Debt junkies

ELEPHANT modified

If you feel like you’re not getting ahead, you’re not. The inflation rate last month was 2% annually. The average pay increase is 1.8%. Energy prices are 8.4% higher than a year ago. And you know about real estate. Don’t let anyone tell you the middle class isn’t getting pooched.

The low interest rates that realtors come here to puff about are a big part of the problem. They’ve allowed people to take on elephantine levels of debt, while pushing property values to record highs. Low rates have also made savers and the risk-averse massively less well off. Anybody not making at least 3.5% in a savings account or a GIC is losing money. In order to build wealth, you need to double that return.

All-time indebtedness means borrowers are transferring wealth to lenders as never before. Those ‘lenders’ aren’t just bankers, but everyone who owns equity in the banks (or the wider economy) through ETFs, mutual funds, stocks or preferred shares. Low rates, which encourage people without money to borrow and buy houses, make rich people wealthier. They play an absolute role in the yawning chasm now opening up between the 1% and everybody else.

Of course, the debtors don’t see it that way. They’re all trying to play the leverage game, borrowing heavily at record-low rates to buy assets at all-time high levels, in the desperate hope there’s more to come. For a while, maybe there is. But with every mortgage payment, the wealth transfer continues.

And it appears to be a uniquely Canadian thing. Remember this chart I passed on recently:

DEBT TO INCOME modified

Given pathetic wage gains and rampant increases in the goods and services people need to get by (including houses), the chart above tells us one thing: middle-class people are living beyond their means and must borrow to maintain their lifestyles. It’s financial suicide.

An outfit called Bensimon Byrne, based in Toronto, came to this conclusion recently when it looked at the disconnect between how the economy’s doing, and what’s going on the in the lives of most citizens. They asked folks about their debt. If rates were to increase by just 1%, they found 27% of us would have “a big problem” making the payments. In fact, 60% would have “some problem” if that were to happen.

Half of Canadians now have more debt than savings, it says. And the cost of living is crushing them – the number one concern for consumers. Despite a real estate boom that’s supposed to make everyone wealthy, half the people surveyed say they’re worse off than a year ago.

And no surprise here: “Those most likely to be losing ground are over the age of 45 and middle to lower income. The more affluent one is, the more likely one’s fortunes are to be improving year over year.”

All this brings us to a conclusion which should be obvious. It’s an unsustainable situation. When half the population has more debt than savings and average wage gains trail inflation – meaning real incomes are falling – the current real estate market is built on sand. Today realtors in Vancouver said the benchmark price for detached homes has risen 5% to $966,500, about the same as where the average SDH now sits in Toronto. But families don’t earn, save or invest more. They just spend more. And borrow more.

Canada now has the same inflation rate as the US. But their family debt is decreasing. House prices are 60% lower, and people can sign up for a mortgage with a low rate that doesn’t change for 30 years.

In Europe the central bank is about to drop interest rates to zero from one-quarter per cent, because households are borrowing less and the economy teeters on the brink of deflation.

If none of this concerns you, please go here.

191 comments ↓

#1 Paul on 06.03.14 at 7:28 pm

http://globalnews.ca/news/1370916/canadian-retailers-expect-to-slash-prices-as-consumer-demand-shrinks/

#2 prairie person on 06.03.14 at 7:44 pm

Had some time this afternoon. Went to Costco, not to shop, but to see what was being sold and bought. Wed. afternoon. The place was busy. Carts were full. People with dolly’s hauling away large items. One surprise, there is so much demand for big (70″) TVs that they are small mountains of them. These used to be specialty items. 2500.00. Lots of summer yard items. BBQ, table and chairs, canopy, lounge set, many necessary small items. Likely cost 10,000.00. No one looking over this stuff looked like they were going to pay cash. I earlier saw a yard in Winnipeg set up with this type of toys for what is often a six week season. If one is lucky, 12 weeks. No wonder there are mega millionaires in China. Why complain when we made them rich. Sure would be nice to see people’s bank accounts. I doubt if it is people with the house paid off that is buying this. And, on the parking lot, young couple, can’t be more than in their late 20s, climbing out of a 65,000.00 truck. I checked on the price. Yup, 65,000.00. Have we all gone mad?

#3 Brian on 06.03.14 at 7:44 pm

http://www.vancouversun.com/business/Hong+Kong+audience+hears+plans+Canadian+immigrant+investor+program/9643664/story.html

#4 Smartalox on 06.03.14 at 7:45 pm

So here’s another elephant in the room:

The only way that debt-to-income ratios this high can be sustained is if assets are used as ‘collateral’ for credit, like a home equity line of credit, or a mortgage.

What happens if the value of the underlying assets goes down, and loans start to get called? Liquidation of assets – at any price.

#5 Teacher's Ass-istant on 06.03.14 at 7:48 pm

I’ll pass on the become a realator stuff but if the right people are reading I’m available for one of those senate seats. More of them are becoming availble all of the time and with an appointment there I would rapidly become at least close to the 1%.

#6 Robert agnew on 06.03.14 at 7:48 pm

I trust the brain trust of Stevie Harper I have confidence that we are DOOMED – the gilded age of petrol barons , banana politics and plain poor workin youngins and folkies is upon us – working for the corporate kleptocracy of the race to the bottom. Thanks Reformercons – your kept your biblical promises that we shall have riches in heaven and only debt and suffering on Earth.

#7 hudak = mike harris on 06.03.14 at 7:49 pm

Hudak has the worst math skills and I fear his daughter will fail math. hudak believes in his heart and his mind he will create a million jobs by cutting 100,000 jobs. What a moron. Oh yeah 10 jobs over 8 years is 80 jobs according to hudak math. Hudak will try to finish what mike Harris started. We don’t need a mad man like that.

#8 hudak is an idiot on 06.03.14 at 7:51 pm

How can anyone vote for this idiot? As a conservative I will not vote for this idiot. The conservatives have to get rid of this idiot. Hudak gives conservatives a bad name.

#9 SHELTER THE MONEY NOT THE PEOPLE on 06.03.14 at 7:52 pm

Gold is the currency of Kings!
Cash is the currency of Merchants!
Credit is the currency of Slaves!

#10 TurnerNation on 06.03.14 at 7:52 pm

If you flip over to AM640 radio most commercial ads are for bankruptcy or employment lawyers, weightloss services, home repairs, mortgages, and fancy coloured diamonds.

Yep that same outfit milked the gold/silver scam dry. Years of price losses adding to their margin loan interest. Now on to a devastatingly illiquid, more useless thing dug up from the dirt.

Would be better off buying barrels of oil for the basement. At least this is useful in daily life.

#11 TurnerNation on 06.03.14 at 7:53 pm

Herb your ramrod ideals hold little truck here. Save it for the parade grounds. In China.

#12 Smoking Man on 06.03.14 at 7:55 pm

I declare Andrea the uncontested winner in the debate..

Hope fully she splits the commies and Mr bean gets in.

#13 hudak telling stories on 06.03.14 at 7:55 pm

Did hudak even say anything? He told a bunch of family stories. I thought I was listening to my father in law rambling. Did you see his trying hard to smile? Thanks for the stories about you teaching your daughter math which Btw you suck at hudak.

#14 Mishuko on 06.03.14 at 7:57 pm

So if EU is experiencing close to 0inflation because no one is borrowing, would that mean Canada will be in a similiar situation right about now? I mean we aren’t increasing our borrowing nor decreasing the debt and holding a status quo.

I can’t see our inflation staying this high for more than a few months.

#15 shane on 06.03.14 at 7:58 pm

Garth, how much of a loan could I get from a bank or a financial institution so I can invest it with a financial advisor is that possible?

Leverage carries risk. Be careful. — Garth

#16 Kris on 06.03.14 at 7:58 pm

#6 hudak = mike harris on 06.03.14 at 7:49 pm
Hudak has the worst math skills and I fear his daughter will fail math. hudak believes in his heart and his mind he will create a million jobs by cutting 100,000 jobs. What a moron. Oh yeah 10 jobs over 8 years is 80 jobs according to hudak math. Hudak will try to finish what mike Harris started. We don’t need a mad man like that.

YES WE DO NEED HIM TO AXE ALL THOSE CUSHY GOV JOBS.
GO Hudak go !!!

#17 Observer on 06.03.14 at 8:03 pm

The low interest rates that realtors come here to puff about are a big part of the problem. They’ve allowed people to take on elephantine levels of debt, while pushing property values to record highs.

How is this policy not punishing young families’ finances in Canada? Who benefits the most?

#18 Smoking Man on 06.03.14 at 8:04 pm

#8 hudak is an idiot on 06.03.14 at 7:51 pm

I’m not voting for Hudak.

I’m voting for Doug Holiday…
The next premiere of Ontario after this election runs it course.

Had a great cook out at his campaign office last Saturday.

#19 RayofLight on 06.03.14 at 8:04 pm

95% of the Liberal Politicians give the rest of them a bad name!

#20 pinstripe on 06.03.14 at 8:06 pm

Why is there so much concern about people with debt?

Leave them alone. Let them make their own financial decisions.

#21 Millenial-Falcon on 06.03.14 at 8:09 pm

Economy is booming here in BC….party’s not gona stop till interest rates hit north of 6 percent. When’s that gona happen? 2025? Give it up guys….come outa the basement and goto the beach it’s beautiful out!

#22 Bobs ur uncle on 06.03.14 at 8:09 pm

#17 Observer
who benefits most?

Boomers who own their houses. IE, policy is aimed at those who bother to vote.

#23 Kris on 06.03.14 at 8:10 pm

76% of new home purchasers in Vancouver expect to receive money to make it happen from their parents according to global tv……holly shit….some healthy re market….LOL

#24 Don Derc on 06.03.14 at 8:21 pm

Welcome to an economy based on consumerism and consumption – better known as the American casino. A radio ad, for a local car dealer mentions a 2014 Ram 1500 hemi for $20K – with $132 bi weekly payments over 96 months. The astonished “customer” says “what about the $10K I owe on my credit cards and the ad continues with “$190 bi-weekly”.

I know most people add on credit card debt to their refinanced mortgage (which I say is a no-no) but now through a dealership/car payment?

So if the interest rates stay low, because Europe drops to a zero per cent bank rate, I see the heavily leveraged home/condo buyers in Cda, of the last 4 years, delay their slaughter until say 2017.

Plus why do I get the feeling that a BOC increase on the rate, would not be our choice. What nefarious gov’t holds the debt for the usa and cda? – financially, are our federal/provincial/municipal governments truly master of their domain when it comes to finances?

BC – $90 billion debt
ONT – $200 billion debt
QC – $250 billion debt

#25 Observer on 06.03.14 at 8:25 pm

@ Bobs ur uncle

…..so if you’re under 30, have a desire to be responsible and save and not take on huge debt and meanwhile, try to have kids…the boomers and the politicians they’ve voted in have already spoken? Gotcha.

#26 Old Man on 06.03.14 at 8:28 pm

Hudak – who dat? I will never vote for a man with a smile and a grin who has a girly voice.

#27 Joe2.0 on 06.03.14 at 8:31 pm

Re Garth 161 previous post
“Now we hate Persians too? ”

Ouch…

No I don’t hate Persians, it’s Persians that we know who explained how a group pulled out with the Shaw with millions of stolen money artwork and jewels for starters.

And a bunch of them settled in the British Properties, in West Vancouver.
(The areas called that it’s not a racial slur)
It’s a fact.

I don’t blame people for wanting to live here.
I have travelled to many 2nd and 3rd world countries in the course of doing charity work, we help people of all races, and we don’t get paid.

What bothers me is the blind eye our immigration policies turn towards certain people or groups that have the same common denominator, cash.

To think that people aren’t bypassing the “rules” is naive
The banks have broken the laws, politicians will lie, but immigration doesn’t because they have more integrity?

Don’t think so.

#28 Ralph Cramdown on 06.03.14 at 8:35 pm

Welcome to Canada. The Prime Minister, always classy, mumbles an announcement of a Supreme Court appointment on an airplane.

Meanwhile, on a faraway continent, Canada’s immigration minister announces new immigration policy — to the South China Morning Post. When did I wake up in a country where I have to read foreign newspapers to learn of government policy in a timely fashion?

If they’re just selling citizenship, they could at least maximize value for those of us already here. Auction off 100 visas a day on the steps of the consulate in HK.

http://www.scmp.com/news/china/article/1453230/chinese-welcome-canadas-new-investor-visa-stricter-rules-apply

#29 Smoking Man on 06.03.14 at 8:35 pm

#26 Old Man on 06.03.14 at 8:28 pmHudak – who

#30 hudak = recession on 06.03.14 at 8:37 pm

I will not vote for a recession and so I will not vote hudak. Hudak is a moron who was mike Harris right hand man. We all remember the mike Harris days of recession , lay offs and closed hospitals and schools. Oh yeah he sold the 407 for pennies on the dollar to his Spanish buddies. Hudak a true mad man economist who doesn’t know how to do math.

#31 Piketty Pocket on 06.03.14 at 8:39 pm

I don’t get the thematic relationship between the photo and the post’s content. Please enlighten.

#32 will on 06.03.14 at 8:39 pm

That CREA webpage is hilarious! A bachelors degree in real estate?! My god what a bunch of shite. I’d rather flip hamburgers.

#33 Ralph Cramdown on 06.03.14 at 8:41 pm

“No I don’t hate Persians, it’s Persians that we know who explained how a group pulled out with the Shaw”

Nitpick: It’s the SHAH. The Shaw brothers are, depending on your location and tastes, either the controlling shareholders of your local cable company, or purveyors of fine chop-socky movies.

#34 Freedom First on 06.03.14 at 8:43 pm

Well said Garth. Debt junkies borrowing to finance a lifestyle. Financial suicide Garth said. I love this Blog, nothing but the truth.

It is startling to read some of the comments I read on this Blog on a regular basis. Like: “What does it matter about the price of a house when you pay for it over 25 years?”. I believe this to be one of the all time stupid comments on here, and yet I read it in the comments on a regular basis. There is many many reasons this is stupidity at its finest, but, let’s stick to just one today. Like in the U.S. and other countries that went through their own debt insanity, because when, and it will happen, consumers are tapped out, then the SHTF. Any # of reasons can bring this to happen, but happen it will, and when it does, people stop buying, and good luck paying your daily expenses and debt with no job. This is only one scenario, but there is a very wide variety of things that can happen in life that will interfere with your plan of when to sell your house. Garth has pretty well covered all of the scenarios, but I think many people have poor reading comprehension skills. Or, they are brainwashed, or, they are just stupid.

#35 Old Man on 06.03.14 at 8:44 pm

#29 Smoking Man – give him a ukulele and he can join Caesar’s all star band; his name is Tim. Get it)

#36 Bill Gable on 06.03.14 at 8:45 pm

ZIRP has driven the consumer to take on a life of debt servitude.

Cue up Tennessee Ernie Ford (*I’m dating myself) – because a lot of folks will ‘owe their soul to the big bank store’.

Under 40’s don’t think there has ever been a correction, a Depression.

It’s like everyone thinks they should be driving a 65 thousand dollar truck.

Yeah, insane.

Maybe it’s the chemtrails, or Justin Trudeau’s fault.

#37 Dean Mason on 06.03.14 at 8:59 pm

All these repeating reports by so called professionals, experts about what if a 1.00% increase in mortgage rates happens, how will this impact you financially. Will they lose their house?

What cuts are they willing to take and can they make a long term change in their lifestyle?

Will they have a plan to deal with all their debts?

They never ask the question what is going to happen when all their property taxes, heating and electricity costs, water costs, H.S.T, home insurance, repairs and maintenance, condo fees etc. are double or more in 10 to 15 years at the minimum.

A homeowner in Toronto that has a $600,000 house that pays at least $13,000 a year in all these expenses, taxes, costs today but will be paying $26,000 to $35,000 a year in 2024 to 2029.

Condo owners paying condo fees of $450 a month today but will be paying condo fees of $900 to $1237 a month in 2024 to 2029 are going to be condemned.

This is not including all the other future increases in the general cost of living from food, gasoline, transportation costs, auto insurance, repairs, maintenance, medical, clothing, income taxes etc. that many people will certainly face.

This is not even including the massive pile of mortgage, consumer debt picture that Garth mentioned today on his blog, forum.

They are too busy watching American Idol, sports or America’s got talent. Keep the masses distracted and as they say in the movies, it will all work out. Not!!!!!!!

#38 Herb on 06.03.14 at 9:01 pm

#11 Turner Nation,

are you talking to me?

#39 Hillbilly on 06.03.14 at 9:03 pm

comment # 30 Hudak = recession

It seems that it is you who “…doesn’t know how to do math”.

Continuation of the spending policies of either the Liberal or NDP will ensure the further erosion of the quality of life for all Ontarians.

The attempt to finance these expenditures through the raising of personal and corporate taxes, fees, etc. will hasten the departure of businesses, tax base and jobs.

A recession would be an “upside development” from that grim scenario.

While no fan of Hudak, he is the only viable alternative this time around to arrest the out of control spending in the province.

You, like Wynne and Horvath think you can spend your way to prosperity and that huge indebtedness somehow carries no consequences.

Learn to do ‘ real world’ math before criticizing others.

#40 sheane wallace on 06.03.14 at 9:08 pm

We are evidently witnessing the last years of the credit money era.

The rule always has been: earn and then spend.
Our grandfathers did not have mortgages, paid in cash for everything. No money, no purchase, no inflation.

I understand the fractional reserve banking and the desire to get something for nothing but what the zero interest rates is achieving is to put the last nail in the coffin of the credit money.

What is wrong with spending the money that you saved and not spending somebody else’s money?
The moral hazard of nill-ionairs – people with no money that live in million dollar homes at the expense of the savers and taxpayers is outrages.

Once the inflation picks up (yes they will lie about it) and the rates need to be raised the thing will hit the fan
and the currency would be perceived for what it is – a necessity to have for everyday purchases but not really store of value in mid to long run, our currencies are not really money, money are a store of value and the currencies are worthless piece of crap.

I would be convinced otherwise if they let the market determine the interest rates and then watch for interest rates north of 6-7 % (follow the energy increase – 8.4 %…)

I don’t really care that Canada’s economy is crappy and people can not pay me market interest rate, I am simply moving my money to different markets that provide better returns. It is that simple.

The powers to be can fake and lie as much as they like but once the capital and the quality professionals move out they would be left with the printing press.

Nobody will work for nothing in this open world.

#41 Hillbilly on 06.03.14 at 9:10 pm

Freedom First – comment #34

I’d go with stupid, but perhaps there is that element that fantasy is preferable to their reality?

Yeah, stupid is probably most apt.

#42 Ray Skunk on 06.03.14 at 9:24 pm

#20
Why is there so much concern about people with debt?

Leave them alone. Let them make their own financial decisions.
———————————————-

Because it’s the sensible ones among us – those who saved and didn’t piss all our money up the wall on consumer luxuries – that will have to bail them out down the road.

And Garth, poster #7 – bringing up Tim Hudak’s daughter who has known health issues – lowest of the low.

#43 Habs76-79 on 06.03.14 at 9:24 pm

Minutes online, clicking ‘BUY IT NOW’ and a credit card can put you thousands of dollars in the hole, most often buying stuff that you really did not need, may not really use, nor truly appreciate. It may take months or years to pay this set of purchases off.

Hours in a sales office of an automobile dealership and working some financing jig can get you many tens of thousands of dollars in the hole with a payment schedule that today is ranging between 6-7-8 years. Buying a car/truck that may very well be beyond your means and something that you may likely grow tired of well before the loan is repaid.

A couple of days with a “I need to wash my hands after I meet” realtor and a mortgage broker or banker buying a home that is in most parts of Canada at the top of the market or now even past such, picking up a debt that will likely take 25 years or so to pay off. That paying off of mortgage debt will often be extended and delayed as too many home buyers later feel a need to sell and move up taking on even more debt and/or borrow against the home often to buy even more crap they have little need for nor appreciation to own.

All three scenarios here can be very caustic to the better functioning of one’s life and the greater economy in the long run.

Not gonna end well!

#44 Mr. Reality on 06.03.14 at 9:36 pm

The link to the realtor page made me chuckle…..

Mr. R.

#45 Andrew Woburn on 06.03.14 at 9:37 pm

#41 gladiator on 06.01.14 at 6:40 pm
@17 Ayn Rand:
Re: The Snwoden stuff: whatever he said, see the video below and make your own conclusions.
Office furniture melting thick steel beams – all at once!
http://www.youtube.com/watch?v=hZEvA8BCoBw
===================================

Thanks gladiator

Of course anyone who questions anything at all about 9/11 is branded as a “conspiracy nut” but I find it hard to believe this group of architects and engineers are all wearing tinfoil hats. If anybody finds this video disturbing they should also google “Operation Northwoods”.

The Chinese government must be so jealous. In the PRC you have to shoot people or run them over with tanks to suppress dissent. In the US you can get away with anything by using public and media relations to write off concerned citizens as lunatics.

#46 Andrew Woburn on 06.03.14 at 9:40 pm

Bond yields are due for a comeback

http://www.investmentnews.com/article/20140603/FREE/140609986?issuedate=20140603&sid=INTEL&utm_source=MarketIntel-20140603&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text#

#47 Harbour on 06.03.14 at 9:42 pm

#21 Millenial-Falcon

Sorry dude wish I could, but I don’t have it. Not going to the beach on credit, thanks.

#48 crowdedelevatorfartz on 06.03.14 at 9:52 pm

aaaaaaaaaand the local Global TV propaganda in Vancouver this 6pm.

“Parents lending to their Virgin Offspring’!
The gist of the ‘news” story. All ok but parents may have to delay retirement………..

And then the break to the ads.

“Vancouver House! Its not just an address. Its a work of ART!”

http://www.google.ca/aclk?sa=L&ai=ChARdc3qOU-eGEIam-gODh4KYAuz67YEF5NyRy48B16_3QggAEAEoA1D62OTG-v____8BYP2Y-4DMA8gBAakC9HiMnrrArj6qBCJP0N9rNhH_GOVKr9K5tQrqHj-r9i-zcfdveYXL5rpO9ZVXgAeIiJMHkAcD&sig=AOD64_2J3Cpyl8bi6KpM7Um85DdWGqDYcQ&rct=j&frm=1&q=&ved=0CCMQ0Qw&adurl=http://presalesvancouver.ca/vancouver-house.html

I want to vomit.

#49 Bob Rice on 06.03.14 at 9:53 pm

interesting how the two “anglo-saxon” nations are worse off than the rest… so much for our “nose to the grindstone”, frugal Scottish ways..

#50 Joe2.0 on 06.03.14 at 9:58 pm

#33 Ralph Cramdown

Thanks, too much TV.

#51 devore on 06.03.14 at 10:01 pm

#4 Smartalox

What happens if the value of the underlying assets goes down, and loans start to get called? Liquidation of assets – at any price.

Asset-based lending end-game is not pretty. How do you wind down a pyramid scheme?

#52 devore on 06.03.14 at 10:07 pm

#24 Don Derc

I know most people add on credit card debt to their refinanced mortgage (which I say is a no-no) but now through a dealership/car payment?

Refinancing expensive debt with cheap money is absolutely the right thing to do, if you cannot pay it off immediately. As long as the debt is existing or could not be avoided (sometimes life happens). It is a no-no if you continually run up credit card debt hoping you can continually keep refinancing with magically increasing equity.

#53 Old Man on 06.03.14 at 10:10 pm

#39 Hillbilly – do you mean like the reformists in Ottawa under Caesar? Hudak is cut from the same cloth and is this your viable alternative? Methinks you got it all wrong with your twisted logic, and what is the going rate for a troll?

#54 devore on 06.03.14 at 10:13 pm

#27 Joe2.0

No I don’t hate Persians, it’s Persians that we know who explained how a group pulled out with the Shaw with millions of stolen money artwork and jewels for starters.

I get my cable from Shaw, they’re still around, no one’s pulling out or stealing money, and the Shaw brothers are not Persian.

#55 For those about to flop on 06.03.14 at 10:15 pm

Good to see Australians are only 3/4 as dumb as Canadians!!!

#56 Hessie Goodfellow on 06.03.14 at 10:18 pm

Interesting debate tonight..I think Horvath is a good stoic leader for Ontario. Can’t vote for Wynne’s Liberals because of the $1Billion+ Hydro Scandal. Can’t vote for Hudak because he is not trustworthy.

#57 Mark on 06.03.14 at 10:20 pm

“Nitpick: It’s the SHAH. The Shaw brothers are, depending on your location and tastes, either the controlling shareholders of your local cable company, or purveyors of fine chop-socky movies.”

Very witty! I like that, and was going to say something similar myself.

And WTF is it with the obsession with hating Hudak? Just because some overpaid civil “servants” will be cut isn’t the end of the world. Have you seen the sunshine lists? $150k+ for HR clerks at OPG? Compensation and employment in the Ontario public service is way out of line with the market reality, and cutting back will definitely create a lot of jobs in the private sector.

#58 Dual Citizen In Canada on 06.03.14 at 10:21 pm

My parents hate to see me rent so they have offered to help me purchase a home in this RE market. Being immigrants who arrived here in 1969, my parents believe, and still do, that all wealth is in a home as an investment. I just explained to them that all their hard earn money they made in this country will now go to the banks, effectively wiping out their life savings if I take them up on their offer. This is the bank’s master plan. Recoup all those government pensions paid out and steal it from the boomers. All the while creating an illusion of wealth and prosperity to the millennials. The next generation is seriously in trouble.

#59 Smoking Man on 06.03.14 at 10:29 pm

#46 Andrew Woburn on 06.03.14 at 9:40 pm

I’m with you on 911 inside job, so obvious, saying it went down any other way is an insult to logical thinking.

However, wrong on the bond markets. The sell off today was done by central banks.

A subliminal play to create an illusion of rotation hoping to prevent an equity free fall.

It might work. But then again.
The peasants have no money.

#60 Mark on 06.03.14 at 10:36 pm

” Being immigrants who arrived here in 1969, my parents believe, and still do, that all wealth is in a home as an investment. “

Extremely toxic for the economy. What about investing in things that actually create jobs? Canada is in the midst of an unemployment crisis, yet all that people can seem to think of doing is “investing” in houses. And the government goads them on by providing nearly $1T of CMHC subprime mortgage insurance.

I personally hope the CMHC blow-up is epic, so that future governments never are enticed to enter into the delusion that they can manipulate the housing market on a widespread basis through the provision of subprime credit.

#61 Millenial-Falcon on 06.03.14 at 10:39 pm

#47 harbour
Come on man use ur imagination! Last time I checked the beach or your local park was free….. Before u cast me into a spend free gen y twitter user know that im actually a big fan of Garth and any other index investing strategist, I heed all their advice of diversification and balance however I don’t care for basement dwelling tin foil hat wearing doomers who think they need to hord cash and toilet paper. Save money and live your life too it’s all about balance!

#62 Notta Sheeple on 06.03.14 at 10:43 pm

“‘…….The inflation rate last month was 2% annually. The average pay increase is 1.8%……”
=========================

No worries.

The same political thinking that brought globalization, Free Trade Agreements, TFW’s, and ‘less government’ oversight to help spread (concentrate?) the wealth of the many into the hands of a few have it all figured out:

Right To Work (for nothing).

Coming June 12th to a Hudak province near you.

#63 Kreditanstalt on 06.03.14 at 10:44 pm

1.8% pay INCREASE??

Er…why are people getting pay increases at all in a no-real-growth economy? Shouldn’t there be wage cutbacks instead?

Maybe next time the public employees “bargain” they should offer a salary rollback. The employers – we taxpayers – will counter with a higher rollback…

#64 sheane wallace on 06.03.14 at 10:50 pm

#58 Smoking Man

Nobody in their right mind would buy that junk aka bonds.

#65 Old Man on 06.03.14 at 10:52 pm

#59 Rexx Rock – I bet you have a nice casita by the beach somewhere eating tacos and drinking beer. Oh for the good life.

#66 Joe2.0 on 06.03.14 at 10:54 pm

#45-Andrew Woburn.
Great link.
It seems that the mainstream sheeple are being systematically deprogrammed by the press which is controlled by the powers that be.

Kinda like the RE propaganda….
Hey do you think there’s a connection?

Fade up the Pink Floyd classic Money.
And cut to

Classic Homer response.

#67 TheCatFoodLady on 06.03.14 at 10:59 pm

No matter where in Canada we live, under what political regimes or on what rung of the socioeconomic ladder, I think most of us are going to have to face declining standards of living one way or another.

We boomers are entering the expensive years, like it or not, ready or not & most of us aren’t ready. We don’t have the right living situations we can age into & we don’t have the money for the care we may need. That care is going to be increasingly hard to come by in any case – the pay sucks, workers are poorly motivated & the burnout rate high.

We barely reproduced ourselves & our kids certainly didn’t & aren’t resulting in a shrinking tax base. Where’s the money to replace our rapidly aging infrastructure that’s already breaking down? Ghost towns will soon become more than romantic settings for fiction. Few want to live in ‘bucolic’ country villages with bad roads, lousy services & no jobs. Why build roads to nowhere?

Age & jobs are increasingly forcing urbanization on people – like it or not. green belting is forcing us up into cookie cutter closets.

Jobs & education are changing in the context of sweeping societal changes. We’re seeing the results of an increasingly rudderless society or societies. We all like stability & at the very least broad guidelines on how we should lead our lives. Right now for many, those guides are in short supply or questionable.

Humanity has been there before, many times. In the short term for many, it sucks & the eventual outcomes aren’t predictable. That’s scary.

What we can do is make sure we’re prepared for our own financial futures as best we can. Few things are such sure bets that they’re worth jumping on without a lot of thought & in many cases, considered advice. Good opportunities will always be there. Bad ones will suck you dry & leave you nothing with which to do smart & prudent things later when the chances present themselves.

#68 Shawn on 06.03.14 at 11:02 pm

How to Get Rich, How to Get Poor

All-time indebtedness means borrowers are transferring wealth to lenders as never before. Those ‘lenders’ aren’t just bankers, but everyone who owns equity in the banks (or the wider economy) through ETFs, mutual funds, stocks or preferred shares.

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

Our choices are clear, investor or debtor.

We all make our own beds, but we are not all comfortable laying in them.

#69 Young & Foolish on 06.03.14 at 11:04 pm

Ok, so own the debt …. We get it … But you still have to pay to live somewhere. You pay the bank, or you pay the landlord. Why pay more to ‘own’? Because you believe bricks and mortar will hold it’s value better in the long run than debt and equities. And since the greater majority is up to their eyeballs in debt, it becomes more than just an economic problem. It becomes political.

In a carefully managed economy such as ours, politics precedes classic economics. Somebody earlier said … Dorothy, we are not in Kansas anymore.

#70 Hawk on 06.03.14 at 11:10 pm

#59 Rexx Rock on 06.03.14 at 10:32 pm

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

Agreed, but RE isn’t the only reason people aren’t living within their means; two more important ones are rising food and energy prices, both necessities of life.

A little ironic surely? In the country with the second largest land mass (LOL ” Real Estate”) and abundant natural resources, including the prairies bread basket we have a middle class getting squeezed for the necessities of life.

Can’t blame that one on Realtors or Real Estate folly.

#71 45north on 06.03.14 at 11:15 pm

If rates were to increase by just 1%, they found 27% of us would have “a big problem” making the payments. In fact, 60% would have “some problem” if that were to happen.

prices would drop 30% across the board, putting 50% of households under water. Or effectively underwater.

prairie person : earlier I saw a yard in Winnipeg set up with this type of toys for what is often a six week season.

in karate class we line up in neat rows. the man behind me said that people in Winnipeg still had frozen pipes

And, on the parking lot, young couple, can’t be more than in their late 20s, climbing out of a 65,000.00 truck. I checked on the price. Yup, 65,000.00.

Toyota Tundra?

Picketty Pocket : I don’t get the thematic relationship between the photo and the post’s content.

I didn’t get it either:

Smartalox : So here’s another elephant in the room:

Freedom First : Garth has pretty well covered all of the scenarios, but I think many people have poor reading comprehension skills. Or, they are brainwashed, or, they are just stupid.

many people think that the gov’ment will save them. It won’t.

#72 AB Boxster on 06.03.14 at 11:16 pm

Debt…
Perspectives have certainly changed towards it, over time.

At the nation level, once upon time, debt was bad and had to be repaid in gold. Now, it seems, that this national debt does not ever need to be repaid as long as it is ‘manageable’.
Ok…

At the state (province)level, debt is becoming so high, that its unlikely to ever be repaid. But that’s OK because the nation does it and its ok for them. And really, the nation will just bail out the province, and since the nation never needs to repay its debt, all’s OK.

And at the personal level, since its OK for the nation and the province to have massive debts that can’t be repaid, then why shouldn’t the individual do the same?

I mean if it’s OK for all levels of government to do, (you know, our ‘leaders’, the ones we elect and who make our laws, and who really understand all that complex economic stuff with all their advisors and high paid help) why would it not be OK for the individual?

Load up on debt, never pay it back, and then die penniless.
I suppose they can try and sell your corpse.
But do you really care? You’re dead.

Classic ponzi scheme really but this is what we have now that passes for an economy.

I’m sure it will all work out.

#73 james on 06.03.14 at 11:24 pm

Crazy to see the debt that people are willing to take on. I didn’t like spending $350k on my house in Seattle, and my personal income is well over half the house value.

Why? First, I think the Seattle market is far too hot, and you never know what the job market will look like 3 years down the road. Second, I’d rather not have 6%+ transaction costs on an $800k home in case I have to sell. Third, I wanted to make sure that if I have to rent it out, the rent will cover carrying costs plus some for maintenance. Fourth, I don’t want too much money in this particular asset class.

Even with 20% down and a lot of research to find a place that fit the criteria, I’m still wary of the remaining debt. This blog is probably part of the reason.

#74 Cici on 06.03.14 at 11:26 pm

I blew a bunch of brain cells shopping in downtown Toronto this afternoon. Dropped $350 and about 30 IQ points. For punishment, made myself read The Jar Lady’s post. She usually gets me back on track when I slip up.

Very interesting blog post tonight. She seems to be getting bearish on the Canadian economy in general and is telling people to prepare for interest rate hikes and job losses: http://gailvazoxlade.com/blog/?p=6097

#75 Teacher's Ass-istant on 06.03.14 at 11:32 pm

This is directly for that teacher from a couple of days ago. I was poking around that website from the Ontario Securities Commision and found that they actually have lesson plans where you can select the grade you are aiming at from 4 to 12. I can’t see how it could be any more perfect for your purpose. You can get there from the site I originally posted but it opens a new window.
Here is that link. I Hope it helps the kids.
http://www.inspirefinanciallearning.ca/?intsrc=GetSmarterAboutMoney.ca&intpg=Website&intlng=English&intcmpn=Global%2BMasthead&_ga=1.112083202.728475617.1401851017&__utma=112521746.728475617.1401851017.1401851017.1401851017.1&__utmb=112521746.54.8.1401852364044&__utmc=112521746&__utmx=-&__utmz=112521746.1401851017.1.1.utmcsr=(direct)|utmccn=(direct)|utmcmd=(none)&__utmv=-&__utmk=67668177

#76 Spectacle on 06.03.14 at 11:41 pm

Thank You Garth .

#31 Piketty Pocket on 06.03.14 at 8:39 pm
I don’t get the thematic relationship between the photo and the post’s content. Please enlighten.

Um, long shot but might be the innocence of the child and the elephant. We use the term “elephantine debt” on Garth’s blog frequently, like tonight.

It starts out simply enough, a cute idea: hey let’s go look at some real estate….oh let’s get qualified by this nice lady at the display suit…oh oh! Quick nobody mention the elephant in the room.

Ps Agenda -21 . Can anyone relate international Banksters and Agenda-21 ? The reason the Shah and Iranian enter out bailed with the loot was because the “Economic Hitmen” gave him that option to leave to Los Angeles in 1979. The people were tired of the Massive /crippling International loans to their country for “infrastructure” , like airports, highways, energy plants and things they didn’t need or require. Much like all,of our rapid transit, bike lanes, bridges, …..it is also destroying our nation financially.

Anybody have any good links on this ? Aggregator?

Regards all

#77 David Lee on 06.03.14 at 11:46 pm

Mark,

I find your counter-arguments informative (right up there with the Aggregator and Ralph). Please take a shot (or several) at this one:

http://www.scmp.com/comment/blogs/article/1525043/vancouver-real-estate-cheerleader-crying-racist-dont-bother-kow-towing

#78 Joe Schmoe on 06.04.14 at 12:05 am

I know people are drowning in debt. I see it every day. I’m an accountant and after finishing this year’s tax season I’m pretty tired of people who make $100k coming to me complaining that they don’t have any money to pay their $2,000 tax bill. Where did all the money go? Easy: they spent it: vacation trips, home renovations, new cars, visits to the spa, doggy daycare etc etc. The marketing machine sure works well because at the end of the day, nobody has any money left over.

#79 Waterloo Resident on 06.04.14 at 12:24 am

Let me explain to everyone here why you just might want to vote for that funny looking ‘Hudak’ guy.

He wants to cut ‘MIDDLE MANAGEMENT’ from government, and cut away ‘UN-NEEDED PROGRAMS’ from government. He’s not going to cut basic health care or basic education, that’s a bunch of nonsense that the other parties are saying so you don’t vote of this guy.

However, there is ONE REALLY GREAT REASON why you probably SHOULD NOT vote for him: RECESSION IS COMING FAST !

Yes, as #1 Paul pointed out with that link to this story:
http://globalnews.ca/news/1370916/canadian-retailers-expect-to-slash-prices-as-consumer-demand-shrinks/

You can see from that one chart that demand in the economy has been constantly dropping and is now going into ‘RECESSION’ stage. That’s scary. The last thing you want to do when the economy is slowly sinking into a recession is lay off 200,000 highly-paid government workers, because that just tips the economy right over into a recession.

Hey wait. I want cheaper house prices right? And a nasty deep recession is what we need to make house prices crash right?
WAY TO GO HUDAK !!!!
I’M VOTING PC

(oh yeah; his jobs plan won’t work, not a chance. It will create maybe 20,000 jobs. So letting go of 200,000 government workers will reduce the government spending, thus allowing it to reduce taxes slightly, and that will then allow small businesses to be able to afford to hire a few more workers, about 20,000.

So the death of 200,000 high paid government workers will result in 20,000 low paid private sector jobs, and 180,000 more unemployed workers, and a housing sector that will drop about 20% over the next 10 years.

No Million jobs plan, more like a million jobs lost plan, however, if you want houses to fall, like everyone here on this blog is hoping for, then you really should go out and vote for this guy, because he’s the only one who’s got a really great plan to kill the economy.

#80 Son of Ponzi on 06.04.14 at 12:43 am

Nobody hates Persians.
They make damn good carpets.

#81 Son of Ponzi on 06.04.14 at 12:48 am

#28 Ralph

Meanwhile, on a faraway continent, Canada’s immigration minister announces new immigration policy — to the South China Morning Post. When did I wake up in a country where I have to read foreign newspapers to learn of government policy in a timely fashion?
———-
Welcome to the Chinese Province of Canata.
It’s well known in Vancouver, that if you want to know what’s really going on you must read the Chinese Newspapers.

#82 Son of Ponzi on 06.04.14 at 12:58 am

http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/cracks-in-the-bedrock-of-chinas-economy-as-house-prices-slip/article18969226/
——————–
No bedrock in Richmond only Tofu Soil.

#83 Chris on 06.04.14 at 1:04 am

Can somebody explain the reason why there is inexpensive 30 year fixed rate mortgage in the U.S. while 10 year seems to be the longest in Canada for a pretty big premium.

#84 EIT on 06.04.14 at 1:32 am

DELETED

#85 Richie Rich on 06.04.14 at 2:21 am

In Canada banks loan money to people who can afford to pay. In other countries banks loaned money to those who couldn’t afford to pay.

That’s why real estate prices across Canada are increasing and sales volumes are climbing higher.

Obvious is obvious.

#86 live within your means on 06.04.14 at 2:30 am

We’ve a BBQ that has terrible wheels on it. In early spring we try to move it in front of our patio doors to BBQ. The other day hubby removed the doors below, drilled holes & put rods & wheels on either side. The wheels were from old lawn mowers. What a hoot. We’ll buy another at the end of summer on sale.

#87 gmc on 06.04.14 at 2:40 am

Yes and the USA recovery seems to be failing here is a quote from latest gold news, I guess the gold manipulation is real, wouldn’t now be at time to buy the juniors for my TFSA, everything else is now fraud on a grand scale, 100:1 paper games on the comes and forex, what can we trust??????

The important point is that the FCA report illustrates how the Barclays “exotic options” trader, Daniel Plunkett, twice conjured up out of thin air up to 150 LBMA good delivery bars that he did not own (then valued at $93.5 million) in order to force the price of gold lower during the fixing process. He then covered this short position by ‘buying back’ these non-existent bars from the trader at Barclays spot metal desk.

the housing recovery is based on the funds managers that stole the houses from the unfortunate USA consumers , now it is on the way down again, apparently US consumers HAVE NO MONEY and therefore cannot even afford the cheap houses on the market,
What is going t happen to US, who is going to be paying for the 1 trillion that CHMC has allowed.
we are in dead dead do do.
yeeks
signed EXPAT

#88 gmc on 06.04.14 at 2:49 am

here is another FACT how can we rely on any bank??????

Total face value of unregulated derivative contracts is something around 1,000 Trillion dollars – depending on who is counting and who is lying.

Banks (Goldman, JP Morgan, Deutsche Bank, etc.) sell these contracts because they generate huge commissions and probably other long-term profits.
we pour sap pay for this , the whole world is in a mess
yeeks

#89 gmc on 06.04.14 at 2:59 am

there is no US housing recovery, here is a quote from
Bloomberg.
After a decade of boom-bust-boom, the U.S. housing market is going downhill just when many economists thought it would be heading upward. Sales of previously owned properties tumbled 7.5 percent in March from the previous year, to the slowest pace in 20 months, while purchases of new houses sank 14.5 percent from February. And applications for mortgages to buy homes are down 21 percent from this time last year, indicating fading demand during what is typically the busiest season for deals.

#90 lawless1 on 06.04.14 at 3:08 am

And the “news”papers keep on pumping up the bubble out here on the left coast…

http://www.cbc.ca/news/canada/british-columbia/is-vancouver-real-estate-heading-for-a-seller-s-market-1.2664056
http://www.theglobeandmail.com/news/british-columbia/residential-real-estate-numbers-push-vancouver-into-sellers-market-territory/article18977446/

#91 Buy? Curious? on 06.04.14 at 3:53 am

Whoa, Garth, slow down! You’re scaring all the old people and empowering losers. Let me offer a simple rebuttal.

You said, “Low rates have also made savers and the risk-averse massively less well off. Anybody not making at least 3.5% in a savings account or a GIC is losing money. In order to build wealth, you need to double that return.” Gee, I wonder how one would do that? Hmmm? What could someone do to get that return? I’ll come back to that.

The household debt to income debt ratio looks great but compared average home price averages would tell a different picture. The appreciation of one’s assest would offset the debt people are incurring. If someone bought in 2000 would be laughing all the way to the bank in 2014.

“An outfit called Bensimon Byrne, based in Toronto, came to this conclusion recently when it looked at the disconnect between how the economy’s doing, and what’s going on the in the lives of most citizens. They asked folks about their debt. If rates were to increase by just 1%, they found 27% of us would have “a big problem” making the payments. In fact, 60% would have “some problem” if that were to happen.” What the hell is this? What’s the difference between a BIG problem and SOME problem? Does that mean little Johnny has to play soccer instead of football or the family will have to have their vacation camping in a Provincial Park instead of Paris?

Canada has never had a bank fail, ever. They know what they’re doing. Interest rates are not going anywhere and I still have a full head of hair.

https://www.youtube.com/watch?v=6CpffhKm9vw

#92 piazzi on 06.04.14 at 6:59 am

Garth,

could you address and illuminate us about the innards and gotchas of promotions like “List with us and we buy your home guaranteed if not sold”, “buy this house and we’ll buy yours”, flat fee financing”, etc

thanks

#93 piazzi on 06.04.14 at 7:00 am

whoops, I meant flat “fee commission” and not flat fee financing

#94 Mark on 06.04.14 at 7:03 am

“I find your counter-arguments informative (right up there with the Aggregator and Ralph). Please take a shot (or several) at this one:”

Sure. Chinese immigrants to Canada buy houses using CMHC subprime credit. That’s no secret. Are these immigrants pushing up housing prices? Absolutely. Zero disagreement there. Do Chinese immigrants have a huge affinity for debt and paying top dollar for RE? Absolutely. So do established long-term Canadians. Which is why debt levels and savings rates in the GVR and GTA are right off the charts.

However, I think we all know what happens in the aftermath of a debt-fuelled bubble in any asset class, such as the housing price declines we are now seeing in the GVR and GTA regions.

Are these buyers so-called “HAM”? No. They’re new Canadians, buying on subprime credit. Just like younger not-so-new Canadians do as well, except there happens to be a lot more new Canadians in the GTA and GVR than in the rest of the country. Evidence of “HAM” with suitcases of cash or “money” transferred from Asia remains mostly non-existent. And the over-leveraged will always face some sort of consequence when the leverage cycle turns against them.

#95 Missed the Target on 06.04.14 at 7:05 am

https://ca.finance.yahoo.com/news/target-launch-leaves-retailers-wary-coming-canada-201444946.html

#96 Mark on 06.04.14 at 7:10 am

“Can somebody explain the reason why there is inexpensive 30 year fixed rate mortgage in the U.S. while 10 year seems to be the longest in Canada for a pretty big premium.”

It mostly has to do with the existence of Fannie Mae and Freddie Mac. In Canada, the primary function of the CMHC is acting as a subprime mortgage guarantor, but not taking interest rate risk. In the USA, the primary function of Fannie/Freddie is more attuned to taking huge amounts of interest rate risk, thus facilitating an investment climate for the private sector in long-term mortgage obligations.

Both schemes are catastrophically bad. Fannie/Freddie effectively went bankrupt in the 2008/2009 collapse. CMHC’s portfolio of being levered 50X into subprime mortgage guarantees is equally unsustainable and prone to failure.

#97 Mark on 06.04.14 at 7:14 am

“Our choices are clear, investor or debtor.”

You can be both. As long as one doesn’t get too carried away. The non-existence of the equity risk premium in Canada over the past 35 years leads me to believe that the next 35-years will deliver us a very healthy equity risk premium.

#98 gwcanuck on 06.04.14 at 7:17 am

‘Half of Canadians now have more debt than savings’…..does that mean that half of all Canadians have a negative net worth? That is the scariest thing I’ve heard for a long time.

#99 Mark on 06.04.14 at 7:19 am

“Maybe next time the public employees “bargain” they should offer a salary rollback. The employers – we taxpayers – will counter with a higher rollback…”

The problem in the public sector isn’t with people receiving 1.8% versus 2%. Its the large numbers who are so dramatically overpaid relative to the private sector rates for their skills that they could be red-circled for decades and still find themselves overpaid.

For instance, last time I looked at the OPG sunshine list, I found a dozen HR clerks being paid around $160k/year. Or more than most engineers were paid at OPG (yes, the engineers responsible for the nuclear reactors!). Nothing short of management incompetence allowed such to happen.

#100 I love real estate on 06.04.14 at 7:31 am

Sorry doomers, you are all just wrong.

Those of you who have believed in Garth since 2009 have lost out on growth of up to 65%, even more in many locations, in real estate assets. Even with a large drop, if it could ever happen, you will be far behind those who bought and waited out any temporary blips.

How much will you be prepared to fall behind in the next ten years?

You come here to feel better about your decisions.

You really are the greater fools. Garth is your official enabler. You enable each other.

Shame on all of you.

So sad. I know of no one who has had to sell for less than they bought in the last fifteen years.

Good realtors are all around to help you get into this market before you and your children are frozen out for a lifetime. Half of the “99%” are there because of sheer stupidity like this.

Otherwise, enjoy raising your kids in a crowded apartment building with drug dealers on every second floor. They can always run down the halls to play, back and forth and back and forth. It’s so exactly like having their own back yard, isn’t it? And when you raise them that way, their own prospects for a better life take a nosedive and will never be fulfilled.

Dumb people make bad parents.

All real estate doomers deserve Darwin Awards. This is how you eliminate yourselves by natural selection. Basement dwellers don’t reproduce nearly as much. (And no, what you do in the basement while playing video games is not reproduction)

Thanks for that, seriously! I wouldn’t want any of my kids reproducing with any of yours.

http://www.darwinawards.com/

Normally I delete similar messages from realtors. But this is a classic. Good job. — Garth

#101 Mark on 06.04.14 at 7:32 am

Just further to my above comments on the public sector, this is why a Hudak is needed in Ontario. A flamethrower must be taken to the public service, and positions eliminated or rationalized on a ‘value for money’ sort of approach. Merely trying to bargain with the entire group on a statistical basis won’t work. Too many people paid top dollar for largely worthless “experience” or “qualifications” far in excess of actual requirements. Too many managers, not enough actual workers. Public “service” should be a sacrifice, not viewed by the public as a way to usurp a bunch of wealth from taxpayers. The line-ups at the college career fairs should be at the private sector employers’ booths, not queued up 20-deep at the various government employers’ booths. Under McGuinty and now Wynne, the economy has been a disaster, and complete incompetence in government staffing practices, particularly in organizations like OPG are largely at the root of the problem.

#102 Bottoms_Up on 06.04.14 at 8:02 am

#7 hudak = mike harris on 06.03.14 at 7:49 pm
————————————————-
Can’t vote for Hud-AXE (immediate austerity, the last thing Ontario needs).

Can’t vote for LIEberals, unless we are all masochists.

Can’t vote for the 3rd string, fly-by-night NDP.

Green? Possibly, but they’d rather I turn off this computer and walk 20 km to work.

#103 Bob Rice on 06.04.14 at 8:07 am

Low supply in the GTA continues to fuel price increases…

http://www.bnn.ca/News/2014/6/4/Toronto-home-sales-rebound-post-best-May-on-record-.aspx

I don’t see supply increasing anytime soon… therefore prices will continue to go up without question – at least for the next few years… there will have to be one or two sizeable shocks to the system to change this – tangible rate increases, a recession, something… I don’t know, folks.. for the time being, this market will likely only go in one direction – at least in Canada’s three big cities (sorry Montreal, not you.. you’re still fighting off the demons of Levek ;)

#104 Bob Rice on 06.04.14 at 8:14 am

Agree 100% with post 91… Anyone who bought in 2000 (or mid/late 90s) is laughing… even a major correction would see prices going back to 2000… maybe 2006 or 2007… you’d still be up – A LOT! In 1995, you could have bought a very nice bungalow in South Etobicoke (a very nice “older suburb” of T.O.) on a good street for $250K I know b/c family almost bought… we’re talking 75 X 180 lot, all-brick, decent interior, trees, space, etc… same houses are selling for 1.3 or more now… even a 20% drop would put prices over a million… Those deal are gone – for good… I don’t think Toronto will ever see a huge correction.. the economy here is more diversified than anywhere else in Canada – perhaps North America.. this is why places like toronto will never become place like Detroit… one-indsutry towns.. Not sure if Calgary can say the same thing.. even Vancity… it is not as diversified

well, you can just drive 20 minutes north of Steeles and get a great place for half the money.. or rent! City life is overrated..

#105 Bubblicious on 06.04.14 at 9:02 am

-“Best May ever”
-“the best May for sales on record”
-“prices continued to climb – up 8.3 per cent on average from a year ago”
-“With listings down and sales up compared to last year, competition between buyers increased.”

GTA, you rock!!!

http://www.thestar.com/business/2014/06/04/house_sales_in_gta_have_best_month_ever.html

How is any of this good? — Garth

#106 jess on 06.04.14 at 9:12 am

#11 TurnerNation
what about copper held “off the balance sheet”
Are those financial tools “western? ”

========
gravity & gravey
interesting point # 7

Seven Key Takeaways From Joseph E. Stiglitz’s Tax Plan for Growth and Equality
May 30, 2014
http://billmoyers.com/2014/05/30/seven-key-takeaways-from-joseph-stiglitz%E2%80%99s-tax-plan-for-growth-and-equality/

7. Make Dividend Payments Tax Deductible, But Impose a Withholding Tax

One of the distortions associated with the current tax regime is that it encourages excessive leverage, which can, in turn, contribute to excessive volatility. Firms that raise capital through debt can deduct the interest they pay, but this is not true for the dividends that firms pay to those who contribute equity. This bias would be eliminated if dividends were tax deductible. But many of the recipients of the dividends would, under the current regime, then succeed in avoiding all taxes on this income, by taking advantage of various provisions in the tax code. Hence we propose that there be a 40 percent withholding tax. Upper-income Americans who actually pay taxes on dividends received would then get a full credit for these taxes that have been withheld. There would then be no double taxation — there would be an effective integration of the individual and corporate income tax.
Download the entire report, “Reforming Taxation to Promote Growth and Equity,” which also includes Stiglitz’s plan for reforming the individual income tax.

#107 irrational protuberance on 06.04.14 at 9:15 am

On the other hand, half the homeowners can still borrow on their increased property values.

http://www.marketwatch.com/story/over-50-of-americans-struggle-with-home-affordability-2014-06-03?dist=beforebell

#108 HogtownIndebted on 06.04.14 at 9:15 am

Mark #99 and #101

You make some valid observations but sound like you have little direct experience of the public sector. I’ve worked across sectors, and have to tell you that Hudak and the team around him simply does not have the brains or the strength to do what you want.

You are correct, there are too many administrative pencil pushers in government, often making the lives of front line workers miserable in order to justify their jobs.

But the culture is unique, I think, and requires some unique intelligence and skills to challenge. Most of these middle managers grew up as boomers (no, not another attack on boomers, just an observation) in a time when promotions were pretty straightforward. So they got into management directly from unionized positions over the years. The culture of solidarity and mutual support among such managers is unusually strong, because of such shared backgrounds.

In Ontario, ‘managers’ have their own quasi-union – AMAPCEO. In the city of Toronto, it is COTAPSA. These are very powerful groups that set a tone for managers.

So when a politician goes to the civil service saying he wants to cut, who does he talk to about how to do it?
These very same managers. And what do they do? They want to protect their jobs, and will never suggest those be the ones cut. They will direct cuts to the front lines, where there will be, coincidentally, negative public impact immediately, giving the best chance for the cuts to be repealed and have the civil service left alone. This is what I and my contacts in public service have seen for decades.

The closest effective approach I have seen to this has been by John Tory, who has variously suggested cutting half of all public service managers. We would barely notice it, I agree. He has the organizational experience and the intelligence to do it , smartly and effectively, imho. But he has so far proven unelectable for various reasons. That kind of tough, but intelligent approach is what is needed. Hudak is so full of hot air and bs himself, he would not have the ability to see through the same put up by others. He would be easy to manipulate.

Hudak is no match for the intelligence of the system. His performance last night was like a smiling lobotomized robot, and he has no experience in life other than being at the public trough himself. He would be a disaster in effecting the kind of change you, and I, want. Things would get worse, much worse, and needed services would suffer.

Ironically, it is those wily Liberals themselves who will likely do this best. (Think of Paul Martin’s cuts in the 1990s, which people in Ontario still blame too simplistically on Mike Harris alone)

All they have to do is follow the Drummond Report recommendations, respond a little more to various ‘economic pressures’ and you will have the downsizing needed. (And it will probably be Hudak’s 100,000 cuts and more over time, but just not so stupidly presented.)

Hudak is not very bright, nor is his team. No wonder he hangs with Harper and Ford. To the detriment of all of us and our general political discourse, conservatism has become amazingly unintelligent about these things and how to make real change happen.

#109 maxx on 06.04.14 at 9:33 am

#1 Paul on 06.03.14 at 7:28 pm

Great post.
Greedy retailers must keep on slashing prices, because, apart from the fact that people have now gone far beyond scraping the bottom of the credit barrel, they will: reduce, reuse, recycle, repair and also reconsider buying; source items at second-hand stores, dollar stores and garage sales; buy in the U.S. as prices, selection and quality are superior; barter. And they are getting better and better at it. Once this habit gets entrenched mainstream, buying retail will be viewed as lunacy.

Canadian retail. Pffft! Think of all of the times you’ve done comparison shopping only to discover a shocking price difference. Small recent example: battery for a mobile ‘phone- Canadian retail, $20.00 plus taxes- Internet, $4.99- with waaaaay better service. Retail attitude was, “well, we have it now, your only other option is possibly online”. Didn’t give a rat’s behind and wore this on his sleeve.

Saving is sooooooo much easier than many realize.

#110 Zeeman1 on 06.04.14 at 9:34 am

Wow Garth, judging from today’s posts the liberals and their buddies in the working families coalition are getting really desperate.

You guys look good with your backs up against the wall, and your faces drenched in sweat. After what you kleptocrats have done to this province you deserve oblivion, and you’re going to get it.

#111 Bubblicious on 06.04.14 at 9:34 am

-”Best May ever”
-”the best May for sales on record”
-”prices continued to climb – up 8.3 per cent on average from a year ago”
-“With listings down and sales up compared to last year, competition between buyers increased.”

GTA, you rock!!!

http://www.thestar.com/business/2014/06/04/house_sales_in_gta_have_best_month_ever.html

How is any of this good? — Garth
———————————————
Good for me cause I’m getting out of this hellhole soon.

Of course. Foolish of me. For a moment I forgot this is all about you. — Garth

#112 Bubblicious on 06.04.14 at 9:46 am

#26 Old Man on 06.03.14 at 8:28 pm
Hudak – who dat? I will never vote for a man with a smile and a grin who has a girly voice.
——————————————-
Garth, I hope his is not talking about you.
Them is fighting words.

#113 Bubblicious on 06.04.14 at 9:47 am

Good for me cause I’m getting out of this hellhole soon.

Of course. Foolish of me. For a moment I forgot this is all about you. — Garth
——————————————-
I’m special :) Mommy told me.

#114 Aggregator on 06.04.14 at 9:53 am

(16 March 2012) Offshore bids price Canadians out of housing market

(May 14, 2013) Real Estate Channel & Juwai.com Partnership to Assist Agents Access Chinese Buyers

(Sep. 05 2013) Toronto agents go online to reach Chinese buyers

As of May 2014, Chinese companies will find it easier to invest in countries abroad, especially in the US [and Canada]

This is thanks to the latest Outbound Investment Project Approval & Filing Regulation approved by China’s National Development and Reform Commission (NDRC).

This means Chinese projects abroad with investments less than $1 billion in non-restricted sectors no longer need NDRC approvals, and only have to register with the NDRC, who then issues a filing acceptance in 7 business days.1

However, large and massive land development projects fall under a restricted category, as do deals above $1 billion – requiring them to still obtain approval from the NDRC.

Overseas projects worth over $2 billion need approvals from China’s State Council, along with a recommendation from the NDRC.

China’s relaxation in overseas investment rules is in tandem with its “go global” investment strategy and reform agenda, promising to free up the market by simplifying administrative controls.

China’s global outbound foreign direct investment increased by 30% to nearly $100 billion in 2013 – of which $14 billion was invested in the US alone.

Hence $1.5M+ properties sold in the GTA soaring to a new record in May. Chart

Alas, more Canadian real estate is going for international bids as more corrupt state-owned developers abandon their projects and run off with deposits money. Video

#115 Nathan on 06.04.14 at 9:56 am

Next stop, indentured slavery!

#116 Nemesis on 06.04.14 at 10:04 am

#WickedWednesday #”致富光荣” #MaybeNextTime

[NYT] – For One Tiananmen-Era Student, a Very Different Path to Power

…”Corruption, or the appearance of it, was already one of the main concerns of students protesting in Tiananmen Square in 1989. But the scale of collusion between business and political elites has increased markedly since that time, with even the party now acknowledging that insider deal-making has itself become a threat to the legitimacy of the Communist Party.

“There’s now this self-destructive tendency within the party,” Minxin Pei, who teaches at Claremont McKenna College in California, said in an interview. “Many officials regard China’s growing wealth as fair game. And as a result, corruption has morphed into large-scale looting.”…

…The crackdown is putting pressure on businessmen like Mr. Xiao, who know that if they fall out of favor with the top echelon of the party, their business empires could come crashing down.

But his associates insist that his investments are “market-oriented” and that he has engaged in no wrongdoing.

There are signs, though, that he is not taking any chances with the changing political winds in China. Some years ago, after Chinese news reports suggested that some of his companies were involved in privatizing state assets at below-market prices, Mr. Xiao set up a residence in Canada, where he had obtained citizenship. He now spends much of his time working in Hong Kong, which is governed independently.”…

http://www.nytimes.com/2014/06/04/world/asia/tiananmen-era-students-different-path-to-power-in-china.html?hp&_r=0

#117 frank le skank on 06.04.14 at 10:08 am

#98 I love real estate on 06.04.14 at 7:31 am
“Shame on all of you.” – The shame of not being in debt?

“Good realtors are all around to help you get into this market” – phew, I was worried!!!

“Enjoy raising your kids in a crowded apartment building with drug dealers on every second floor” – future job opportunities for the kids!!

“their own prospects for a better life take a nosedive and will never be fulfilled” – I never knew that success was directly correlated to living in a house!

“Dumb people make bad parents” – some people would consider buying a house that is over 5 times your income as being dumb.

“Basement dwellers don’t reproduce nearly as much” – another mind blowing fact!

Thank you Garth for sharing that one.

#118 Aggregator on 06.04.14 at 10:57 am

Slim Shirts Get Slimmer as Nordstrom Courts Fitter Guys

American men over the past decade have embraced the slim-fit shirt styles long favored by their counterparts in Europe and Asia.

Now the fashion industry is betting that U.S. guys, spurred on by encouraging partners and the spread of social media, are ready for something more extreme: extra-slim fits, which can be 4 inches smaller around the waist and chest than plain old slim versions.

This is what happens when overstretched households serve adult men kiddy burgers at backyard parties because they can't afford to serve regular size burgers anymore. But hey, at least they have a big home to show everybody.

These are all early signs of poverty and a shrinking middle class, literally.

#119 Shawn on 06.04.14 at 11:10 am

Why Americans can lock in cheap rates for 30 years and Canadians max out at 10 years

Mark responded to this question at 96

In Canada, the primary function of the CMHC is acting as a subprime mortgage guarantor, but not taking interest rate risk. In the USA, the primary function of Fannie/Freddie is more attuned to taking huge amounts of interest rate risk, thus facilitating an investment climate for the private sector in long-term mortgage obligations.

********************************************
That may be right but I understood most of the interest rate risk was passed along to the buyers of the mortgage backed securities. So, I understood the reason was that laws require little penalty to refinance and that Fannie Mae, Freddie Mac facilitated the development of a HUGE mortgage backed securities market that passed the interest rate risk onto investors. Even much of the default risk may have gone to investors, I am not sure.

I tried looking into this question and got no where. Some pointed to the Bank Act in Canada that makes mortgages penalty free after five years. That can’t be it as U.S. mortgages are ALL relatively penalty free to renew (no interest differential applies, just some administrative fees). Others said that there were not enough investors in Canada to buy the mortgage backed securities. I don’t believe that for a minute. We are smaller than the U.S but we behave about the same.

My conclusion is that we don’t get 25 year locked in rates in Canada with no interest differentials applicable on refinancing because CMHC has not facilitated the securitized mortgage products to do so. For reasons unknown. CMHC probably has internal studies on the pros and cons. Someone should ask the new boss at CMHC.

If interest rates were to rise a lot in Canada the lack of locked in mortgage rates will be seriously regretted.

#120 Notta Sheeple on 06.04.14 at 11:14 am

#100 I love real estate on 06.04.14 at 7:31 am
=========================

Nice try, REALTURD®. No one here is drinking your purple coolaid.

Maybe try posting on the Ford Nation website. I’m sure there are some takers there interested in your Jimmy Jones routine.

#121 AB Boxster on 06.04.14 at 11:16 am

#28 Ralph Cramdem

http://www.scmp.com/news/china/article/1453230/chinese-welcome-canadas-new-investor-visa-stricter-rules-apply

(“Chris Alexander”) also dismissed any growing resentment of rich Chinese immigrants for buying their way into the country. “You’ll hear all kinds of anecdotal information, but the reality of Canada is that immigration is seen as part of our national vocation,” he said. “There are voices in the United States, there are certainly voices in Europe, there are voices in Asia that really are negative about immigration. You will not find that point of view organized or prominent in Canada at any level.”

Gee Canada really is special. The rest of the world has concerns and can debate the impacts of these such policies, but we Canadians have risen above such discussion.
Good thing we’re not ‘racist’ like the rest of the world is.

That alone justifies Canada as a great country with the most overvalued property values in the world.

#122 OttawaMike on 06.04.14 at 11:18 am

#118 Aggregator on 06.04.14 at 10:57 am

These are all early signs of poverty and a shrinking middle class, literally.
————————————————————

You are really reaching on this one Chart Man. Still lots of fatties around that won’t fit those shirts. In fact reduced household budgets increase waste lines as cheap food is often loaded with fat and carbs.

#123 Doug in London on 06.04.14 at 11:48 am

@Dual Citizen In Canada, post #57:
Show your parents this website, and INSIST they read many of Garth’s past postings! You say your parents have been here since 1969. Is that by some calendar other than the Gregorian calendar most of the western uses, so 1969 by that calendar is some time after 1998 by the Gregorian calendar? I ask that question because if they actually have been here since 1969, Gregorian calendar, they SHOULD understand the concept of real estate corrections. If not earlier ones they should remember the correction of the early 1990s.

#124 calgaryPhantom on 06.04.14 at 11:49 am

First hand info. Another kind of bidding war going on.
My friend wants to sell his house in calgary $550000 is the fair market rate according to him. He bought it 8 months ago for $480000.

But this is not the story i want to tell.

We went shopping for Realtor to sell his baby. Guess what `Bidding war`. One Realtor quoted 4% as fee, another one $15000 flat. And the winner was a Realtor who agreed to sell his house for a flat $10,000.

#125 happity on 06.04.14 at 11:50 am

“Canada now has the same inflation rate as the US. But their family debt is decreasing. ”

In the USA the gdp is going down, real estate over the past many years was bought by institutions with the biggest being Blackrock.

Now helocs are vogue again in the USA because the middle class never recovered.

There never was a USA economic renaissance as some want to believe.

And Obama care is another financial failure. It appears things will only get worse.

I’d worry more about you than the US. Watch the job numbers Friday. — Garth

#126 Herb on 06.04.14 at 11:50 am

#118 Aggregator,

I would number your interpretation of mini-burgers and extra-slim shirts as “early signs of poverty and a shrinking middle class” as one of your few errorenous conclusions (such as the GG as actual ruler of Canada.)

Obesity would be a more appropriate sign, because poor people do not have the surplus money to be selective about what they buy or eat, and are forced to settle for what is cheap and fills empty stomachs.

They would also lack the financial means to influence or make fashion.

#127 Buy? Curious? on 06.04.14 at 11:54 am

First of all, I’d like to thank Garth for doing this blog and allowing a fun-filled discussion about simple finance. Speaking of simple finance, it all boils down to winners and losers.
Secondly a quote for Canada’s largest newspaper, ”prices continued to climb – up 8.3 per cent on average from a year ago”

http://www.thestar.com/business/2014/06/04/house_sales_in_gta_have_best_month_ever.html

Here’s what Garth said, “Low rates have also made savers and the risk-averse massively less well off. Anybody not making at least 3.5% in a savings account or a GIC is losing money. In order to build wealth, you need to double that return.”

Um, like, is 8.3% more than double 3.5%?

Hello? Hillbilly? Hillbilly? Hello?

I guess there’s a rerun of Duck Dynasty on or something.

https://www.youtube.com/watch?v=y6y_4_b6RS8

Real estate capital gains that are not crystallized are not income nor actual wealth. — Garth

#128 CRF on 06.04.14 at 12:04 pm

http://www.cbc.ca/news/business/bank-of-canada-leaves-key-interest-rate-unchanged-1.2664402

so no change there.

None was anticipated. — Garth

#129 Lurcher on 06.04.14 at 12:22 pm

#28 Re: scmp article on renewing the IIP, Chris Alexander is quoted as saying:

Alexander added that mainland investors’ impact on rising home prices in cities such as Vancouver was “negligible to zero”.

Now we really know the truth.

#130 Buy? Curious? on 06.04.14 at 12:22 pm

Real estate capital gains that are not crystallized are not income nor actual wealth. — Garth

We all know that, but my point has been that after years of living in my house and year-on-year gains doesn’t it seem that the more prudent choice of wealth creation is in buying a home in the city of Toronto? Look at London or New York. If you bought a place there in 2008, how much would those properties have appreciated? Regular people are soon going to be priced out of the city and condos will be where the Help live. Like I’ve stated before, I bought a nice place in 2012. It’s appreciated 12%-15% since then. Would I have been better off if I rented and invested with a fee based advisor in a diversified portfolio or in my house?

https://www.youtube.com/watch?v=nDX0j80h2rk

I’ll give you this, you are a fighter.

It’s not NY. Or London. A one-asset investment strategy can end up biting you hard. — Garth

#131 DOSOUTH on 06.04.14 at 12:34 pm

#124 calgaryPhantom on 06.04.14 at 11:49 am

“….We went shopping for Realtor to sell his baby. Guess what `Bidding war`. One Realtor quoted 4% as fee, another one $15000 flat. And the winner was a Realtor who agreed to sell his house for a flat $10,000.

—————————–

Please let us all know how that goes. In real estate as in all sales fields, you get what you pay for. Hopefully you friend gets more…. (no we aren’t realtors, just have sold a few properties across Canada in our time)

#132 Hillbilly on 06.04.14 at 12:36 pm

Buy? Curious? – comment #127

Why are bothering with me or any other comments on this blog?

You are obviously the smartest guy here, if not in the world of investing !

Say, did you invent RE or something?

Chump, you only know an up market – owned RE for what, all of 13 years ? And what – a single family home – woohoo are you ever a player !

You have been lucky, NOT smart.
Don’t confuse a bull market with brains.

If you were smart, you would have levered up in RE 10 years ago, like I did.

Now, if you or I were really that smart, we would have bought AMZN sub US $ 6.00 (go look at a long term chart) or GOOG at IPO and pyramided it with margin. No RE has EVER made returns like that unless oil or gold was found under it.

So stop being a boastful bozo and be thankful that fortune has favoured you …. for now.

#133 HogtownIndebted on 06.04.14 at 12:39 pm

Herb #126 and Aggregator #118

Actually, I think you both have elements of something truthful and interesting here.

I recall talking with workers in one office who all are obese to morbidly obese, living in distant overpriced suburban shacks to “save money” and enduring slow death by commuter lifestyle.

At the water cooler as I remember, among other topics they would express how they are furious with that ‘elitist’ Target store for deliberately not carrying ‘super plus sizes’, like in this article:

http://thecurvyfashionista.com/2010/09/my-plus-sized-open-letter-to-target/

Obesity now indeed correlates with lower class status (lower education too) and poverty, not the other way around, as Herb says.

But, Aggregator is on to something as well. People do care about, and understand (mostly subconsciously I would imagine) this connection, and the higher status of skinny clothing, whatever its origins.

Aspiring to the upper classes now means more attention to your weight and physical appearance. The days of a big belly suggesting success are long over in North America.

Buying clothing that Rob Ford or Lisa MacLeod can’t fit into is another way of separating yourself from them, or your fat neighbours or co-workers etc…

I can totally see people trimming down and donning slimmer clothes as a status symbol and attractant for the opposite sex. (Especially if you feel you can’t do much about the rest of your financial and housing portfolio to communicate success, given the housing bloat and economic conditions)

Another sign of the widening class divide that we have entered, I think.

#134 Dupcheck on 06.04.14 at 12:40 pm

A lot of the civil servants still type with two fingers. It is time for change. New generations are more efficient and more productive than the older ones stuck in the past.

If these are bad times, it is time to trim the fat. Don’t forget the pensions that these civil servants take can only be dreamed by the rest of us.

So why not, go Hudak go. I am tired of supporting cushy lazy civil servants that give people the run around most of the time so they feel important or look busy, and therefore secure their jobs in unfair ways. Oh yeah, why does any Gov paid subsidy need Unions anyway? Don’t they make the rules and laws. Come on, this is not the 50’s and 60’s any longer.

#135 jimbo on 06.04.14 at 12:40 pm

http://thechronicleherald.ca/business/1212010-taylor-military-transfer-rules-hurt-tepid-halifax-housing-market

#136 Pre-Retiree on 06.04.14 at 12:44 pm

#39 Hillbilly

I completely agree with your comment.
Indebtness does not seem to bother anybody as Garth points out, so there does not seem to be any real grasp of the issues at hand for the Province.
It seems to me only Hudak had a clear understanding of the necessity to get ourselves out of debt.
According to this post, a lot of people seem to think you can spend your way out of debt, and therefore, I truly fear a return of Liberal government, lest people are wary of the billion dollar deal gone wrong – my money and yours gone in a puff.

#137 Kim on 06.04.14 at 12:45 pm

hudak = mike harris on 06.03.14 at 7:49 pm
Hudak has the worst math skills and I fear his daughter will fail math. hudak believes in his heart and his mind he will create a million jobs by cutting 100,000 jobs. What a moron. Oh yeah 10 jobs over 8 years is 80 jobs according to hudak math. Hudak will try to finish what mike Harris started. We don’t need a mad man like that.
—————————————————————–

Hudak is a Mike Harris clone and I don’t want my kids to suffer and go though what I had to when mike Harris was in power and made all those cuts in education. Hudak’s math just doesn’t add up and even he can’t explain his faulty math skills. Hudak won’t effect those who are rich enough to send kids to a private school which Hudak does with his kids. The working Class has to stand up to this crazy man who cares not about the average working person and who’s cuts will effect EVERY SINGLE WORKING CLASS person. I don’t even want to get into hospitals cuts under mike Harris and that Hudak wants to cause the exact same problems . Go out and vote. We don’t need another recession under Hud(AXE) .

#138 Buy? Curious? on 06.04.14 at 12:50 pm

#132 Hillbilly on 06.04.14 at 12:36 pm

Apology accepted.

And thank you for the compliments.

#139 Bank of Canada on 06.04.14 at 12:51 pm

http://www.bankofcanada.ca/2014/06/fad-press-release-2014-06-04/

Bank of Canada in second paragraph essentially states that interest rates will remain low for the LONG TERM.

And the next move might be down.

“Global economic growth in the first quarter of 2014 was weaker than anticipated in the MPR and recent developments give slightly greater weight to downside risks. The U.S. economy is rebounding after a pause in the first quarter, but there could be slightly less underlying momentum than previously expected. Globally, long-term bond yields have continued their decline, reflecting in part growing market anticipation that interest rates will remain low over the long term. This, along with buoyant stock markets and tight credit spreads, indicates that financial conditions remain very stimulative.” The term ‘very stimulative’ means the bank feels there is no need for further stimulus. No rate cut. — Garth

#140 Bank of Canada on 06.04.14 at 12:54 pm

And you will get a Lower dollar….which will revive exports.

#141 tim baskermeyer on 06.04.14 at 1:00 pm

Owning a home no longer the American Dream

Nearly two-thirds of Americans, or 64%, believe they are less likely to build wealth by buying a home today than they were 20 or 30 years ago, according to a survey sponsored by non-profit MacArthur Foundation. And nearly 43% said buying a home is no longer a good long-term investment.

http://money.cnn.com/2014/06/04/real_estate/american-dream-homes/index.html?iid=Lead

#142 Hillbilly on 06.04.14 at 1:02 pm

Old Man – comment # 53

Not a troll, just a realist.

Are you math challenged or something?

Large and increasing debt = reduced flexibility = hard choices

Liberals or NDP will continue to dig Ontario’s financial grave.

I prefer to take away their shovels and Hudak seems to be the only “leader” (involuntary shudder) prepared to even attempt to do so.

Your tangental ad hominen is immature and unworthy of you – you have made some good postings in the past.

#143 Hillbilly on 06.04.14 at 1:07 pm

Buy? Curious? – comment # 138

I was pretty sure you were delusional, but gave you the benefit of the doubt.

Your response to my post definitely confirms your lunacy.

#144 Old Man on 06.04.14 at 1:11 pm

#137 Kim – I couldn’t agree with you more. Now just received my head tax bill in the mail from her Majesty The Queen directly from England. $1.75 this year but well worth the slight increase due to travel expenses.

#145 Bubblicious on 06.04.14 at 1:13 pm

All this talk about Hudak being the bogeyman and a clone of Mike Harris blah, blah, blah.
Everyone seems to forget that during Harris’s reign the federal liberal government cut transfer payments to Ontario for billions of dollars. Something had to be done.
The same people that come to this board and tsk, tsk and those bad Canadians who run up their personal debt to higher and higher levels seem to have no issue when our provincial government does the same.
Funny how that is.
Personally I am of the mind that whenever one party or individual is governing for too long things start to stink.
This is the time for change.

#146 SESs on 06.04.14 at 1:28 pm

DELETED

#147 Shawn on 06.04.14 at 1:31 pm

What is Wealth?

Real estate capital gains that are not crystallized are not income nor actual wealth. — Garth

******************************************
Respectfully, I must disagree.

Unrealized capital gains are not income but I would certainly argue that they are wealth.

The wealthiest people in this world leave most of their gains unrealized whether in real estate, stocks or private companies. This minimizes taxes and allows wealth to compound.

A house or a profit-making company is more real in terms of wealth than is even cash money. Cash money is more certain in terms of its value but I would argue that the house equity is certainly wealth.

All forms of wealth including houses are subject to fluctuations. Today’s unrealized gain is today’s increase in wealth. Yes it could be tomorrow’s decrease but until then it IS wealth.

If ‘twer not the case we would have to change all the rules of how balance sheets are presented.

Those without large gains on houses and stocks can speak of “paper gains” all they want. They wish they had the paper gains.

#148 Aggregator on 06.04.14 at 1:33 pm

#126 Herb

"Obesity would be a more appropriate sign, because poor people do not have the surplus money to be selective about what they buy or eat, and are forced to settle for what is cheap and fills empty stomachs."

Poor people don't own homes and obesity would not be a good indicator because obesity is also caused by antidepressant consumption: Canadians among the biggest antidepressant users in the world The proper indicator is to look at the normal weight Body Mass Index, which is declining even as Canadians pop more pills.

"I would number your interpretation of mini-burgers and extra-slim shirts as “early signs of poverty and a shrinking middle class” as one of your few errorenous conclusions (such as the GG as actual ruler of Canada.)"

No bill passes parliament without the GG's signiture, a privy to Her Majesty. I guess you're not in tune with how your own country is governered. They don't teach you that stuff in school for a reason.

#149 kILLabOY49 on 06.04.14 at 1:33 pm

Wow, I’m shocked, shocked I tell you, that interest rates didn’t go up today. No I’m not.

Nobody expected a change. — Garth

#150 SESs on 06.04.14 at 1:34 pm

Ok, back to more serious stuff.

Can someone explain what is a FIRE economy?

If our CBs are proclaiming that interest rates will go higher, then why are bond prices going higher? And high yield equities are also going up!? As well as housing prices going up. And the cost of borrowing is going down? Does the word inflation have anything to do with this?

#151 Old Man on 06.04.14 at 1:41 pm

Peter The Great will once again attempt to table his latest Bill today, as his last pathetic effort was shot down by the Supreme Court as being unconstitutional. He is a great Lawyer is he not. Peter went to his Department of Pornosec (Orwell), and told them to reform it once again and make it pass under the radar.

#152 T.O. Bubble Boy on 06.04.14 at 1:43 pm

HAM will now have a reality show in Vancouver:

Ultra Rich Asian Girls of Vancouver.

http://www.theglobeandmail.com/life/celebrity-news/the-a-list/vancouver-reality-show-producer-raises-eyebrows-with-new-show/article18982404/

Yes, Garth, I know that these could all be Canadians of Asian descent…. but, then I read this:
most of the show will be in Chinese and that the focus will be on the privileged existences of young women who have inherited family fortunes.

Doesn’t sound like the typical Canadian immigrant story is what they’re going for here… they want “privileged” people with “fortunes”.

#153 SofaKing on 06.04.14 at 1:44 pm

“Real estate capital gains that are not crystallized are not income nor actual wealth.”— Garth

Sure they are. If the value of your house appreciates a lot more than what you owe, you can get a heloc and make it actual wealth that you can spend. And the extra debt that you incur from the heloc only diminishes as your property keeps going up in value.

What do you think has been happening in the last decade or so. INFLATION, it’s the bankers and borrowers best friend. It works effortlessly.

Yes, worked great in the US. Go ahead. Perfect. — Garth

#154 Holy Crap Wheres The Tylenol on 06.04.14 at 1:45 pm

Well I guess we should pack our bags and leave with the coming doom. ET come and get me I’m calling home.
Perhaps I’ll be on the same flight as Smoking Man?

Hey Smoking Man I was looking at one of my old university books and found this formula that was being taught in a bird class we had back in the sixties. You will find it useful! It was created by Dr Frank Drake.

R * fp * Ne * fl * fi * fc * L = N

#155 Gregor Samsa on 06.04.14 at 1:46 pm

Garth, in an upcoming post you should try to explain to the financially semi-literate (such as me) WHY you think interest rates will inevitably rise and WHEN you anticipate it will happen.

Me, I think low rates are the new normal.

My case study: Japan. Japan has had its rates at around 1% or less since the mid 1990s!! That’s 20 years and counting. If they can do it, why can’t we?

Because we’re not a trade-centric island nation with a massively aging population, no domestic energy supplies or systemic deflation, among other reasons. — Garth

#156 T.O. Bubble Boy on 06.04.14 at 1:46 pm

Another article on Ultra Rich Asian Girls of Vancouver:
http://www.vancitybuzz.com/2014/06/ultra-rich-asian-girls-vancouver-latest-reality-show/

#157 happity on 06.04.14 at 1:55 pm

I’d worry more about you than the US. Watch the job numbers Friday. — Garth

The job numbers don’t represent reality, look at the total number of people NOT in the work force, or who have been dumped from the stats because they haven’t found work, or the %50 who earn less than $ 35k per year.

The USA economy is %70 consumers buying things, and recent reports show most retail outlets letting people go.

Good news kills you, doesn’t it? — Garth

#158 Son of Ponzi on 06.04.14 at 1:59 pm

Vancouver housing market dependent on healthy Chinese economy. Conference Board of Canada.
http://www.biv.com/article/20140324/BIV0111/140329980/-1/BIV/vancouver-8217-s-housing-market-strongly-dependent-on-chinese
————-
Who would have thought ?

#159 Mike in Germany on 06.04.14 at 2:30 pm

@140 “And you will get a Lower dollar….which will revive exports.”

Shame we only manufacture houses.

#160 devore on 06.04.14 at 2:31 pm

#139 Bank of Canada

http://www.bankofcanada.ca/2014/06/fad-press-release-2014-06-04/

Bank of Canada in second paragraph essentially states that interest rates will remain low for the LONG TERM.

And the next move might be down.

Hardly. The only takeaway from that article is Bank weak dollar policy to stimulate exports. This has actual investment implications you can take advantage of, instead of speculating on lower overnight rate, maybe, at some point in distant future.

#161 Smoking Man on 06.04.14 at 2:57 pm

Wonder how LaughingCon took the record May numbers..

Perhaps he’s polishing, his it’s going to be a nasty crash Realtors, a nasty crash..

I suggest changing it to, one day Realtors it’s going to be a nasty crash…

#162 Ray Skunk on 06.04.14 at 3:02 pm

#145

Personally I am of the mind that whenever one party or individual is governing for too long things start to stink.
This is the time for change.

———————————

Bingo.

Governments are (and should be) cyclical. Progressives come in and spend. Conservatives then come in and put the financials back on track. When things are rosy again, time for progressives to return to spend and invest. Rinse and repeat.

I have no problem with this cycle.

However, the Ontario Liberal party has gone above and beyond it’s spending remit, and is beyond corrupt.

Time for a change indeed.

#163 Mark on 06.04.14 at 3:13 pm

“And you will get a Lower dollar….which will revive exports.”

Doubtful. Domestic debt deflation tends to increase the value of a currency by reducing domestic consumption. The CAD$ is headed much higher in the not-so-distant future as housing price declines continue to accelerate.

#164 Bank of Canada on 06.04.14 at 3:14 pm

“….Globally, long-term bond yields have continued their decline, reflecting in part growing market anticipation that interest rates will remain low over the long term….”

Hot air to prevent more debt but means they are not raising rates in the long term.

The BoC does not set bond yields. Another fail. — Garth

#165 moldy blue on 06.04.14 at 3:17 pm

To all the ‘debtors’ I say thank you. You have been transferring wealth into my financial and related equity accounts quite nicely. This will continue almost indefinatley. The FED says rates won’t pass 1.6% until 2016. The bond market says hell will freeze over before rates go up. The yields on long term bonds just keep sinking, rather than going up. The government mouthpiece is just talking moral suasion, they have no way of raising rates. Our collective governments are drunk on debt, they can’t afford to raise rates, not even a smidgen. Again, I say thanks to all the fools who have made me rich with capital gains and dividends..

#166 Mark on 06.04.14 at 3:19 pm

“Hudak’s math “

Attacking Hudak’s “math skills” is probably one of the most juvenile things that the Liberals and the NDP have done in this election. Hudak’s policy needs to be looked at in terms of all the spin-offs that will be created by not only liberating Ontario taxpayers from the burden of supporting an extremely bloated public sector, but also from freeing those resources to be used elsewhere.

Every dollar spent on a public servant that is not really needed, is a dollar that isn’t available for investment in modernizing factories, engaging in R&D, or even increasing the compensation of the long-suffering in the private sector. The job creation arising out of such is certain to be enormous. Is 1 million a good estimate of the net gain to eliminating 100k public “servants”, and likely reducing the salaries of the rest on the balance? Probably. Might even be a bit conservative (no pun intended).

Think about it for a while. And put yourself in the shoes of a factory owner — would you locate in Ontario, where there’s a government that taxes you and pays its relatively unskilled employees double, sometimes triple what you can pay your employees out of actual revenues that have to be earned from customers? Its not just an economic issue, its effectively a moral issue. The question that Ontarians should be asking is whether Hudak’s proposed cuts even run deep enough. I’d suggest that Hudak should go further and immediately shut down the LCBO (for instance) to send a strong message that Ontario is open for business.

#167 Kris on 06.04.14 at 3:28 pm

http://www.google.ca/aclk?sa=L&ai=CcupR0HKPU42wENK9-QOCoYKABOz67YEF5NyRy48B16_3QggAEAEoA1D62OTG-v____8BYP2Y-4DMA8gBAakCgYf21kWorj6qBCJP0CKAT-o554gCHyINlJ-xlWxEdb5fiI3YdQZ5u7LfxhRBugUTCIC0o8354L4CFYQ5iAodoTEAxcoFAIAHiIiTB4gHAZAHAg&ei=0HKPU4CMCoTzoASh44CoDA&sig=AOD64_2ntWLQtI_o0MLN3t03AwncXjMxHw&rct=j&q=&sqi=2&ved=0CCAQ0Qw&adurl=http://presalesvancouver.ca/vancouver-house.html
Newest Vancouver condo-tower being advertized on global tv today by a german dude with extra tick accent.
Yep, i guess everyone around the world wants to live in Vancouver.
Yes siree, number 1 city in the world indeed.

#168 Mark on 06.04.14 at 3:30 pm

“Vancouver housing market dependent on healthy Chinese economy. Conference Board of Canada.”

I disagree. If the Chinese economy turns unhealthy, a traditional response of Chinese has been to turn to gold and silver to protect wealth.

Many of us are aware of the significant number of Vancouver-based companies involved in that industry.

This is one of the reasons why I personally believe Vancouver’s ratios have always been somewhat elevated; there is significant counter-cyclical support to Vancouver RE due to its economic exposure to the precious metals industry.

#169 Mike T. on 06.04.14 at 3:33 pm

#100 I love real estate

Dear Mr or Mrs house seller,

may the Infinite Creator bless your soul and guide you on your path for you have deviated in the most un-fortunate way

personally I am thankful for your existence as you remind me what I am not

Also

that is probably my favorite photo I have seen here

#170 Really? on 06.04.14 at 3:41 pm

Mark said:
“And you will get a Lower dollar….which will revive exports.”

Doubtful. Domestic debt deflation tends to increase the value of a currency by reducing domestic consumption. The CAD$ is headed much higher in the not-so-distant future as housing price declines continue to accelerate.

What website did you get your economics degree from?

#171 Old Man on 06.04.14 at 3:44 pm

A lower dollar would be fine if we had a manufacturing base to sell the world something, but such is not the case. One cannot survive selling natural resources as its too cyclical from time to time. We have a Real Estate based economy that will be slowly coming to an end. Methinks there are chaotic economic realities blowing in the wind like a tornado.

#172 Mark on 06.04.14 at 3:47 pm

“What website did you get your economics degree from?”

Its just common sense.

RE prices go down –> consumers consume less, particularly on imports and domestic consumption –> fewer imports and more domestic production available for export –> improved trade balance –> higher currency.

Intuitively, you can also think of it in terms of credit being a ‘short’ on the currency, while paying back debt or saving being a ‘long’ on the currency.

As the rate of credit growth decreases (or goes into reverse), that means that fewer people are effectively ‘shorting’ the CAD$, and more are going “long”. When this happens with a stock, we know that the price goes up. When this happens with a currency, it is logical to conclude that the value of the currency appreciates.

#173 Old Man on 06.04.14 at 3:57 pm

#172 Mark – and just tell us all what domestic production will be available for export. Give us the list so can run out and buy stock in those companies.

#174 Mark on 06.04.14 at 4:12 pm

“#172 Mark – and just tell us all what domestic production will be available for export. Give us the list so can run out and buy stock in those companies.”

I don’t think it would be a good idea to buy stock in companies that are going to be losing a noticeable amount of domestic demand for their production.

But think of oil, for example. As RE construction slows down, and as domestic consumption slows down, there’s going to be an incremental quantum of oil and even refined products available for export.

Or airline seats. If heavily indebted homeowners have to cut back their winter travel schedule from two trips to one trip per year — many of those seats can be sold to foreigners instead.

#175 Hulot on 06.04.14 at 4:34 pm

#158 Son of Ponzi

Now we can add the Conference Board of Canada to Bernanke and Wharton Professor Siegal that are not as prescient as Garth. The list grows everyday.

#176 Herb on 06.04.14 at 4:41 pm

So now we have Mark in all innocence (or malevolence) proclaiming the evils of the oppressive public service, just like Westernmoron, Truthhammerer, eaglevale – Parksville, Maxx, Turner Nation, Zeeman1, kreditanstalt, Renter-Redemption (?), Agent.Smith, Hawk, Randman, Richard, Mackie, Hoof-Hearted, First Time Poster, anotherwhistleblower, Barry Lainhof, JuliaS, Hangfire, Richard and Zeus, Inflation Nation, and other handles of the Neandercon Roach Brigade have done before.

The problem, Mark, is that like your illustrious predecessors, you won’t bother with facts and logic because these are too messy, with uncertain outcomes. You don’t have to: the Fraser Institute, Canadian Taxpayer Federation, Conference Board, council of Chief Executives etc. have given you the ideology that the public service is overstaffed, overpaid and underworked. Your current poster boy, Hudak, is signing from the same song sheet, and that’s enough for you. He doesn’t have to worry about the functions of the provincial level of government and how these should be performed effectively and efficiently by which number of public servants working where and at what level. The slogan’s good enough; just cut somewhere, and the devil take the results.

Absolute BS! And you expect me to vote for this? ABC would be much more realistic.

#177 SofaKing on 06.04.14 at 4:46 pm

@ Garth — “Yes, worked great in the US. Go ahead. Perfect. — Garth

But we’re not the USA or Japan, are we. And I’m not suggesting folks run out and try to build-up the kind of equity appreciation we’ve seen in housing since 2003.

However, since 2001, how many people have built up that kind of equity playing the stock market.

@Mark #168 –“Many of us are aware of the significant number of Vancouver-based companies involved in that industry.”

Yeah.Right. It was called the Vancouer Scam Exchange and it got shut down specifically because of these so called mining companies. Good advice there,Mark.

@Mark #174 — ” many of those seats can be sold to foreigners instead.”

Indeed. But those foreigner seats will be bought as one-way tickets to get their fortunes out of a country that can seize it at anytime they want.However, never mind that, it’ll be mostly corrupt officials trying to get the hell-out before the shit hits the fan, socially. Tienanmen 2.0

Anyway, get back to work. Don’t you have a screen to stare at?

#178 betamax on 06.04.14 at 5:01 pm

#2 prairie person — I’ve observed the same in Walmart and Costco parking lots: people driving vehicles that they obviously couldn’t afford to buy outright, so you know it’s financed out the wazoo. But hey, who cares about the price, because it’s never going to get paid off anyway; they’ll just fold it into the next finance package on the next vehicle. Rinse and repeat indefinitely, or until it doesn’t work any more.

These people are one paycheque away from poverty.

#179 sciencemonkey on 06.04.14 at 5:06 pm

From a personal standpoint, I would welcome cuts to overpaid government jobs, because a) it would warm the spiteful cockles of my heart, b) less taxes for me, and c) it would mean less competition for stuff that costs money, like cars, RE, etc. I might feel different if I had a spouse on the government gravy train, but since I don’t, I don’t.

And there’s the rub. Just like the federal conservative plan of getting everyone to want high house prices (since otherwise they would be underwater) is so strongly self-reinforcing in terms of voter sentiment, so too anyone who works for or has a spouse working on the gravy train will vote liberal/NDP to keep things going the way they are.

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labr66g-eng.htm

Let’s see, of the 6.9 million employed Ontarians, 1.3 million are public sector. Let’s assume that 2 million people total are either public sector or married to public sector workers. That means that 2 million out of the ~ 8.9 million voting age adults in Ontario benefit from public sector pay. Not a bad voting block to have behind you.

#180 betamax on 06.04.14 at 5:07 pm

#57 Dual Citizen In Canada: “I just explained to them that all their hard earn money they made in this country will now go to the banks, effectively wiping out their life savings if I take them up on their offer.”

You are to be commended. I’ve seen too many young adults happily beggaring their parents’ retirement fund for a downpayment. I know of one young woman who did so with the promise of taking care of her parents in their retirement, but given her income I don’t see how that would be possible, irrespective of her intentions.

For many, the ‘golden years’ are going to feel like cheap tin.

#181 Smoking Man on 06.04.14 at 5:21 pm

#154 Holy Crap Wheres The Tylenol on 06.04.14 at 1:45 pmWell I guess we should pack our bags and leave with the coming doom. ET come and get me I’m calling home.
Perhaps I’ll be on the same flight as Smoking Man?

Hey Smoking Man I was looking at one of my old university books and found this formula that was being taught in a bird class we had back in the sixties. You will find it useful! It was created by Dr Frank Drake.

R * fp * Ne * fl * fi * fc * L = N
…….

Drake came up with a while ago.

Now that they believe that each star had planets the probability is through the roof.

I have a confession, I’m an Alien, from the planet nicotina, 1 billion light years away. Our craft can get here in about 7 hours.

People back home sent me here to evaluate you bastards. Your govt are close to developing our technology from Teslas classified gravity waves.

The council are worried about you humans, I’m here the tell them if we should eradicate you before you have the technology to bring your wars to other planets.

Humans are a threat to the balance of the universe.

#182 TO Renter on 06.04.14 at 5:30 pm

RE #130 Buy? Curious?

Well, I can answer your question with one example.

Sold in T.O. in ’12 and invested proceeds in a diversified portfolio. Decided to put primary residence exemption somewhere else. Identical house across the street sold this spring for 17% more than my sale price. DAMN, right?

Let me run the numbers:

Buy my old house in 2012 = $1,261,000 “sold price” + land transfer tax $42,640 = $1,303,640 out of my pocket

Sell (identical house that sold across street, slightly below list, as proxy) in 2014 = $1,475,000
Real estate commission $73,750 + $8,850 HST
$1,392,400 back into my pocket

Let’s ignore moving, legal and other costs of buying selling and owning real estate as an “investment”.

So I would have $88,760 to show for 3 years of capital apprecation in a bubbly 416 market. Woot woot.

Now let’s pan over to see the diversified portfolio born out of the SDH sale, professionally managed. Hmm.. it spun off over $175,000 in tax efficient income net of fees just in 2013 alone.

So not regretting selling RE in ’12 and going liquid… will keep you posted on 2014 since I have a few interesting private placement investments locked in for a year.

To each his own.

#183 Habs76-79 on 06.04.14 at 5:33 pm

So to those who say, low interest rates are for the long term and as such mean that housing will only continue to rise in price much higher than any form of measured or real inflation, how does that protect you?

If you require low ball mortgage rates and low entry of down payment to buy whatever type home you want, you are already falling out.

Low interest rates for the last decade or so were good if you carried into the beginning of the last decade or so a chunk of debt already accrued. The lower interest rates should have been used to pay down or better off said debt more quickly and/or with less day to day pain of finding funds to pay said debt down.

Once debt was erased or made much more manageable than looking at a more BALANCED housing market could result in a safer level of borrowing for whatever type home you wanted and TRULY COULD AFFORD! Afford by using a principle of taking the given mortgage rate upon approval and say doubling it to see if then said mortgage payments are achievable? If so then ok, buy the home that you can fit into for acceptable price paid.

But again if having to need a minimal down payment and sub standard low interest rates are the only way you can buy into housing then you are already losing. Add the fact that you may be acting possibly 100% irrationally in over-biding on housing that may cost you much more money in maintenance and repairs etc. well only pours more fuel on the fire you are sitting in.

But ok, you brainiacs with ultra clear crystal balls and see mortgage rates not going up for EONS! tell me this. Can you afford all the other costs THAT ARE AND WILL KEEP GOING UP!?! Not just the costs on the home you overpaid for such as maintenance and repairs, you got what $30,000-$40,000 for the roof repair? You got thousands of $$$$ for HVAC repairs? $$$$ for plumbing repairs? You got $$$$ for fixing a leaking or crumbling foundation? How about the property taxes, which go up what 3-4% per year? If you live in a condo the strata fees never go down, but go up and up, can you afford such increases tomorrow, in two years in 5 years? Buy a leaky condo especially in rainy Vancouver (oh yeah, just see, they are all still leaky ones or waiting to leak) and see what it will cost you to fix!

Energy costs, they rarely go down for long and trend up and in recent years well above inflation rate, can you afford to heat/cool your home as such? Electricity rates the same, they go up!

Oh yeah FOOD! Maybe you have been all too much looking at over paying for a home that while doing so you may not have seen how much food costs have risen. You gonna go without eating? I mean Kraft Dinner is ok and fun as quick meal, you gonna eat that 24/7/365?

So yeah, you just celebrate what is a manipulated mortgage market and that you feel mortgage rates will not go up over say the next 5-10-15-20 years. But that may not still keep you in the home you just bought and likely over bid on to get and OMG maybe with no home inspection as part of the deal too boot! Fall behind on property taxes and see how long you stay inside said home you think you own! Miss a few mortgage payments and see how long your bank keeps you in said home. If/once home prices fall significantly and your mortgage comes for renewal, the bank freaks that your house value is under water and demands full repayment WATCH YOURSELF SQUIRM! to stay in said house. If you or your significant other loose a good job and can’t find another quick enough see how well you live even with emergency interest rates!

Add the fact that logic says house prices cannot keep rising faster than inflation and the rate of wage increase forever tells me that you may already be screwed even before a mortgage rate hike may come for you!

Walk down said path at your own peril.

#184 LL on 06.04.14 at 7:41 pm

…”The US economy recovered and the currency along with it. That stability and rising corporate profits attracted money to assets which promised far more predictable growth – shares of companies that were making money. Inflation vanished, so fiat cash became more valuable, not less as the gold nuts had convinced themselves would happen. Banks around the world got stronger, more stable. Contagion in Europe was contained. Central bankers coordinated their playbooks. And without inflation or financial collapse, gold crumbled”….

Gold price is not based on inflation.
There were any inflation when she reach $1,900….!!!

Yesterday you wrote we are having 2% inflation.
Why gold price (I would not say “collapse”) is low? Because of gold price suppression.
Gold is competitor to fiat money.
By suppressing gold price, US dollar is save!
(But wait and see what will happen with Russia/China petro deal…not really good for US dollar). But this is another story…..

Europe economy is not good at all…specially in UK.
Anybody can do some Internet search on European economy and USA economy.

Garth, your glasses are Pink!

Yes, it’s all a conspiracy. — Garth

#185 LL on 06.04.14 at 8:03 pm

Gart, you don’t sell gold right?

I am sure if you were selling gold your “discours” would be different. (Tu preches pour ta paroisse!)
Gold is also a competitor to all traditional investments.

I don’t think there is “conspirancy” when guy like Edd Steer, Casey, Sprott, Mark Faber repeat all the same story!

Just saying “conspirancy” (the magical word…used a lot in “mainstream media”) is not really a credible argument.

You have the right to believe anything you want.

……”May we live in interesting time!”….

#186 Snowboid on 06.04.14 at 8:11 pm

#99 Mark on 06.04.14 at 7:19 am…

I call BS on “…I found a dozen HR clerks being paid around $160k/year…”

The Director makes $ 195K, and there is a manager and three HR consultants, one of whom is listed at $ 155K.

No HR clerks listed here, certainly not a dozen.

Your point is taken about relatively high salaries in some public service areas, mainly ‘appointees’ (political).

But it is better to support your argument with links to back up your statements.

http://www.fin.gov.on.ca/en/publications/salarydisclosure/pssd/pdf/electricity_2013.pdf

#187 Entrepreneur on 06.04.14 at 8:30 pm

Right on, Mark…Public “service” should be a sacifice not viewed by the public as a way to usurp a bunch of wealth from taxpayers…The line-ups at the college career fairs should be at the private sector booth. Well said but well add: how about learing to become an entrepreneur of your own small business.

But, but we all know that starting your own business is risky and the easier road is to work for the government, no risk and only gains. Better still become a life-long career politician.

You think getting elected is without personal cost or risk? Try it. — Garth

#188 James kitchener on 06.05.14 at 7:52 am

Just wondering about debt statistics. Is the actual debt people owe? Does it include people like me who have a $250,000 line of credit and I currently owe $20,000, which number is counted as debt owed by Canadians?

Because it could make a real difference if 10,000 or 100,000 people have large limits on LOC and credit cards, but do not max out their limits.

I remember when I applied for the LOC the bank used the maximum amounts I could borrow in my debt service ratio and counted my Total LOC as debt

Just curious
As I find in the world of statistics, countries use different factors in calculations, think about it they will soon estimate the underground economy and include that in GNP.

#189 jess on 06.05.14 at 8:13 am

” China’s housing market is seriously correcting.”

Does that mean those +/-700 mountains ready for leveling will be spared

http://www.news.com.au/technology/environment/china-flattens-mountains-in-a-bid-to-make-room-for-its-growing-population/story-fnjww010-1226944661125

#190 Inglorious Investor on 06.05.14 at 1:20 pm

Many people today are beating up on Garth because the Canadian housing market hasn’t collapsed on cue.

I said on this blog years ago that if you want to buy a home, don’t base your decision on anyone’s forecast, or your own market timing for that matter.

I have carefully surveyed a plethora of market forecasters over these many years and I have not yet found a single ONE who could accurately forecast any market with any consistency. Yet, if they get lucky one time, they claim they saw it coming all along. Bull Shekels.

You should not treat your home like a tradeable commodity. If you really want to own a home… And home ownership fits your lifestyle… And you can afford it (I mean REALLY afford it, not what mortgage brokers call affordable)… And you can manage through some possible market turmoil and economic uncertainty… You should not wait and put your life and the life of your family on hold. It’s not only a financial issue. It’s a lifestyle issue.

I know people who are already ‘calculating’ how much money they will have in retirement (like, more than 20 years from now) based on the future value of their home. In fact, their home is their retirement plan. Yet, they have no clue how much their home will actually be worth in real terms in 20 years; they just know it will be much, much higher for sure. Like it’s all preordained and carved into their house’s concrete foundations by the finger of God.

That said, the idea for home ownership, or ownership of any asset, is not to time the markets, but to manage risk. No one knows how high or low prices will go in homes, stocks, bonds, etc. All you can do is try to manage the risk (which is not based only on price). You may know something about market risk, but there’s also the risk associated with your own personal situation that is unique to you. And I believe that managing the risk has been Garth’s message all along.

#191 Inglorious Investor on 06.05.14 at 2:11 pm

Is government too big in Ontario?

So, according to Stats Can:
• # of employed persons in Ontario: 6,879,4000 (2013)
• # of public sector employees: 1,330,805 (2011)

The numbers may not be perfectly correlated because of the two year gap in the dates. However, let’s assume they have not changed much.

That means that over 19% of all employed persons work in the public sector.

I don’t know what others think about this, but IMO when almost one in five working people work for the government, I’d say that the government has gotten, shall we say, a bit bloated.

It takes four people’s taxes to pay for the salaries, benefits and pensions of government workers. And that’s just Ontario. And that’s just the workers. Not to mention all of the other costs. Ever wonder why our taxes are so freakin’ high?

Nothing against public sector workers, per se. We do need a public sector. Just not so much public sector. 100,000 would be just a start in my book.