Money for nothing

COPS modified

Janet was smug. In her hand was a yellow-and-blue bank brochure she kept flapping in the region of my nose. “See?” she said. “Why should I have to take any risk on things I don’t understand when the bank will give me 9% interest?”

I’d been explaining how her GICs were getting her nowhere, and she’d be a lot better off owning a mess of preferreds, REITs and bonds, plus some ETFs for growth. But she wanted simple. And the bank was offering that. There it was, right in a big headline:

“Nothing to Lose. More to Gain.”

Maybe you’ve seen it. Posters are glued to bank branch windows everywhere. RBC’s been spending big bucks on marketing index-linked GICs, trumpeting, ‘Earn up to 9% interest’. Hybrid GICs have been around for more than a dozen years, of course. They were misleading and ineffectual when created. Today they’re heartbreaking. I can only imagine how many risk-averse people will be sucked in, realizing years later it was all just marketing.

Index-linked GICs are like eloping, but asking your mom to come along. They promise adventure, sans risk. A guaranteed investment certificate is linked to a stock market’s performance, so if markets rise you make more. If they fall, you don’t lose. This appeals to people who want something for nothing, which the bank figures must be everybody. That’s why RBC earns $2 billion in profits every 90 days. This stuff works.

At least, it works great for the bank. Not so hot for people like Janet. Let’s look at this 9% RBC offering.

RBC modified

First, the 9% return is the maximum amount an investor could receive, if stock markets soar, over a three-year period. That means the greatest annual payout would be 3%, not three times that amount. Hey, this is higher than the 1% RBC will pay you for a one-year GIC, yet hardly a big niner.

But wait. If the stock market is flat, or declines over the next 36 months, the minimum amount you’ll receive is not even the lowly 1% per year, but this: “You are guaranteed a Minimum Return of 1.5% per term for the 3 year RBC MarketSmart GICs.” Yup, that means 0.5% a year for three years. Given inflation (let alone taxes), you lose money.

Compare that with buying perpetual preferred shares in RBC which have a fixed dividend of just over 5% annually, paid to you quarterly and also entitling you to a dividend tax credit, halving your taxes. The preferreds also have a par value (like a bond), and while the market value might dip when rates eventually rise, the dividend won’t change and you always know the value when they’re called. In fact, you could also get a capital gain.

Market-linked GICs, as you can see by this example (and other banks try the same thing) are dodgy vehicles almost always destined to disappoint. By design, they are extraordinarily complex. The ‘market gains’ investors seek are not determined by the high point within any calendar year, but rather by the day before your GIC term expires. Formulae used are indecipherable to most folks, and you never have any idea during a point in the GIC term exactly how your investment is doing. Unlike a true market-based asset (such as an ETF) you can’t sell it when markets jump, locking in gains.

Market-linked GICs also do not include dividends paid by equities in the calculation of performance. Bummer, since bank common stocks (like RBC) are throwing off cash right now. (RBC’s dividend just went up 6%, to 71 cents a share.) Therefore GIC investors are stripped of real returns in the form of actual cash flow that holding stock or an equity ETF would give.

And if you hold a market-linked GIC outside of your RRSP or TFSA, all returns are considered interest and taxed 100% at your marginal rate. In contrast, an equity-based ETF that went up 9% would not be taxed at all until you chose to sell it and then the tax would be only 50% of that levied on the GIC. Ditto for dividends – also taxed at about half the bite put on the yields from guaranteed investment certificates.

Janet listened patiently. She pouted.

“I don’t understand how they can do that,” she said.

“Because it works,” I replied. “So, don’t give the bank your money. Buy the bank.”

Amen.

169 comments ↓

#1 gladiator on 03.23.14 at 4:11 pm

Love the pic, but it’s not complete. After the cops there should be another guy holding a board saying “tips”, so people throw them change as “thank you notes”.

#2 Dave on 03.23.14 at 4:34 pm

Hi Garth

New reader from Winnipeg…

I talk to my friends about the RE market in winnipeg and they all still say that we’re different than the rest of Canada even as they prepare to enter bidding wars this upcoming season.

Can you post about some of the lesser talked about cities in Canada…winnipeg, stoon, edmonton, etc…

Thanks!

#3 pastor dave on 03.23.14 at 4:34 pm

gartho you can have it all my empire of dirt

#4 Steven on 03.23.14 at 4:43 pm

10,000 shares of TD stock could generate $7o,ooo a year plus or minus in dividends providing the bank stays in business with sufficient income. The trick is to acquire the ten thousand shares.

#5 Linda Mulligan on 03.23.14 at 4:46 pm

Have to say the RBC campaign sounds a lot like ‘bait & switch’, with the ‘up to’ 9% return in big print & the small print explaining why this is a pig in lipstick requiring one of those magnifying lenses to read it (they do mention the full deal details in the small print, right?). Seriously, should we not have a regulator to rein in some of this stuff? Yes, we are all adults & are supposed to be able to do our due diligence etc. but some of this stuff is so ambiguous that one can’t really be surprised at people being taken in.

#6 Human Capital on 03.23.14 at 4:49 pm

CCP also discusses this topic: http://canadiancouchpotato.com/2012/06/11/a-homemade-principal-protected-note/

#7 F on 03.23.14 at 4:58 pm

People are calling in to discuss your friend’s ‘legacy’ on CBC radio. ;-)

#8 Retired Boomer - WI on 03.23.14 at 5:11 pm

It’s REALLY those pesky asterisks *.

Every time I SEE an Advertisement that has an unbelievable DEAL * there is that pesky dam* asterisk!

Never Fails New Cars $99* with the mouse type at the bottom telling me the details that make the thing a trap.

If it has an * or maybe two ** you might get *******

#9 Saskatoon-Living on 03.23.14 at 5:13 pm

Your stock market advice is no different than the bank’s advice of offering GIC’s. Slow steady returns with no excitement and low yearly returns. Once again Garth, younger people can invest in individual stocks vs ETFs. Your Old Bay Street strategy is fine for older, more conservative investors, and for those 30yr olds who think being a millionaire at 64 is sexy. I would rather have more money when I’m younger than when I have a hip replacement and need the blue pill.

And how much money do you have? — Garth

#10 Thoughts on 03.23.14 at 5:19 pm

Is cold calling from realtors a normal thing? Even when the market is hot? Getting a lot of these calls lately. Everyone trying to convince us to sell… Makes me want to sit right more. I don’t buy all the bidding wars… There are some for sure but it sucks to be one of those people sitting on a property for 2+ years and hearing about bidding wars. Also hearing more and more about condo owners suing for leaky condos in the GTA. Times are interesting…
As for the nonsense on the blog these days… Stay at home moms… Please stop the nonsense… There is no right or wrong just what works for your own family… People that spend this much time justifying their lives… Chicken little and the other one.. Go be with your kids instead of the blog… Telling people not to have kids reveals your bias. Educate your daughters and teach them to decide what’s best for them.. Not that there is only one way to parent… Sigh… Seriously annoying.

#11 Mishuko on 03.23.14 at 5:24 pm

Finally a post a bout those linked GICs…. big red has some too, but they chose a ‘basket’ of stocks, have fancy options and about 2 hours of reading the online brochure I still wasn’t 100% sure how the calculate your potential returns.

Then I looked at BNS preferred paying 4% anually of par value. 7 keys into my calculator and I have figured out the annual dividend returns. 10 tells me the quarterly payout.

As the saying goes… KISS!!!

#12 Bobby on 03.23.14 at 5:30 pm

Ads like these continue, because they work.

I remember years ago going to a car dealership to see a new Camaro that was advertised. Got there to quickly realize the car didn’t exist.

When I complained about the ad to the sales manager, his only comment was it got me into the dealership.

Never again, I’m now a very informed consumer.

#13 jess on 03.23.14 at 5:40 pm

leveraged loan issuance

http://www.reuters.com/article/2014/01/29/us-banks-regulators-loans-idUSBREA0S0DG20140129

..”the investors in alternative asset managers are pension funds that have funding issues of their own, he said. …”Transferring future losses from banks to pension funds does not aid long-term financial stability for the U.S. economy,”

OCC Has ‘No Exceptions Policy’ for Financing Takeover Deals, Official Says
Regulators Are Warning Banks to Stop Lending Excessive Sums to Fund Corporate Acquisitions (wsj)

#14 Obvious Truth on 03.23.14 at 5:51 pm

Unfortunately most people will just focus on the “this is higher than the 1%”. They have a chance at more. And no loss.

It’s hard to blame people with the lack of education through the mainstream media. It’s very confusing for most. If it were mainstream to invest by diversifying and creating balance people would take to it.

#15 hohoho on 03.23.14 at 6:03 pm

> … If the economy produces 100 bushels of corn (and only that) and there are 100 “dollars” (units of currency) …

is that what they teach at the All-I-Need-to-Know-I-Learned-in-Kindergarten school of economics??

#16 Shawn on 03.23.14 at 6:05 pm

Investing is Simple but Not Easy?

Steve at number 4:

10,000 shares of TD stock could generate $7o,ooo a year plus or minus in dividends providing the bank stays in business with sufficient income. The trick is to acquire the ten thousand shares.

******************************************
Well acquiring the 10,000 TD shares is a mere detail isn’t it?

TD trades at $51.54, so you just need $515,400 to buy them.

Now that’s the value of a typical house in much of the country. Most would consider it absolutely insane to put $500k in a single stock. A guy with a $2 million portfolio would be considered wildly risky for doing that. Yet still wet behind the ears pups sign up to invest $500k in one house (WITH BORROWED MONEY YET!) and Garth is almost alone in calling that risky.

TD pays $1.88 per share per year so 10,000 shares gives $18,800 per year perhaps Steve was talking a preferred share.

With pref shares paying say 5% you just need $1.4 million worth to generate your $70k per year income.

How to get the $1.4 million is a detail… and is your problem.

#17 gladiator on 03.23.14 at 6:13 pm

Sorry for the offtopic, just found this interesting:
1. Venice’s region of Veneto voted to separate from Italy. 89% voted pro-separation.
2. Just in 2008, 454k of people immigrated into it, which was 9.3% of the region’s population.

And we are afraid of the 1 per cent or so immigration into Canada?

#18 buy? Curious? on 03.23.14 at 6:14 pm

Oh Toronto Cops, They are so well paid for the work they do.

They buy houses in Brooklyn Ont.

I dislike cops.

#19 jess on 03.23.14 at 6:29 pm

..”At a meeting Thursday with Russia’s richest men in Moscow, Putin said Russian companies “ought to register on Russian territory and pay taxes in our motherland.”…”I know that you are also interested in this. That is why we have set the task of de-offshorization in this part of the economy.”

http://www.cbc.ca/news/business/putin-urges-russian-billionaires-to-pay-taxes-at-home-1.2579854
=========
Offshore Web Nets Chinese Giant in Italian Solar Scandal
..”It’s a tale about the nexus of offshore financial secrecy and Italy’s onshore culture of corruption, featuring a cast of characters that includes figures linked to a businessman who has served, authorities allege, as a front for Mafia clans.

The story can be told in full detail for the first time thanks to secret offshore files and court records from around the world obtained by Investigative Reporting Project Italy and the International Consortium of Investigative Journalists as part of ICIJ’s “Offshore Leaks” probe.
http://www.icij.org/offshore/offshore-web-nets-chinese-giant-italian-solar-scandal

#20 Freedom First on 03.23.14 at 6:40 pm

Poor Janet. Another example of what Smoking Man always says. Our Education system is failing Canadians. They can’t think.

Garth, you have the patience and the goodwill of a Saint. So many Janet’s in your face and you keep helping everyone. Thankfully, there is many people who do listen and learn, unfortunately there is also many people living in the dark not learning anything except what the [email protected] tells them.

I am fortunate and grateful for my life and how things have turned out for me. I took Business at night school, but I learned far more from my own research, and have always operated my RRSP and TFSA with self-directed investments. From my personal experience, and this great blog, I know why, on the odd occasion I actually speak to anyone at a bank over the years, no matter their job title, they speak to people like they are know nothing idiots. I have also learned in talking with the bank people, many of the them too have been brainwashed by their own employer, and are operating in the same manner as a lot of their idiot customers. Mortgaged, invested, and indebted to the nutz by their Boss.

#21 Roman on 03.23.14 at 6:55 pm

Yeah, the house can’t complain about lack of “Janets”. Although it really makes money off lending at 5-20% to them.

For those not believing how well that works on mass scale, take a quiz (and check what the national averages at the end)
http://www.usfinancialcapability.org/quiz.php

#22 Pope NostyNacho Snugglebums the 666qd on 03.23.14 at 6:58 pm

Ahhh yes, GICs — guaranteed to lose money. They make great serviettes, ‘tho.
*
Hey SMan, gettaloadof this! Possibly this has something to do with it.

#23 gut check on 03.23.14 at 7:01 pm

I have a theory that whatever a company advertises is actually its weakest feature:
McDonalds – “made with 100% pure beef”
Allstate Insurance – “you’re in good hands”
Metro (formerly A&P) – “we’re fresh obsessed”
Monsanto – “improving agriculture” “helping farmers”

… not so much so with small local places; they couldn’t survive the blowback. Large corporations, however, seem to take a sick pride in duping people.

#24 DaleFromCalgary on 03.23.14 at 7:27 pm

#10 – Yes, it is perfectly normal (and legal) for realtors to make cold calls offering to buy houses. I live in central Calgary where all the bungalows are being ripped out one by one and replaced by twin infills. About once a month there is a flyer in my mailbox offering to buy the house. Some realtors are honest and use their letterhead. Other letters are on ordinary blank paper and say they are homeowners desperately looking for a good house to raise their kids. Yeah right. However my blue bin is beside the front door so all the letters never enter the house.

I used to joke that I’d have the last bungalow in Altadore. Not such a joke anymore. I paid off the house two decades ago and it only costs $1,000 a month to live in (property tax, utilities, heating, maintenance and the occasional big repair). You can’t rent a decent one-bedroom apartment in Cowtown for that amount.

#25 Daisy Mae on 03.23.14 at 7:35 pm

Hmmm…

The words ‘up to’….and ‘if’….always catch my attention. Necessary to keep the ads legal so must be included. It serves as a clear warning to steer clear….

#26 Adam on 03.23.14 at 7:45 pm

Garth,

Fixed vs Variable?

Economy seems to be going nowhere up any time soon and everybody seems to be urging you to lock in while rates are low – seems like a great time to get a 2.5-2.6% three year variable rate, doesn’t it?

#27 Daisy Mae on 03.23.14 at 7:49 pm

#12 Bobby: “I remember years ago going to a car dealership to see a new Camaro that was advertised. Got there to quickly realize the car didn’t exist.”

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

‘Bate and switch’ has been around a long time….

#28 Smoking Man on 03.23.14 at 7:50 pm

Vladster checked out the link…dudes a bit paranoid, I would love to add to the hysteria, stir it up a bit.

But I got an Isreali buddy, sub 30, I think he moon lights as mossad , got him drunk many times but no confession..

But the bottom line is kids in isreal are getting bent over just like our youth here. A labour strike is very likely.

However If I had plans to visit Seria or Iran, I would put them on hold. Just in case.

Plus, who know what Snowden has, or Russia has……

Popcorn and beer….as I watch….

#29 Daisy Mae on 03.23.14 at 7:54 pm

#20 Freedom First: “…unfortunately there is also many people living in the dark not learning anything except what the [email protected] tells them.”

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

As stated before, they’re in denial. They believe only what they WANT to believe. The truth is immaterial.

#30 Ilona on 03.23.14 at 7:56 pm

Two questions if I may:

1) What usually happens to REITs when interest rates go up/house bubble bursts? (wanted to buy some for my portfolio, like in Complete Couch Potato one: http://canadiancouchpotato.com/model-portfolios, but not sure if it’s a good time)

2) Does it make sense to try  preferred ETFs first (as opposed to shares), like CNPF?

I’m experimenting within my RRSP account, so taxes are not an issue. 

Thanks! :)

#31 Daisy Mae on 03.23.14 at 7:59 pm

#20 Freedom First: “I know why, on the odd occasion I actually speak to anyone at a bank over the years, no matter their job title, they speak to people like they are know nothing idiots. I have also learned in talking with the bank people, many of the them too have been brainwashed by their own employer, and are operating in the same manner as a lot of their idiot customers. Mortgaged, invested, and indebted to the nutz by their Boss.”

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

People don’t THINK. They don’t use their brains. They just believe everything they’re told. Therein lies the problem.

#32 Smoking Man on 03.23.14 at 8:04 pm

Remember when I told you dogs (smoking men) to off shore you loot, well here it comes.

Vanpire in red is coming after it,

http://www.thestar.com/news/queenspark/2014/03/18/tax_hikes_loom_for_upperincome_earners_in_ontario.html

Only thing left for me to do is mortgage my house to the 9s, and off shore that too.

Anit no way I’m capitulating to teacher…..

Extra Tax on income over 150k rediculous…..

You’re the CEO of a multi national company making millions and want access to this market. What would you do?

You would set up shop in Buffalo.

Liberals are mad, insane and will completly destroy Ontario…

Off shore it Now. She’s comming for it.

#33 Andrew Woburn on 03.23.14 at 8:11 pm

#241 Macrath on 03.23.14 at 3:20 pm
#234 Andrew Woburn

I`m experimenting with a small solar setup where I`m running my communications equipment (answering machine, cable modem, router, etc ) from solar panels and a deep cycle battery. It also functions as a UPS during power failures. I`ve calculated ROI at 6 years. and will save a hundred a year thereafter.
================================

Thanks. I like the idea of an incremental investment rather than moving straight to full on roof top system to sell excess power back to the grid. I am distrustful of investments where ROI depends on government policy. Perhaps the next logical increment would be to power your house lighting and other low demand circuits from solar with an automatic back-up switch to the grid.

For anybody who missed the first comment, we are talking about investing in energy savings as an alternative to financial investments. If your $1,000 GIC is only earning you $20 per year, you might get a better and just as risk-free return by investing it in cutting your energy bills while protecting yourself against inflation and the insidious growth in backdoor taxes built into utility rates.

#34 marquis de sale on 03.23.14 at 8:14 pm

21# roman I took the test. got 5 outta 5. i’m now a financial advisor in a few southern states!

#35 Muddy Waters on 03.23.14 at 8:18 pm

@#15 hohoho on 03.23.14 at 6:03 pm
> … If the economy produces 100 bushels of corn (and only that) and there are 100 “dollars” (units of currency) …
is that what they teach at the All-I-Need-to-Know-I-Learned-in-Kindergarten school of economics??

——
The original quote, from yesterday’s blog was by
#148 Randman on 03.22.14 at 1:17 pm,

They don’t teach ‘The Sumerian Swindle’ in kindergarten but they should. It IS all you need to know. The bushels of corn examples are the best for economics, for a reason: borrow a bushel, pay back a bushel plus a cup. Yes even a child in kindergarten gets it. The borrower, who was poor because he had to borrow becomes more poor at the end of the transaction, the lender who was richer, becomes even richer and can lend out more bushels
that he acquired without labor (the cups add up)
That’s the scam in the real world, using tangible food as an example. There is no fractional reserve lending of bushels of corn- you must have the goods. So when the same principles are applied to fractional reserve lending the transfer of wealth occurs at a monumental pace.

“You can’t spend what you ain’t got,
and you can’t lose what you ain’t never had”

#36 nonplused on 03.23.14 at 8:24 pm

There should be a law about that kind of advertising. What if Garth tried to advertise “Guaranteed 18% returns!” and then in fine print “over a 3 year term based on past performance and there is no guarantee as market prices fluctuate wildly. Consult a qualified financial advisor to see if this service is right for you.”

#37 jan on 03.23.14 at 8:31 pm

I notice all canadian band prefs are about $25 each.
Are they then all redeemable at $25 and the end of the term and, do they all have the same lie span.
Also, I notice they all are a little above the $25 mark.
Does that mean that the actual rate of return is lower because of having to pay a premium over he $25 mark??

#38 bubu on 03.23.14 at 8:41 pm

Logic?…. No…
Guys, as much as you want to use the logic thinking, it looks like it doesn’t work anymore…. I was looking at new houses in AB and it looks like the prices are going up again… full of people at builders show homes… if you look at some of them you would say those poor guys barely have money to eat but they buy houses for $450-500k… I don’t know how they get mortgages but nothing is logic anymore… I assume it can be way worse looking at prices in BC and Ontario so there is room for growth in AB… I’m referring mainly to Calgary and Edmonton…..

#39 drydock on 03.23.14 at 8:50 pm

#21 Roman

According to the test i’m a financial wizard in Alabama.
Somehow i don’t find that very reassuring.

#40 will_da_man on 03.23.14 at 8:56 pm

Wow, where to start….

Per Garth: “Compare that with buying perpetual preferred shares in RBC which have a fixed dividend of just over 5% annually… The preferreds also have a par value (like a bond), and while the market value might dip when rates eventually rise, the dividend won’t change and you always know the value when they’re called. In fact, you could also get a capital gain.”

1. Seems to me you’re arguing pretty hard that these market-linked GIC’s are junk compared to perpetual prefs. On paper, yes absolutely. However, i suspect these (and the run of the mill) GIC’s are marketed towards those people that actually want their principal 100% guaranteed i.e. most likely those retired wrinklies that need that extra peace of mind at the expense of higher returns. From that perspective, there is no way that perpetual prefs are a viable alternative (see next 2 points).

2. The par value is meaningless if the issuer doesn’t opt to buy back the prefs. Garth uses the phrase “when they’re called”….there is actually no fixed date for when prefs are bought back by the issuer….if you read the RBC prospectuses for all their prefs, the buy-back call is always at RBC’s option. In the current environment, where interest rates are surely going up, why would RBC (who has presumably issued these perpetual prefs when interest rates were lower), buy back these prefs when rates are higher and potentially have to issue new prefs down the road and pay a higher rate than they were paying before? Absent some sort of decline in interest rates or a debt crisis where RBC has to get rid of debt (in which case the economy has likely gone into a tailspin), the perpetual prefs are not getting bought back anytime soon if ever.

3. Garth kind of glossed over the whole capital loss thing with the phrase “the market value might dip…”, which this is actually a more probable outcome than just a possibility. Again, if interest rates rise, which even according to Garth they surely must, then the perpetual pref share prices will sink so that the fixed dividend produces a yield that is aligned with the then current market conditions. Not really attractive to the wrinkly that wants to preserve capital.

IMO, rate reset prefs trading under par value are the way to go…

#41 Turtle on 03.23.14 at 9:00 pm

#16 Shawn

“… How to get the $1.4 million is a detail… and is your problem.”

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

Compounding interest.

#42 Montellino on 03.23.14 at 9:12 pm

you should just redirect people to previous posts and let them have a read..
speaking of which – Jenny’s strategy is my strategy, not comfortable buying CAD/USD equities at this point.. looking to park the cash portion until stock correction.. anyone with suggestions for a good ETF to stick it in?

Garth mentioned money market fund which is great but with online discount brokerage its $25 a pop for mutual funds.. and if you look to “free to buy $4.95 to sell” ETFs you will find only 1 that’s right ONE Canadian money market ETF CMR @ 0.79 yield..

kinda wonder if I should just sit on cash for a few months (Blasphemy I know but really? 0.79)

#43 Andrew on 03.23.14 at 9:16 pm

It boggles my mind why people don’t think critically about these things.

#44 learningfromyou on 03.23.14 at 9:22 pm

Thank Garth for this post.

I started to buy index related ETFs because there is not cost for them while buying, there is a cost while selling but my approach is long term. On top of that they are diversified internally.

a few questions about this post’s subject

1 is there any ETF related to all preferred stocks for big companies?.

2 how to buy preferred stock for one specific company, the rbc could be a good example?

3 how to protect myself against the power of the stock issuer like in the link below?, also related to rbc

http://www.financialpost.com/analysis/columnists/story.html?id=00c37c14-8cc6-451d-af69-b1a031fdf541

Thank in advance to anyone who could help me with my questions.

#45 stage1dave on 03.23.14 at 9:29 pm

Was it Jerry Della Femina who said “…the more you see something advertised, the more of a rip-off it is” ? Still true today…

The other thing I’ve noticed over the last few decades is that the more advertising is devoted to the differences between objects, the more they are probably the same. For instance, we’re bombarded with new vehicle advertising, & I still can’t tell the difference between a Lincoln or a Lexus or a Buick…& I’m a serious car guy!

1.5 % a year? JHC, I can make more money than that hawking Iron Maiden tour t shirts in my spare time…& it’s more fun than dealing with the bank.

(while I’m on this subject, to alleviate the boredom that accompanies most bank visits, I’ve often fantasized about wearing my prized Slayer “Reign in Blood” tour t whilst standing in line…(while everyone is trying to ignore everyone else, & if you catch someone’s eyes, those awkward silences arise, y’know?) Over the tour dates on the back is scrawled “are you ready to die?” in eye-catching drippy-type lettering. (that whole album & tour wasn’t really a “happy go lucky” snapshot of the world, btw)

Anyway, my wife rightly pointed out that no one in the bank would know who Slayer is or was, & she didn’t need the hassle of bailing me out at the copshop because I’d been arrested on suspected terrorism charges)

I think that’s a bit far-fetched, even in this terribly paranoid & PC society; but I guess the cell phone is gonna have to carry the day for a while in these lineups. Besides it’s still too cold out here to wear a t shirt.

In the meantime, I’ll await the next “Get rich slowly…maybe…while WE get even RICHER!” advertising campaign from the big 5…

THAT would be some truth in advertising!

#46 Popeye the Sailor Man on 03.23.14 at 9:37 pm

#38 bubu

I not so fast, I also live in Alberta just west of Edmonton in Spruce Grove we vulched a house in 2009 and there was some empty lots on the drawing that they said will be for sell in a year or two. We had our name down for a call in case they came up before we found the home we ended up with. Anyway we got a call some time last spring and were urged to buy by the sales lady we played along because we wanted to know what the large pie shaped lots will go for. Well they built 3 show homes and last month we had time to kill so we looked at them. We guess what they wanted a lot of money for them and only one lot was sold, three had show homes and 2 are having spec home built. So not much movement there compared to the last few years where the pie shaped lots on a green belt went fast and all that remained was the smaller pocket average lots. We live two blocks from them so we see this every day. Well a large lot $200k+ and a 2300sf home for $400k + is over $600k plus closing costs, I don’t see how they expect people to by this.

I thought $430K for a two story 2200sf house on a above average lot was a lot and our tax assessment says $444K. How do they expect to sell a house for 160k+ more. There are a few resale houses JUST like mine in the area 1800sf-2300sf with a bit smaller to a bit larger lots asking $400-$480K.

So the builder asking price is a dream, and the land company can and has in the past adjusted the lot price to help the developer/s in the show homes move lots. There asking price will have to come closer to the resell prices in the area.

#47 Brian Ripley on 03.23.14 at 9:37 pm

Logic?…. No… asks and answers by Bubu #38.

I will take the other side of the question Logic? and say Yes. Calgary and Edmonton buyers are being spurred on to bid up housing prices by earnings:
http://www.chpc.biz/earnings-employment.html

Average employment earnings in Alberta are 23% above the national Canadian average, 23% above Ontario, 28% above BC and 34% above Quebec.

Since the Pit of Gloom in March 2009, average earnings are: Up 26% in Alberta, Up 16% in Quebec, Up 13% in Ontario & Up 13% in BC.

When you’re hot you’re hot.
Calgary housing chart: http://www.chpc.biz/calgary-housing.html

#48 Drill Baby Drill on 03.23.14 at 9:48 pm

Dear Pathetic Blog : if a so called investor wants to have a return approaching 3% per annum then just shop around for GIC’s paying close to that. Many local Credit Unions have higher rates to attract money and many approach 2.5 to 3% per year.

If you have piles of money, sure. But few do. — Garth

#49 nomad on 03.23.14 at 9:49 pm

When preferred shares dipped last year I bought 50/50 of CPD and ZPR. Also, when the fed was hawkish, causing yields to move up, I bought some more. Since then, those shares have been flat, but produced 4.5%. Worst than my ZCN etf (canadian index) but I like the diversity.

However, considering preferred dipped that much in anticipation of rates moving up, I won’t be surprised to see them fall even more when rates actually go up, possibly in 18 months.

#50 Ralph Cramdown on 03.23.14 at 9:50 pm

#35 Muddy Waters — “The bushels of corn examples are the best for economics, for a reason: borrow a bushel, pay back a bushel plus a cup. Yes even a child in kindergarten gets it. The borrower, who was poor because he had to borrow becomes more poor at the end of the transaction, the lender who was richer, becomes even richer and can lend out more bushels”

That’s right, pass your own ignorance on to your children, and they’ll spend their lives blaming banks and the Jews (I googled ‘Sumerian Swindle’) for all their problems.

If instead you teach them that you’ll lend them a handful of corn if they’ll plant and grow it and return two handfuls to you when it’s time to harvest, and they’ll have several handfuls left over to feed themselves, save for planting next year, and sell at the market, you’ll be imparting a useful lesson. No dirt farmer ever got a private loan of seed at much less than the typical 50% interest for the season which dates back to Ptolemaic Egypt.

#51 45north on 03.23.14 at 9:52 pm

smoking man : from your link: I do want to say that middle-income class earners and the majority of Ontarians are going to find themselves in a position where they’re going to have the tools necessary to prosper and go forward in a more meaningful way. It’s right for you to assume that we are protecting the middle class.

“the tools necessary to prosper” what does that mean?

Garth warns that people with big mortgages are going to hurting when interest rates go up. Well so is Ontario:

http://www.ottawacitizen.com/opinion/op-ed/Ontario+usurps+California+role+poster+child+fiscal+management/9642262/story.html

#52 bubu on 03.23.14 at 10:02 pm

Brian Ripley , in my company the average increase was 1.5% in the last 5 years… on top of these.. even with the 60k you see in that graph, an average house should be 360k not more…. 3 times family income….

#53 Macrath on 03.23.14 at 10:05 pm

CPD since 2007 down 20% in a falling to zero rate environment. Should preferreds not have been gaining with falling rates? Why are they a constantly depreciating asset ?

https://tinyurl.com/lsrfcvm

Constantly depreciating? Hardly. Plus the dividends keep flowing. — Garth

#54 Nemesis on 03.23.14 at 10:06 pm

#BonCopBadCop #Tabernac! #RoadKill

“Chortle, chortle…”, AuldPol.

http://youtu.be/tXEqTaoM2QQ

[NoteToGT: Once you throw them out of the helicopter, it’s – like – you’ve got so many other things on your mind. All that extra PaperWork, for example [just kidding, natch]. As justice goes… generally speaking, AerialDefenestration is such a GaucheMove – after all, you never really know where they’re going to land. Personally, as regards punishment/rehab – I strongly advocate CommunityService. The more humiliating/public, the better. But that’s just me. TeeHee!]

#55 bubu on 03.23.14 at 10:07 pm

Popeye the Sailor Man, even 430k in Spruce Grove is a lot in my opinion…

#56 Ripped on 03.23.14 at 10:17 pm

#47 Brian Ripley

I don’t know where these crazy numbers come from. I live in Alberta and I’m in tech and there’s nothing special with wages. Of course I’m not in oil… but neither is 95% of the population of Alberta.

#57 Pope NostyNacho Snugglebums the 666qd on 03.23.14 at 10:26 pm

#28 Smoking Man on 03.23.14 at 7:50 pm — “Plus, who know what Snowden has, or Russia has……”

Notice the sniveling slimeball leeches at the m$m are saying (in unison) that Russia annexed Crimea, they are thugs and should be tossed out of the G8? Ooohh that hurts! No one says the freely elected govt. was illegally tossed.

Well, there were two separate and free votes taken, one by the Crimean govt. and the other by Crimeans. Both voted overwhelmingly to secede from Ukraine. Doesn’t sound like hardball tactics to me!

Convenient Accidents, Eddy baby, Honeymoon over and this one, More Secession and Alaska Secession.

#58 Cici on 03.23.14 at 10:39 pm

Janet listen to Garth, he’s a real saviour!

I wish he had written this post years ago and that I had stumbled upon it before getting suckered into one of these GICs (with a different institution, but it’s the same scam). Heed his warning now while you have the chance instead of wasting three years of your investment life!

#59 saskatoon on 03.23.14 at 10:44 pm

garth,

ironically, the SFH (danforth area) you mentioned below is back…after 2 months!

http://www.greaterfool.ca/2014/01/05/rutting/

http://beta.realtor.ca/propertyDetails.aspx?PropertyId=13981907#v=d

same price as back in january: $749,000.

gotta love the carpeted kitchen!

#60 Happy Renting on 03.23.14 at 10:46 pm

Incredibly misleading to quote a three-year return when the standard is per annum.

Also, people are used to the sneaky “save up to 50%” offers when shopping, where you only get the 50% discount if you buy half a truckload or some other very high quantity. The “up to” is a dead giveaway that there’s fine print. Don’t know why they’d choose to ignore the same red-flag-raising words just because it’s a bank advertisement.

#61 Gen Y on 03.23.14 at 10:56 pm

#42 Montellino on 03.23.14 at 9:12 pm
you should just redirect people to previous posts and let them have a read..
speaking of which – Jenny’s strategy is my strategy, not comfortable buying CAD/USD equities at this point.. looking to park the cash portion until stock correction.. anyone with suggestions for a good ETF to stick it in?

Garth mentioned money market fund which is great but with online discount brokerage its $25 a pop for mutual funds.. and if you look to “free to buy $4.95 to sell” ETFs you will find only 1 that’s right ONE Canadian money market ETF CMR @ 0.79 yield..

kinda wonder if I should just sit on cash for a few months (Blasphemy I know but really? 0.79)

Well, if you just want to park cash in an ETF, PSA (PURPOSE HIGH INTEREST SAVINGS ETF) is basically a savings account ETF, I believe the yield is around 1.25%. The only thing is distributions might be considered interest, so it’s not tax efficient in non registered accounts. Hope this helps.

#62 Macrath on 03.23.14 at 11:00 pm

Constantly depreciating? Hardly. Plus the dividends keep flowing. — Garth
———————————-
No complaints, the last 6 years of 5% plus tax credit is great. But the price dynamics are not rational for a bond like investment. They should have had at least some modest gains. I doubt they will gain when interest normalizes. Complicated, lots of curve balls in investing.

#63 Republic_of_Western_Canada on 03.23.14 at 11:03 pm

#40 will_da_man on 03.23.14 at 8:56 pm
In the current environment, where interest rates are surely going up, why would RBC (who has presumably issued these perpetual prefs when interest rates were lower), buy back these prefs when rates are higher and potentially have to issue new prefs down the road and pay a higher rate than they were paying before?

Dude, right now, a large number of Pfd-2 and up preferreds resetting in 2014 are being called and replaced with lower interest series.

That means those things that were issued 5 years ago during the housing/bank crash at 6 to 7% are being replaced today with 3% rate-resets. Half the rate. The banks obviously do not anticipate any significant investment rate jumps anytime soon.

The banks will pull anything they can to reissue at lower rates whenever possible. They think there’s nothing better in town at their rating level, so have no intention of leaving callable series out there at present high rates.

There’s a ton of perpetuals out there with ‘worst callable’ dates falling in 2014, at about 5.5%. But mostly seem to be the big banks. Various perpetual industrials at similar ratings which have 2022 ‘worst call’ dates are still running 5.5%. If you think a perpetual for example at 5.6% priced at 25.37 and callable in a few months will give you a decent return at $25 when called, go for it. But I’d take the longer term at 5.1% at a 25.40 market price if necessary and hold my nose for the next 8 years.

In principle, correct, perpetuals act like bonds, so when ol’ Yeller seriously drops another shoe saying QE will stop, their market price will drop, even though interest rates aren’t going up too far anytime soon. – Countries don’t have the cash to finance anything at 7% interest, and established companies are rolling in cash so generally don’t have to cough up 7% to finance stuff. Rates will stay as low as long as powers that be, including the Fed, can keep them.

I’d look at rate-resets first, stuff due in 2016+, which has a decent market price and still offers 6-7%; or lower-priced perpetuals at 5.5% that you can keep for the next 8 years and ignore any price gyrations till then.

#64 Son of Ponzi on 03.23.14 at 11:08 pm

Even 80 year old ladies are flipping condos in TO.
http://ca.finance.yahoo.com/news/revenue-canada-cracking-down-condo-sales-023421464.html;_ylc=X3oDMTEwM2huMWJsBF9TAzExODQ1NTAwMDgEcG9zAzUEc2VjA211c3RyZWFk

#65 Son of Ponzi on 03.23.14 at 11:09 pm

Money for nothing.
But I hope the chicks are still free.

#66 BG on 03.23.14 at 11:11 pm

To all the people commenting that “people can’t think”:

It does not take just common sense to realize this RBC GIC is a ripoff. It also takes a minimum of financial knowledge/education.

You guys are here every day, reading this (very useful) blog on real estate and financial assets. I’m sure it’s not the only time during the day you actively learn about this stuff.

You (and I) clearly are interested in this and deem it important/interesting enough to spend the time learning.
That other people don’t, does not mean they can’t think logically.

This blog has given a few examples of people occupying critical positions (doctors, etc) but still having no clue on how to manage their finances. These people can think.

#67 Happy Renting on 03.23.14 at 11:12 pm

#6 Human Capital on 03.23.14 at 4:49 pm

Great link, a very easy-to-understand how-to. Thanks for posting it.

———————–
#10 Thoughts on 03.23.14 at 5:19 pm

Regarding the nonsense bickering, I find it interesting to see how absolute some people’s opinions are, and fun to speculate on the personal experience they’ve endured that made them so bitter.

———————–
#20 Freedom First on 03.23.14 at 6:40 pm

Yes, Garth, super-human patience having to point out the obvious (bank fine print) and tolerate people always wanting to prove you wrong when they don’t actually know what they’re talking about. You must have a permanent imprint of your palm on your face.

———————–

#50 Ralph Cramdown on 03.23.14 at 9:50 pm

I enjoy your pointing out (more than once, in the past) that borrowing can be a tool to generate profits. I think most people are mired in the mindset of borrowing mostly to consume. We should be smarter, as you say, and realize that debt can be a business tool to invest and increase wealth.

#68 Panhead on 03.23.14 at 11:13 pm

Held up a sign when I was much younger that said “radar ahead.” Wasn’t long before the “boy’s in blue” had us all by the scruff of the collars threatening us with “erecting a sign without a permit.” Still laugh when I think back on it though … I’m sure the cop’s had a good laugh too.

#69 Republic_of_Western_Canada on 03.23.14 at 11:19 pm

#44 learningfromyou on 03.23.14 at 9:22 pm

That article seems to be oriented towards initial sales of new series shares. Something not already in the market.

The remedy mentioned at the end of the article, to buy in the secondary market, is what 99.99% of people do anyway.

Regarding protecting yourself, the best solution is to shop around, to diversify, and understand the terms of the contract which governs each series.

#70 TrumpVu on 03.23.14 at 11:27 pm

#45 stage1dave,

My friend is an accountant and loves Slayer, dragged me to a concert in Vancouver a couple years back. Luckily I was so drunk don’t remember a thing. Anyway, singing Angel of Death in your head while in a bank seems kind of fitting. There must be some kind of correlation between death metal (speed metal or whatever the F people call it) and the financial industry.

#71 Republic_of_Western_Canada on 03.23.14 at 11:32 pm

#48 Drill Baby Drill on 03.23.14 at 9:48 pm

Exactly how does the return on a credit-union GIC at 2.9%, subject to full taxation, get compared to a Pfd-2 or better industrial bought near par giving 6% thru 2016 and has a 50% better tax rate?

#72 Derek R on 03.23.14 at 11:33 pm

#50 Ralph Cramdown on 03.23.14 at 9:50 pm wrote:
If instead you teach them that you’ll lend them a handful of corn if they’ll plant and grow it and return two handfuls to you when it’s time to harvest, and they’ll have several handfuls left over to feed themselves, save for planting next year, and sell at the market, you’ll be imparting a useful lesson.

Thanks, Ralph. You saved me the bother of pointing out the obvious to the clueless.

#73 4 AM Sunrise on 03.23.14 at 11:43 pm

There are lots of ways for consumers to pay a premium in return for warm fuzzy feelings. Banks are no different. I used to work in a bank and I saw how people love to pay service charges in return for warm fuzzy feelings and warm fuzzy feel-ups courtesy of my (female) boss. Market-linked GIC’s are just another way consumers pay a premium to feel good.

#74 Christopher Lackey on 03.23.14 at 11:44 pm

In regards to your last post Garth
I just want all your haters to know that we don’t come here for a guru. People fall into all kinds of cults – central bankers, CEO, Brad Lamb, whatever. In the end, none of us is infallible. We come for the great insights, hilarious banter, and interesting exchanges. I don’t agree with every single thing you’ve ever said. Your detractors on red flag and other places are too dumb to see that that’s not the point.

Here’s to diverse perspectives, freedom of speech, and thanks for all the great work you do.

#75 Republic_of_Western_Canada on 03.23.14 at 11:47 pm

#53 Macrath on 03.23.14 at 10:05 pm

CPD had one ‘drop’ of about 9% last summer. I sold mine earlier at about 17 3/8 after booking a series of dividend payments. It was approx flat at 17 for awhile. Definitely not decreasing. Bought back in at about 16. Gotta watch for those bargains.

Funny thing though, my perpetuals have been the most stable of any holding over the last year or so, regardless of interest rate chatter.

#76 Popeye the Sailor Man on 03.24.14 at 12:01 am

#55 bubu

I know!

I make a good living traveling to BC to work for 4 weeks on ships and the only way I could afford the wonderful house we have is we rode the real estate bubble up from 2000 on. I still owe half the value of our first house.
Yet the bank told us we could get a house worth $600k+ with our down-payment and as a single income family its Insane!

We are prepared for a 10% drop still hoping that the fact we got this house for 100K less than the last owners payed in 2006.

#77 b on 03.24.14 at 12:20 am

Great post Garth. Much appreciated. Although I am skeptical of anything the bank recommends in terms of investments, I do appreciate learning their tricks for my own knowledge. Banks should be help to a higher standard in terms of marketing compared to say a clothing store. It makes me want to hate them and then I remember that buying them can be a nice addition to a balanced portfolio (another great point of today’s post). Hope the leg is mending.

#78 takla on 03.24.14 at 12:25 am

re#solar
I pieced together my own small portable solar setup last yr and it gives a person some peace of mind in case of power outages,on the west coast they say we’re over due for the big one so I ve now got 80 watts of solar/30 amp charge controller/2-deepcell 12 v batteries/1000w inverter.A 500.00 investment that will pay dividends in case of the unexpected.

#79 KommyKim on 03.24.14 at 12:39 am

RE: #37 jan on 03.23.14 at 8:31 pm
I notice all canadian band prefs are about $25 each.
Are they then all redeemable at $25 and the end of the term and, do they all have the same lie span.

Yea, $25 is the typical issue price per share, though not all issue at $25. As for their “life span” you probably mean the Call date? There is no certainty that they will be called. For details you need to read the prospectus.

Also, I notice they all are a little above the $25 mark. Does that mean that the actual rate of return is lower because of having to pay a premium over he $25 mark??

Preferreds sell above the issue price if interest rates have dropped since they were issued. Kinda like bonds do.
Possibly you will suffer a capital loss by paying a premium, but not always. It depends on where interest rates go. Look at the yield to call to estimate your return if they are called before you sell.

Here’s a good list of Canadian Prefs for you to study.
http://www.cibcwg.com/c/document_library/get_file?uuid=823ffb68-e59e-45f0-817f-dcfc349fbdd6&groupId=92706
Or just buy an ETF of prefs.

#80 mark on 03.24.14 at 1:05 am

You’ll be pleased to know after the first caller on Cross Country Checkup gave his list of problems with Flaherty, he noted his biggest achievement as the TFSA.

#81 KommyKim on 03.24.14 at 1:06 am

RE: #44 learningfromyou on 03.23.14 at 9:22 pm
1 is there any ETF related to all preferred stocks for big companies?.

CPD and ZPR contain Canadian preferred shares. You can also buy US and Intl preferred ETFs but no Dividend tax credit with those.

2 how to buy preferred stock for one specific company, the rbc could be a good example?

Buy RY-W for example…..
See my link in my post above for list.
BTW, RY.PR.W = RY-W on Google Finance.

3 how to protect myself against the power of the stock issuer like in the link below?, also related to rbc

Don’t buy rate reset preferred shares (ZPR) if this bugs you. All Prefs can be called, but rate resets gives the issuer much more control.

#82 meslippery on 03.24.14 at 1:28 am

Thought just came to me about rent vs buy.
Think of it as you will, but if the bank really owns my
home.How come they wont let me smoke in the bank?? but I can in there other home. (MINE) Or will that change soon?
You heard it here first. (resale value).

#83 Kingarthur on 03.24.14 at 1:39 am

Between HAM (Hot Asian Money) and WWEM’s (Winter Weary Eastern Migrants), Vancouver urban real estate will not crash any time soon.

#84 Something for nothing on 03.24.14 at 1:59 am

Janet is an idiot.

Smart enough to call Garth first, tho.

> Pouts. “How can they do that?”
They can do anything that the government lets them, sweety. Don’t pout, it wrinkles your forehead. They can do anything that’s not explicitly illegal, and maybe even a few things that are. Why are you surprised, have you seen the cell phone industry? What makes you think robelus are the only ones allowed to be predatory? What makes you think the bank is your friend? If you get something for nothing, it means they give something for nothing. Why would they do that?

#85 Jl on 03.24.14 at 4:11 am

#24 DaleFromCalgary

Dale, it pains me to do this, but I have to argue Garth’s point here. Your bungalow in Altadore is NOT costing you only a $1000 per month. You are completely ignoring the opportunity cost on the asset.

Depending on your lot, the property probably worth about $650,000 maybe more, as a tear down. At 7% the opportunity cost is $45,500 per year, or $3700 per month. I could rent you a townhouse in the area that has more square footage than you currently have for $3000 per month and you’ll be living for free and protecting your capital.

Now with that said, holding for the past few years has served you very well, and Garth has been dead wrong. When Garth started this blog those lots were selling for $500,000-$550,000, so you’ve done well holding. But my opinion is that those lots don’t have much more to increase.

#86 Devore on 03.24.14 at 4:16 am

#44 learningfromyou

1. Sure, there are ETFs focusing on preferred shares, CPD is one of them.

2. Prefered shares have a specific naming convention, with PR.series appended to the common share ticker, such as RY.PR.A.

3. Protect yourself? It is what it is, if you want to “protect” yourself, don’t buy rate reset prefereds .

#87 Rob aka Captain and Mrs Slow on 03.24.14 at 5:02 am

Money Saver covered the same thing in a short article

http://www.moneysense.ca/save/gic/market-linked-gics-designed-to-fail

#88 Ripped on 03.24.14 at 5:03 am

#47 Brian Ripley

Here check out these fantastic wages in Alberta for Telecom/Tech

http://neuvoo.ca/view/?id=51396452#relatedId=47317287

$19 to $22 an hour for a college graduate… another words a Journeyman Telecommunications Electrician.

I made $50 U.S. an hour in Texas for AT&T where it cost me a third the amount to live.

So f#$k off with the high wage crap in Alberta

#89 Buy? Curious? on 03.24.14 at 5:37 am

Hey! I haven’t heard the “THIS WON’T END WELL…” line in a while. Where are all the people who said the crash of Real Estate is near?

Ask yourself this, how many rich people do you know that rent and invest the money they “save” in a diversified portfolio? The only person that I know is Sherry Cooper but to be honest, I don’t think she buys ripe bananas anymore. The fact is that buying a house is a two transaction investment that is simple to understand. One of my many girlfriends’ parents sold their house in Lawerence Park for slightly over $1.5 million. All these investment plans change over time and are subject to tax. Not to mention that it’s a full time job managing it that you either pay someone to do or do it yourself with no guarentee that it pay a return of 5-7% annually.

Ever hear the expression, “Safe as houses”? There’s a reason for it.

So buy GIC’s, REIT’s, or WTF’s. I bought a house. I’ve placed my bet and I’m letting it ride.

https://www.youtube.com/watch?v=JSSAcdrSmyw

#90 OttawaguyRenting on 03.24.14 at 6:46 am

Smoking Man is right.. She is coming. IMF dictated fuel money to help with “income equality”

From the report. IMF. Great Read if you are into that sort of dry tartar

“Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation. ”

(More from the back of the film)

_ Over the past decades, revenue from these taxes has not kept up with the surge in wealth as a share of GDP (see earlier section) and, as a result, the effective tax rate has dropped from an average of around 0.9 percent in 1970 to approximately 0.5 percent today. The prospect of raising additional revenue from the various types of wealth taxation was recently discussed in IMF (2013b) and their role in reducing inequality can be summarized as follows.
Property taxes are equitable and efficient, but underutilized in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martínez-Vázquez, 2008). There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument, although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013).

#91 2CntsCdn on 03.24.14 at 7:06 am

Banks are very smart business people. Maybe the smartest. They know exactly how to push the right buttons and word things very carefully (intentionally deceptive) to make money from the stupid and/or ignorant. Stupid/ignorant people are easier to get money from than smart people. People will pay a huge premium for perceived “safety” …. always have and always will. Banks (and insurance companies) know this and make billions.

No one of any wealth or success took no risk. At the lowest end of the scale … even buying one lottery ticket involves risk. But you don’t want your odds of having a decent life to be ten million to one. With a tiny bit of planning, time, discipline and education .. you can increase those odds to 50/50 at worst.

#92 TrumpVu on 03.24.14 at 7:33 am

Garth is looking at the wrong statistics.

http://www.cbc.ca/news/business/fears-of-a-housing-bubble-in-canada-overblown-report-says-1.2581913

I think Spice Lucks and Robin Wiebe are getting it on.

#93 Mr. Frugal on 03.24.14 at 8:18 am

Okay, I’ll admit it. I have a few of these stupid GICs! I’ve been a pretty good saver but not such a good investor. Then a couple of years ago I experienced an “awakening” and got on the investing band-wagon.

The bottom line is that the bank doesn’t care how well you’re doing – nobody does. If you want to get ahead the only one that’s going to help you is YOU! GICs may have their place but they are no substitute for equities.

#94 Nuke on 03.24.14 at 8:35 am

Just a reminder that prescribed rates for family loans is 1% for the quarter ending March 31st, 2014, and is setfor as long as the loan is outstanding. That is an interest rate worth locking in for.

#95 jess on 03.24.14 at 8:55 am

“frenemies.” ?
Why ExxonMobil’s Partnerships With Russia’s Rosneft Challenge the Narrative of US Exports as Energy WeaponBy Steve Horn, DeSmogBlog | News Analysis
==============================
ah yes, the new spirit of co-0perating
http://eng.kremlin.ru/news/5625

…”The first steps in this direction are already being taken. Rosneft and ExxonMobil have created a research and development centre for Arctic technologies…I believe that this mutually beneficial swap of assets in the fuel and energy industry is a good foundation for moving forward….Today, several new documents were signed at this forum on partnerships between Rosneft and international oil and gas companies ExxonMobil, Statoil and Eni (I am happy to see our old friends here today and to greet them), as well as an agreement on technological partnership with General Electric and agreements on the principles of supplying LNG.

=======
As long as it isn’t affecting my backyard
Exxon CEO Comes Out Against Fracking Project Because It Will Affect His Property Values
http://www.democraticunderground.com/10024542513

#96 Macrath on 03.24.14 at 9:03 am

#75 Republic_of_Western_Canada

RE: CPD
long ago it was $20, I bought in at $18. It has spent the last few years at $17 and now its $16. Stable, but I doubt I`ll be harvesting a capital gain on this. I did buy for the yield. Definite sell if it pops up.

Anyone buying preferreds for capital gains is unschooled. — Garth

#97 Life's a supermartingale on 03.24.14 at 9:21 am

In case anyone is wondering how the bank engineers this product, it works like this:

For simplicity, suppose the product was for 1 year and the interest rate is 2%. Suppose you give the bank $1000 to invest in the market linked GIC.

The bank puts $980 in a GIC. The bank then invests the $20 (less fees) in the stock market. At the end of the year you will have $1000 in the GIC and whatever return the market gives on your $20 (less fees). Ta-Da! Your principle is protected. If there is a guaranteed minimum return above the $1000, the bank just invests a little more in the GIC and a little less in the stock market (or they buy a derivative with with part of your $20).

The bank takes no risk when they offer you a market linked GIC.

It makes little sense to buy these products. It’s just a splitting of your portfolio, but on the same ticket. And Garth, as for selling to lock in gains as you suggest in your post, that’s crazy – no on can time the market. People who try to time the market eventually learn about an interesting mathematical result called gambler’s ruin.

Routine rebalancing means locking in gains, and distributing cash among under-performers. It should be rote with every investor. Gamblers? Not so much. — Garth

#98 Dupcheck on 03.24.14 at 9:33 am

How do factory workers and technicians afford homes that are bigger and more expensive than say office workers that make a lot more than them? Are office workers stupid? I do not think so. So what gives? This upsets me, not that I care what they do with their money, but it is not their money it is all borrowed. How do this people dare to show off their bosses and company owners? Do they know something we do not know? My guess is this kind of mentality is poisoning the normal people that want a normal life with normal things they could afford. This is how greedy wars start, from ignorant people that do not know their place in society. It is so hard to deal with ignorants, I guess the best medicine is to ignore them.

#99 BG on 03.24.14 at 9:35 am

#89 Buy? Curious?

To become rich, you don’t look at how rich people invest and do exactly the same. It’s naive to think that.
They don’t have the same capital as you do, and they probably can handle more risk than you do.

But agree that there’s nothing exciting about a diversified portfolio.
When you’re young, you want to conquer the world, you don’t just want to make sure you’re well off when you retire.
But this portfolio is still a safe place to keep your money until you decide you want to do something else with some of it (creating a business?).

Good luck with your “bet” though.

#100 Penny Henny on 03.24.14 at 9:39 am

#32 Smoking Man on 03.23.14 at 8:04 pm
Remember when I told you dogs (smoking men) to off shore you loot, well here it comes.

Vanpire in red is coming after it,
______________________________________
Vampire in red, I like that.

#101 Muddy Waters on 03.24.14 at 9:40 am

@ Derek R and Ralph C

I’m not discussing borrowing for consumption vs. investment. If there’s nothing in it for the lender, no one will lend. The swindle occurs when collateral of any kind (over and above interest) is inserted into the equation. ie borrow grain, forfeit real estate on default. Borrowing at interest for investment requires the borrower to add labor and or risk; with ‘collateral’ the lender has no risk and adds no labor. It’s all in the book that made me ignorant and clueless.

#102 Aggregator on 03.24.14 at 9:46 am

#92 TrumpVu

The report says those calling it a bubble are looking at the wrong statistics — by focusing on the ratio of house prices to incomes and the ratio of house prices to rents. Instead, the report looks at the ratio of principal and interest costs to incomes and to rents, and finds that they are in the same range they have been in for the past 20 years.

There's never a dull moment for Canada's Conference Board of Keynesians, who've completely isolated themselves with this idiotic theory that looks at principal and interest to incomes as if household debt loads and expenditures don't matter, because it's all about lower debt service payments in the ponzi world of Keynesianism.

A few reasons why this measure is flawed: i) presale market effects ii) developers' unit size shrinkage capacity iii) lenders offering mortgage vacations and iv) as noted on #153, the fact that CMHC is now paying distressed mortgage payments (principal), meaning, CBA mortgages in arrears data isn't really the number of arrears cases, rather the overflow of what lenders and mortgage insurers' couldn't deal with, therefore they demand gov't guarantees, or in other words, now that Canada's total arrears has turned back into a positive year-on-year increase, means the amount of late payments has exceeded lenders and CMHC's capacity to bailout (or workout as they call it) mortgagors in arrears and prevent a foreclosure.

If principal and interest to income was a better measure of a bubble's burst, then why did Netherlands' home prices start falling even when impaired mortgages as a percentage of banks' total loans was only 1%, while non-mortage debt (credit cards, auto loans, student loans, HELOCs, LOCs, etc.) stood at 8% with rising unemployment. This proves that rates don't need to rise for home prices to decline.

What matters is the total debt load held by households versus income minus expenditures, regardless of how it's allocated on their balance sheet. The only argument that can be made about principal and interest payments is how households prioritize their payments and assets. Numerous studies by credit bureaus and rating agencies show how debtors' preferences can change when assets begin to depreciate or stagnate — as the saying goes — when people stop throwing good money at bad assets because the math proves it's not worth holding it.

#103 OttawaguyRenting on 03.24.14 at 9:51 am

No Worry Google this bad boy over at the Star Toronto

All is good – Headline

No housing bubble to burst, Conference Board says in major survey

#104 pinstripe on 03.24.14 at 9:52 am

http://www.cbc.ca/news/business/fears-of-a-housing-bubble-in-canada-overblown-report-says-1.2581913

#105 Aggregator on 03.24.14 at 9:56 am

(Corrected links)

#92 TrumpVu

The report says those calling it a bubble are looking at the wrong statistics — by focusing on the ratio of house prices to incomes and the ratio of house prices to rents. Instead, the report looks at the ratio of principal and interest costs to incomes and to rents, and finds that they are in the same range they have been in for the past 20 years.

There's never a dull moment for Canada's Conference Board of Keynesians, who've completely isolated themselves with this idiotic theory that looks at principal and interest to incomes as if household debt loads and expenditures don't matter, because it's all about lower debt service payments in the ponzi world of Keynesianism.

A few reasons why this measure is flawed: i) presale market effects ii) developers' unit size shrinkage capacity iii) lenders offering mortgage vacations and iv) as noted on #153, the fact that CMHC is now paying distressed mortgage payments (principal), meaning, CBA mortgages in arrears data isn't really the number of arrears cases, rather the overflow of what lenders and mortgage insurers' couldn't deal with, therefore they demand gov't guarantees, or in other words, now that Canada's total arrears has turned back into a positive year-on-year increase, means the amount of late payments has exceeded lenders and CMHC's capacity to bailout (or workout as they call it) mortgagors in arrears and prevent a foreclosure.

If principal and interest to income was a better measure of a bubble's burst, then why did Netherlands' home prices start falling even when impaired mortgages as a percentage of banks' total loans was only 1%, while non-mortage debt (credit cards, auto loans, student loans, HELOCs, LOCs, etc.) stood at 8% with rising unemployment. This proves that rates don't need to rise for home prices to decline.

What matters is the total debt load held by households versus income minus expenditures, regardless of how it's allocated on their balance sheet. The only argument that can be made about principal and interest payments is how households prioritize their payments and assets. Numerous studies by credit bureaus and rating agencies show how debtors' preferences can change when assets begin to depreciate or stagnate — as the saying goes — when people stop throwing good money at bad assets because the math proves it's not worth holding it.

#106 Woke To The Sounds of Horking on 03.24.14 at 9:57 am

I’d like to squish that little cartoon RBC pinstripe-suited f*ck between my fingers. Sneaky, sneaky basterds. Always in the fine print, eh?

And by the way, after 11 months of reading this blog, it’s clear that this is a fear-based blog that uses fear — the greatest of all motivators — to shift product. Nothing wrong with that. We all gotta sell something. But the overarching message is one that treads out the same, tired rhetoric that a Canadian RE bubble exists and must burst, sometime . . . soon . . . it must . . . burst . . . maybe?

Nope. Ain’t gonna.

Here’s the skinny on real estate in Canada: Low interest rates are here to stay, for at least the work-life of Gen X, perhaps longer. So if you’re 34-48 yrs old, enjoy the low-payback plan. You didn’t earn it, but what the hell, take it.

The BoC daren’t raise rates now. The risk? Throwing the whole of Canuck society into total meltdown/chaos. Too many poor sods are mortgaged to the hilt as it is. Now, imagine them with a much higher monthly mortgage obligation (plus the absolute sh*t weather and overpriced everything that defines expensive Canada — at least in Sweden you get your uni tuition covered!)

And then increase interest rates by a-lot-all-at-once and whaddya got? A recipe for vagabond Chuck Bronsons wearing Maple Leafs balaclavas. Won’t happen, can’t happen, unless the feds want a Great White Armageddon on their hands. Even if Asian cashola pulls out of Van City that, per se, won’t bleed the local market. Just watch. (Know about the cash-rich Mexicans, anyone?)

But . . . increase interest rates by smidgens over a looooooong period of time and you’ve got the perfect recipe to bring the whole stoopid thing back to ‘normal’.

I’m not dissing Garth.

Garth, you’re one hell of a great writer. Too bad journalism and the creative arts have been gutted for evermore. In better days you musta been handsomely rewarded for the quality of your wordsmithing.

Khap Khun Khrap, Good Night, Lights Out . . . Peace

Rates will be rising in 2015 in the US. Canada will not escape. Looks like the bond market will pop mortgages this fall. — Garth

#107 gladiator on 03.24.14 at 10:02 am

An oops in China:
http://www.zerohedge.com/news/2014-03-24/furious-chinese-demand-money-back-housing-bubble-pops

#108 Old Man on 03.24.14 at 10:37 am

#106 Woke: – lots of booga booga in your rant so where is the beef? Do us all a favour and outline in detail your investment plan over the next few years, as we all need to know – thanks!

#109 Aggregator on 03.24.14 at 10:45 am

*RUSSIA PUBLISHES SANCTIONS LIST AGAINST CANADIANS

Oh yes, two can play this game.

#110 Buy? Curious? on 03.24.14 at 10:58 am

#99 BG on 03.24.14 at 9:35 am

*ahem*

BOOOORRRRRIIIINNNGGGGGG.

https://www.youtube.com/watch?v=pTt9GSyW184

#111 Ralph Cramdown on 03.24.14 at 11:02 am

#99 BG — “To become rich, you don’t look at how rich people invest and do exactly the same. It’s naive to think that. They don’t have the same capital as you do, and they probably can handle more risk than you do.”

Although rich people COULD handle more risk than those of lesser means, they typically don’t. Who’s at more risk if he loses half his capital, someone in his 20s with $50,000 in the bank and on a salary of $50,000/year, or someone living on the $600,000 annual income of $10 million? The millionaire will typically be far less reckless with his capital, because to him, the pain felt by a loss of 1/2 his wealth is FAR greater than the pleasure to be had by doubling it.

There are, of course, specialists in the art of fleecing the naive rich. Hedge funds and other vehicles available only to “accredited investors” (the only requirement is enough money) are a case in point.

I have no data to support it, but I think one could do worse than to invest in ten or twenty business controlled by billionaire entrepreneurs who have the majority of their wealth invested in them. Beware of the occasional poseur who controls a company through a dual-class share structure with very little of his own capital at risk.

Conversely, the reason we hear so much about “artificially low” interest rates and “financial repression” isn’t that the media and the right wing think tanks are worried about granny’s $50,000 in GICs, it’s because many millionaires and billionaires would rather hold government bonds and earn a bit above inflation than to risk their capital elsewhere, and that isn’t an option right now.

#112 Ralph Cramdown on 03.24.14 at 11:20 am

#101 Muddy Waters — “The swindle occurs when collateral of any kind (over and above interest) is inserted into the equation. ie borrow grain, forfeit real estate on default. Borrowing at interest for investment requires the borrower to add labor and or risk; with ‘collateral’ the lender has no risk and adds no labor.”

Today, most people can borrow reasonable amounts of money (i.e. perhaps between a few months’ and a year’s income) without collateral, at 10-20%. Or against good, marketable collateral (real estate, late model car, marketable securities) at 3-7%. The choice is theirs, and the difference in interest rates between collateralized and uncollateralized loans has been around for centuries.

Most lenders do not want to see their borrowers default, and will either lose money or make less money than if the borrower performs. Most aren’t good at or efficient at reposessing and remarketing physical collateral. Which is why they also examine your credit rating and capacity to repay.

Even Karl Marx realized that capital is substantially the product of previous labour. If I lend a man a bushel of corn or $500 in gold against his farm, what I lend is the product of somebody’s hard work which I opted to save rather than to consume and enjoy. The interest that he pays me is likewise the product of his labour, which he opted to trade some of in exchange for the use of my capital.

#113 Victor V on 03.24.14 at 11:23 am

If you can’t beat ’em join ’em.

http://ca.finance.yahoo.com/q/bc?s=RY.TO&t=2y&l=on&z=l&q=l&c=

RBC shareholders, including small investors, have made out pretty well in past years.

#114 Victor V on 03.24.14 at 11:28 am

PRICE DROP/RELIST – 80R Crescent Road – ROSEDALE

http://themashcanada.blogspot.ca/2014/03/price-droprelist-80r-crescent-road.html

One year.

5 price drops. 2 price increases.

And now this 2+1 bedroom, 4 bathroom condo/coach house at 80R Crescent Road (though the ‘R’ has been omitted in the new listing) has had another price drop!

It started at $3,495,000, with the most recent price being $2,450,000.

$1,496,000 later and 43% less than initial ask…

And now this house is listed at $1,999,000!!!

#115 Macrath on 03.24.14 at 11:38 am

Anyone buying preferreds for capital gains is unschooled. — Garth
————————————-
I `m here for the education. The short bond funds are bleeding capital because there are bonds maturing that were bought at a premium. This I understand. I have yet to find an explanation anywhere why the same happens to a diversified preferred share ETF. Resets and calls eroding capital ? supply and demand ?
The only explanation out there is that they are sensitive to interest rates which have done nothing for a long long time.

#116 Ralph Cramdown on 03.24.14 at 11:41 am

#106 Woke To The Sounds of Horking — “And by the way, after 11 months of reading this blog, it’s clear that this is a fear-based blog that uses fear — the greatest of all motivators — to shift product.”

Seriously? Garth has been optimistic about the US recovery for a few years now, and recommending that people invest some of their money in equities is fundamentally optimistic. It’s the commenters on here that are most pessimistic. Gold pumpers and those who breathlessly repeat that Zerohedge is reporting a Raccoon-fart derivative gone wrong is about to blow up the entire world financial system.

Most days, Garth doesn’t even overtly plug what he’s selling here. You could read the blog for a week and not know what the man does for a living. If you want fear, check out his back catalog of books, when he was advocating digging a fallout shelter, buying a generator, and laying in a decade’s supply of dried beans.

That said, what about Canada? The Harper government is reducing the federal deficit, which is a headwind for the economy. Families’ debt is increasing at a slower rate, and may even peak, which is a headwind for the economy. The Ontario government is talking of raising taxes, another headwind for the economy. We shall see.

#117 Bottoms_Up on 03.24.14 at 11:58 am

That RBC marketing ploy is despicable. It should be illegal to post additive gains like that, especially when the reality is 0.5-3% per year.

Speaking of despicable marketing, check this out, $5000 lit on fire:

http://www.calgaryherald.com/business/bunch+goofs+marketing+geniuses+Radio+station+burns/9652243/story.html

#118 No bubble on 03.24.14 at 12:20 pm

“No housing bubble to burst, Conference Board says in major survey”
http://www.thestar.com/business/2014/03/24/no_housing_bubble_to_burst_conference_board_says_in_major_survey.html

Posted four times. The CBoC are purveyors of the status quo. I’d be shocked at any other conclusion. — Garth

#119 TurnerNation on 03.24.14 at 12:24 pm

A cloud of smug descending over this blog.

That “store of value” is still a little shy of $5000.

TLT.US on the other hand is proving its worth.
Life, death, and (power) of taxation.

#120 pinstripe on 03.24.14 at 12:30 pm

#117…..Bottoms_Up

————————————————————

Were the bills for real? Bogus?

Excellent Marketing!!!

OTOH, there would be more waste generated by giving the money to charity, with administrative cost consuming the total amount plus.

#121 Holy Crap Wheres The Tylenol on 03.24.14 at 12:33 pm

#32 Smoking Man on 03.23.14 at 8:04 pm
Remember when I told you dogs (smoking men) to off shore you loot, well here it comes.
Vanpire in red is coming after it,
http://www.thestar.com/news/queenspark/2014/03/18/tax_hikes_loom_for_upperincome_earners_in_ontario.html

Only thing left for me to do is mortgage my house to the 9s, and off shore that too.
Anit no way I’m capitulating to teacher…..
Extra Tax on income over 150k rediculous…..
You’re the CEO of a multi national company making millions and want access to this market. What would you do?
You would set up shop in Buffalo.
Liberals are mad, insane and will completly destroy Ontario…
Off shore it Now. She’s comming for it.

____________________________________________

I hate to say it but already don this to some extent. Have a remote sales office in USA. This is not new at all the Liberals have been gunning to tax us to death for years. The second McGinty got in office, he couldn’t implement his Health Premium (tax) fast enough. Given the Liberal’s proven track record of lies, broken promises, back-to-back scandals under OPP criminal investigations and their admitted theft of almost 1.2 billion dollars only to buy votes, never mind being in office as the Liberals should be behind bars.
We used to play this back in the sixties Smoking Man but it still rings true today!

http://www.youtube.com/watch?v=MbQiVQuiu04

#122 Hallelujah on 03.24.14 at 12:36 pm

So, these guys are casting in Toronto right now:

http://www.wnetwork.com/living/property-brothers-buying-selling-now-casting

Smoking Man, I think you gotta get on there.

#123 high Plains Drifter on 03.24.14 at 12:39 pm

In the occupation I dwelt in there was a concept known as being a “lifer”. It meant you kept the job as the centre of the universe, once the job was over, even if you had money, you knew living in isolation was intolerable. This shallow intellect is pervasive and I am sure the leaders of our thought processes are quite thrilled with this habitual human behaviour. Teaching people to have an abiding faith in the trustworthiness of our finance system is a part of the process of forming lifers but trying to bury the belief in owning your own piece of dirt takes things to a new level. When the corporate culture separated me from my workmates it was my real property that grounded me. Me, a former and possible present hippy made them pound sand if for just a little while.

#124 Snowboid on 03.24.14 at 12:55 pm

#88 Ripped on 03.24.14 at 5:03 am…

What’s with all the tech people on this blog who worked in Texas for AT&T at $ 50 an hour?

Picasso, Ben, Truth Hammer, Airhead Princess, Ripped?

I bet you all rented in the same ‘extended-stay’ hotel too!

#125 A Yank in BC on 03.24.14 at 1:16 pm

So basically what the CBoC is saying.. is that Canada will show the rest of the world that generally accepted rules of economics don’t apply to the RE market here, and that bubbles can continue forever. Right.. very credible indeed.

#126 Castaway on 03.24.14 at 1:18 pm

#48 Drill Baby Drill on 03.23.14 at 9:48 pm
Dear Pathetic Blog : if a so called investor wants to have a return approaching 3% per annum then just shop around for GIC’s paying close to that. Many local Credit Unions have higher rates to attract money and many approach 2.5 to 3% per year.

If you have piles of money, sure. But few do. — Garth
————————————
Not true. For as little as $5,000 you can still get 3% on a GIC which is government guaranteed therefore ZERO risk. (the US risk free rate is less than .5%). Just check on Ratesupermarket.ca.

We all know you hate GICs Garth, but dont lie to support your position on them. They can work for risk averse situations and form a small part of a balanced portfolio.

And before everyone starts posting about how they earn much better returns elsewhere please note two points

1. The 3% has no risk and is 100% govt guranteed.
2. I also invest elsewhere and did 30% on my US S&P ETFs last year and 15%+ on some others. But still keep drop dead money in GICs where I know it will be come whatever.

They can and do work but like everything else need to be carefully looked at and compared with other market options.

My point was clear: the only people who can afford to take no risk are those who already have piles of money. Does that include you? — Garth

#127 Smoking Man on 03.24.14 at 1:29 pm

So MH730 has been found, well sort off.

The PM of Malaysia, reports a new un proven technology is undeniable proof your loved ones are dead. Somewhere in the Indian Ocean.

Oh and they received this important info in the form of text message.

Doesn’t matter that we don’t even have a single rivet in our possession.

Take if from the teachers pulpit of authority as fact.

Attention terrorists, launch your thermo nuke attack from the Indian Ocean, no radar there….

I smell a rat……..

#128 Tim on 03.24.14 at 1:30 pm

Bahahaha….(deep breath)….aaaaahahahahaha!

http://projects.thestar.com/race-to-rhodes-ave/

#129 Gary on 03.24.14 at 1:32 pm

After an horrific automobile accident, I am back up and running again.

Calgary real estate prices have gone no where in 8 years. Absolutely no where but down.

http://albertabubbleblog.blogspot.ca/

#130 Victor V on 03.24.14 at 1:36 pm

http://www.thestar.com/news/gta/2014/03/23/highend_shops_in_downtown_oakville_closing_doors.html

Higher rents and parking rates, as well as competition from outlet malls, online and cross-border shopping, are mentioned by struggling business owners. But the recent recession’s impact on Oakville’s affluent class is the theme they all turn to.

“They’re cashed out. We call it ‘maxed’,” says Greg McKinnon, owner of The Running Company. “They’re paying $2,000 a month for the Beamer and the Land Rover in the driveway, they have million-dollar mortgages and $50,000 in landscaping. There’s not a lot of money left over.”

Oakville has long been known as an affluent community. According to Statistics Canada data from the 2011 census, the number of Oakville residents over the age of 15 earning more than $191,000 was four-and-a-half times the national rate, with 4.5 per cent of its residents in that category, compared to only 1 per cent for all of Canada…

“I’ve lost so many friends that have left main street. All the mom-and-pops are gone.”

Julia Hanna is an executive member of the Oakville Chamber of Commerce and the past chair. She also owns a downtown Oakville restaurant. “I’ve been a business owner in downtown Oakville for 30 years. I’ve never seen it this bad. Never.”

#131 Old Man on 03.24.14 at 1:41 pm

#118 No Bubble:- I was at the home of my old university professor for dinner one night near Guelph, as he set me up with a young lady for the evening; we were going, all four of us to this wild club later. He was an English professor at UofT, and after he downed a few pints announced he was going on stage to rant some poetry. He did it, and I said never again am I coming for dinner, as the crowds were cheering him on all night long with free drinks. He had a few words of wisdom for me, “Never Say Never.” I went back for another dinner, as it was too much fun.

#132 World According To Garth on 03.24.14 at 1:56 pm

DELETED

#133 World According To Garth on 03.24.14 at 1:58 pm

That RBC marketing ploy is despicable. It should be illegal to post additive gains like that, especially when the reality is 0.5-3% per year.

—————————————————–

Even less than that after “Management Expense (new BEEMER) Ratios”‘

#134 TrumpVu on 03.24.14 at 1:59 pm

Should we use “O” in reference to our new finance minister. If we do, there’s going to be a lot of sentences like “HO stole my money”. Maybe we should use a 0 (zero).

#135 Victor V on 03.24.14 at 2:07 pm

Spend 10 minutes reading this article from The Star’s Susan Pigg. Quite an homage to the house-horny, property virgins.

http://projects.thestar.com/race-to-rhodes-ave/

#136 zoe on 03.24.14 at 2:12 pm

Thanks for this post Garth. I had seen these advertisements and was curious…

#137 X on 03.24.14 at 2:13 pm

Read another Toronto Star article today, what they try to pass off as news is a shame. I won’t even post the link. I feel sorry for the RE buyers now, who think they are getting a home now or never, or who think they will be able to continue to carry the cost of their home 5 years from now as rates rise.

I wish the gov’t had done more to protect the sheep from slaughter.

#138 World According To Garth on 03.24.14 at 2:15 pm

Ripped on 03.24.14 at 5:03 am
#47 Brian Ripley

Here check out these fantastic wages in Alberta for Telecom/Tech

http://neuvoo.ca/view/?id=51396452#relatedId=47317287

$19 to $22 an hour for a college graduate… another words a Journeyman Telecommunications Electrician.

I made $50 U.S. an hour in Texas for AT&T where it cost me a third the amount to live.

So f#$k off with the high wage crap in Alberta
—————————————————————

This is the “Key” to it won’t end well in Canada. Wages in the private sector have not gone up in 15 years. The Main Slime Media and their Govt Worker buddies will never publicly acknowledge this because Govt Workers make nearly double (with benefits page for by taxpayers) than the average private sector worker.

And it is stupid expensive to live in Canada. You have to drive everywhere. Transit is bullshit unless you live in a Major city. Fuel is expensive. Food, utilities expensive. 57 kinds of taxes on top of income tax (mostly to pay for govt worker pensions).

Private Sector – tapped
Public Sector – leaches of Private Sector.

This will not end well.

#139 Holy Crap Wheres The Tylenol on 03.24.14 at 2:44 pm

Ya Think? Bubbles what bubbles? Garth you are now officially known as a “Correction Hawk” according to the Star. Correction hawk doesn’t sound too bad, could have been a stool pigeon, dead duck, tweety bird, red robin, basted turkey, chicken delight. Correction hawk, yes I like the sound of that. It implies that you are are the top of the food chain. We will be looking up into the sky’s for your shadow!

http://www.thestar.com/business/2014/03/24/no_housing_bubble_to_burst_conference_board_says_in_major_survey.html

#140 espressobob on 03.24.14 at 2:46 pm

#115 Macrath

The whole idea of owning prefs in a non registered account is to provide an income stream somewhere down the road. Averaging in slowly year after year helps to smooth out those ups & downs.

Keep in mind the dividend tax credit which allows you to keep more of your profit (dividends), than interest made on bonds which are fully taxable at your marginal rate.

#141 SRV on 03.24.14 at 2:48 pm

Just when you thought you’ve started to grasp the depth of the depravity that is western banking(?), you realize you have barely scratched the surface…

http://wallstreetonparade.com/2014/03/document-jpmorgan-chase-bets-10-4-billion-on-the-early-death-of-workers/

#142 World According To Garth on 03.24.14 at 2:54 pm

#118 No bubble on 03.24.14 at 12:20 pm
“No housing bubble to burst, Conference Board says in major survey”
http://www.thestar.com/business/2014/03/24/no_housing_bubble_to_burst_conference_board_says_in_major_survey.html

Posted four times. The CBoC are purveyors of the status quo. I’d be shocked at any other conclusion. — Garth

—————————————————————–

CBoC is funded by Taxpayers. Of course they are going to blow sunshine up your ass. That is what the Govt pays them to do.

Funded exclusively through the fees we charge for services to the private and public sectors.
Experts in:
Conducting, publishing, and disseminating research;
Forecasting and economic analysis;
Helping people network;
Running conferences;
Developing individual leadership skills;
Building organizational capacity.
Specialists in economic trends, as well as organizational performance and public policy issues.
Not a government department or agency, although we are “”””””often hired to provide services for all levels of government.”””””””

#143 World According To Garth on 03.24.14 at 2:57 pm

ALLOT of cherry picking going on these days Garth. Where is this “balanced” you talk about?

#125 World According To Garth on 03.24.14 at 1:56 pm
DELETED

Off-topic and defamatory. — Garth

#144 Nemesis on 03.24.14 at 2:57 pm

#MandarinMondayMischief #SoCalFengShui #WokKitchens

“People are getting money out of mainland China and sticking it here.” – Mr. Mel Wong, President, West San Gabriel Valley Assn. of Realtors

[LAT] – Wealthy Chinese home buyers boost suburban L.A. housing markets

…”The Chinese buying spree sometimes borders on recklessness, said Dominic Ng, chairman of Pasadena’s East West Bank, the largest Chinese-American bank. East West specializes in home loans for Chinese buyers with no U.S. credit histories, but often enormous down payments.

Unwary buyers accustomed to urban China’s $1-million-plus luxury flats take “housing tours” and snap up homes east of Riverside or in Arizona without considering the cost of property taxes (China has none) or maintenance of homes with pools and yards.

“They look at the dinky little apartment in Shanghai or Beijing — you know, like one-fifth the size — and they say this is affordable,” said Ng, who fears prices will appreciate less than the buyers expect. “They are buying for speculative purposes.”

Others want the prestige of a San Marino or Pasadena mansion, even if paying for it means working in China and rarely visiting. One of Ng’s neighbors bought a Pasadena estate, then lived there for just two days out of the two years that followed.

“He was not renting it out,” Ng said. “People have so much money, they just say, ‘What the heck. It’s a nice neighborhood. I might as well just buy one.'”

It’s a story echoed by Patti Hahn of Arcadia, gesturing to the house next door, which sold for $2.45 million last year, up from $1.55 million in 2006, the last time it changed hands.

“No one lives there,” Hahn said.”…

http://www.latimes.com/business/la-fi-chinese-homebuyers-20140324,0,2832012,full.story

#145 Shawn on 03.24.14 at 3:12 pm

Bank Usury is evil? (Not)

Ralph’s post at 50 contains much wisdom: He said

That’s right, pass your own ignorance on to your children, and they’ll spend their lives blaming banks and the Jews (I googled ‘Sumerian Swindle’) for all their problems.

If instead you teach them that you’ll lend them a handful of corn if they’ll plant and grow it and return two handfuls to you when it’s time to harvest, and they’ll have several handfuls left over to feed themselves, save for planting next year, and sell at the market, you’ll be imparting a useful lesson. No dirt farmer ever got a private loan of seed at much less than the typical 50% interest for the season which dates back to Ptolemaic Egypt.

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

Those (not Ralph) who spout that banks just make money for doing nothing are beyond help. And in any case if banks make abnormnal profits the solution is to buy their shares.

Ralph illustrates that borrowing, even at very high rates of interest CAN BE be highly beneficial to a borrower when the money is invested in seeds to grow crops by a farmer who has land. (Farmers create wealth in a most basic and obvious way).

Ralph also notes that in ancient times the interest rate may have been 50%.

Somewhere I read that interest rates have basically been declining for thousands of years. Perhaps the high rates of the 80’s were totally abnormal. It could be that low rates will indeeed be with us permanently.

Demographically we have many younger seniors with pots of money to invest (loan out) and fewer young adults needing to borrow. This leads to low interest rates by simple supply of and demand for money.

Corporations are growing slower with less need to invest (borrow). This pushes down the demand for loans and pushes down interest rates.

So low interest rates may indded be the new normal.

If so, don’t hold your breath for lower house prices.

#146 airhead princess on 03.24.14 at 3:17 pm

Meat Puppet BOC Gov Poloz attacks the dollar…..again. What planet is this guy trying to hide behind? This guy is nutz with a capital ‘N’……… if theres a collsion with Harper….now warning CDN business to prepare to take a hit ‘in the national interest’….over Ukraine’….then neither of these guys has a lick of market sense. Canada can only benefit from the US shutting out Russian resource companies…….Canada will be a net winner in the export game.

“Meanwhile, events here in Canada added to the loonie’s demise. Bank of Canada governor Stephen Poloz presented a gloomy outlook for Canadian growth on March 18, saying he wouldn’t rule out rate cuts if the economy worsens. The Bank of Canada is now severely misaligned with the Fed, as Ms. Yellen shifts towards a tightening cycle. “The risks are that the BOC begins to raise rates months or even quarters after the Fed does,” says Mr. Rosenberg.”

There is no obvious truth in what the BOC meat puppet is pushing…….Are the Cons usining a ploy from the Liberal playbook…..crush Canadians aspirations…..poverty stricken needy people are easier to control……..they vote for whoever controls the welfare cheque.

#147 Smoking Man on 03.24.14 at 3:19 pm

Not coming to a MSM stand just yet, but in breaking news.

Yulia Tymoshenko the Darling of the West, new Ukrane pm hopefully was just caught on tape, seems the Ruskies have there own version of the NSA.

She said, see wants to nuke the 8 million Russians still living in Ukraine.

O boy……

Note to Western leaders…

Read Art of War by San Tuz……

Putins got it memorized….

Check!!!!!!

#148 joblo on 03.24.14 at 3:22 pm

What Conference is Boring Kanada?

#149 jess on 03.24.14 at 3:43 pm

“This kind of predatory activity is reprehensible.”
-charging them up front for loan modification services that they didn’t provide.

Attorney General Kamala D. Harris Announces Seven Arrests in $6.2 Million Mortgage Fraud Scam
February 26, 2014
===================
Attorney General Kamala D. Harris Busts Statewide, Multi-Million Dollar Housing Scheme
FRESNO – Attorney General Kamala D. Harris today announced the arrest of five individuals who allegedly ran a statewide housing scheme by using adverse possession laws to fraudulently seize at least 23 homes in nine counties.

“It is reprehensible that these individuals lied to the courts in order to steal homes and in some cases to demand payment from the rightful owners,” Attorney General Harris said. “The conduct of the attorneys in this scheme is even more offensive because they violated their ethical duty to be honest to the courts. I am pleased that my mortgage fraud strike force, together with our state and local partners, continue to investigate and prosecute these crimes against our people and our economy.”

Under California law (Code of Civil Procedure 325), an individual can claim adverse possession of real property if he or she has occupied or claimed it continuously for at least five years and paid property taxes for that period of time, among other requirements.
https://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-busts-statewide-multi-million-dollar-housing

#150 sciencemonkey on 03.24.14 at 3:46 pm

I’m an aggressive young investor, and this is my breakdown.

ZDV 20% CDN dividend equity
XRE 10% CDN REIT
ZCN 20% CDN equity
XEF 20% Non-US Equity – unhedged
XEC 10% Emerg Equity – unhedged
VUN 20% US Equity – unhedged

You’ll note that I have only 20-30% of what you might loosely call fixed income. Why choose dividend CDN equity ETF (ZDV) instead of preferred ETFs like ZPR or CPD? ZDV pays a 4.2% dividend, and I figure that dividend equity will not be rate-sensitive like a preferred share ETF and might have some capital gains over time. Of course going all equities like I am carries risk, but again, I’m aggressive and young.

#151 Pope Smokin' Snugglebums the 666ad on 03.24.14 at 3:54 pm

#127 Smoking Man on 03.24.14 at 1:29 pm — “So MH730 has been found, well sort off. Oh and they received this important info in the form of text message. Attention terrorists, launch your thermo nuke attack from the Indian Ocean, no radar there …. I smell a rat……..”

OTOH, it could be Chop Suey or Chop Shop “Telecoms expert Alan Spencer told MailOnline that if the phones are really ringing, they can categorically not be under the sea. . . . This means that if the phones are genuinely ringing, the plane needs to have landed on land – not in the sea – and be in a location where there is cell service, rather than landing in the middle of a jungle, for example. Perhaps this was not an ordinary plane crash.”

Sounds like a case for Sherlock Holmes at 221B Baker Street. Nukes, yes. Case solved? Not yet. Tally-ho!

#152 OttawaguyRenting on 03.24.14 at 3:57 pm

New Lawsuits suggest that Fargo Wells had a manual on how to fudge mortgage applications handy for employees

GoOoOOOooOOOogle – Mass Fabrication of Foreclosure Documents Fargo Wells

Reading is fun.

#153 jess on 03.24.14 at 4:06 pm

nemisis
did you know the city of london has 2 mayors?

http://www.the-american-interest.com/articles/2014/03/19/the-much-too-special-relationship/
rehypothecation
when a loan is borrowed against collateral, and the new holder of that collateral re-pledges it to someone else, to back fresh borrowing—and so on. U.S. rules restrict this practice but in London they have been able to do it without limit.

#154 bob dog on 03.24.14 at 4:07 pm

This is outrageous but you cant blame banks for being evil. Its in their nature. The blame falls squarely on the corrupt puppet regime in ottawa which allows the banks to carry out their criminal activity.

#155 Penny Henny on 03.24.14 at 4:18 pm

#124 Snowboid on 03.24.14 at 12:55 pm
#88 Ripped on 03.24.14 at 5:03 am…

What’s with all the tech people on this blog who worked in Texas for AT&T at $ 50 an hour?

Picasso, Ben, Truth Hammer, Airhead Princess, Ripped?

I bet you all rented in the same ‘extended-stay’ hotel too!
——————————————————–

Those were the days, weren’t they.

#156 espressobob on 03.24.14 at 4:20 pm

#150 sciencemonkey

20 to 30% fixed income? Where?

#157 TurnerNation on 03.24.14 at 4:27 pm

Solution is Dollarama (DOL.TO)!
It’s always a buy if holding above the 200 day MA.

I’m heading there this week for high margin essentials

#158 TurnerNation on 03.24.14 at 4:28 pm

^last post is re. #130 Victor V on 03.24.14 at 1:36 pm

#159 Renter's Revenge! on 03.24.14 at 4:51 pm

@2 Dave:

Garth doesn’t like to talk about Winnipeg. He calls it an “anachronism from the railway age”. Maybe he had a bad experience here once?

I’m from Winnipeg. What I’ve noticed is that while there are plenty of new single family home developments going up in the far corners of the city, none of the new houses are “starter homes”. The result seems to be an increasingly large number of immigrants and young buyers getting in to bidding wars for the small, older houses in the $200k – $300k range. Stories abound from people at work about competing against “18 other bidders”, with the house going for “$50k over asking”, etc. This doesn’t seem to be happening for houses priced over $350k. I’m just going wait it out, renting cheaply, saving and investing until I can pull myself out the cess pool, above the writhing masses of micro-organisms fighting over the meager supply of starter houses, and buy something worth at least $400k. I don’t see any point in buying a small house or condo here when I can rent one for half the cost.

#160 sciencemonkey on 03.24.14 at 4:54 pm

@156 espressobob

The ZDV and XRE, sorta, but not really.

#161 Macrath on 03.24.14 at 4:54 pm

I think I found my answer !

“Longer-term maturities with fixed yields provide a hedge against deflationary environments. The problem with long-maturity preferred stocks is that the call feature negates the benefits of the longer maturity in a falling rate environment. Thus, the holder doesn’t benefit from a rise in price that would occur with a non-callable fixed rate security in a falling rate environment. If the issuer is unable to call in the preferred stock, it’s likely because of a deteriorating credit, putting the investor’s principal at risk, the benefit of the high-yielding longer maturity is unlikely to be realized by the holders of these callable instruments.”

© 2012 CBS Interactive Inc

#162 Assquatch on 03.24.14 at 5:06 pm

#143 World According To Garth on 03.24.14 at 2:57 pm
ALLOT of cherry picking going on these days Garth. Where is this “balanced” you talk about?

ALLOT – did smoking man teach you to spell?

#163 Bram Cotton on 03.24.14 at 5:51 pm

Garth,

enjoy your blog and read it daily. I agree with you regarding the RBC Index linked GIC’s. I have some from another financial institution that are unlimited on the growth and my last ones that came due returned 6.5% per year which I think is okay? They do have ones that are limited but in reading the prospectus I caught the limit and have avoided.

Any thoughts?

#164 Bill Gable on 03.24.14 at 5:53 pm

Say goodbye to HAM.

Don’t say we didn’t warn you: Read on, MacDuff.

The Music Just Ended: “Wealthy” Chinese Are Liquidating Offshore Luxury Homes In Scramble For Cash” = **OOPS

One of the primary drivers of the real estate bubble in the past several years, particularly in the ultra-luxury segment, were megawealthy Chinese buyers, seeking to park their cash into the safety of offshore real estate where it was deemed inaccessible to mainland regulators and overseers, tracking just where the Chinese record credit bubble would end up.

LINK: http://tinyurl.com/nuuuvhr

#165 espressobob on 03.24.14 at 6:25 pm

#161 Macrath

Your research is all well and good, but how will that help you as an investor?

#166 espressobob on 03.24.14 at 6:46 pm

#163 Bram Cotton

Link? A few people I know brag about these GIC’s!

#167 Nemesis on 03.24.14 at 6:57 pm

@Jess/#153…

Yep. Or to put it another way… they don’t call it “TreasureIslands” for nothing.

http://www.amazon.ca/Treasure-Islands-Uncovering-Offshore-Banking/dp/0230341721

[NoteToJess: Never met the City’s LordMayor… but – in a previous life – a former TillerGirl who eventually became Speaker of the House of Commons, better known today as Baroness Boothroyd of Sandwell, did once personally hand a rather naughty parchment to me. That’s ChorusGirlz for ya. What we would do without them?!?]

#168 Scully on 03.25.14 at 1:19 am

Smoking Man
The Indian Ocean really is Mysterious part of the world. Have you looked up the Vela-incident?

#169 Ross Andrew on 03.25.14 at 9:02 am

http://www.meridiancu.ca/personal-banking/investments/index-linked-GICs/canadian-market-GIC/Pages/default.aspx

This is Meridian with S&P/TSX Exposure and there is an international Index Fund as well. The rest have limited percentages you can gain with them.

The guy at Meridian told me the ones that came due before my first one did had returned nothing so there is risk