the rest to the homeless…. Encourage them to buy booze.
After the trip, and a find a sucker at University of Toronto to fix the technical errors, I will throw a book launch at Seneca, booze and food on me.
But only for those that post here.

_____________________________________________

Smoking Man have fun in Yuma I hear there’s Casinos there now. Did my first parachute drop compliments of the USAF back there in 1969 at the Yuma Proving Grounds. If you want to have fun go rent a dune buggy and go for a ride out in Imperial Sand Dunes Recreation Area. If they allow it now, not sure with the tree huggers and such. I did it for a weekend leave what a blast. Oh the sixties, what a great time!
Oh yes Ive read Hunter S Thompson s books he was quite the writer. The first book I read was Hell’s Angels: The Strange and Terrible Saga of the Outlaw Motorcycle Gangs. This was his first hit! You should check it out Smoking Man, but you do realize he blow his brains out while talking to his wife on the phone as well as having his children and grandchildren in the same house when he did it. He was brilliant but suicidal due to his many aliments. So I would surmise your writing methodology is going to be Gonzo journalism?

#152 JM on 02.12.14 at 10:27 am

Great article to read about demographic shift. I imagine it will be relatively the same here in Canada in terms of boomers, as you have mentioned. It will be interesting how this is all handled:
http://www.zerohedge.com/news/2014-02-11/22-facts-about-coming-us-demographic-shock-wave

#153 Ralph Cramdown on 02.12.14 at 10:30 am

#142 JL — “I own a $300,000 condo in Calgary […]”

Kudos for doing the math. Every situation is different. Even for the same unit, the answer to “I have a five or ten percent down payment, should I buy or rent?” and “I own, with a mortgage of 62% of my property’s value and a 20 year remaining amortization. Should I sell?” might be different.

The prospective owner has to consider mortgage insurance, maybe land transfer taxes and burning any first time buyer tax credits. If he’s amortizing over 25 years, more of his monthly goes to interest and less to paying down principal than the guy who only has 20 years left. The current owner has to consider mortgage break fees and realtor commissions.

In markets where price:rent and price:income isn’t severely out of whack, it can sometimes make sense for owners to continue to own and renters to continue to rent.

#154 -=jwk=- on 02.12.14 at 10:30 am

@ #120
SM why Yuma?
That drive is mind numbing thru dessert. Bleak.
Lotsa old airsteams, broke down trailors out in middle of nowhere. Grim.
Will kill creative.
Gonna need more than JD to get groove back.

Yuma has the greatest Colorado river swimming /lazy river anywhere. warm, slow, reedy it is awesome. And the local limo is a jacked up 4×4 Limo that can take you out to the huge sand dunes nearby….good times. And she was so cute. Sigh.

#155 Aggregator on 02.12.14 at 10:39 am

I think a lot of people are taking the govt's termination of the investor class story out of context. It appears to me, that what the budget implies is the investor class ended up being a first class passport for currupt officials and was oversubscribed for what the government expected.

Read it again:

The current Immigrant Investor Program stands out as an exception to this success. For decades, it has significantly undervalued Canadian permanent residence, providing a pathway to Canadian citizenship in exchange for a guaranteed loan that is significantly less than our peer countries require. There is also little evidence that immigrant investors as a class are maintaining ties to Canada or making a positive economic contribution to the country. Overall, immigrant investors report employment and investment income below Canadian averages and pay significantly lower taxes over a lifetime than other categories of economic immigrants. For these reasons, the Immigrant Investor Program has been paused since July 2012 and the Entrepreneur Program since July 2011.

In place of the current Immigrant Investor Program, the Government will introduce a new Immigrant Investor Venture Capital Fund pilot project, which will require immigrants to make a real and significant investment in the Canadian economy.

In other words, the investor program wasn't a real investment for Canada, rather a program that allowed wealthy corrupt individuals to park their cash offshore. Why isn't anyone or MSM critizing our govt for their failure to regulate this program and spinning this story as if it's good news to regulate capital flight coming abroad?

FT 2011: Corrupt officials took $124bn out of China

For higher-ranking officials who managed to abscond with large amounts of money, the US was the favourite destination, while Canada, Australia and the Netherlands were also popular.

So now that there is already tens of thousands of corrupt Chinese nobels, Russian oligrachs and Middle Eastern royals set afoot with Canadian passports and numerous devleopment (see planned 2014 condo launches for TO here) or whatever bogus Canadian corporation under their name, I suppose they can now hire wealthly middle class friends and family (skilled labour in shortage) from abroad through Canada's latest gimmick, the temporary foreign worker program? Even so, does anyone really believe the govt will be able to regulate capital inflows when they just admitted to screwing up the investor class program?

What difference does it make if they cancel citizenship for multi-million and billionaires and increase overall immigration for more middle class millionaires who want to buy homes in Canada?

The footing is already planted. The investor class is ten steps ahead and doing the only thing they know how to do: infultrate cities, control local governments, buy lots of land and keep building and selling homes to middle/lower class families here and abroad.

Mark this post. Absolutely nothing will change.

Including your prejudice and envy. — Garth

#156 Ralph Cramdown on 02.12.14 at 10:42 am

#147 thinker — “Garth can you do a survey of what people think a house cost to run – forget the tax, etc. I mean everything from pipes to plugs, reno’s etc…Is it worth 2%, 3%, etc of the avg house price of the life, etc?”

I’ve seen that type of estimation before and I’ve never understood the logic of it. A house is going to cost a similar amount to maintain whether it’s in Detroit at $10,000, Windsor at $100,000 or Toronto at $1,000,000.

#157 TnT on 02.12.14 at 10:47 am

CNN

http://money.cnn.com/2014/02/12/news/canada-chinese-immigration/index.html?hpt=hp_t2

#158 GsAmazon on 02.12.14 at 10:49 am

This is so embarrassing. And it takes a lot to make me blush.

#159 Smoking Man on 02.12.14 at 10:53 am

#147 Holy Crap Wheres The Tylenol on 02.12.14 at 10:23 am

Don’t worry, not suicidal.

I definitely lead an unhealthy life style guaranteeing I won’t end up
a living zombie brain dead corps, rotting away, deteriorating away in a nursing home.

Would hate to put the kids through what I deal with 3 times a week with my folks.

I don’t read, the dogs here put me onto Hunter S. I was hooked, as I’m reading it I feel it, I know where the next pages are going before I get to them.

So this will be an interesting
experiment, an un schooled, non
reader, hammering out truths via the safety of fiction.. Teaching the herd how money is really made, through the eyes of a lush.

Only thing I’m still struggling with is the title.

I might go with an image of a guy, crazy happy face, standing in close proximity the the rear end of a sheep. The sheeps face in distress

Title reads.
How to make loot.

Or Zyban Hallucinations in Yuma

#160 cramar on 02.12.14 at 11:03 am

Getting Detroit TV stations is an education. Many ads are for lawyers advertising settlements they can get for you. Sandwiched between these was one that advertises mortgage restructuring. It starts off, “You have a $500,000 mortgage on a house that is now worth $250,000….(actual figures from commercial). Could it happen north of the border? Naw, we’re different here!

#161 Diggstown on 02.12.14 at 11:09 am

Grantmi says –
Canada scraps ‘millionaire visa,’ sends B.C. property market reeling – British Columbia – CBC News
*******
Leave the sensationalist headlines to the “reporters”. How do you get reeling out of hazy? The story is about high end real estate in West Vancouver. Their sources are a real estate agent and an immigration lawyer.

Opinions on the state of real estate in Canada aside, can we at least agree to discuss facts?

Thanks for the opportunity to comment.

#162 cramar on 02.12.14 at 11:11 am

#127 joblo on 02.12.14 at 1:46 am
SM why Yuma?
That drive is mind numbing thru dessert. Bleak.
Lotsa old airsteams, broke down trailors out in middle of nowhere. Grim.

———–

Perfect! Gotta go there since I’d love a vintage Airstream cheap to renovate.

#163 Daisy Mae on 02.12.14 at 11:12 am

#37 Gladiator: “…just look at what’s happening. Low rates, HAM, Iranians, parent-financed down payments, cash-back mortgages, liar loans, and many more things that, in a way or another, keep fueling this madness.”

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

Yes, that’s what it is — madness. It must and will end, sooner or later.

#164 kitchener on 02.12.14 at 11:13 am

Interesting read:

Mo said that in most cases, the breadwinners in investor migrant families would simply return to China to make a living, rather than integrating economically in Canada.

“They tell me they can’t make money here,” she said. “For them, it’s irresistible to keep working in China and keep making big money.”

Mo said she doubted whether many investor migrants would return to China, amid a crackdown on so-called “passports of convenience”. “They are happy they have left China. Their assets are safe now. But they try to keep a low profile,” she said.

Mo said that when she asked her rich friends if they would speak to journalists to talk about their situation, they demurred. “Why? Because of tax issues.

http://www.scmp.com/news/world/article/1426637/chinese-investor-immigrants-no-long-term-benefit-says-vancouverite

#165 Diggstown on 02.12.14 at 11:14 am

@ Grantmi – my apologies, my first post appears that it is directed at you. My comment is on the sensationalism in reporting.

#166 High Plains Drifter on 02.12.14 at 11:28 am

T.D. a primary dealer of Federal Reserve. This needs interpretation and rest assured, kleptocrats will not be liking mine. The half life time of Wall Street schemes for Canada is now halved. Canada’s loonie is on a teeter totter with greenback and nobody knows when the fat kid changes sides. O.K. kiddies, anybody notice that little sneak over there, greasing the slide?

#167 Daisy Mae on 02.12.14 at 11:46 am

#69 ChickenLittle: “The kids themselves would lobby for more time with mom and dad…that’s what they want the most!”

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

Yes. There’s going to be a price to pay for this, as well.

#168 Daisy Mae on 02.12.14 at 11:55 am

#75 Paul on 02.11.14 at 9:59 pm
#60 Daisy Mae on 02.11.14 at 9:01 pm
#29 Jeremy: “First to say first!”

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

How old are you?
——————————————————————-
Daisy Mae. You looking for a date. Lol

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

Just amazed a child would be interested in this blog… :-)

#169 James on 02.12.14 at 11:57 am

http://m.theglobeandmail.com/report-on-business/economy/housing/home-prices-rise-in-january-economists-still-cautious/article16825659/?service=mobile

Toronto is in a ‘balance’ territory.

#170 Bottoms_Up on 02.12.14 at 12:01 pm

#163 };-) aka Devil’s Advocate on 02.11.14 at 6:00 pm
——————————————————–
If you look at the latest Teranet resale stats for Ottawa (prices flat yoy), we’re indexing at 140 relative to 100 for June 2005. That’s a compounded return of just 4% per year over 8.5 years.

If the market stays flat for 3 more years, that compounded return drops down to just 3% per year. The soft landing may already be here in Ottawa.

#171 Daisy Mae on 02.12.14 at 12:05 pm

#92 Happy Renting on 02.11.14 at 11:10 pm
#75 Paul on 02.11.14 at 9:59 pm
#60 Daisy Mae on 02.11.14 at 9:01 pm
#29 Jeremy: “First to say first!”

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

How old are you?
——————————————————————-
Daisy Mae. You looking for a date. Lol

==========================
No, Paul. I’m convinced Daisy Mae is secretly Dorothy. Loyalty to rival Bandit’s. It’s cute, though, because Garth deserves it.

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

No, I’m not Dorothy. LOL I’m just amazed at all the guff Garth has to take from some idiots. If these few idiots are so damn smart, they don’t need this blog…so buzz off. :-)

#172 Smoking Man on 02.12.14 at 12:21 pm

Teranet house price index for Toronto, up 4.91 %

No hockey stick yet……

#173 Dogs playing poker on 02.12.14 at 12:32 pm

Gartho,

Time to take a few lessons from the Zen Buddhist Master Bandit.

Bandit will tell you that it is all an illusion, except of course “walkies”, “catch”, “rides” and “treats”.

Bandit will also tell you “that when the going gets tough, or windy, take a nap by a warm fire”.

Bandit will also tell to forget about yesterday and stop worrying about tomorrow. “Right now is all that we have”, “Live fully in the moment “Dad” “.

Bandit will tell you that that should be enough.

Bandit is so very wise, you should listen to him.

#174 jess on 02.12.14 at 12:34 pm

icesave Landsbanki “hot” savings money
British and Dutch authorities have filed a claim of up to £5.3bn against Iceland’s deposit insurance fund over money that their savers lost when the country’s banking system collapsed in 2008.

“There is no state guarantee so it is clear that Icelandic taxpayers will never have to pay this,” Iceland’s Finance Minister Bjarni Benediktsson said.
=====
irish bank trial
http://www.irishtimes.com/news/crime-and-law/courts/maple-10-loan-letters-were-unusual-says-ex-anglo-official-1.1688231
=

#175 Holy Crap Wheres The Tylenol on 02.12.14 at 12:40 pm

#159 Smoking Man on 02.12.14 at 10:53 am

Current temperature in Yuma AZ 68 degrees F, outlook all week into next Wednesday highs, low 80’s all week.

Have fun in Yuma, god knows why you would want to go there, nothing there when I went way back in the 60’s, lots of native Indians, prisons, military, unbearable heat. Its not a big town. Hope you speak Spanish mi amigo.
Get out of town and go rent a dune buggy, I guarantee you will have a blast!

#176 happity on 02.12.14 at 12:47 pm

“In time millions will learn how putting all  their net worth into one asset, then piling on three or four times in debt, was one of the worst ideas they ever had”

In a very short time billions around the globe will learn how unprecedented bank and gov debt levered beyond compare was the worst idea that ever was.

#177 Victor V on 02.12.14 at 12:54 pm

http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/living-in-retirement-im-sorry-i-ever-downsized-to-a-condo/article16798491/

I purchased my two-bedroom, 895 square foot condo in 2006 from a glamorous storefront showcase. It wasn’t move-in ready until June 2011. What happened during those years is that two high rises were erected outside my balcony. The first one blocked the view of Lake Ontario before I even moved in. The second one, that is still not complete, blocks the view of Toronto’s cityscape.

The value of the condo hasn’t risen in two years. More that 60 per cent of the building is occupied by renters, who by nature, do not have a vested interested in maintaining the integrity of the building. Why should they? Repairs take months and usually after repeated nagging. Some days, it’s difficult to enjoy a long hot shower since the water runs cool. The condo fees have risen twice, once before I moved in and once after.

Adding this up, I’ve joined the group of Canadians suffering from condo remorse.

#178 Shawn on 02.12.14 at 12:56 pm

House Returns at 4% since 2006

Bottoms Up at 170 says:

If you look at the latest Teranet resale stats for Ottawa (prices flat yoy), we’re indexing at 140 relative to 100 for June 2005. That’s a compounded return of just 4%
per year over 8.5 years.

***************************************
Should you add something for the value of the living accomdations provided as a sort of dividend. (Or an actual dividend if the place was rented?)

#179 Smoking Man on 02.12.14 at 1:01 pm

#175 Holy Crap Wheres The Tylenol on 02.12.14 at 12:40 pm

#159 Smoking Man on 02.12.14 at 10:53 am

Current temperature in Yuma AZ 68 degrees F, outlook all week into next Wednesday highs, low 80′s all week.

Have fun in Yuma, god knows why you would want to go there, nothing there when I went way back in the 60′s, lots of native Indians, prisons, military, unbearable heat. Its not a big town. Hope you speak Spanish mi amigo.
Get out of town and go rent a dune buggy, I guarantee you will have a blast!
………..

That’s exactly why I’m going, no distractions, having the self disiplin of a 3 year old, no academic training to get the job done. Void of any assignment due spirt in my soul, it’s the only way I will ever get this book to the point were I can get a schooled to fix the technicals..

Just two cartons of cigarettes, few bottles of JD, a sleazy motel with no pool, just a power jack, and a disabled TV.

That’s all I need….

#180 Peter on 02.12.14 at 1:37 pm

I want to date Daisy Mae.. single???

#181 Sean on 02.12.14 at 1:48 pm

So when does buying and not paying rent make sense? Paying $1400 in rent now. I can buy a simliar place for 269k and 600/m in maintenance. Does it still not make sense? I’d put 50k down and still have 30k in savings with zero debt.

#182 bill on 02.12.14 at 1:58 pm

#151 Holy Crap Wheres The Tylenol on 02.12.14 at 10:23 am

” So I would surmise your writing methodology is going to be Gonzo journalism?”
my apologies- too good to miss…

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

smoking man should definitely read the ‘strange and terrible saga’ if he hasnt already.
Hunter’s best effort in my opinion.

#183 princess airhead on 02.12.14 at 2:01 pm

#103 gmc…agreed….except one issue…..foreigners can’t buy land in Thailand….or have a proxy ( even Thai wife) supplied with the money to do so. Visa’s…( like the world over, since Osama imposed the new world order of paranoia,) are becoming increasingly restrictive and onerous.

In fact there are strictly enforced speed limits on the highway….its just that no one obeys, and as a consequence there are a stupid number of road accident deaths every year..especially around the many many holidays where people travel out of the city to visit family….really gruesome statistic. Riding a motorcycle on the highway at these times is a suicide mission due to drunk drivers. Sawat Dee Khaap. Khun sabai dee mai.

#184 Grantmi on 02.12.14 at 2:03 pm

#165 Diggstown on 02.12.14 at 11:14 am

@ Grantmi – my apologies, my first post appears that it is directed at you. My comment is on the sensationalism in reporting.

No offense taken! I just link it as I see it. MSM is fanning this flame because it’s sexy and you know it.

BUT!! I have to admit… allowing someone (anyone.. Green, yellow, Black, Purple, Orange) to come into this country under a program that I’m going to start a business and help foster jobs in Canada.. and simple buy a $800K+ home and say you did your duty… well to me is disingenuous and gaming the program as it was intended.

I don’t blame new immigrants for that. They gamed the system (with lawyers and the like).. and the FEDS turned a blind eye to it for 28 years. I blame the Libs and Cons for allowing this to happen for all those years.

Lets see what the CHANGES to the policy does for REAL $$$ coming into Canada to start businesses and grown Canada?

Stay tuned! 2014 will be interesting.

#185 Enthalpy on 02.12.14 at 2:07 pm

Hey guys, did you see they cancelled the investor program and have shut out 50k+ Chinese? *posts same article*

Do none of you people read before posting? Are these the same people who are part of the growing debt and housing issue?

#186 raisemyrent on 02.12.14 at 2:16 pm

#142 JL on 02.12.14 at 8:31 am
I own a $300,000 condo in Calgary…

and

#153 Ralph Cramdown on 02.12.14 at 10:30 am

It took me a while to get there because I just woke up; you are forgetting a very important thing. How come your condo is $300k but your mortgage is $185k?

Maybe you bought a really long time ago or maybe you had a good down payment.
If the former, then calculate opportunity costs based on that equity (I use the term loosely) and consider cashing out (remember, unlike stocks, you still need to get someone to actually buy it off you).
If you had a down payment, then all your opportunity cost calculations need to include that mystery $115k.
I hope this helps; it should skew things significantly.
One way or another, your case is not a normal buy vs. rent scenario.

p.s. that’s why the same place would rent for what it costs to carry a mortgage on it.

#187 Smoking Man on 02.12.14 at 2:19 pm

#182 bill on 02.12.14 at 1:58 pm

It’s more like Gonzo Capitalism…

#188 T.O. Bubble Boy on 02.12.14 at 2:20 pm

“Why Canadians Should Be Cheering For A Correction In The Housing Market”
https://businessincanada.com/2014/02/12/canada-high-home-values-bad-for-the-economy/

#189 VT on 02.12.14 at 2:23 pm

This was posted by a friend on facebook. She has a legal background so likely correct.

Just had a call with an accountant. Assignments are NOT exempt from HST. An assignor selling has an obligation to collect and remit HST on the difference between the original builder price and new assignment price. So if the Assignment Agreement says HST is “included in” the assignment price, then the assignor needs to back out the HST and remit it to the CRA. If it says “in addition to” then the assignor needs to add the HST as an adjustment on closing for the assignee to pay. So bottom line, if acting for assignor better for HST to be “in addition to” and if acting for assignee, better for HST to be “included in”. This is not legal advice – just passing on some information I learned.

#190 Old Man on 02.12.14 at 2:30 pm

I see that F has sold out to win the next election for Caesar by ripping us off, as many changes will be taking place especially with a few taxation issues that needs time to study. I got some revenge today as bought me a 50.72 oz. jar of quality Polish kraut for $2.79. Now have some advice for Peter, as Daisy Mae might be a high maintenance lady, as on a first date its Tims for a coffee and donut with me. This is why there are no takers in my sordid life, so govern yourself accordingly, and make it Hy’s steakhouse instead with a limo.

#191 45north on 02.12.14 at 2:32 pm

Garth – message received

#192 T.O. Bubble Boy on 02.12.14 at 2:32 pm

@ #181 Sean on 02.12.14 at 1:48 pm
So when does buying and not paying rent make sense? Paying $1400 in rent now. I can buy a simliar place for 269k and 600/m in maintenance. Does it still not make sense? I’d put 50k down and still have 30k in savings with zero debt.
———————–

I’ll briefly run the numbers:

$269k w/ $50,000 down = AT LEAST a $219k mortgage

Since you are under 20% down, you’d also need CMHC insurance. And, you’re likely paying 1-2 land transfer taxes (depending on where you are buying).

So, I’ll round up to say $225k as the mortgage, assuming that you don’t have other cash on hand to pay the costs.

With a 25-yr amortization and 3% rate, the monthly payment on that $225k mortgage is around $1,065.

Add on the $600/month maintenance, and you’re already losing from a monthly cash flow perspective vs. your current rent.

But, let’s keep going…

$1065 in mortgage payment
+ $600 maintenance
+ $300 property tax
+ $300/month you’re losing if the $50k was invested at 7%
= $2265/month

So, even without looking at all of the factors, you’re basically paying $1000/month more to own that place!!!

Yes, your mortgage payment would pay off some principal (approx $32,600 paid off in the first 5 years), but you’re losing $60k ($1000/month x 60 months) to “save” that $32,600.

#193 T.O. Bubble Boy on 02.12.14 at 2:43 pm

Just got a spam mail inviting me to this conference:
http://toronto.theinvestorforum.ca/speakers/speakers-2014

Headliner = Brad J Lamb!

And, half of the other speakers “built” their real estate careers within the past 5-10 years (i.e. they’ve never worked in a housing downturn).

#194 bill on 02.12.14 at 2:51 pm

#187 Smoking Man on 02.12.14 at 2:19 pm
so I gathered. check this book out if you havent already…
I heard one of Thompson’s exercises to gain proficiency in writing was to copy in longhand authors he admired. Conrad and Hemingway I think ,were two of them.
why not give that a whirl?
yuma should be perfect for this.

http://en.wikipedia.org/wiki/Hell%27s_Angels:_The_Strange_and_Terrible_Saga_of_the_Outlaw_Motorcycle_Gangs

#195 45north on 02.12.14 at 2:56 pm

Julie We closed on the new home a few weeks before the closing on the old home and the bank simply added the cost of the new home to our existing mortgage.

I first read your post and thought “bought” instead of “closed”. There’s a young man the same age as my son he has bought a new house but hasn’t sold his old one. Too late now.

Hillbilly It is doubtful that this line of thinking shall change with the majority until there is an event or events occur that causes reality to trod rudely upon their fervent beliefs.

In the US in each area, people listed their houses and then failed to sell them within the expected time period. A well priced house with good exposure should receive a serious offer in 30 days. Then 60 then 90. Then “what the hell is going on?”.

High Plains Drifter Man with house payment becomes monster at work and sees life as do or die.

that was me

O.K. kiddies, anybody notice that little sneak over there, greasing the slide?

give us a hint

#196 Peter on 02.12.14 at 3:10 pm

….thank you for the advice Old Man, I am more coffee and donuts than steak, but Ill send you home in a limo if you can put in a good word to Daisy Mae. Good deal on the kraut, take care

#197 waiting on 02.12.14 at 3:10 pm

According to BCREA there are no restrictions on non-residents purchasing real estate in BC. I’m wondering how many people who registered through the now cancelled immigrant investment program had already purchased property in Vancouver and how many will consider selling and putting their money elsewhere considering they’re already down approx. 10% on the Cdn. dollar alone.
http://www.bcrea.bc.ca/working-with-a-realtor-/buying-and-selling-canadian-property

It will be interesting to follow the money.
http://www.marketwatch.com/story/rich-chinese-line-up-to-leave-china-2014-02-09

Also, many of us are not anti-immigrant. I know many hard working people from all over the globe who came here with little to nothing and educated themselves, set up businesses and created jobs and wealth for themselves and others. That’s very different from using Canada to park ill-gotten gains.

#198 Josh in Calgary on 02.12.14 at 3:12 pm

#156 Ralph Cramdown,

The percent of house price for maintenance cost is a very rough idea of what it will cost. I’ve heard 1 to 3%. It most definitely will not cost the same to maintain a $1 million house vs. a $100,000 house. For starters the $1 million house is way bigger. So when you go to replace the roof you’ll be paying quite a bit more. The other thing is a $1 million house likely includes all the designer upgrades, compared to the $100,000 containing the home depot special. When you go to fix a designer faucet it’s going to cost you $50 just to replace the internals or $300 to replace th whole faucet. Home depot special is probaly 20% of that. Same thing on appliances. The million dollar house probably has high end stuff compared to the $100,000 house which has the cheapest stuff around.

Of course your example of the million dollar house in vancouver which might actually be the same exact house as the $100,000 house in Detroit is valid, but the exception to the rule. It is just a general guide line to give you an idea of what to expect.

Also in a brand new house you wouldn’t expect to have to start replacing major stuff for a good 10 to 20 years, compared to an old house where something is going to give out every year or two.

#199 Shawn on 02.12.14 at 3:15 pm

Life is Truly Grand in 2014

50 Reasons We’re Living Through the Greatest Period in World History

http://www.fool.com/investing/general/2014/01/29/50-reasons-were-living-through-the-greatest-period.aspx

It takes a a young person or an old fool to think that 1954 was better than 2014…

#200 Sunny and warm Nosty on 02.12.14 at 3:29 pm

#93 omg on 02.11.14 at 11:13 pm — “Radio call-in shows were full of “HAM” haters ruining neighbourhoods.”

Those HAM haters are juvenile racists, pure and simple. Their IQ levels rarely surface above minus 140. The better half is Chinese and I’m Caucasian.

Whatever color skin is, we’re all human, all in this together and it really is a privilege to be in this outer, lowest physical classroom of a planet, having as many adventures as possible during our short, temporary lives.

They are the ones who have to come back, life after life, learning patience, tolerance and compassion.

The wheel always turns.

#101 Scully on 02.11.14 at 11:33 pm — “Smoking Man…put me down for a copy of your book. Oh, and hurry up – I’m not getting any younger!” — Ditto!

#201 Happy Renting on 02.12.14 at 3:34 pm

#180 Peter on 02.12.14 at 1:37 pm
I want to date Daisy Mae.. single???
=========================

Hey, this is a real estate/personal finance blog. Include a balance sheet when you forward your dating profile. :)

#202 Sean on 02.12.14 at 3:42 pm

@#192 T.O. Bubble Boy on 02.12.14 at 2:32 pm

Thanks for the numbers, its great talking this out. I think one thing to point out is 50k would actually be higher than the 20% down even at 225k mortgage (thats 45k, right? or is taxes or something included here to make it higher?).

The property tax is actually included in the monthly maintenance costs so 300 wouldn’t be added there. Also the 50k is currently invested but not all of it, as I like to have at least 10k for buys when prices fall.

I’d say its closer to 1065+600(maintenance)+200(opportunity lost) = 1865 – 1400 = -465 cashflow

So that’s more like 27900 lost vs 32600 paid off on the mortgage.

Granted I lose flexibility in moving (under 30 years old) but that place could easily rent for 1600 if needed. All the taxes and fees (this is in Toronto) add up during the buy/sell and I would likely like to move into a house in the next 10 years.

#203 Sean on 02.12.14 at 3:50 pm

Actually I should even clarify, 1400 is now renting as a couple but with another roommate. If we go out on our own we are spending at least 1600 — the difference keeps going down.

#204 experienced.optimist on 02.12.14 at 4:07 pm

No Fooling:

Came across an article that gives another interesting perspective on Canada’s housing issue from outside our borders. I have quoted the Canadian part of the article, but the remainder of the article is also an interesting read.

“Five: Canada. Probably the only good thing to be said for Canada right now is that it managed to off-load its central banker — Mark Carney — onto the British, for whom he is busily blowing up a fresh housing bubble.
Slashing interest rates when Canada had been barely touched by the financial crisis now looks like a mistake, creating a wholly unnecessary property boom. Now the economy has slowed down, that is inevitably going to unwind — and we all know what comes next when that happens. “

Main Article here –
http://www.marketwatch.com/story/next-crisis-wont-come-from-the-emerging-markets-2014-02-12?pagenumber=1

#205 Derek R on 02.12.14 at 4:19 pm

#198 Josh in Calgary on 02.12.14 at 3:12 pm wrote:
Of course your example of the million dollar house in Vancouver which might actually be the same exact house as the $100,000 house in Detroit is valid, but the exception to the rule. It is just a general guide line to give you an idea of what to expect.

But that’s the problem, Josh. It’s not just an exception to the rule. It’s a really, really common exception to the rule. It’s not just Vancouver/Detroit; it’s Toronto/Moncton; it’s Halifax/Sydney; it’s even Calgary Mount Royal/Calgary Rundel.

It makes far more sense to compare the size of the house to maintenance costs than the price of the house to maintenance costs because a huge part of the house price (the land part) is down to those three special factors: location, location, and location.

#206 Stickler on 02.12.14 at 4:38 pm

@ #130 Bottoms_Up on 02.11.14 at 12:13 pm

#119 Stickler on 02.11.14 at 10:28
——————————————–
You conveniently left out that the starting wage for a teacher is $45,000 – 55,000, after having put in 4 years of post secondary education ($100,000 debt?). In major cities this wage thus puts your child’s teacher in a scuzzy rental in a shady part of town.

They also work extra hours/overtime (for no pay), and for the most part truly care about our children. You also forget that they pay a hefty sum into their pension plans, and that their sick leave benefits have been under attack.

———————————-

So:

#1 you think a starting salary of $45,000 – $55,000 for someone with no experience is “peanuts”?

I can hear the screams of the tons of university grads that would love to have a starting salary like that.

#2 Hate to tell you, but most people in the private sector with salary work “overtime” for no extra pay…

#3 Everyone that has gone to university needs to pay for it. Teachers are not unique in that regard.

#4 They don’t pay for their whole pension. More like 1/2…the private sector for the most part has to pay 100% of their own.

#5 Sick leave benefits under attack!? gimme a break. Compare teacher’s sick leave the private sector. (seriously)

My comment (which was a response to someone else complaining that teachers work their asses off for peanuts) was that teachers do not work their asses off for peanuts.

If you think they do work their asses off for peanuts please tell me what their compensation should be.

#207 Stickler on 02.12.14 at 4:56 pm

oh…. @ #130 Bottoms_Up on 02.11.14 at 12:13 pm

Re your elementary school teacher graduating with 100K in debt. I called BS on that, and looked it up.

Apparently you watch too much Fox news.

Teacher Education Tuition & Related Fees 2013-2014 Fall/Winter

The normal credit load for the Teacher Education Program is 6.0 credits. Therefore the tuition and per credit ancillary fees for this credit load would be calculated as follows; 6 x $1,255.40 or $7,532.40 for Domestic students

#208 docteurfolamour on 02.12.14 at 5:21 pm

…a piddle into the teeth of a hurricane…
in the last few years we were in the eye of that hurricane who shooked the world. the sky was deep blue. now, the eye is moving away. Run for the shelters

#209 Fast & Furious -in your face ! (posted by Realtor #1) on 02.12.14 at 5:41 pm

Here is my colleague Ben, the faster data entry I know. http://i.imgur.com/icPISzI.jpg

And he brings more bad news …most of the neighborhoods went up

PS: to quote an article line by line for your twitter followers is a little bit primitive.. unless it is not self promoting. Not sure which one is worse
I think that last week CNN announced that “they” invented the hyperlinks. Ben probably missed the news

#210 Retired Boomer - WI on 02.12.14 at 5:41 pm

3:10 to Yuma track 6 no 5 no, now 2.

Actually more fun to think of going there than actually going there. Tucumcari same story, but they have a neat old train depot. Maybe that was Johnny Yuma? No, he was a rebel.

#211 Led on 02.12.14 at 6:39 pm

I view this blog like Garth’s facial hair. out of style for decades, but when it hits, facial hair was never more right.

#212 Aggregator on 02.12.14 at 6:44 pm

Posted yesterday

 #128 Aggregator on 02.11.14 at 12:09 pm

The other subprime that nobody is talking about:

Canadian banks hit accelerator on U.S. auto loans; Moody’s raises red flag

According to Moody’s, TD’s auto loans represent about 15% of total U.S. loans, while for BMO it’s around 12%.

Plan on buying a new car or truck? Don't. There's going to be a flood of inventory as GM et al stuff dealers with loads of inventory, forcing dealers to liquidate lots at discounted prices over the next year or so.

And just in from WSJ:

Car Makers Snip Pricing Now to Avoid Haircuts Later

Detroit's big auto makers are trying to sweeten discounts to clear unsold vehicles from dealer lots, but not so much to start a profit-killing price war.

It is a balancing act making Wall Street investors nervous. Analysts aren't sure whether the moves to counter a January slowdown in sales—particularly new discounts on large pickup trucks—will undermine the rising prices that have helped General Motors Co., Ford Motor Co. and Chrysler Group LLC rebuild profits during the past three years.

DO NOT buy a car or truck. Prices are set to tumble hard as subprime auto lenders have already given every last deadbeat who couldn't afford to drive a new vehicle. There's nobody left, literally.

This is what happens when taxpayers bailout companies that should have defaulted years ago. They just do it again because that's all they know how to do: Chrysler eyes $700-million in aid from Canadian governments

#213 princess airhead on 02.12.14 at 7:11 pm

#207….Sticky….sorry man…I know lots of graduating teachers ( two in the family) and the ‘average’ student debt is $80,000. This varies from person to person….of course …many ( a lot) students are single parents ( majority women) and have a greater burden to finish the last few years with a 7 course load….. 5 years ( you can’t get a BA in 4 anymore due to class shortages and seats full of international students) plus the two year program at teachers college. Just adding the standard tuition is naive math….and don’t forget the $150/200 dollar texts that can’t be resold due to constant changes in the curriculum.

The course schedule leaves very little time to work outside and these students tend to take the maximum..( $15000 p/a…food rent daycare, utilities AND tuition and ancillary costs) . This $80,000 amount is a common thread among new grads. Audit for political correctness’s as you will…most teachers graduate with a significant debt. They get sucked in by the lure of huge wages and perks when they finish…bwahahahahaaha!!!

The loan becomes repayable the day after graduation…literally the phone starts ringing. The ‘average’ amount demanded is around $2200 p/m ( this is not a 25 yr amortized mortgage…and something to do with the maximum amount of salary a creditor can legally demand) …not figure out how to repay the loan on a $45,000 salary after taxes. Wonder why so many teachers get money radical at contract time?

Now…..lets say you’re a fresh grad…looking for a first position….you find that the old duffers who have recently retired have contracted back their jobs ( nudge nudge wink wink) with complicity between the board and the unions. The seniors teachers are keeping thousands of young teachers out of the classroom while collecting a full pension plus all the perks….and earning on ‘average ‘ $500 dollars per day plus additional benefits.

It’s really a case of walking a mile in the new teachers shoes before ragging on them for getting an education that the government says is in demand…but really isn’t… thereby misling the youth into paying loans with no hope of gaining employment due to the greed of union members.

#214 jan on 02.12.14 at 8:03 pm

Just in.
European bank considering negative interest rates.
I wonder if it makes its way here……..
Can anyone say RE bull market all over again ?

NA central banks won’t drop rates. Silly question. — Garth

#215 jan on 02.12.14 at 8:43 pm

#214 jan on 02.12.14 at 8:03 pm
Just in.
European bank considering negative interest rates.
I wonder if it makes its way here……..
Can anyone say RE bull market all over again ?

NA central banks won’t drop rates. Silly question. — Garth

But not as silly as denying HAM Turner.
I guess only future will tell but i bet anything the change on the wealthy immigrant thingie today will spur the correction in upper crust housing………

#216 Stickler on 02.13.14 at 2:54 pm

@ #213 princess airhead on 02.12.14 at 7:11 pm

…sorry but you just described everyone that goes to university…NOT just teachers.

It is a sad truth, but has nothing to do with the fact that teachers do not work for “peanuts”

…and it has nothing to do with the fact that new teachers are having a hard time finding work in their profession (i know it sad but true).

…but guess what? I know lots of MBA grads that work at the mall. Sad for them too.

#217 Pulp Faction on 02.13.14 at 4:42 pm

” It’s the recency effect gone rampant – when people grow convinced what just happened will dictate the future.”

Brilliant !

Most people do this, and most don’t know they do it, they think they are being clever and predicting the future.