Temptations

NO modified

Here we go again. Even as Canadians are swimming in debt and overexposed to housing, they’re being encouraged to pile on more risk. Just what we need.

In BC, the house-hornies who run the provincial government have cut property tax for first-time buyers. The exemption level now rises by a full $50,000, to $475,000 – enough to buy a third-share in a lovely crack house on the east side. Not missing a beat, Vancouver’s hyperventilating condo-floggers, Onni Group, has just sent out this Virgin Alert:

“With this increase, an anticipated 1,700 additional first-time home buyers every year will be eligible to save up to $7,500 in Property Transfer Tax. PTT is calculated at a rate of one percent on the first $200,000 and two percent on the balance of the purchase price. With interest rates remaining historically low and allowing for monthly payments comparable to rent, now is the time to take advantage of these great opportunities!”

Hey, that makes sense. After all, it takes 82% of gross income (and over 100% of net) to carry the average Van house. The province’s savings rate is, as I’ve mentioned, negative. And several thousand young people a year are leaving in disgust and penury. The political solution? Cut the house-buying tax encouraging more first-timers to lurch into debt, and in the process further inflate real estate values.

Meanwhile Ontario’s largest credit union has broken through the 3% barrier. Meridian CU is now offering a five-year, fixed-rate mortgage for 2.99%, which comes with a 45-day rate hold (hurry, kids!) and the ability to skip payments (thereby increasing your debt).

The company is bald about why this is happening: “We wanted to get out there in advance of the spring market,” an exec told Canadian Mortgage Trends, an industry site. “We had a very successful fall campaign in raising deposits, so we want to put that money to work.”

Yup. People willing to lock their money away for five long years in a GIC at Meridian get a 2.48% return, then the same cash is loaned out to homebuyers at 2.99%. Not hard to see who gets the tasty end of that stick. After inflation (it’s now 1.5%) the depositors make a miserable 0.98% of their money (taxable annually even though no interest is paid), while the borrowers are hooked in to a loan which, guaranteed, won’t renew at anything remotely close to that in 2019.

The deal is good only in Ontario, but it’s a safe bet one or two of the major banks will venture down this road in the coming weeks. Engineered cheap rates would be cool, of course, if people used them to accelerate debt repayment. But they don’t. Low mortgages almost always mean first-timers borrow more, stumble into bidding wars, and squirt prices higher. Like I said, here we go again.

Now, some quick advice for Lynn. She writes:

“My husband and I are in our late 20s, combined income of 130K, no debt/kids, renting, and we are diligent savers.  In three years we anticipate having about $100K in retirement savings, and $100K waiting as a down payment fund.

“The TFSAs hold only retirement investments.  The RRSPs will hold additional retirement savings, as well as 25K each for our down payment for the home buyers plan (tax refunds going to retirement, of course).  The rest of the down payment will be non-registered.

“Although we enjoy renting for now, we would like to be ready to put 20% down on a house when (or if) the market corrects to a point where it makes financial sense to buy. With that said – how would you suggest we hold the down payment funds?  Cash? GIC? Lumped in with the retirement portfolio? Or am I just approaching this all wrong?”

Well, Lynn, you’re doing well compared with most of the wretched, indebted, equityless condoholics in your doomed cohort. And why is that? Because you’re smart – renting, saving and investing. You’ve resisted the siren call of Brad Lamb or Bon Rennie or any of the other property floggers who profit so handsomely every time a virgin’s deflowered. Bear this in mind as you go forward, because the day you cut a deposit cheque is the one your diligent saving will stop.

But to your question. Should you adhere to the Jar Lady philosophy and stick your house downpayment in a riskless GIC or some low-interest, high-interest account? Or should this money be folded into an integrated, holistic portfolio along with your other funds?

It’s a point oft debated within the wealth management industry. It even has a name: goals-oriented investing. But it’s not worth the breath devoted to it. Three years is a long time. Keeping any significant amount of money in a brain-dead GIC, or cash, for that period is not helping your cause. Your best bet is to take all of your investible assets and create that balanced, diversified, low-cost, liquid, tax-efficient portfolio I am always yakking about.

Properly constructed and routinely rebalanced, it should have low volatility and fairly consistent growth. Even if stock markets were to have zero growth in a year, your fixed-income assets would deliver at least a 3.5% return – far above any GIC or HISA. But over the last four years, which included a stinker (2011), the annualized return has been north of 10%.

Build a proper portfolio. Don’t look at it each month (would you appraise your house every four weeks?). Fully fund the TFSAs with exchange-traded funds. Put higher-taxed fixed income inside the RRSP. Earn dividends and cap gains in the non-registered account. No stocks. No mutual funds.

Who knows? In three years you might dig it. After love, nothing beats liquid.

172 comments ↓

#1 bdy sktrn on 02.21.14 at 9:18 pm

any thoughts on a cashflow positive 4plex in sechelt?

#2 Ray Skunk on 02.21.14 at 9:24 pm

Where’s Aussie Roy and his Aussie Update these days?

Not seen him for a while.

#3 not 1st on 02.21.14 at 9:24 pm

Garth does this make your head shake?

http://business.financialpost.com/2014/02/21/sometimes-a-lot-of-money-is-not-enough-money-debt-free-couple-with-2-7m-must-choose-house-or-lifestyle/

#4 not 1st on 02.21.14 at 9:25 pm

Garth your greater fool term just got co-opted for the rising tech bubble.

http://seekingalpha.com/article/2034233-facebook-the-greater-fool?source=google_news

#5 BG on 02.21.14 at 9:27 pm

“Well, Lynn, you’re doing well compared with most of the wretched, indebted, equityless condoholics in your doomed cohort. And why is that? Because you’re smart – renting, saving and investing.”

Yeah… And the fact that their household income is almost twice of the median while they’re not even 30 has nothing to do with them doing well… ?

#6 Freedom First on 02.21.14 at 9:30 pm

Bad for sucking more house horny virgins into the Canadian housing vortex. Good for Lynn and her husband, and even better if they follow your advice Garth, and stay balanced, diversified and liquid until the end of time. I know it is difficult for Lynn and her husband to ignore the insane thinking coming at them from every direction in their personal lives, but if they do, Garth’s formula of asset allocation is good for their entire lives, and they will avoid the risk of one asset being able to bend them over and cause extreme financial hardship. Later, if Lynn and her husband stick to always being balanced, diversified and liquid, with regular rebalancing, nobody will want to talk to them because they will be so jealous and envious of Lynn and her hubby. Soooo, it is important to keep ones financial affairs private, like the millionaire next door talks about. What others can’t see can’t hurt you.

#7 TurnerNation on 02.21.14 at 9:30 pm

Just as I get over my fear of Hypothocation I learn of Reverse Hypothocation! Arrgh. Pass the worry beads.

#8 Curious! on 02.21.14 at 9:32 pm

So the expected correction is pushed out for another three years?!

#9 Daisy Mae on 02.21.14 at 9:37 pm

“Properly constructed and routinely rebalanced, it should have low volatility and fairly consistent growth….”

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

Listen to Garth, Lynn….if you do, you and hubby will be fine!

#10 Chickenlittle on 02.21.14 at 9:42 pm

Who is the Jar Lady?

#11 John on 02.21.14 at 9:46 pm

Good info. Garth. Pretty dismal though compared to all the other patriotic publications buzzing around the media. So glad you wrote this because no one else worked today.
Canada for Gold… in hockey of course, but obviously not in financial planning.

#12 DR on 02.21.14 at 9:46 pm

3 more years of prices going up and your 100K downpayment will buy you a 500K semi bungalow with no parking in a sketchy part of town.
There are bidding wars in scarborough if you can believe it. I cant.

#13 Role on 02.21.14 at 9:46 pm

Has anyone really been far even as decided to use even go want to do look more like big loans?

#14 Chickenlittle on 02.21.14 at 9:47 pm

I was wondering why Garth was using a year so far away and then it hit me….2019 is in 5 years. Now I’m sad. I’ll be 40 that year.

Why do I keep thinking it’s only 2008?

#15 Eli on 02.21.14 at 9:49 pm

Should I bet the farm (and wife) on Tesla at current levels?

#16 mark on 02.21.14 at 9:53 pm

Given most of Australia went insane again, fueled by cheap rates and nutty boomer investors, Aussie Roy probably jumped off a bridge.

#17 Ford Prefect on 02.21.14 at 9:56 pm

#5, BG: As someone who worked with the personal finances of many hundreds of people, I can positively assure you that earnings and savings are not related. People with very high earnings often saved nothing and those with modest earnings sometimes saved a great deal.

#18 jj on 02.21.14 at 10:00 pm

Humm I thought it was HAM that was buying everything up.

The banks all know its the Virgins and builders who are buying everything up.

Its election year so they want keep housing stable. In order to stop a ponzi from crashing and burning you need more virgins to fuel it

#19 DR. WAYNE on 02.21.14 at 10:03 pm

FIRST to say Role is worse than Firsts.

#20 Bob Rice on 02.21.14 at 10:06 pm

I wouldn’t put money intended for a home purchase in three years into equities… We are immersed in a very similar scenario… We are renting and considering buying if the market is saner in 2017, maybe 2018. We have some money in equities/bonds, but most in HISA in a TFSA (and some in RSPs . We get 3% and that isn’t bad considering it isn’t taxed and it’s 100% secure. In three years we could experience market corrections… turbulence for sure….

I wouldn’t chance that.. just find a good balance, which includes investments, but you need to keep a good chunk of that in secure savings. Peoples Trust offers 3% in a TFSA account – no fees, very easy to open/close/access…

Three years at 3%, with inflation erasing at least half. That won’t help buy a house. — Garth

#21 Daisy Mae on 02.21.14 at 10:06 pm

“In BC, the house-hornies who run the provincial government have cut property tax for first-time buyers.”

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

The premier is devious. I wouldn’t trust her or her cohorts any further than I could throw them.

#22 april on 02.21.14 at 10:07 pm

That’s how bad the Canadian housing market is that they have to add more temptations to keep dragging in more fools. Check out Vancouverpricedrop……..

#23 matt on 02.21.14 at 10:12 pm

Hi Garth, I hope your leg is healing well.

Now to my question. I currently have:
15% bonds (up 8%)
32% REIT (up 5%, bought at a low price)
17% international ETF (up 20%)
17% TSX ETF (up 11%)
19% S&P ETF (up 40%, kicking myself for not investing more)

I took a break from investing to pay off some debt, which may or may not have been the best idea, but I’m back into it now.

I seem to remember an asset mix that you posted that seemed right for me, but I can’t find the post. I’m in my early 30s, ok with risk, what do you think my % balance should be in each? When you say rebalance, what’s the cheapest way to do it (avoiding fees and such)? Do you suggest doing this yearly, or does it depend on the $ value of the portfolio?

#24 Victor V on 02.21.14 at 10:19 pm

Canadian stocks on a roll: ‘This bull and the TSX still have room to run’

http://business.financialpost.com/2014/02/21/canadian-stocks-on-a-roll-this-bull-and-the-tsx-still-have-room-to-run/

#25 Realtor #1 on 02.21.14 at 10:21 pm

I think we can infer that you anticipate
A hot spring.
If you are waiting for interest rates to rise you will need to wait 2016. Remember before 2010 ( when you should have bought a home) the variable rate
Was the more popular one. People will start to pick variable rates over fixed if fixed goes over 4%.

Don’t look at interest to slow market conditions. Bond
Markets are moving sideways.
A job losses are your only hope or a switch in supply and demand

#26 ABP on 02.21.14 at 10:29 pm

Just re-reading some old postings while waiting for tonight’s “fix”:
“[Y]ou’re taking on substantial debt when interest rates are at their lowest point ever, which means the cost of the financing will be going in only one direction. Conceivably, this could double your payments five years out.”
— “No Dear”, greaterfool.ca, posted on May 24, 2009

On May 24, 2009, someone with a 30-day hold with the “orange guy’s shorts” could have borrowed 5-year fixed money at 3.84% and 5-year variable money at 2.85% (i.e. prime+0.35%).

On February 21, 2014, as posted on this blog, Meridian CU offers 2.99% 5-year fixed money (and there are lenders with similar offers with 90-day holds), and the absolute lowest offers on 5-year variable money have just come down to 2.30% (i.e. prime-0.70%).

#27 OnlyTheBankersLaugh on 02.21.14 at 10:29 pm

Something tells me that 2019 will see 2.99% 5 yr fixed as the economy will tank if anything goes up. I would almost bet on that eventuality versus a 5-6% range as economy still not able to thrive at these rates. Never would have believed it 2009 that we would still be at these rates in 2014!

#28 ABP on 02.21.14 at 10:30 pm

The couple referenced in the 2009 post would be just ready to lock in their renewal rate at somewhat-higher than “the lowest point ever” (otherwise known as early 2013).

A $500,000 mortgage @ 3.84% with a 25-year amortization, would have required a monthly payment of $2,587. With no intervening pre-payments, to have that payment amount double, with a remaining amortization of 20 years, that mortgage would have to renew into a 5-year fixed mortgage with a rate of… wait for it… 13.68%.

13.68% > 2.99%

Well, the original posting did say payments “could” double five years out. In the intervening five years, “conceivably” the value of the underlying real estate for that mortgage “could” have gone anywhere from $0 to $5 billion.

See, that’s the problem with late posts: people have to have their “fix”.

#29 Republic_of_Western_Canada on 02.21.14 at 10:40 pm

#1 bdy sktrn on 02.21.14 at 9:18 pm

any thoughts on a cashflow positive 4plex in sechelt?

Does it come with a nasty little old man who drives a jetboat?

#30 drydock on 02.21.14 at 10:41 pm

#13

Whiskey Tango Foxtrot.

#31 Nemesis on 02.21.14 at 10:49 pm

#CouldBeWorse

Packs of stray Chihuahuas devour children and terrorise residents in Arizona suburb

http://www.independent.co.uk/news/world/americas/packs-of-stray-chihuahuas-chase-children-and-terrorise-residents-in-arizona-suburb-9144891.html

[NoteToSaltyDogz: Anyone heard from SnowBoid lately?]

#32 Cold YWG on 02.21.14 at 10:49 pm

Garth, how often should you rebalance your portfolio?

#33 Shawn on 02.21.14 at 10:51 pm

Jealous Much?

BG at 5

Yeah… And the fact that their household income is almost twice of the median while they’re not even 30 has nothing to do with them doing well… ?

****************************************
Perhaps their incomes being almost twice of the median while they’re not even 30 has something to do with things they did well. Like getting good educations. Or moving to where the jobs are. Or just taking responsibility for their own lives.

Life is surely partly luck but to a good extent we determine our own fates.

#34 KommyKim on 02.21.14 at 10:52 pm

RE #4 not 1st on 02.21.14 at 9:25 pm
Garth your greater fool term just got co-opted for the rising tech bubble.

I hate to disappoint you, but the term “Greater Fool” originated in the stock market, not with Garth.
It means to buy a hot stock, even if it is over priced, with the hopes of selling it to a greater fool in the future.

#35 jan on 02.21.14 at 10:52 pm

Dude, stop using auto-correct all the time.
There are enough boogers in it as it is.
Peace all !

#36 carpicker on 02.21.14 at 10:52 pm

Lynn,

Lower interest rates, more debt, high QE levels, create that “precious metals” balanced, diversified, low-cost, liquid, tax-efficient portfolio Garth is yakking about, so do not buy only gold, get some AR,Pt and why not… some palladium.

#37 Republic_of_Western_Canada on 02.21.14 at 10:56 pm

..and don’t forget:

When diversifying into U.S. high-dividend preferred’s, put them into your RRSP and nowhere else.

Further, make sure the company isn’t issuing new stock or bonds just to fund a dividend payout or price increase. (That kind of sickness seems to be spreading, first Dow now CPG).

#38 Smoking Man on 02.21.14 at 11:10 pm

So the great wizard of GF has discovered that Canadians are idiots. A nation where even the slightest cut eye on the ice, will guarantee a beating… Yet when some one in a suit sets you up to be financially raped, the herd, knowingly bends over convinced this is good.

Speaking of hockey, I watched the game at Ceasars, in the sports book room. When Canada one the place went wild… 90% watching the game are great white northerners.

One guy went boo. Then 300 hundred dudes wearing red and white turned and stared him down. He flipped the bird and walked.

That guy own his life to the fact, they weren’t on Ice.

#39 Jane24 on 02.21.14 at 11:11 pm

If this is an election year in Canada then yes the govt goal will be to keep the ship steady. No-one wants to vote for the govt that killed them financially.

Once that is over then the bubble will be over as folk will have another 4 years to forget about it or it will all be Justin’s fault.

#40 Republic_of_Western_Canada on 02.21.14 at 11:12 pm

Where true-dough’s money-grubbing oil-thieving NEP really came from (to support fat-ass Ont. industries and jack up inflation for everyone else):

Now, Stoller uses the Congressional Record to show that “free trade” pacts were always about weakening nation-states to promote rule by multinationals:

Political officials (liberal ones, actually) engaged in an actual campaign to get rid of countries with their pesky parochial interests, and have the whole world managed by global corporations. Yup, this actually was explicit in the 1960s, as opposed to today’s passive aggressive arguments which amount to the same thing.

***

Liberal internationalists, including people like Chase CEO David Rockefeller and former Undersecretary of State and an architect of 1960s American trade policies George Ball, began pressing for reductions in non-tariff barriers, which they perceived as the next set of trade impediments to pull down. But the idea behind getting rid of these barriers wasn’t about free trade, it was about reorganizing the world so that corporations could manage resources for “the benefit of mankind”.

http://www.zerohedge.com/contributed/2014-02-21/liberal-politicians-launched-idea-%E2%80%9Cfree-trade-agreements%E2%80%9D-1960s-strip-nations

#41 Goldie on 02.21.14 at 11:16 pm

Hi all,

More sad news for bitcoin holders (as if the 50% drop in value wasn’t bad enough):

from bloomberg
http://www.bloomberg.com/news/2014-02-21/bitcoins-offered-on-mt-gox-drop-as-withdrawals-halted.html

#42 Lexie on 02.21.14 at 11:17 pm

#10 Chickenlittle

The Jar Lady = Gail VazOxlade . com

#43 HD on 02.21.14 at 11:17 pm

@ #23 matt on 02.21.14 at 10:12 pm

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

If you ask me, your REIT exposure is very high.

But what do I know? ;)

Best,

HD

@ Nemesis –> just in case you missed it:

https://www.youtube.com/watch?v=gLDYtH1RH-U

#44 bdy sktrn on 02.21.14 at 11:19 pm

he’s baaaack!
———————————
#13 Role on 02.21.14 at 9:46 pm
Has anyone really been far even as decided to use even go want to do look more like big loans?

—————————
it’s got to be a gag. it makes my head hurt a little when read carefully.

#45 Snowboid on 02.21.14 at 11:21 pm

#31 Nemesis on 02.21.14 at 10:49 pm…

You should have seen the funny TV news bits about the wild little ones in Maryvale! We are about 20 miles northwest from there, however.

We do have a few coyotes in the area (live on our golf course) who keep the bunnies in check.

With the record February heat the last few days (28-30) a bigger concern is the early awakening of the scorpions, snakes and gila monsters.

More so an issue for SM, not so much for us in a built-up area. Hope he has his cowboy boots!

#46 bdy sktrn on 02.21.14 at 11:22 pm

#14 Chickenlittle on 02.21.14 at 9:47 pm
.2019 is in 5 years. Now I’m sad. I’ll be 40 that year.

Why do I keep thinking it’s only 2008?
————————–
because you are getting older, so the years go faster.

your 40’s go even faster! keep doing what makes you feel 18.

#47 Son of Ponzi on 02.21.14 at 11:23 pm

..and don’t forget:

When diversifying into U.S. high-dividend preferred’s, put them into your RRSP and nowhere else.

Further, make sure the company isn’t issuing new stock or bonds just to fund a dividend payout or price increase. (That kind of sickness seems to be spreading, first Dow now CPG).
—————————–
Exactly that what got my Dad into trouble.

#48 Castaway on 02.21.14 at 11:25 pm

#27 OnlyTheBankersLaugh on 02.21.14 at 10:29 pm
Something tells me that 2019 will see 2.99% 5 yr fixed as the economy will tank if anything goes up. I would almost bet on that eventuality versus a 5-6% range as economy still not able to thrive at these rates. Never would have believed it 2009 that we would still be at these rates in 2014!
—————————

Totally agree. Italy, a Euro basket case, last week floated 10 year paper at only 3.675% and 3 year at 1.5%. Just dont see how rates will rise by more than 100 bps at most over next few years. What say you Garth?

#49 bdy sktrn on 02.21.14 at 11:27 pm

#15 Eli on 02.21.14 at 9:49 pm
Should I bet the farm (and wife) on Tesla at current levels?
————————-
thats a joke right?

#50 gladiator on 02.21.14 at 11:29 pm

Ha! The jar lady. To the three jars she suggests using, add a fourth one – for taxes.
Just like in that joke: when little Tommy earns a candy bar from his mom, his dad bites 35% out of it – just to show him how the real world works.
Just did my taxes today. Wondering how can we tolerate these mind-boggling rates??? Crazy…

#51 Smartalox on 02.21.14 at 11:30 pm

“We had a very successful fall campaign in raising deposits, so we want to put that money to work.”

This from the guy at the credit union? What kind of cash reserve ratios are they running down there!?! They have a bake sale or something, to raise capital?

Will a savings and loan company by any other name be as solvent?

#52 Rexx Rock on 02.21.14 at 11:33 pm

I know a few guys who work in camps in Alberta for 7 months and live 5 months in Mexico for the winter.Theres one guy who barely works 3 months and lives the rest in Puerto Vallarta.So camp work is great for smart single guys.

#53 YVR on 02.21.14 at 11:38 pm

@5 Yeah… And the fact that their household income is almost twice of the median while they’re not even 30 has nothing to do with them doing well… ?
——————————————————–

You would be supprised how many couples making $130K per year plus spend every penny and then some going into debt over and above a mortgage. People tend to adjust their life style to their income and spend everything, even money they havn’t made yet.

#54 gladiator on 02.21.14 at 11:39 pm

Ok, we have a very deeply-thinking philosopher, fellow dog, here. His/her name is “Role”. This dog’s posts short-circuit some minds here. Let’s welcome Role to greaterfool.

#55 sheane wallace on 02.21.14 at 11:45 pm

It is insane, isn’t it?

Now we know that there would be no way out other than the complete and total destruction of currencies.

What is 10 k? less than an average Canadian family saves in a year. It is 1 % of a crack shack in Toronto/Vancouver, e.g. absolutely nothing.

When this baby blows up….

#56 sheane wallace on 02.21.14 at 11:53 pm

#23 matt
————————–
I am getting more and more convinces that one should buy gold and hide it.

Old crappy houses in Toronto and Vancouver at the price of :
1.5 tons of silver,
25 kilograms of gold,
22 kilograms of platinum,
10 000 barrels of oil,
150 tons of copper
100 tons of coffee?

Sure..

THERE IS NO WAY FOR THIS TO BE SUSTAINABLE!

#57 sideline sitter on 02.21.14 at 11:59 pm

is ‘fixed income’ only bonds or are preferreds included?

#58 sheane wallace on 02.22.14 at 12:09 am

Garth, in the light of this insanity and in the light of Facebook buying whatsapp for $19 billions you should really consider the precious metals option. It surely looks less insane

#59 Ontario's Left Coast on 02.22.14 at 12:14 am

10 chickenlittle – Who is the Jar Lady?


I believe this refers to personal finance blogger Gail Vaz-Oxlade, who runs a Site called mymoneymychoices.com. It’s not super-sophisticated stuff, but she’s doing her part to get people living within their means and thinking about their financial futures.

#60 Sheane Wallace on 02.22.14 at 12:29 am

Just read a real conspiracy theory about shadow QE,
for example: Bankrupt Ireland ‘bought’ 100 billions of US bonds since 2007:

YEAR 2000 —> 2007 —-> 2013
Ireland $5 B —> $19 B —> $125 B

Who is really buying these bonds?
If even 10 % of these conspiracies are correct…..

#61 Nat on 02.22.14 at 12:43 am

Credit unions are something worth focusing on when it comes to predatory lending. I am out of the housing market (thank God), but in 2012 I was offered (and accepted) a two year mortgage at 2.25%. The mortgage dude was quite clear – the banks are subject to tougher (new) rules, so we’re swooping in with absurdly low rates looking to expand market share. Have any provinces stiffened mortgage lending criteria for credit unions? Doubt it. I was also offered a 50K loan at 3% and stated I would only need to pay the interest every month – a potential disaster for many, who would never pay it down and be ultimately creamed when rates go up. The scope of this irresponsible and predatory lending will only be revealed when it’s too late.

#62 dominion on 02.22.14 at 12:48 am

As a banking institution, they would be able to loan out 10 times collected deposits, no?

#63 Tony on 02.22.14 at 12:50 am

Re: #15 Eli on 02.21.14 at 9:49 pm

Some guy named DirtBag on misc.invest.stocks once owned Tesla. He went broke on the solar stocks the 3D stocks and always places dead last in the annual stock picking contest. Never I repeat never buy anything he has bought or owns.

#64 Cici on 02.22.14 at 12:54 am

#5 BG

Cut this couple some slack! Yes, they have very good incomes, but they also have excellent savings habits and the wisdom to live within their means.

Most of the medians, which you claim are bringing in half the amount of this couple’s household income, are living at least fourfold beyond their actual means: SUVs, yearly (and often multiple annual) vacations down South and otherwise, big houses with big fat mortgages, and all the latest gadgets and luxury goods.

They haven’t done anything wrong, in fact, they are doing everything right.

#65 Peter Winston on 02.22.14 at 12:59 am

>>But over the last four years, which included a stinker (2011), the annualized return has been north of 10%.

So…anyone buying now would be doing so at the peak of a bubble, just before a major (and fairly predictable) crash.

Any more ‘advice’ you would like share with us suckers, Garth?

You don’t know what ‘balance’ means, do you? — Garth

#66 Cici on 02.22.14 at 1:01 am

#10 Chickenlittle

Gail Vaz-Oxlade, with the pen name coined in reference to her infamous Jar System.
PS – She makes you pay for all that info now, only $4.99, but used to be free.

Take advantage of Garth’s free info (for now), which is much better anyways ;-)

#67 Smoking Man on 02.22.14 at 1:01 am

When a chic comes up to you, several layers of fat filling in as knee pads and says, where you from handsome.

A typical Canadian would say, Toronto.

Not this one, I said, I’m from the
province of dismemberment, County hell. Country death.

She goes cool.
Why, God damn why do fattiesthink there’s a free ride here.

Found the wife, damn, no old spice. Now that’s just not fair, I
need to now pick a night some time this calender year to stay solar and fo fill a monsteres in Vegas.

Far too much physical movement.

God take me now

#68 Cici on 02.22.14 at 1:03 am

#15 Eli

Depends on how much you love her…

#69 Freedom First on 02.22.14 at 1:04 am

#13 Role

That would be a yes, a no, a yes, and definitely no to the big loans, or small for that matter, although, for you, Role, I think you should talk with Smoking Man, as he talks your language.

#70 Catalyst on 02.22.14 at 1:59 am

In the last 30 years, interest rates have gone in one direction. For a guy from an industry that loves trends, you’d think you would see that.

If you have reasoning to believe there is some spark that will send things moving the other direction I would love to hear it.

#71 a prairie dog on 02.22.14 at 2:14 am

“Engineered cheap rates would be cool, of course, if people used them to accelerate debt repayment. But they don’t.”

– – –

Almost no people…!

Years of emergency interest rates with no McMansion ‘upgrade’ and no Lexus or Escalade here, to ‘pretend’ to be winning.

Well guess what? Only 8 easy payments left to debt freedom!

So long suckers. :p

#72 Happy Renting on 02.22.14 at 2:49 am

#14 Chickenlittle on 02.21.14 at 9:47 pm
I was wondering why Garth was using a year so far away and then it hit me….2019 is in 5 years. Now I’m sad. I’ll be 40 that year.

Why do I keep thinking it’s only 2008?

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

Because we were all so much younger and prettier then!

And because it was a great buying opportunity/you’d rather forget the past five years, with the slooooow recovery that still feels like a recession.

Jar Lady = Gail Vaz-Oxlade. I gather the nickname is derisive, but for the basics (don’t blow all your money on stupid stuff) I think she really has a message people need to hear.

#73 Happy Renting on 02.22.14 at 2:50 am

#30 drydock on 02.21.14 at 10:41 pm
#13

Whiskey Tango Foxtrot.

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

Lima Oscar Lima. Why do I feel like Role has been drinking some of what’s in Smoking Man’s glass?

#74 Jon on 02.22.14 at 2:56 am

#37 good point companies have definitely been doing buybacks to make their balance sheets look good however they can only do this because they are becoming more profitable. It may be a bit of agame to make the numbers look good but they are getting better. For the first time in about three years the us conglomerate i work for has given decent raises and bonuses. But for certain i can tell you that spending has been tailed back and hiring is strictly controlled. Its a comeback we are working through it but everyone who is at a high rank is still deeply concerned about how the us government will. Deal with the debt. This is concern from ceos, business ownners etc. i hope what they are doing will work but personally think much more extensive goverment cutbacks in the Usa are required to sustain the growth. The usa has all the people required to make it work but i still think they are walking on a tightrope. I think the usa will overcome this but it will be years before it comes to fruition.

#75 Exurban on 02.22.14 at 4:51 am

#1 Broadway Skytrain

Why buy anything in Sechelt? Nothing there is selling, all prices there are going down. The difference between the Sunshine Coast and Vancouver-West Van-Richmond couldn’t be starker. No rush, lots of time to think about it.

#76 BillyBob on 02.22.14 at 6:29 am

The pic today reminded me of another one I was sent:

http://s30.postimg.org/mkxrjs141/fairytale.jpg

#77 Ralph Cramdown on 02.22.14 at 7:05 am

#206 Aggregator — “Tell me, how is it that, let’s say, a young woman who chose to take job teaching English in China a few years ago is now accumulating her wealth at the same as pace as the western 60/40 investor? And she’s not looking at charts all day and worried about earnings reports — she just works, saves, and lives her life, yet she’s keeping pace with average portfolio returns.”

First off, I’m happy for her. Second off, she actually has to start with a pile as big as the 60/40 investor, and save as much of her income as 60/40 in order to keep up with 60/40. Third, why is 60/40 working so hard? Rebalancing once or twice a year ought to do it.

“I won’t put word’s in your mouth, but it sounds to me like what you’re suggesting the average individual can do is to take his or her paycheck — buy their goods and services — and throw the rest into stocks asap so they don’t lose it? Umm, but that sounds a little doomer-ish, don’t ya think?”

I hope not. I think that the typical person dies broke, or close enough to it that once the undertaker is paid off and the rest split amongst the heirs, it doesn’t make much of a difference to them. Many (most?) people are living hand to mouth, meaning inflation isn’t an issue, or have a mortgage dwarfing their net worth, meaning inflation would help them.

For people that do save, all they have to do is what almost everybody does; save in a bank. Over the long term in most places, interest paid on deposits has outpaced inflation. I can’t guarantee that that will continue, but I can say to the people who say that a US dollar has lost 97% in the last 100 years that if it had been deposited in a bank, it would have held its value pretty well.

The advanced class should put their money in the stock market and reap the benefits of human ingenuity (and monopoly pricing). That’s all.

#78 Moe on 02.22.14 at 7:20 am

…and don’t forget:

Garth has found the holy grail of investing. Liquid, safe, high yield, constant appreciation.
High-dividend preferred’s are a scam, in my opinion.

Look at Royal Dutch Shell, for example. A 5% yield in these times tells me that the market has zero faith in the company.
The yields are always the best on paper, just right before a company goes bust.

Canadian banks are not going bust. — Garth

#79 economictsunami on 02.22.14 at 7:52 am

The old economy (consumer/ debt based) is becoming rather overly tired; as our credit cycle summit has been breached by many.

The new economic narrative of what will take it’s place (export & investment-led growth) is the same hopium pipe dream that many western economies would have us believe is likely to take place.

So the story goes: Everyone’s lower currency will boost their exports.

They’re still not quite sure who exactly will be buying yet, on the demand side of the equation…

TD: Here’s Why Canadian Exports Have Lagged U.S. Growth:

“Much has been made of the rather tepid growth in Canadian exports over the past few years, as the long-awaited rotation of demand away from consumer-led growth and towards export and investment-led growth has not yet materialized.”

https://businessincanada.com/2014/02/20/td-heres-why-canadian-exports-have-lagged-u-s-growth/

Retail Sales Fell During Holiday Season, StatsCan Says:

http://www.huffingtonpost.ca/2014/02/21/retail-sales-canada-december-2013_n_4830479.html

Canada’s retail sales plunge most in a year, bringing recovery to ‘screeching halt’:

http://business.financialpost.com/2014/02/21/canadas-retail-sales-plunge-most-in-a-year-bringing-recovery-to-screeching-halt/

#80 Mr Happy on 02.22.14 at 8:21 am

“#13 Role on 02.21.14 at 9:46 pm
Has anyone really been far even as decided to use even go want to do look more like big loans?”

drunk?

#81 maxx on 02.22.14 at 10:06 am

#30 drydock on 02.21.14 at 10:41 pm

Yankee, Uniform, Papa.

#82 Ian on 02.22.14 at 10:08 am

Hi Garth, thoughts on my TSFA invested in a spread of TD e series funds through direct investing. Low MER 0.33 to 0.5%. Currently buying USD funds for last year. Interested in your opinion on e series! Thank you for your time.

Do you buy things because they are cheap? — Garth

#83 live within your means on 02.22.14 at 10:36 am

#21 Daisy Mae on 02.21.14 at 10:06 pm
“In BC, the house-hornies who run the provincial government have cut property tax for first-time buyers.”

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

The premier is devious. I wouldn’t trust her or her cohorts any further than I could throw them.
………………………………….
Agree.

Christy Clark’s Conservative Conundrum

http://thetyee.ca/Opinion/2012/03/13/BC-Conservative-Conundrum/

“Why has Clark hired three ex-Conservative operatives closely connected to Prime Minister Stephen Harper — her chief of staff Ken Boessenkool, communications director Sara MacIntyre and senior advisor Dimitri Pantazopoulos?”

#84 MarcFromOttawa on 02.22.14 at 10:37 am

#62 dominion

According to the Canada Bank Act, financial institutions are not required to keep any reserves at all. Instead they comply with international/BIS/Basel III regulations.

The easiest way to think of it is to that they lend money and look for the reserves later. Obviously this is an oversimplification but “Mish” has some good articles on the subject if you’re interested (hint: not worth your time / see posts by Ralph Cramdown recently).

Also, there’s always the BoC in case of a liquidity crunch, as we saw in 2008. Pledge collateral at mark to fantasy and receive loans at 1%, a pretty good racket if you can get it.

Garth was talking about Keynes recently (debatably the most influential economist of the 20th Century)

“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

#85 Victor V on 02.22.14 at 10:56 am

http://www.thestar.com/business/2014/02/21/sears_clears_out_of_eaton_centre_sherway_gardens.html

“Everything is so desolate and barren.”

He expressed sympathy for those who will lose their jobs as a result of the Sears store closures.

A total of 1,095 people will lose their jobs when Sears ceases operations at Toronto Eaton Centre, Sherway Gardens and Masonville Place in London on Sunday, and at Yorkdale Mall and Square One in Mississauga in March.

That is in addition to thousands who have already lost their jobs due to downsizing and Sears store closures in 2012 in Calgary, Vancouver and Ottawa.

#86 Obvious Truth on 02.22.14 at 11:25 am

Let’s leave FB out of the doom talk.

Anyone think analysts will have to raise their PTs?

Why are doomers always all or nothing? Doesn’t it go without saying that the world will always offer you more of the same.

Why not make that work for you. The internet is your greatest tool.

The way I see it is that zuckerberg is as smart as they get and he’s making me more money than I could on my own. For a young guy he sure has a great interest in progress for humanity.

Theses young tech guys are different. It’s refreshing. The whatsapp CEO is actually going to work after that payout. Love these guys.

Telcos and cable companies are shaking in their boots. No creativity just protectionism. Let’s not even talk about customer service. Not even in the same league.

Needless to say I think they got a good deal.

Can doomers even entertain that kind of an opposing view?

#87 Stickler on 02.22.14 at 12:06 pm

People that can’t afford houses are getting tax breaks (meaning your and my $) to encourage them to buy. Yikes

Facebook got a good deal? Yikes.

Kudos to the couple in the article. Good saving habits!

#88 Stickler on 02.22.14 at 12:10 pm

@ #86 Obvious Truth on 02.22.14 at 11:25 am

Telcos and cable companies are shaking in their boots. No creativity just protectionism. Let’s not even talk about customer service. Not even in the same league.

——————————

Have you ever thought this -> a telco invests to build out very expensive infrastructure. They need paying users to pay for it.

Take an essentially free app and allow it to run over this infrastructure (again, for free).

Explain to me how that is sustainable, or fair.

#89 BCD (D for Doomer) on 02.22.14 at 12:18 pm

Opened up the morning paper. . .”TSX higher, as dollar goes down”. . .Irrational exuberance or wtf?

Just put a wack of money in the GIC at 2.25% over 9 months. . .better then a kick in the pants I guess. Yawn. . .bring on the crash, I think I slept 8 hours straight last night.

Bank preferreds pay double the return at half the tax. I guess ignorance is bliss. Sleep well. — Garth

#90 Realtor #1 GTA on 02.22.14 at 12:19 pm

Betting on interest rate to raise anytime soon is risky.

Interest rates are not your answer to a correction.
TSX at a two high,Dow at a high and Fed tapering has begun. No reaction from the Bond Market!

Carry costs are low and debt/service ratio low as well.

These market conditions do not point towards a correction.

And I think that Garth has implied with this post the spring market will be hot.

I know “wait till next year”

Risk rises exponentially with prices, especially in a slowing economy. This is not the time to be buying, but an outstanding one to be selling. — Garth

#91 Linda Mulligan on 02.22.14 at 12:38 pm

#17, 33, 53 & 64 – right on. Income does help #5, but it in no way guarantees an easy life of it. True story – I was clerking in an office with a coffee club fund for employees. Every time the dues were being collected, ALL the clerical (lowest paid) staff had their cash ready to pay up. EVERY time at least one or more of the highest paid engineering staff (management, every one) asked to pay up next time as they didn’t have the whopping $10 monthly due in their wallet, even though emails etc. had gone out to remind everyone that the coffee fund was due on X day. So even though the highest paid staff made 3-4 times as much they usually had an empty wallet because they spent the lot & more besides. Moral here is simple – no matter how much you make you can always spend it all & be in debt up to your eyeballs. Conversely, no matter how little you make you can save. What, you’ve never heard of some elderly person living in apparent poverty who didn’t leave a whopping estate to some charity when they died? Let alone the tons of people whose incomes wouldn’t (one would think) allow them to leave anything but debts who still left a modest legacy to their children & no debt whatsoever.

#92 BCD (D for Doomer) on 02.22.14 at 12:43 pm

Bank preferreds pay double the return at half the tax. I guess ignorance is bliss. Sleep well. — Garth
________________________________________

Preferred shares are traded on the stock market and they still trade at the mercy of the markets. I sleep the deep sleep of debt free cash positive living. Far from rich, but could easily live for months without a pay cheque. Life isn’t all about making one dollar into two. When is the last time you read Pablo Neruda?

http://www.poemhunter.com/poem/if-you-forget-me/

#93 Infused with Opiates on 02.22.14 at 12:47 pm

62 Dominion – dont confuse deposits with reserves

#94 Raginnn on 02.22.14 at 12:54 pm

More city homes go up for sale, but you wouldn’t know it

More corrupt dealings of the Real Estate Cartel??

http://www.thestar.com/business/real_estate/2014/02/21/more_city_homes_go_up_for_sale_but_you_wouldnt_know_it.html

#95 Spiltbongwater on 02.22.14 at 1:12 pm

Three years at 3%, with inflation erasing at least half. That won’t help buy a house. — Garth

If you put your down payment money in a HISA then how does interest erase any of the down payment money? I thought the mantra of this pathetic blog was housing was going to be cheaper.

Depends where and what you buy. In a low-yield world, savers lose. Three gears is adequate time for a balanced portfolio to deliver superior returns with acceptable volatility. — Garth

#96 Nemesis on 02.22.14 at 1:25 pm

@HD/#43…

“Vertigo” redefined. I tried something like that once on First Canadian Place… It still creeps me out thinking about it.

See the “Vertical Limit” HD trailer…

“Up there you’re not dying… You’re dead.”

#97 Rinclouds on 02.22.14 at 1:32 pm

http://www.businessinsider.com/time-to-look-at-inflation-2014-2

#98 Alex n Calgary on 02.22.14 at 1:47 pm

Dear Garth, we’re in our late 20’s make 130k between the two of us, live in a mouldy basement rental from our uncle at 200$ a month, don’t get new clothes, don’t travel, take the bus, don’t buy wine, don’t go skiing, our fun is getting cans out of the garbage and look how much we’ve saved!! we’ll be ready for our 60’s when our bodies are old and cracked to have our fun! why do anything interesting in our 20’s and 30’s! we’re the BEST!

#99 Grantmi on 02.22.14 at 1:49 pm

#1 bdy sktrn on 02.21.14 at 9:18 pm

any thoughts on a cashflow positive 4plex in sechelt?

Are you asking Gartho this question? or the Blog Dogs?

#100 Realtor #1 GTA on 02.22.14 at 1:57 pm

It maybe a great time to sell for financial gains- but most
individuals won’t sell for that reason alone.

Its supply and demand issue at the moment for homes less than 1.5M

Which is why most people get it wrong. With your assistance. — Garth

#101 airhead princess on 02.22.14 at 2:01 pm

Sure come to Vancouver so that your kids can join the ranks of the unemployed dopers who sprawl across every sidewalk. Don’t mind the pimps , the puke and the violence. You can have a nice walk around the sea wall…and watch the turds float around and come to rest on the rocks as the tide goes out. Who wouldn’t want their child to know what used condoms and hypodermics needles….a great education. Who doesn’t want to spend 100% of income on housing and get groceries from the food bank? Send the kids to school hungry because there’s no food after rent and mortgage…no problem…that’s someone else’s problem …right? This is Vancouver after all.

“http://www.vancouversun.com/opinion/columnists/Pete+McMartin+Coffee+cannabis+clash+manners+Vancouver/9537374/story.html”

Meanwhile the elite civic servants crowd the hillsides looking down and laughing at the misery below….what a town.

#102 airhead princess on 02.22.14 at 2:21 pm

BOC GOV ‘Mr Meat Puppet Poloz’…..look at the unintended consequences of your failed economic policy…people in Canada forced to steal and buy stolen food because they can’t afford the sticker price.

http://www.calgaryherald.com/news/calgary/Sophisticated+meat+theft+crime+rings+disturbs+Calgary/9537516/story.html

People in Canada are starving ( oh …excuse me ‘substituting’…) because the food costs have been skyrocketing due to the import tax ( crashing the dollar) has reduced them to stealing , begging and the misery of watching the legacy of this country flushed down the toilet in favor of the union elite wages and perks.

#103 KommyKim on 02.22.14 at 2:23 pm

RE: #82 Ian on 02.22.14 at 10:08 am
Hi Garth, thoughts on my TSFA invested in a spread of TD e series funds through direct investing. Low MER 0.33 to 0.5%

The e-series are a good alternative to ETFs if you want to do index investing. No commissions to buy/sell them so they are great for small portfolios or where you want to do monthly contributions.

RE:Do you buy things because they are cheap? — Garth

Surely you are not saying that Ian would be better off with a higher MER mutual fund? ;-)

Better off with ETFs. — Garth

#104 Obvious Truth on 02.22.14 at 2:35 pm

#88.

Isn’t google basically telling them to get out of the way? We’ll do it ourselves.

How long till telcos/cable companies are worth only what their infrastructure is valued at? Or will they become obsolete first.

Rumour apple is buying spectrum.

Theses guys can do it faster,better, cheaper. They have the vision. Can’t wait to see what they can do. It’s Just getting started. Most of these CEOs make themselves available to kids for learning and inspiration.

It’s like comparing buggies to a tesla. Aren’t you saying that tesla benefits because horses built the first roads?

Go youth. They love free and they’re giving it to you too.

Embrace the change. Go to a We Day.

How can one even get excited about RE with all this going on? No catalyst and continued erosion of your money.

#105 KommyKim on 02.22.14 at 2:42 pm

RE: #57 sideline sitter on 02.21.14 at 11:59 pm
is ‘fixed income’ only bonds or are preferreds included?

Preferred shares can be thought of as a hybrid between a stock and a bond. But they are NOT the same.
Look at the difference between the performance of XBB (A bond ETF) and CPD (A preferred share ETF) from 2007-2014. Big difference during 2008-2009! You would have been unable to benefit from portfolio re-balancing in late 2008 if you only held preferreds as your fixed income portion.

Balance. Diversification. How is this hard to understand? BTW, there will be no rerun of 2008. — Garth

#106 Stickler on 02.22.14 at 2:55 pm

@ #98 Alex n Calgary on 02.22.14 at 1:47 pm

Dear Garth, we’re in our late 20′s make 130k between the two of us, live in a mouldy basement rental from our uncle at 200$ a month, don’t get new clothes, don’t travel, take the bus, don’t buy wine, don’t go skiing, our fun is getting cans out of the garbage and look how much we’ve saved!! we’ll be ready for our 60′s when our bodies are old and cracked to have our fun! why do anything interesting in our 20′s and 30′s! we’re the BEST!

———————-

Sounds like someone is trying to justify a complete lack of savings / money management.

Good luck with your new clothes and wine LOL.

#107 Spectacle on 02.22.14 at 3:00 pm

Thank You Garth.

Re : #30 drydock et al #44 bdy sktrn on 02.21.14 at 11:19 pm,
he’s baaaack!
———————————
#13 Role on 02.21.14 at 9:46 pm
Has anyone really been far even as decided to use even go want to do look more like big loans?
—————————
it’s got to be a gag. it makes my head hurt a little when read carefully.

Reply: No gag it has meaning, if you use the Google Translate app, it says:

” Those who fear the thorn should never crave the rose”
By Emily Bronte

Notice she never mentions Tulips, or bitcoin…..but we know, we know!

A little levity.

#108 Cici on 02.22.14 at 3:13 pm

#67 Smoking Man

That’s beyond nasty. I hope that girl slims up and gets so hot that you make a move and that she refutes you while slamming you on some of you flaws in the process.

Not cool. What’s wrong with being a human; turning her down gently if you aren’t interested and just go your way? Is there really that much pleasure in insulting and debasing other people unnecessarily?

#109 Nemesis on 02.22.14 at 3:31 pm

“Three gears is adequate…” – HonGT

Spoken like a true HarleyMan, AuldPol.

[NoteToAttendingPhysician: You might want to consider dialling down his DemerolDrip a bit…]

#110 KommyKim on 02.22.14 at 3:38 pm

RE:Balance. Diversification. How is this hard to understand? BTW, there will be no rerun of 2008. — Garth

Agreed. There will be no 2008 repeat nor a 1929 repeat. It will be something new & different.
No matter what it is, bonds will provide better diversification for our equity portion than preferreds will.

You still don’t get it. I quit. — Garth

#111 Realtor #1 GTA on 02.22.14 at 3:47 pm

Your right – but it goes both ways.
People got not buying in 2010 were wrong as well.

And those who thought it would be correct in a few years are still waiting to be right.

The irony is to sell you would have first needed to buy.

You and I both know a 20% decrease is not likely in some toronto areas.

One would think with 1)70% ownership 2) aging population 3) increase in household debt
that demand would wane, but is hasn’t.

#112 TurnerNation on 02.22.14 at 3:51 pm

Guess I’m going to liquidate all my fiat-based assets and hunker down into a portfolio of physical metals, fancy coloured diamonds, and a basket of online crypto currencies.
I’ll put my employer and landlord on notice that I will no longer transact in their worthless, rigged fiat currency game.
Next week: convincing the butcher and baker of their own benevolence.

#113 Ole Doberman on 02.22.14 at 4:13 pm

Driving to the gym in NW Calgary RE still the same. Every time I see a for sale sign it’s slapped with a sold next time I drive by within a couple weeks.

Well I’ve about had it and not sure how much longer I can hold out.

-Trying to be strong.

#114 PJ on 02.22.14 at 4:20 pm

High probability of a significant market correction (10% or more) this week. Historically end of February is crap for markets and the way cash moved from bonds and equities into commodities last week, (plus everyone on CNBC is bullish) well as a contrarian (not GT contrarian, but contrarian still), that makes me bearish.

#115 triplenet on 02.22.14 at 5:15 pm

#1 body siren

1) Potential annual income less 10 percent
2) multiply by .65
3) divide by .12
4) = value

You may get a return on investment but not OF investment.
so why not a tfsa

#116 KommyKim on 02.22.14 at 5:47 pm

RE:You still don’t get it. I quit. — Garth

Of coarse I don’t get. Your one liners, while entertaining, do not impart much information.

#117 Mike T. on 02.22.14 at 5:51 pm

Realtor #1 GTA

I think that you are smarter than the comments you post on this web-blog. I can apply the same statement to myself, especially lately.

But what I want to say is that it’s ok to take a break from selling. You don’t always have to leave comments trying to make people feel less-than because they did not buy real-estate. A large group of people have, and will continue, to be successful while renting and saving according to the advice given free on this site. You actually don’t have to buy a house to be happy or successful.

You already have 95% of people convinced…I don’t know…I guess the question is why the obsession with us last 5%? Don’t you ever get tired of it?

I wish you nothing but the best, but will remind you that karma is very real.

Go Canada Go!

Don’t you love 1st world problems? I am in BC, how am I going to watch the game at 4am when I work Sat night and Sun morning?

#118 Smoking Man on 02.22.14 at 6:19 pm

#108 Cici on 02.22.14 at 3:13 pmThat’s beyond nasty. I hope that girl slims up and gets so hot that you make a move and that she refutes you while slamming you on some of you flaws in the process.

Not cool. What’s wrong with being a human; turning her down gently if you aren’t interested and just go your way? Is there really that much pleasure in insulting and debasing other people unnecessarily?

…………
Had it been a true story, it would have been bad on my part.

I only texted what I was thinking , in reality I actually gave her a dance.

It was fun….

#119 espressobob on 02.22.14 at 6:34 pm

#116 Kommy Kim

The whole idea is to ‘average in’ with preferred shares in a non registered account over the long haul. This evens out the ups & downs.

Theres nothing to figure out! Enjoy the ‘dividend tax credit’ No brainer.

#120 Buddah on 02.22.14 at 6:45 pm

Todays top trolls….Role
Air head a$$ hat
Smoking liar.

Namaste.

#121 AK on 02.22.14 at 7:26 pm

#13 Role on 02.21.14 at 9:46 pm
“Has anyone really been far even as decided to use even go want to do look more like big loans?”
====================================
Tony, is that you?

#122 -=jwk=- on 02.22.14 at 7:35 pm

@ #88

The telco has a government mandated monopoly and a fat, 10% guaranteed return on capital for over 100 years. Extra costs? No sweat, raise the rates. This isn’t an open market.

The deal was, when the network is built you are guaranteed profits, but you must share the network with other carriers. Now they built it, WE paid for it, and they don’t want to share it….while continuing to charge for it.

Explain to me how *that* is sustainable, or fair.

#123 KommyKim on 02.22.14 at 7:41 pm

RE: #119 espressobob on 02.22.14 at 6:34 pm
#116 Kommy Kim
The whole idea is to ‘average in’ with preferred shares in a non registered account over the long haul.

Gottcha. I’ve already got a preferred ETF and a divi Index ETF in my non registered acct collecting divies.

However, this whole thread started with post #57 by sideline sitter. It was about the fixed income portion of a balanced portfolio. I was, and still am, of the opinion that Preferred shares do not behave the same way as BONDs. ie: They don’t have the same negative correlation with equities the way that bonds do.
As far as taxes are concerned, bonds belong in a TFSA or RRSP for better tax efficiency.

#124 bdy sktrn on 02.22.14 at 7:49 pm

#119 espressobob on 02.22.14 at 6:34 pm
#116 Kommy Kim

The whole idea is to ‘average in’ with preferred shares in a non registered account over the long haul
————————————-
if i recall, the question was ;
for FI should you have Pref or Bonds

what Mr. T means is ***IT”S NOT ONE OR THE OTHER! IT NEVER IS.**** you must have BOTH!

maybe you missed big G’s blog entry or 08/02/13 where he mentions the word DIVERSIFICATION . pity he never mentions it more often.

#125 bdy sktrn on 02.22.14 at 7:58 pm

sad to see SM cave in to a PC “purseman” at a single lash from cici.

jesus sm grow a backbone – you will never meet cici, let alone have a chance with her so who the h#ll cares what she thinks.

fatties are an unprotected species, yes, you can be a dick to them. some will object, tough, they are over-sensitive.

eat less, stop smoking,drink less, control your temper – all things undeserving of sympathy.

#126 AK on 02.22.14 at 7:59 pm

#114 PJ on 02.22.14 at 4:20 pm
“High probability of a significant market correction (10% or more) this week. Historically end of February is crap for markets and the way cash moved from bonds and equities into commodities last week, (plus everyone on CNBC is bullish) well as a contrarian (not GT contrarian, but contrarian still), that makes me bearish.”
====================================
Bring it on. I use dips as buying opportunities.

#127 Frustrated on 02.22.14 at 8:07 pm

I thought we would of had a correction by now, with some banks going back to 2.99 for 5 years will just keep things steady for longer.

#128 Nemesis on 02.22.14 at 8:17 pm

#BonusZen #QuoteOfTheWeekend!

“The top end of London is driven by cash buyers. It’s driven in many cases by foreign buyers. We as the central bank can’t influence that.” – GuessWho [hint: he is frequently depicted by Guardian PoliticalCartoonist Steve Bell as a Rampaging Moose.]

[UK Guardian] – Celebrity stylist goes to war with council over Chelsea’s ‘rich ghettos’

…”A report by rightwing think tank Civitas published earlier this month revealed that 85% of prime London property purchases in 2012 were made by overseas buyers. Civitas pointed out that the problem is not confined to the top end of the market; many foreign buyers are acquiring less expensive newbuild homes too. Two-thirds of the homes bought by people from overseas were not purchased for owner-occupation but as investments.”…

http://www.theguardian.com/society/2014/feb/22/chelsea-celebrity-stylist-london-rich-ghetto

#129 BCD (D for Dinnertime) on 02.22.14 at 9:16 pm

Todays top trolls….Role
Air head a$$ hat
Smoking liar.

Namaste.
———————————-

This ^^^ X 2 Lol. Not sure how Smoking Man always gets through Garth’s troll detector. I guess they both go to the same Masonic lodge or something…either that or related by blood? Smoking Man Garth’s illegitimate and alcoholic offspring? Lol!

#130 espressobob on 02.22.14 at 9:17 pm

#114 PJ

Sounds a bit weird what your doing? Try rebalancing your portfolio instead of predicting market moves.

http://news.morningstar.com/classroom2/course.asp?docId=4549&page=2&CN=sample

#131 Daisy Mae on 02.22.14 at 9:39 pm

#106 Stickler: “Sounds like someone is trying to justify a complete lack of savings / money management. Good luck with your new clothes and wine LOL.”

********

Sounds like Alex thinks we were all born yesterday….

#132 Daisy Mae on 02.22.14 at 9:55 pm

#116 KommyKim: “RE:You still don’t get it. I quit. — Garth”

Of coarse I don’t get. Your one liners, while entertaining, do not impart much information.

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

‘Cause he expects us to think things thru. He has no intentions of coddling us.

#133 Sam on 02.22.14 at 9:58 pm

http://www.rosskay.com/2013-year-end-review.html

#134 X on 02.22.14 at 10:07 pm

re #95 – don’t confuse inflation with interest or taxes.

#135 KommyKim on 02.22.14 at 11:13 pm

RE #132 Daisy Mae on 02.22.14 at 9:55 pm
‘Cause he expects us to think things thru. He has no intentions of coddling us.

To complain that someone doesn’t “get it” when you refuse to state your case is ridiculous. Garth never stated what portion of fixed income should be bonds and what portion preferreds. In fact neither did I. I simply stated that you can’t sub preferreds for bonds because they don’t behave the same way in a market downturn.

#136 sheane wallace on 02.22.14 at 11:27 pm

The governor of BOC is happy as he sees inflation picking up. Apparently CA dollar dropping 7-8 % is not enough.
He sees manufacturing picking up in his dreams.

http://ca.finance.yahoo.com/news/bank-canada-39-more-comfortable-39-inflation-pick-050407885–business.html

Sigh…

#137 Jl on 02.23.14 at 12:24 am

#113 Ole Doberman:

Same as what? 1990-2004 prices in Calgary barely moved. 2005-2007 shot up like crazy. 2008-2011 fell 10-20% (some as high as 25%). 2012-2013 recovering but still not at peak prices (for most neighbourhoods, some exceptions). Even though I debate with Garth quite a bit I’ve been somewhat bearish about Calgary, or at least figured prices would be flat for the next 5-10 years, but I appear to be wrong. Prices were up 5-10% last year and may do the same thing this year unless inventory comes on the market.

#138 World According To Garth on 02.23.14 at 12:31 am

Welcome to Canada

http://armstrongeconomics.com/2014/02/21/ineptocracy/

#139 Waterloo Resident on 02.23.14 at 1:52 am

Why is it that guys always have to ask the women “will you marry me?” Why is it that men never get asked by women the same thing?

ANYONE GOT ANY IDEAS WHY?

#140 Tony on 02.23.14 at 4:09 am

Re: #136 sheane wallace on 02.22.14 at 11:27 pm

I guess this means the middle class in Canada will go broke like what happened in America when their currency devalued on its own.

#141 Tony on 02.23.14 at 4:34 am

Re: #121 AK on 02.22.14 at 7:26 pm

No its not me, I have no idea what Role even means in his reply.

#142 BillyBob on 02.23.14 at 5:35 am

“Isn’t google basically telling them to get out of the way? We’ll do it ourselves.

How long till telcos/cable companies are worth only what their infrastructure is valued at? Or will they become obsolete first.

Rumour apple is buying spectrum.

Theses guys can do it faster,better, cheaper. They have the vision. Can’t wait to see what they can do. It’s Just getting started. Most of these CEOs make themselves available to kids for learning and inspiration.

It’s like comparing buggies to a tesla. Aren’t you saying that tesla benefits because horses built the first roads?

Go youth. They love free and they’re giving it to you too.

Embrace the change. Go to a We Day.”

What utter nonsense. As if companies like Facebook were Utopian charities. For someone “giving” so much, Zuckerberg seems to have “gotten” quite a bit himself. Likewise the founders of Google and Apple.

I don’t deny the innovations. But deriding telcos is silly. It takes a great deal of vision, massive amounts of capital, not to mention incredible feats of engineering, to produce the infrastructure we all take for granted. Unlike the “great innovation” of social networks that adds SO MUCH to our lives (*sarcasm*), physical networks are at least tangible.

When you actual read the mission statements of some of these tech companies, they start to sound like something out of the Disney era of “imagineers”.

#143 Linda Pearson on 02.23.14 at 6:35 am

#14 Chickenlittle on 02.21.14 at 9:47 pm
I was wondering why Garth was using a year so far away and then it hit me….2019 is in 5 years. Now I’m sad. I’ll be 40 that year.
***********************************
Years ago I met a woman who, at age 40+, decided to go back to school to become a registered nurse. She had put aside that dream to get married and have children, one of whom (the last) was intellectually challenged, so her stay-at-home time stretched considerably longer than she’d intended.

When people poo-pooed her dream by saying that by the time she finished her courses she’d be 45 she replied, “By your thinking I’m going to be 45. By my thinking, I’ll still be 45 but I’ll be a nurse.”

So Chicken Little, forget the numbers! They mean nothing.

#144 AfterTheHouseSold on 02.23.14 at 8:46 am

#138
Welcome to Canada

Those few words are Ayn Rands’ Atlas Shrugged in a nutshell. Just saved yourself a 1200 page read.

#145 RVP on 02.23.14 at 10:02 am

Up early in Vancouver and watching the Olympic men’s hockey game. Big fat snow flakes are falling in Vancouver right now. When Vancouver was hosting the Olympics back in 2010 it was hot and sunny. It was so warm, people were walking around the sea wall in shorts and T-shirts! It sure didn’t feel very wintery around here. Now this year, Russia is hosting the winter Olympics and Vancouver has got snow. Vancouver should have been hosting the Olympics in 2014, instead of 2010.

#146 Herb on 02.23.14 at 10:17 am

#139 Waterloo Resident,

I din’t ask, I was told. But it was a good thing I listened. : )

#147 Tony on 02.23.14 at 11:03 am

#113 Ole Doberman:

Ross Kay pegs Calgary real estate as being more than 50 percent above replacement cost as of the end of last year. The highest of any major city in Canada to date.

http://www.rosskay.com/sos.html

#148 Daisy Mae on 02.23.14 at 11:05 am

Joke:

“Based on my calculations, I can retire five years after I die…”

#149 pitfield on 02.23.14 at 11:27 am

I want to create a balanced portfolio for 600k earning 6 % rather than buy a house and pay a 3% on 500k. I could pocket the 3% difference but how do I convince the banks to lend me 500k for the portfolio?

#150 Daisy Mae on 02.23.14 at 11:48 am

#116 KommyKim: “You still don’t get it. I quit. — Garth

Of coarse I don’t get. Your one liners, while entertaining, do not impart much information.

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

Balance…and periodic re-balancing, plus diversification says alot.

#151 Squatter on 02.23.14 at 12:18 pm

#139 Waterloo Resident:
Why is it that guys always have to ask the women “will you marry me?” Why is it that men never get asked by women the same thing?

ANYONE GOT ANY IDEAS WHY?
—————————————————
Because it’s like that in the movies.

#152 jess on 02.23.14 at 12:37 pm

case from 2003 – swaps

(HMRC) in the UK described the bank’s attempt to use a loophole in the law governing the taxation of derivatives as a “highly complex and speculative avoidance gamble”.

http://www.independent.ie/business/irish/bank-of-ireland-fails-to-overturn-33m-british-tax-bill-30028517.html

#153 Republic_of_Western_Canada on 02.23.14 at 1:12 pm

PRETTY GOOD FINANCIAL COURSE:

Not sure if this has been posted before, but for anyone who wants or needs a good financial base for silly things like buying real estate, this is a very good initial on-line orientation. And it’s free.

http://oyc.yale.edu/economics/econ-252-11#sessions

#154 Piccaso on 02.23.14 at 1:20 pm

#127 Frustrated

I thought we would of had a correction by now, with some banks going back to 2.99 for 5 years will just keep things steady for longer.
……………………………………………………………………..

You’ll die of old age waiting for any correction because it’s not in the governments best interest.

The Fed will do whatever it takes to keep this bubble inflated.

End of Story

#155 Whinepegger on 02.23.14 at 1:23 pm

@ 139 Waterloo Resident

Here you go: http://www.winnipegsun.com/2014/02/15/wesmen-player-pops-question-during-valentines-day-basketball-game

#156 jess on 02.23.14 at 1:38 pm

‘Variable Interest Entity – (VIE) excluded from the balance sheet?

http://www.investopedia.com/terms/v/variable-interest-entity.asp

#157 Snowboid on 02.23.14 at 1:51 pm

#138 World According To Garth on 02.23.14 at 12:31 am…

Love the definition, how about the one the US judicial system has for Armstrong?

Fraudster:

Martin A. Armstrong

“All told, by the time Mr. Armstrong is released, he will have served 12 years for orchestrating what prosecutors called a $3 billion Ponzi scheme through his investment fund, Princeton Economics International.”

http://www.nytimes.com/2007/04/28/business/28financier.html?_r=0

Maybe that explains why he doesn’t like government!

#158 Republic_of_Western_Canada on 02.23.14 at 2:09 pm

#149 pitfield on 02.23.14 at 11:27 am

I want to create a balanced portfolio for 600k earning 6 % rather than buy a house and pay a 3% on 500k. I could pocket the 3% difference but how do I convince the banks to lend me 500k for the portfolio?

Set up a CDS on the portfolio and/or get a gov’t agency to back it with taxpayer money.

Alternatively, create some useless but popular product through the company you’ve set up to be financed with the potential 500K, and give mark zuckerberg a call. -In this case, best to ask for 500 million instead, as the chance to get that kind of loan on Sand Hill Road is much higher than 500K, which is merely a rounding error to them.

#159 Obvious Truth on 02.23.14 at 2:41 pm

#142

The tangibles will be replaced by someone with vision. Someone who sees potential to serve its customers better. Yes someone that wants to create a great experience for you and make it accessible to all for limited cost or free. If they owned FB you would be paying.

The tangible people are standing in the way. Dinosaur middlemen. Carriage drivers. Slowing progress. Everything our young tech heros stand against.

Google with all things tangible that it gives you is FREE!

Garth is free and he also takes a tangible bashing.

How about these guys making worldwide communication free for you? That’s tangible.

It’s just getting started. Our young heros have big plans for our tangible world. Enjoy the ride. (Metaphor not a tangible ride).

I guess tangible is in the eye of the beholder.

#160 Obvious Truth on 02.23.14 at 2:58 pm

Oops. Forgot. WMC on this week. Guess the keynote speaker?

Just a dreamer with one of the biggest market cap companies that lets you use it’s service for I repeat FREE.

Everyone have a magical day.

#161 World According To Garth on 02.23.14 at 3:08 pm

New York times what a joke. He was never convicted. They were chumped up charges by the bankers he was exposing. Thats your evidence?

How about Marty is the most dangerous man alive and your slimy govt pals will do everything to discredit him. Read a book why don’t you.

And the US “just us” system? You mean the one that lets big banks launder drug and terrorist money like JP Morgan and HSBC and then they get a fine?

Oh……and here is a perfect example once again of useless govt workers doing what they are told so they can steal a million dollar pension from the working poor and retire down south.

Farmers: 220
Useless Govt: 0

Snowboid: fail

http://www.bizpacreview.com/2014/02/21/farmers-almanac-nails-winter-freeze-government-climate-scientists-way-off-1022

——————-

#138 World According To Garth on 02.23.14 at 12:31 am…

Love the definition, how about the one the US judicial system has for Armstrong?

Fraudster:

Martin A. Armstrong

“All told, by the time Mr. Armstrong is released, he will have served 12 years for orchestrating what prosecutors called a $3 billion Ponzi scheme through his investment fund, Princeton Economics International.”

http://www.nytimes.com/2007/04/28/business/28financier.html?_r=0

#162 World According To Garth on 02.23.14 at 3:10 pm

Sorry messed up the link

http://www.bizpacreview.com/2014/02/21/farmers-almanac-nails-winter-freeze-government-climate-scientists-way-off-102258

#163 Republic_of_Western_Canada on 02.23.14 at 3:48 pm

#98 Alex n Calgary on 02.22.14 at 1:47 pm

Dear Garth, we’re in our late 20′s make 130k between the two of us, live in… [tripe snipped]

AnC, head up ur azz much?

Age, any age, is no reason to squander money, especially on cosmetic, trivial and egotistic shyte, and double-especially with debt/credit.

Sometimes it truly pays to take the bus (or even more so the LRT) to avoid the aggravation of traffic and parking in d.t. Calgary for example.

There’s a difference between ‘buying clothes’ just to get next season’s most popular colour (as determined by some pret-a-porter marketing weenies in a european city you’ve never seen) vs replacing some classic clothing which you’ve worn out after a few years frequent use.

And there’s a difference between renting some nice cozy condo or small house within walking distance of your employment (I assume you’re employed…) vs getting sucked into killing mortgage payments on some chipboard doghouse an hour’s drive away from work just because RE marketing shills told you to.

Get the basics right and invest the rest, so when some dickweed manager fires half the staff just before a recession, you won’t lose your pretty little consumerist life and then actually have to dumpster-dive for bottles.

#164 Buddah on 02.23.14 at 3:59 pm

Sorry,

World according to Farce..
only runner up Troll of the day for you…

Namaste.

#165 rosie "moving forward" in the knowledge that, "this won't end well" on 02.23.14 at 4:19 pm

Who leaked this one? Or was it on purpose?

http://www.theglobeandmail.com/news/politics/middle-class-dreams-a-myth-in-troubled-economy-internal-government-report/article17056573/

#166 Steven on 02.23.14 at 5:22 pm

Since this blog talks of the obscene criminality of real estate prices I think I should point out that this sort of problem has happened before. It inspired what many would consider an extremist political movement that was wildly popular in its own domain and reviled elsewhere.
This is what the National Socialists demanded in respect to speculation in real estate and other forms of financial crime against the nation.
I am assuming that by speculation in land it is a reference to all real estate speculation and profiteering. Jacking up the price and pricing the people out of the country is viewed as a serious crime. In their view residential real estate is to be ultimately privately owned but non profit and financed at no interest and if children were born a quarter of the debt per child would be expunged. How is that for an incentive to get married buy a house and make babies? The financing would be done by the state as lender.

This is based on the following interview.
http://theendofzion.com/2013/02/04/30-06-on-spingola-speaks-we-must-destroy-the-jewish-narrative/

16. We demand a land reform suitable to our needs, provision of a law for the free expropriation of land for the purposes of public utility, abolition of taxes on land and prevention of all speculation in land.
17. We demand struggle without consideration against those whose activity is injurious to the general interest. Common national criminals, usurers, profiteers and so forth are to be punished with death, without consideration of confession or race.

#167 GoldCanada!Gold! on 02.23.14 at 5:53 pm

Now that everyone has gorged on the bread and circus known as the Olympics, here is the reality check:

OTTAWA – Canada’s middle-class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.”

That’s the blunt assessment of an internal Conservative government report, an unvarnished account of the plight of middle-income families that’s in contrast to the rosier economic picture in this month’s budget.

the story:
http://www.calgaryherald.com/news/politics/Canadian+Dream+myth+says+internal+government+report/9541042/story.html

the report highlites:
http://www.therecord.com/news-story/4381100-text-of-internal-gov-t-report-on-middle-class/

the report (with pretty graphs):
http://www.scribd.com/doc/208456900/Middle-class-blues

Hope you’ve saved some beer in your glass to cry in to

#168 espressobob on 02.23.14 at 6:06 pm

#123 Kommy Kim

“Preferred shares do not behave the same way as BONDS”

………………………………………………………………

You make a good point! Maybe investors should cover all the bases & rebalance accordingly.

The bigger question might be ‘asset allocation’?

#169 Republic_of_Western_Canada on 02.23.14 at 6:42 pm

#78 Moe on 02.22.14 at 7:20 am

…and don’t forget:

Garth has found the holy grail of investing. Liquid, safe, high yield, constant appreciation.
High-dividend preferred’s are a scam, in my opinion.

Look at Royal Dutch Shell, for example. A 5% yield in these times tells me that the market has zero faith in the company.
The yields are always the best on paper, just right before a company goes bust.

Not quite sure what you’re really complaining about, but it looks like your comment is superficial at best.

First off, 5% for a preferred is pretty typical right now. That’s 3 to 400 basis points over the risk-free return on a 3-year horizon:
http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/

Secondly, the price of rate-reset type preferred’s have come down and stabilized over the last half of 2013 with the expectation of higher market interest rates. -Margin rates for example are a full % higher now than a year ago. And those older RR pref’s with higher interest are generally being called to be reissued at slightly lower rates – because companies can get away with it. Not too many other opportunities are out there with relatively low risk (i.e. S&P rating of ‘BB’ or ‘P3’ or better).

So the (lagging) market trend is to pull RR pref’s and reissue at approx 1.5%+3%, down from the high 7’s, on stuff which was issued around around the 2008/9 crash and before.

The rate of return will vary between 3.5 to 6.5 depending on an individual stock as well as it’s rating.

Thirdly, there’s different kinds of preferreds out there, with rate-resets and perpetuals being two of the most common. They will (and have) behaved differently depending on the stock market demand for it, or general interest rates, or time to maturity if any.

So, condemning some stock, or all preferreds, because it has a 5% yield with no other information is just stupid.

If you really want to see a circus, look at AZP.PR.B (rating P-5) with a current yield of 12.92%.

#170 Snowboid on 02.23.14 at 11:01 pm

#161 World According To Garth on 02.23.14 at 3:08 pm…

Okay, you caught me!

“…useless govt workers doing what they are told so they can steal a million dollar pension from the working poor and retire down south…”

Suck it up!

#171 Enthalpy on 02.24.14 at 11:42 am

but i like td e-series. good for lower portfolios?

#172 Dennis on 02.24.14 at 6:15 pm

Good advice. When saving with a goal in mind, you do need to consider your risk tolerance and timeline. The shorter the timeline the less risk you can take on.