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HUGS modified

Well, who knew?

Here I thought this blog was catering to failed basement-dwellers, roofers, dyslexic accountants and the odd vet assistant. Never did I realize our ranks included corporate raiders, pot barons or the idle rich. Yesterday’s big reveal at least told us who all those damn rich people are driving up the price of houses. It’s you. I am so ashamed.

Okay, back to business. Here’s Josie Carrillo, a Mississauga real estate agent who days ago sent out this urgent email, and Facebook message:

PEEL PROGRAM IS NOW OPEN, BUT WILL CLOSE IN JUST A FEW DAYS! IF YOU OR ANYONE YOU KNOW ARE INTERESTED IN RECEIVING A $15,000 GRANT TO USE AS  DOWN PAYMENT ON A HOUSE IN PEEL REGION, I NEED YOU TO CALL ME OR TEXT ME ASAP ON FRIDAY 6/20/14! THERE IS NO TIME TO WASTE!

Besides the caps fetish, Josie wants you to have a religious experience when you deal with her. You have to admit, this is an inspiring signature block:

Josie Carrillo,  Salesperson
“The Savvy Investor’s Agent”

…Real Estate is your best investment. Call me Today and let your money start working for you!

“Jabez called on the God of Israel, saying, ‘Oh that Thou would bless me indeed, and enlarge my coast [territory], and that Thine hand might be with me, and that Thou would keep me from evil, that it may not grieve me!’ And God granted him that which he requested.” 1 Chron 4:10

Who do you know that can benefit from my strong negotiations techniques to sell their home fast for top dollar?

But this isn’t about Josie, who’s just trying to make a divine buck flogging houses to citizens of limited means. It’s more about the systemic risk involved in a getting people into houses, and debt, who have no money, no resources and little knowledge. Is this what government should be doing?

Well, in Peel Region – which keeps the GTA from falling into Manitoba, and has 1.3 million people – that’s exactly what they’re doing these days. The ‘Home in Peel Affordable Ownership Program’ apes some similar do-goody, myopic real estate welfare schemes across the country and actually gives people free downpayments. No wonder Josie is singing her hallelujahs. It’s a gift from God.

Here’s the deal: If you live in Peel (including the pubescent city of Mississauga, home to Canada’s weirdest condo towers, plus poor Brampton), and have an income of less than $80,000 (which means you aren’t allowed to read this blog), then you can apply and get your free 5%. The most expensive place you can purchase is one worth $295,000, which these days gives you a choice of more than 1,050 properties.

Technically, this is a 20-year loan which carries no interest and on which no payments need be made. After two decades, it’s forgiven. If you sell the house and lose money, it’s also forgiven. If you sell and make money, you pay it back. The property must be your principal residence, and the loan must be from a lender backed by CMHC. That’s right. The 5% downpayment comes from the government. The other 95% is secured by the government. What’s wrong with this picture?

For starters, real estate ownership is no right. Governments shouldn’t try to make it so, when the private sector does a fine job at providing rental accommodation. Does everyone want a house? Of course they do. They also want a new Kia and an iPhone.

Second, people without money shouldn’t be buying stuff that costs $300,000. The risk is simply being passed on to others. In this case, taxpayers, who are already having a hard enough time keeping it together.

Third, this gets unsuspecting people into bigtime debt. Three hundred grand in a mortgage obligation is almost four times gross income for people in this Peel program. The majority would be new to a mortgage, or new to Canada with only a cursory understanding. We all know interest rates will be rising as time goes by, for example, which will dampen house values and jack monthlies. Why is it considered a good thing to put naive people at risk?

Fourth, the risks of homeownership are, at best, glossed over. For example, nowhere in the Home in Peel bumpf is it even suggested that house values can (and do) go down. For people with a scant 5% equity, this is worth knowing. It could wipe them out, and create unrepayable debt.

Fifth, lower-income people chained to a 20-year loan will probably feel they have less mobility, or the means to chase job opportunities. Is this what the politicians running Peel want? An underclass?

Well, it’s what Josie wants. That much is clear. Praise be.

243 comments ↓

#1 Cow Man on 06.20.14 at 7:35 pm

Sir Garth:
I once had a crown attorney explain to me why the Justice of the Peace “negotiated” with the convicted defendant a payment schedule to his liking. It is cheaper to make a deal than send them to jail. Is it cheaper to “help” people to buy homes than to provide social housing. Is that why the government wants as many families as possible to “own” homes. Costs the taxpayers less. As long as the bubble keeps expanding.

#2 Retired WI Boomer on 06.20.14 at 7:37 pm

Josie is working on commission don’t flog her for trying to make a buck, flog your local MP who could take this nonsense to the appropriate lawmaker’s oversight.

Here, it would be our local (bought & paid for) Congressman, or perhaps the tone-deaf Senator (sorry he comes with a much higher price tag). Just kidding, both of my elected reps have been quite responsive to inquiries, and both helpful in the past.

All governments do create bad legislation from time to time, or legislation that seems good at the time, but becomes stale. A great example of that would be the requirements for a minimum level of financial responsibility for auto insurance. Passed years ago, and not revisited its laughably out of date, but it is still the minimum. (Applies on State & Federal issues as well).

#3 Cici on 06.20.14 at 7:38 pm

All I can say is that that is one idiotic and high-risk policy that could ruin a lot of people in the event of an interest spike or economic downturn.

#4 Trader on 06.20.14 at 7:43 pm

I hate stuff like this! Government money to give a government backed loan!! What the hell are us Canadians thinking? Why would we allow this… this is wrong in so many ways!

#5 Nemesis on 06.20.14 at 7:47 pm

#ForSomeInexplicableReason. #ThisWorks. #”WalkOnBy”/DionneW

http://youtu.be/L0wCuwUneSM

[NoteToGT: “Do You Know The Way To San Jose” was just too ‘OnTheNose’. Tempting though.]

#6 Sheane Wallace on 06.20.14 at 7:47 pm

Inflation is already here, even official CPI excluding food and gas (where most of the inflation is) is already at 2.3 %. Food already up 10 % this year.
Recent actions in oil and gold are indicative on what is coming.

But inflation is good, fear deflation.

#7 Rob on 06.20.14 at 7:48 pm

Garth I dont think people care about when and how they will pay that debt. Affordable housing doesn’t seem to come and people just give up and buy. Sad but what do you do.

#8 Jsan on 06.20.14 at 7:52 pm

Just casually talking to one of our contractors today. He mentioned how a friend (relative?) just bought a fixer upper flipper in one of the Toronto burbs. He mentioned how it should be easy to flip it for 2-3X the purchase price in 5 to 10 years. I kid you not!
This is the current very irrational thinking that has helped fuel the Great Canadian Housing Bubble and it will also be it’s downfall. When these people who foolishly believe that house prices do nothing but soar catch a whiff of prices starting to crumble, you can be sure that they will all try heading for the exits at the same time.

#9 Happy Renting on 06.20.14 at 7:54 pm

LOL, Garth. Wittier than usual, today. I guess you’re paying it back from yesterday’s epic haul of comments (was that the most, ever?)

#10 Sheep on 06.20.14 at 7:54 pm

We have changed the name of the TFW program. Most sheep won’t notice. We will transfer 85% of the TFWs into a new category called “International Mobility Program”.

Then we will cut TFW program entrants by half! 50%!!!

Vote for us now. Are people really that dumb in Canada??

Then we will say to the great unwashed,

#11 Visitor number 9 on 06.20.14 at 7:55 pm

“The 5% downpayment comes from the government. The other 95% is secured by the government. What’s wrong with this picture?”

Instead of Gov’ment, read: ‘Taxpayer’

#12 JO on 06.20.14 at 7:56 pm

Why does the gov’t do this ? Easy: the economy is “credit ism”, not capitalism. Economist Richard Duncan shows, along with others such as dr Steve keen, that it is growth in credit that has been the primary driver of “growth” on our economy over the last couple of decades.
So the debt must keep growing despite the fact productivity and GDP are growing much more slowly than debt.

Hence gov’ts use various schemes to keep inflating the RE bubble to maintain the debt growth and the illusion of prosperity alive. As long as the masses see their houses going “up”, they think they are wealthy. Gov’ts tax revenues are inflated due to inflated house prices and elevated construction activity which temporarily inflates GDP.

The entire thing is a sad joke. A fraud on a financially illiterate public.

The collapse in living standards we have experienced will keep gaining steam and within 10 years we will be a third world country.

#13 Sheane Wallace on 06.20.14 at 7:57 pm

How does 10 % interest rate sound like?

#14 T.O. Bubble Boy on 06.20.14 at 8:03 pm

I have one question on yesterday’s “surprise findings” (i.e. that almost all blog dogs are rich:

Who is managing your wealth?

A) Yourself/Spouse
B) Garth, or other Fee-Based Financial Advisor
C) Commission-based Financial Advisor
D) Robo-Advisor
E) Other?

I am currently A), but I am increasingly interested in D).

Seriously? — Garth

#15 Allan T on 06.20.14 at 8:04 pm

Unbelievable. Even more ways to waste tax payout money. Geez

#16 Freedom First on 06.20.14 at 8:06 pm

Let us pray for and forgive Josie, as I think later when more is revealed as to why what she did was wrong and unethical, Josie will humbly admit that “The devil made me do it”.

And the Government’s role in this…….what Garth said.

#17 johnny d on 06.20.14 at 8:22 pm

Free houses for scores or new Canadians with this Peel program. The TFW program still gonna be running full steam despite the toothless changes announced today, taking jobs from people native to Canada.

I don’t know what this country is becoming but it sure doesn’t look too good for our collective futures.

#18 Seeing it from both sides on 06.20.14 at 8:35 pm

Yesterday’s blog survey flies in the face of the oft chanted mantra here “We Are So Screwed.”. 700+ sampled from a cross section of the nation make waaaaay above the 60k+ median. AND …. the majority seems to be in their 30’s. If that is to be believed, then real estate prices are not overdone.

#19 chickenlittle on 06.20.14 at 8:39 pm

That’s not fair to the rest of us. I may not make 4.5 mil, have a paper route, or live under a bridge, but if I can’t afford a house, I’m not buying one.

Not fair!

#20 José on 06.20.14 at 8:44 pm

Month by month, report by report, Mr. Poloz is showing how inept he really is. Instead of actually doing his job as the Govenor of the BOC, he’s still doing his job as the leader of export Canada.

His trying to talk down CAD is losing it’s crediblity and he’s losing his. Inflation is here. Retail numbers are strong.

He’s hoping to replace the contribution that real estate makes to GDP by trying to give an edge to Canadian manufacturers and exporters. Unfortunately, they’ve decreased not because the dollar was at par, but because it costs so much more for Canadian workers to live in Canada. Houses cost double what they do in the US. Is a 7¢ bonus in the Loonie going to sway them to invest here. I think not.

Keeping the Loonie down is not going to restore the manufacturing sector. It’s a double edged sword – they have to purchase goods from abroad and a depreciated Loonie won’t help.

It’s also making average Canadians poorer and accelerating inflation. He won’t be able to keep this up for long. He’s pushing the already perilous housing market closer to the edge faster. Bringing a catastrophe for many home owners like Garth talks about every night.

When it goes, the GDP won’t have housing, you won’t have a pickup in manufacturing and you’ll have inflation. Canadians homeowners will be poorer. Not the building blocks for growth.

RAISE RATES A BIT SOON to slow down this growing problem. Or a least drop the “rate cut talk” now. Then maybe you might get the soft landing in housing that you want.

#21 Waterloo Resident on 06.20.14 at 8:49 pm

After reading the $150,000 PLUS incomes from people in yesterday’s blog I felt like a POOR HOMELESS MAN.

Wait there a moment: I rent so I am homeless, and I only earn $40,000 per year so I am ‘Poor’.

Oh crap, I am a poor homeless man !!!!!

( I wonder if I could get a mortgage on a $1 Million bungalow in T.O.? )

#22 aaron on 06.20.14 at 8:50 pm

You mentioned that average down payment is 7%. That contradicts this report:

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2014/05/cmhcs-annual-report-documents-its-contraction.html

It seems to me the down payment size is much bigger and Canadians have way more equity that could sustain 20%+ price drop.

There is nothing in that report about average downpayments. As for equity, with the bulk of their net worth in homes, a large number of Canadians would be severely impacted if they lost 20% of it, while debt did not budge. — Garth

#23 Potato on 06.20.14 at 8:54 pm

London, like many cities, had a similar program from time-to-time. AFAIK no one has actually been able to use it: the price ceiling is usually set so only a few properties are eligible in the first place, and as soon as the program arrives the bidding wars on those properties instantly drive the price up to (for this program) $295,001 — with no skin in the game everyone in the program is willing to bid up to $295,000 so it just takes that one person who can actually scratch together 5% down to bump the price up that incremental amount and knock the rest of the crowd out of the running.

#24 sideline sitter on 06.20.14 at 8:55 pm

per Bubble Boy’s question…

A) me

But, I’m mostly chicken and have way too much in cash. With inflation apparently rising, need to get in with it already.

Thankfully, my monthly nut is fixed and is only 17% of after-tax income (even with a big pay cut this year).

#25 Iceflows on 06.20.14 at 8:57 pm

Ummm, free $15,000 DP that doesn’t need to be repaid you sell for a loss?
Take the grant, buy the place, take a 0.01% loss and pocket the difference after a year.
Any flippers know the score here?
Damn Gov will get its piece but, if you sell private, register yourself, skip the inspection, and buy the cheapest insurance available you just might pull it off. That and sell some of the fixtures and appliances…

And Garth, we all know you do the website for community service…
Or at least a tax break. :)

#26 sideline sitter on 06.20.14 at 8:59 pm

#18 – the survey was hardly representative of the general population… most readers are from GTA, Van, or YYC, and clearly have an interest in investing / housing… and many rent, even with high income (me included)

Why would you expect this blog to represent society? We’d have to hire security. — Garth

#27 aaron on 06.20.14 at 9:04 pm

#22 aaron on 06.20.14 at 8:50 pm

Can get point me to a report that does? My conclusion was based on the LTV % of the cmhc portfolio.

#28 Iceflows on 06.20.14 at 9:06 pm

Hey #21 Waterloo.
Its not what you make. Its where you live.
In my home town $40,000/yr will get you a nice 3bd/2bth (rent or own), a decent vehicle, ample fun budget and still max your tfsa.
Where I live now it’s scraping by. Lucky if you if can put anything away and run a vehicle (and owning is just asking for trouble.)
A wealthy person is one who lives within their means.

#29 Smoking Man on 06.20.14 at 9:17 pm

How many blogs get 700 + comments, even the National post don’t get this many..

Well done garth, let’s hope the keep contributing…

If not, just play teacher again and say, today you are all invited to brag, you won’t be judged today…

#30 Mark on 06.20.14 at 9:38 pm

“Inflation is here. Retail numbers are strong.”

Are you kidding? The housing market is deflating. Core CPI excluding the one-time impact of energy, is fairly stagnant. The Canadian economy isn’t really creating any quality jobs, and the housing sector is decelerating rapidly (just look at the desperation to prop it up!).

Six months from now, we’ll likely be dealing with a CAD$ back at parity, and perhaps even a little further beyond if it receives some help from gold. The BoC is way, way behind the curve in lowering policy rates from the current 1%, down to zero. We’re upon a deflationary precipice, and it would be completely irresponsible to raise rates at this point.

#31 Mark on 06.20.14 at 9:41 pm

“It seems to me the down payment size is much bigger and Canadians have way more equity that could sustain 20%+ price drop.”

As Garth’s comment stated, the report says nothing about the size of the downpayment actually used up-front to purchase a house. Now, obviously over the past 5-10 years of price gains, a lot of people have received un-earned equity that has not been ‘paid in’. This, at least temporarily, makes the CMHC subprime mortgage guarantee portfolio look a lot better than it is — but as prices continue to decline, especially in the major markets of Toronto, Calgary and Vancouver, the quality of the CMHC subprime portfolio can (and will) deteriorate rapidly.

No Schedule I bank is allowed to, nor would any hedge fund, take on the sort of subprime mortgage guarantees that the CMHC does in the normal course of business. It is ridiculous that taxpayers have been asked to guarantee, for a nominal below-market fee, the subprime mortgages of Canadian speculators.

#32 Old Man on 06.20.14 at 9:44 pm

#5 Nemisis – you need to put the pedal to the metal on occasion like ‘Mississippi Queen by Mountain’ with some juicy lyrics added in.

#33 NoName on 06.20.14 at 9:47 pm

Something similar happened in hammer “grants” and city owned re. city needed money and dumped lots of town homes.
long story short i personally know family that took an advantage of this program some years back.

#34 Vlad on 06.20.14 at 9:52 pm

Isn’t “Josie” a man’s name? Or am I being politically incorrect in question a gender issue ( like xe, xem and xyr)?

#35 Bon on 06.20.14 at 9:54 pm

These ladies borrowed almost 900K for “investment properties” without doing the math. http://business.financialpost.com/2014/06/17/alberta-women-532640-in-hole-after-they-failed-to-do-the-math-on-real-estate-investments/?__federated=1 I wonder how many other landlords are in a similar boat. My old landlord was highly leveraged and it was causing her a lot of stress.

#36 Shawn on 06.20.14 at 9:56 pm

The State of Household Finances is not so Rotten

From a Bank of Montreal publication today come two statistics:

1) Household Net Worth-to-Disposable Income at a record
high 726.3% (Q1)

2) Household Debt-to-Disposable Income slipped to
163.2% (Q1)—second drop in a row

http://www.bmonesbittburns.com/economics/focus/recent/140620doc.pdf (see the recap section)

Now we know that point two here is often quoted with extreme alarm. But throw in point one and suddenly a vastly different picture emerges.

Households on average have 22 cents in debt for every dollar of assets and equity of 78 cents. Suddenly that sounds very tame.

Now that is just average and we should remember that average in no way means typical. In fact statistically, the chance of any particular household being precisely average is precisely zero. There is a huge dispersion around average.

But the main point is that scare mongering about debt being 163% of income takes on a different context when we see that equity is much higher at 726% of net income, on average.

#37 Sebee on 06.20.14 at 9:57 pm

As I said….collusion. Everyone is pumping it, everyone is in on the pump. How can you bet against them?

#38 T.O. Bubble Boy on 06.20.14 at 10:00 pm

Who is managing your wealth?

A) Yourself/Spouse
B) Garth, or other Fee-Based Financial Advisor
C) Commission-based Financial Advisor
D) Robo-Advisor
E) Other?

I am currently A), but I am increasingly interested in D).

Seriously? — Garth
————————————

Yes, I’m seriously A), but I am intrigued by the idea of WealthFront/Betterment/etc. where you pick an allocation of Vanguard ETFs, and get auto-rebalancing across those ETFs for 0.25%.

#39 Shawn on 06.20.14 at 10:01 pm

Sample Errors

I think we can safely assume that yesterday’s responders were not a random sample of the visitors here. It seems safe to assume that those willing to open the kimono, even anonymously, were, on average, the better endowed among the visitors.

This is why reliable samples need to be randomly chosen. The sample yesterday, I would assume was never meant to be a random sample of the visitors here, much less the population of Canada.

#40 Not My Usual Handle on 06.20.14 at 10:08 pm

Re Yesterday’s reveal all:

Like many readers I wondered if the income figures are even remotely plausible.

I am retired and obviously know my own income, and it is in the $150k range, almost all investments and tax free – ROC, TFSA, RRSP, dividend tax credit, capital gains. When we worked my wife and I made in the $350k range. So overall I think the figures presented are plausible because it is likely that your blog is self-selecting for those interested in financial matters or in other words the 1%.

In my case I find the Canadian real estate bubble the most amazing economic phenomenon I have ever experienced so I read your blog to get some perspective on it. Like many readers I am convinced real estate will fall, perhaps dramatically, but when is almost impossible to say – as my wife says every level of government will do its damnedest to keep this thing going.

#41 Waiting on 06.20.14 at 10:13 pm

I missed yesterday’s post but here’s my info. I rent after having owned for many years. Lost my job 3 years ago. Earn about $15,000 a year from interest and cpp survivor benefits. 57 years old, my partner earns about $85 k. Live frugally in vancouver, ok house, nice landlord. Have $500,000 in savings, but not invested properly. Time to see Garth.

#42 X on 06.20.14 at 10:15 pm

Don’t hate the playa, hate the game.

Even gov’t leads the lambs to slaughter.

The fact that we collectively are on the hook for some of this is ridiculous.

I would be happier if gov’t just gave me free groceries, I mean living in a house is not a right…..but I do need to eat.

#43 T.O. Bubble Boy on 06.20.14 at 10:23 pm

Bubble keeps growing… 19.16ft-wide semi-detached for $1.179M:
http://beta.realtor.ca/PropertyDetails.aspx?PropertyId=14580829&CultureId=1

$61,534 per foot of frontage on a semi-detached house in Toronto?

Who’s buying?

#44 Mark on 06.20.14 at 10:35 pm

“But the main point is that scare mongering about debt being 163% of income takes on a different context when we see that equity is much higher at 726% of net income, on average.”

The problem is, a very large percentage of that ‘equity’ is highly correlated to the housing market. With the housing market now in decline pretty much across Canada, that equity is melting away, while the debt continues to increase. And of course, you point out the other significant problem, and that is who is in debt. There’s probably a lot of families that are 300-500% indebted as a percentage of disposable income, as we know that there are lots of families that are debt free. The debt-free families, typically the elderly, certainly won’t be the ones driving the economy much forward in the future. Hence my comments about the probable necessity of the BoC lowering policy rates to 0%, and engaging in some form of QE eventually.

#45 JOe on 06.20.14 at 10:37 pm

Inflation up , wages will follow, house prices up and everything coming to normal……….
who is not buying now is a looser……

#46 Aggregator on 06.20.14 at 10:50 pm

How's this for May year-on-year inflation.

14.0% Round steak, 1 kilogram
16.7% Sirloin steak, 1 kilogram
14.6% Prime rib roast, 1 kilogram
16.9% Blade roast, 1 kilogram
19.8% Stewing beef, 1 kilogram
12.4% Ground beef, regular, 1 kilogram
19.1%  Pork chops, 1 kilogram
0.7% Chicken, 1 kilogram
20.5% Bacon, 500 grams
8.0% Wieners, 450 grams
20.2% Canned sockeye salmon, 213 grams

Retail prices (list) jumped 7.7% y/y in May, the highest annual increase since 2004. Chart

And that excludes quality adjustments for GMO and additives like yoga mat bread filler. Makes no difference to StatsCan. It if looks like bread and smells like bread — it is bread.

#30 Mark – Core CPI excluding the one-time impact of energy, is fairly stagnant.

You're forgetting two things: 1) Most goods we buy are from the U.S. (even items from China), so we pay more with a lower exchange rate (lower purchasing power). Not to mention in relative terms, Canadians are charged more then Americans for everyday goods because, well, we're just stupid enough to pay it. 2) Those goods have to be shipped here, that costs producers, wholesalers and suppliers more energy and transporting costs. Those added costs will eventually trickle into retail prices.

There's one way to avoid the impact of inflation on household credit consumption — raise minimum wages. That's where we're heading next.

#47 Cici on 06.20.14 at 10:51 pm

#6 Sean Wallace

You’re on to something, and Doug Porter agrees:

“The low inflation ship has sailed,” BMO economist Doug Porter said of the numbers. “While both core and headline inflation have been pumped up by the early-year slide in the Canadian dollar, there is more than just food, fuel and the currency at play.”

http://www.cbc.ca/news/business/canada-s-inflation-rate-jumps-to-2-3-in-may-1.2682011

#48 José on 06.20.14 at 10:55 pm

#30 Mark

Wow! You’re right – the OECD is wrong. Keep buying gold man.

#49 Terrier on 06.20.14 at 11:06 pm

News like this come with no surprise …. the speeding train is out of control and brakes wouldn’t work even if you apply them … it just too late. Roaches are after last crumbs, hunting last meal before storm … and downhill is steep and long.

#50 Smoking Man on 06.20.14 at 11:07 pm

#47 Cici on 06.20.14 at 10:51 pm“The low inflation ship has sailed,” BMO economist Doug Porter said of the numbers. “While both core and headline inflation have been pumped up by the early-year slide in the Canadian dollar, there is more than just food, fuel and the currency at play.”
http://www.cbc.ca/news/business/canada-s-inflation-rate-jumps-to-2-3-in-may-1.2682011
……..

Obviously you’re a blond.. Please don’t take that the wrong way, I like blonds….

But how many times do I need to tell you humans that inflation to Central bankers is when slaves make more money..

Has nothing to do with CPI it’s the narrative that is fed to the herd.. But it has nothing to do with rates.

Even Kevin O Leary doesn’t get it. So being blond is not an insult..

Pull up 3 charts, interest rates, unemployment rate, CPI.

You will notice that the unemployment rate and interest rates are in sync, the CPI don’t fit.

The Cad dollar has been in a rally….

Fk how many times do I need to tell you.

#51 Andrew Woburn on 06.20.14 at 11:12 pm

The following article reveals the covert racism behind the liberal facade of the Washington Post. Aren’t you proud that no Canadian journalist would be so politically incorrect as to report such inconvenient facts?

“For a century, the mansion sat above Sydney Harbor. Then China’s nouveau riche arrived.”

QUOTE: From London to midtown Manhattan to Hong Kong’s Victoria Peak, wealthy Chinese — often connected to powerful political figures — are buying up some of the world’s best real estate. Australia relies on China to buy much of its two main exports, coal and iron ore. But many say there’s a downside to Chinese investment: surging property prices.

Even though Australia is sparsely populated, house prices in its biggest cities are comparable to those in Washington, San Francisco and Paris.

Sydney’s average house price rose 15 percent to the equivalent of $613,000 in the year ended March 31, according to RP Data-Rismark, a research firm. Apartments overlooking the city’s famous Opera House sell for more than $10 million. Many younger college-educated Australians find it impossible to afford homes close to their workplaces without parental assistance.

“A generation of Australians are being priced out of the property market. Many face a lifetime of renting,” an analyst at investment bank Credit Suisse, Damien Boey, wrote in a recent note to clients.

Credit Suisse estimates that 18 percent of all new houses and apartments in Sydney are bought by Chinese citizens. In Melbourne, the figure is 14 percent.”

http://www.washingtonpost.com/world/for-a-century-the-mansion-sat-above-sydney-harbor-then-chinas-nouveau-riche-arrived/2014/06/17/c6c228aa-f1b3-11e3-914c-1fbd0614e2d4_story.html?

#52 For those about to flop... on 06.20.14 at 11:15 pm

Garth ,re last nights comment about married couples sex life.So if last 4 minutes I can tell the wife I am above average!!!

#53 wallflower on 06.20.14 at 11:19 pm

Region of Peel program – would it not be the Peel tax payers supporting this program?
on a HAM note, check out these overbids:
http://v3.torontomls.net/Live/Pages/Public/Link.aspx?Key=abf35ee985c749a0aef02a2f5a576b63&App=TREB&utm_source=hs_email&utm_medium=email&utm_content=13247514&_hsenc=p2ANqtz–bqLL4BEIoV8Xb7ehqAv7JeW-h1TVLD1I4_ThkU1xCNsawt1YukNk3FjGFnPkMytrBMmBVtSKhz2GqdoiEkWbcgvLVSPxXC3Or0ePht-15BCXpmKM&_hsmi=13247514

#54 John in Mtl on 06.20.14 at 11:21 pm

@ #36 Shawn on 06.20.14 at 9:56 pm
“The State of Household Finances is not so Rotten”

BoM might have based some of their findings on that silly Conservatives report a while back saying people were richer today because they have more assets or those assets have much appreciated… THE asset being mostly houses. When the RE correction comes, then the rot will surely come stinkin’ out ;)

#55 R on 06.20.14 at 11:23 pm

Praise be, I live in Peel and can qualify!

Yet, I won’t take the bait. I rent a small apt. for $750 a month and I’m very comfortable. I’ve made some poor financial decisions in the past but I will be mostly debt free by the end of the year, and fully debt free by the end of next.

By the time I’m done, I’ll have an extra 1k per month free and clear, and it’s going to go towards investing, as per the Garth protocol.

I’m out of the debt game.

#56 Cici on 06.20.14 at 11:24 pm

#18 Seeing it from both sides

“…If that is to be believed, then real estate prices are not overdone.”

Actually, I think that if the people in this country who actually have money refuse to buy at these inflated prices, the alarm bells should be ringing, because if prices continue to shoot higher, the debt will be on the backs of the weakest financial links, which could tear a huge and unprecedented rip into the Canadian economy.

#57 NotAGreaterFool on 06.20.14 at 11:24 pm

Garth – Core inflation was reported up today. Is dis-inflation still a concern?Thoughts for the short vs. medium term?

#58 For those about to flop... on 06.20.14 at 11:29 pm

I always suspected I was one of the lower earners on this blog but yesterday blew my mind.
Anyway since we’re all asking each other questions, What do you think is affecting B.C real estate more .
Hot Albertan Money or Hot Asian Money?

#59 Jack Bean on 06.20.14 at 11:33 pm

I keep reading on this blog that tax payers will be saddled with CMHC debt if people default on their mortgage.

I think it is more true to say that CMHC will sell the debt to a collection agency to recoup the loss. I know of a case where someone defaulted in 1990, and walked away from the home. Six and a half years to date they were contacted by CMHC, and told to work with their collection agency to settle the debt.

The person was doing well six years later, they had a house and investments, so the collection agency was threatened with garnish wages and a lien on the house. They ended up accepting a proposal to settle the debt with a 50% lump sum.

Has this changed, CMHC doesn’t go after people anymore?

#60 Andrew Woburn on 06.20.14 at 11:35 pm

CREA’s got competition.

Americans’ Confidence in Congress Falls to Lowest on Record

“Americans’ confidence in Congress is not only at its lowest point on record, but also is the worst Gallup has ever found for any institution it has measured since 1973. This low level of confidence is in line with Americans’ low job approval of Congress, which has also been stuck below 30% for years.”

According to Gallup, Americans even trust banks and the media more than their government.

http://www.gallup.com/poll/163052/americans-confidence-congress-falls-lowest-record.aspx

#61 Randy Macho Man Savage on 06.20.14 at 11:37 pm

I need your help, blog dogs. I am looking to sell my house without an agent and am looking for some advice. I realize the benefits to having the house posted on MLS, and hoping you might be able to suggest a particular service that lists for a fee. Also, how do I get my hands on recent sold data for the Churchill Meadows neighbourhood without relying on an agent?

Thanks in advance!

#62 Cici on 06.20.14 at 11:40 pm

#34 Vlad,

No. Don’t you remember “Josie and the Pussycats?”

José is a guy’s name, but not Josie.

#63 Son of Ponzi on 06.20.14 at 11:45 pm

Now that we have tallied up the responses from the survey:
Who won?

#64 Andrew Woburn on 06.20.14 at 11:46 pm

From David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates Inc.

Inflation — and interest rates — may be in a coma, but they are far from dead

“Dig deep into the memory bank and recall that the last time the Fed raised rates was on June 29, 2006. How many traders and investors since then have joined the ranks of the financial marketplace who know nothing except zero-interest-rate policies, deflation, falling bond yields and quantitative easing (QE)?

They have never seen a rate hike in their professional lifetimes so it will be interesting to see how they respond to the eventual volley when it comes. It’s the mirror image of the greybeards that used to populate the trading desks in the second half of the 1980s, 1990s and early 2000s who only knew about inflation, tight money and bond bear markets — they also missed the boat.”

http://business.financialpost.com/2014/06/17/david-rosenberg-inflation-and-interest-rates-may-be-in-a-coma-but-they-are-far-from-dead/

#65 Cici on 06.20.14 at 11:50 pm

#36 Shawn

Be careful. The “equity” they are talking about here is not real, but based on current home price valuations. Say I bought my house 10 years ago for $200,000, have $100,000 left on the mortgage, and have loaded up on $200,000 of debt, and in the meantime, my home’s value has jumped to $1.2 million. According to their calculations, I have no debt and have $900,000 in disposable income.
Don’t trust these botched statistics.

#66 Happy Renting on 06.20.14 at 11:51 pm

#14 T.O. Bubble Boy on 06.20.14 at 8:03 pm

LOL, you just said that to get a rise out of Garth! :-)

We are A and C. I’m hoping to eventually eliminate the C a be wealthy enough that B makes sense.

#67 LH on 06.21.14 at 12:01 am

Hi Garth

Did you hear the news re: 371 Bloor St West?
Looks like the anchor tenant gets to stay after all.

After three years of uncertainty and worrying I think the takeaway is:

Regardless of what TO bubble boy says, best own the roof over your head, and the land below one’s feet!

LH

#68 Sheane Wallace on 06.21.14 at 12:11 am

#46 Aggregator
…………………………………
ouch, real inflation is 3 times the ‘official’ CPI…

I would trust retail prices list much more then the official propaganda. How about negative 6 % interest rate on savings, how long before erasing the savings of the sheeple?

We would need 6-7 % interest rates to compensate for the real inflation, do we know what that means? Two options:

1. Increase significantly interest rates or
2. face destruction of currencies and savings.

of course the fallout from CMHC would make things much worse.

BOC and the financial minister are pathetic, the guys are pure talk and no action, they are hoping for soft landing…

They will be blown away from the reality the helped engineer pretty soon.

And then we will learn (again) that: CENTRAL BANKS ARE NOT DETERMINING INTEREST RATES, EXCEPT IN SHORT TERM, BOND MARKET IS!

cheers,

#69 crowdedelevatorfartz on 06.21.14 at 12:13 am

@#46 Aggregator
You must be psychic.
I was having this dicussion today with a coworker about food prices rising for the forseeable future.

We havent seen anything yet.

Almost 800 comments Garth.
Well done.
Did you have fun reading them all before posting or was that onerous task left to the Amazons?

#70 BrainOfEngland on 06.21.14 at 12:14 am

Your man, and now our man, Bank of England Governor Carney might have been jawboning quite a lot in recent months about a “UK housing market that has deep, deep structural problems”.

Including late last year warning buyers not to take on mortgage debt they would find hard to service – whilst at the same time UK Gov running Help-To-Buy (Gov help to buy… helping you pay the asking price.. painfully high prices in many instances from my point of view.)

However more reason for hope now in UK market – hope of silly prices softening, and hope of more inventory coming to market.

Look at what the head of our (United Kingdom) largest Real Estate listing company said in their latest report.
_____
Rightmove Index June 2014

Shipside notes: “Many serious buyers who were waiting in the wings have now bought and moved in, taking a slug out of the pent-up demand for a few years to come, and the consequent chatter on the street is that quality buyers are now thinner on the ground. The next wave of buyers may have less motivation or ability to buy and sellers are going to have to be sensitive to their local market and not pitch their asking prices too high as choosy buyers will not arrange to come and visit.”
_____

We’ve also got our main lenders now doing stress-testing on hopeful mortgage borrowers…. and anecdotally it seems to be having an effect. you know the carefree ones who just want as much debt as possible to pay what it’s worth… the ones who have repeatedly over so many years outbid people in my family…. including solicitors and chartered accountants, renting whilst others go loopy with meeting ever higher asking prices.

It’s just the so called cash-rich being the unknown variable now. I hope some of them who’ve already bought, look to cash out, and accept lower prices than what their neighbours think their homes are worth.

Why am I posting this. Because there are suggestions of weakness now, early hints in UK housing market. Going to take a long while for it to become noticeable to the majority, and global housing markets are very interconnected.

#71 Sheane Wallace on 06.21.14 at 12:15 am

#30 Mark

I would be very mild if I say you are either completely brainwashed or insane.

Deflation? With gas at 1.43 and food inflation at 10 % ytd?

Soon you will learn that this is global economy and there is always somebody with higher and rising purchasing power FOR THINGS THAT MATTER.

For things that do not matter I don’t care.

#72 Sheane Wallace on 06.21.14 at 12:17 am

#30 Mark

So eat you GMO, glucose-fructose additives and wait for the cancer to show up. Luckily we have ‘free’ health care.
Have been to organic store lately?

What do you think the rich eat? GMO?

#73 Gregor Samsa on 06.21.14 at 12:23 am

#46 Aggregator

According to Zerohedge, if inflation was calculated the same way it was measured in 1980, it would be almost 10% right now!

http://www.zerohedge.com/news/2014-06-20/inflation-only-if-you-look-food-water-gas-electricity-and-everything-else

As soon as home prices stop rising, we are in trouble.

#74 Jon on 06.21.14 at 12:23 am

Shawn take that 726% and cut out the top 10% of wealthy and see how much net worth the average joe has, it is not very much. Go empty the bank receipt slips from your typical bank machine and you will see some reality of people living pay check to paycheck and having little or nothing to show for it.

#75 BrainOfEngland on 06.21.14 at 12:28 am

To #47 Cici

“Consumers are paying 10 per cent more for beef than at the start of the year. Prices for fresh or frozen pork have risen by 12.2 per cent since the start of the year. Overall energy prices have increased 8.4 per cent since the same time last year.”

Big deal. Inflation in energy, fuel, food, medical (important items people need to use/live on)…. just takes away from the amount people can pay in rent, and limits what they will pay for houses, via mortgages.

Also look out for this dynamic….. for just because prices rise, doesn’t mean people will pay (aggregate demand slips), or that it doesn’t have a corresponding effect, eventually, for other things like rental prices/house prices.
_____
“The consumer balks at attempts to stimulate aggregate demand via inflationary policy of negative real interest rates, and ever since, has been raising real interest rates by reducing inflation through lower aggregate demand. This is perhaps the most unappreciated yet significant market development since the financial crisis. Aggregate demand in the real economy may be meeting the limit of monetary policy.”
_____

#76 ozy: YOU DESERVE IT on 06.21.14 at 12:31 am

YOU DESERVE IT, YOU created this country to the shame it is today. A neo-global-colony, certainly not the country it was 20y ago. you are all slaves to the 1%. YOU DESERVE IT, stop whinning. You just voted a majority red govt in Ontario…

you DESERVE the communism plus the shut-up Canadian corporate policies…. YOU DESERVE IT, stop whinning

#77 Mark on 06.21.14 at 12:40 am

Inflation up , wages will follow, house prices up and everything coming to normal……….
who is not buying now is a looser……

You do realize that the low mortgage rates we have in the contemporary environment are based on the expectation of inflation being non-existent for the next 5 years, right?

Now if inflation is actually picking up, then good-bye 3% mortgage rates, and “hello” 5%+ rates.

Either way, profoundly bad news for a housing market in Canada already a good year into its decline since the 2013 apex.

#78 james on 06.21.14 at 12:53 am

#14 T.O. Bubble Boy

I’ve been pleased with Wealthfront (a ‘roboadvisor’) so far. You only have one degree of freedom, but the automated rebalancing is slick.

So far no management fees, as employees at my company get a large cap before fees kick in. They’re fairly small anyhow.

I also use Vanguard for my 401k, which has some very low cost ETFs for their own clients. Also TD Ameritrade and Interactive Brokers for self-directed stuff. Diversify, just in case another MF Global happens.

#79 james on 06.21.14 at 12:59 am

#21 Waterloo Resident

Don’t feel outdone. Fortunes can change, markets can tank, and people in a job now can be out of work a year from now. I’ve met people in the oil patch making 200k who save absolutely nothing year to year. Garth had a story about a family in NS or NB making 40k, and stashing some away while raising kids.

I was recently at a dinner meeting with a few senior managing partners from very large US law firms. The big law firms are facing profitability issues, and most of them are looking for ways to automate and streamline their business functions so they can offload a lot of their lawyers. I bet those lawyers feel pretty secure at present with their relatively high salaries, but I bet a lot of them haven’t been saving for a rainy day. Things can change quickly in the private sector.

#80 Robo-Advisor on 06.21.14 at 1:24 am

I’m intrigued too! Have any of this blog’s Canadian readers tried a robo-advisor out? If so, how is it going for you?

#81 I dunno on 06.21.14 at 1:59 am

I’m calling BS on many of yesterday’s numbers. Like the “first” morons, it’s just a bunch of middle-aged people trying to one-up each other.

#82 OffshoreObserver on 06.21.14 at 2:03 am

#38 T.O. Bubble Boy on 06.20.14 at 10:00 pm

To: betterment.com:

So, the sum up, these questions:

1/ Do you manage Canadian citizens accounts?
2/ Are you, or your managers, familiar enough with Canadian Income Tax laws so that, say, U.S. dividends are taxed as income, etc.?
3/ If and when I go Offshore, do you manage expatriate accounts, either personal ones or held through an Offshore structure?

Thanks so much for taking the time to read this, and I look forward to your reply.

“OffshoreObserver”

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

Hello OffshoreObserver,

Thank you so much for inquiring about opening an account with Betterment and for sharing your story with us. We’re all too familiar with scenarios where hard-working people pay lots of their retirement funds in fees to companies, but it never gets an [sic] easier to swallow.

While we are looking into this, at the moment we are only licensed to provide accounts to US residents (Social Security number, US bank account, and US address). We greatly appreciate your interest in Betterment and invite you to follow our blog for announcements as we continue to grow
==================================

#83 Turtle on 06.21.14 at 2:53 am

Re: yesterday’s post.

Garth, if you ever gonna do the survey again, may I suggest to tweak the questions a little bit. Something like this:

1) Shelter: Why do you rent, or Why do you own?
2) Money: How much cash do you have left at the end of the month?
3) Family: How old are your kids?
4) Future: Do you plan to sell, to buy, or to stay put in the next one or two years, and why?

#84 Fortune500 on 06.21.14 at 3:31 am

Yesterday one poster observed a roughly 50-50 split between homeowners and renters on the blog. It would be interesting to see the age breakdown on that. I suspect, even as statistically high earners, most of the renters would be in the under 40 crowd. I would also speculate that this is not because they are still accumulating a down payment, but because they have made the conscious decision not to get involved in this market. It was a very different game 10-20 years ago in Canada. It made sense then. It just doesn’t now.

#85 Andrew on 06.21.14 at 7:02 am

These may be outliers for now but it seems that the cracks are beginning to show.

http://www.thestar.com/business/real_estate/2014/06/19/private_lenders_step_into_mortgage_void_left_by_banks.html Self employed, high-risk homeowners increasingly scrambling to get mortgages

#86 Steven on 06.21.14 at 7:04 am

DELETED. This poster is BANNED for racist and homophobic statements. — Garth

#87 Stickler on 06.21.14 at 7:10 am

” people without money shouldn’t be buying stuff that costs $300,000.”

…I remember, not so long ago, $300,000 was a lot of money.

#88 Anson on 06.21.14 at 8:00 am

I have noticed that the people I know who have bought recently or are looking to purchase a home are the ones with lower wages.I beleive the reason is after rent and basic living expenses there is nothing left over for savings…..so basically the only way these people are able to accumilate wealth is through asset appreciation(home prices).
So when will this madness end?
When peolpe stop being comfortable carrying huge amounts of debt.
When actually paying off debts(heloc,credit cards etc)has to be done with ones labour and not the sale of an asset.
To all of the people who are becoming complacent with debt ask yourself….(how hard will these debts be to extinguish if I actually had to work to pays these off).

#89 Ralph Cramdown on 06.21.14 at 8:07 am

Anybody else spot the humour in yesterday’s business sections? The first article says Canadian household debt-to-income ticked down marginally in the first quarter (the one that ends in March). The second article says consumer spending was up more than expected in April, led by the cars and car parts category.

Here’s an article on Canadian subprime. Mostly anecdote, but a broker seeing subprime go from about 10% of his customers to about 20%, and higher for self-employed.

http://www.thestar.com/business/real_estate/2014/06/19/private_lenders_step_into_mortgage_void_left_by_banks.html

#90 maxx on 06.21.14 at 8:37 am

“It’s more about the systemic risk involved in a getting people into houses, and debt, who have no money, no resources and little knowledge. Is this what government should be doing?……..Technically, this is a 20-year loan which carries no interest and on which no payments need be made. After two decades, it’s forgiven. If you sell the house and lose money, it’s also forgiven. If you sell and make money, you pay it back. The property must be your principal residence, and the loan must be from a lender backed by CMHC. That’s right. The 5% downpayment comes from the government. The other 95% is secured by the government. What’s wrong with this picture?”

What’s wrong is that I’m totally and continuously disgusted with the machinations of government in trying to shoehorn people into homes at any cost. Any cost.

Yet again, this completely disrespects the taxpayer, excises ever more of its disposable income with destructive, needless tax increases of all kinds on a continuing basis which jeopardizes its future well-being. Milked like cattle.

We rent a great condo- it’s a hell of a lot cheaper and exposes us to far less tax abuse than being a homeowner.

We now live in an age where people need to proactively protect themselves against idiotic policy.

#91 maxx on 06.21.14 at 9:09 am

#49 maxx on 06.21.14 at 8:37 am

” We now live in an age where people need to proactively protect themselves against idiotic policy.”

…and without putting too fine a point on it, suppressed interest rates are also a furious abuse of taxation.

#92 Daisy Mae on 06.21.14 at 9:16 am

#17 Johnnyd: “I don’t know what this country is becoming but it sure doesn’t look too good for our collective futures.”

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

Well, remember…Harper DID say we wouldn’t recognize Canada when he gets thru with it. Obviously, he wasn’t kidding.

#93 Ralph Cramdown on 06.21.14 at 9:38 am

#61 Randy Macho Man Savage — “I am looking to sell my house without an agent and am looking for some advice. I realize the benefits to having the house posted on MLS, and hoping you might be able to suggest a particular service that lists for a fee. Also, how do I get my hands on recent sold data for the Churchill Meadows neighbourhood without relying on an agent?”

Hire an appraiser or two. $300-500 and they have access to MLS, so they’ll show you the comps.

Line up a lawyer beforehand so that you have blank contracts ready for ink. Get a mortgage broker in case you get customers who can’t figure out that part.

Decide beforehand whether you’ll pay a commission to brokers who bring you a buyer. Then you’ll have your story straight when agents show up (and they will).

Put together a feature sheet with all the stuff that would be on an agent’s listing, find some plastic tubes at your local dollar or hardware store and hang them under the for sale sign.

Either list at the beginning of your busy spring market or your busy fall market. FSBO is already one strike against you; no sense doing it when the market is slow.

Save $20,000+ and smile, smile, smile.

#94 Castaway on 06.21.14 at 9:42 am

#38 T.O. Bubble Boy on 06.20.14 at 10:00 pm
Who is managing your wealth?

A) Yourself/Spouse
B) Garth, or other Fee-Based Financial Advisor
C) Commission-based Financial Advisor
D) Robo-Advisor
E) Other?

I am currently A), but I am increasingly interested in D).

Seriously? — Garth
————————————

Yes, I’m seriously A), but I am intrigued by the idea of WealthFront/Betterment/etc. where you pick an allocation of Vanguard ETFs, and get auto-rebalancing across those ETFs for 0.25%.
————————————-

T.O. Bubble Boy. You might want to think this auto rebalancing thing through a bit further. Unless you like paying someone to withdraw from your performing assets to invest more in poorly performing ones. Think about it.

#95 Nemesis on 06.21.14 at 9:52 am

#SillySaturday! #OrHowNotToConduct’MilitaryInformationSupportOperations’

[CBC] – HongKong born Vancouver South MP Wai Young claims Liberal party promoting marijuana to kids!: Election style attack flyer full of misleading statements says Liberal party

…”A spokesperson from Wai Young’s office says the political flyer was generated by the Conservative Party’s Central Resource Group and sent to MPs across the country.

Wai Young was not available for comment this week, nor was any other Conservative Party official.”

http://www.cbc.ca/news/canada/british-columbia/vancouver-mp-claims-liberal-party-promoting-marijuana-to-kids-1.2683052

[NoteToGT: Just between the two of us, those naughty flyer authors may have unintentionally energized the VancouverSouth youth vote turnout. What next, StephenHarper comic books? http://en.wikipedia.org/wiki/United_States_propaganda_comics#Iraqi_Freedom.2FNation_Building_Comic_Books ]

#BonusConspiracyZenForPapalSnugglyButtocks

[Tyee] – Why Are BC’s Natural Resource Officers Buying Bulletproof Vests?

…”With spring 2014 amendments to the Agricultural Land Reserve and the Park Boundary Adjustment Policy, the government has opened the door to applications for mining and pipeline projects on land that was previously off-limits to development.”…

http://www.thetyee.ca/News/2014/06/21/Natural-Resource-Officers-Bulletproof/

#96 Mark on 06.21.14 at 10:08 am

“Here’s an article on Canadian subprime. Mostly anecdote, but a broker seeing subprime go from about 10% of his customers to about 20%, and higher for self-employed.”

Has to be much higher than that. The CMHC alone insures or re-insures $900B of subprime mortgages. Perhaps the mortgage broker is referring to the subprime trash loans that are so poor that even the CMHC won’t touch them? I can’t fathom what sort of borrower would find it economic to pay those rates, rather than selling and renting.

#97 Mark on 06.21.14 at 10:10 am

“I would be very mild if I say you are either completely brainwashed or insane.
Deflation? With gas at 1.43 and food inflation at 10 % ytd?”

Food and retail unleaded petrol are what, around 10-15% of an individuals’ consumption basket? Maybe a few of those are going up, but lots of other stuff is going down. The methodology for calculating CPI is rigorous, and if inflation was really as high as some claim, the bond market would have puked a long time ago.

#98 mishuko on 06.21.14 at 10:17 am

Seriously… your poll request was insane! And then I realized how small and insignificant I was. Back to the drawing board! *crawls back into the mouldy spot*

#99 T.O. Bubble Boy on 06.21.14 at 10:33 am

@ #67 LH on 06.21.14 at 12:01 am
Hi Garth

Did you hear the news re: 371 Bloor St West?
Looks like the anchor tenant gets to stay after all.

After three years of uncertainty and worrying I think the takeaway is:

Regardless of what TO bubble boy says, best own the roof over your head, and the land below one’s feet!

LH
————————–

I have never been “anti owning”, simply “anti ONLY owning a bit of a house an no other assets” (i.e. putting EVERYTHING into a house). I am also anti-debt.

Garth’s “Rule of 90” is a good guideline… by the time you are 40, married, kids, whatever, the house should be 50% (or less) of your assets. That is exactly what I am targeting.

The issue is: buying a house now that fits the equation (I have owned in the past), or waiting for wealth to rise and buying a better house without committing over 50% of net worth to it.

#100 Smoking Man on 06.21.14 at 10:35 am

#77 Mark on 06.21.14 at 12:40 am

Dude, inflation up don’t mean wages go up.

Only way that happens is when is when no slaves available to fill the shoes of those demanding more money..

Low unemployment rate = wage gains..

Low rates forever….

#101 Vangrrl on 06.21.14 at 10:56 am

#86 Steven:
Congrats! You get today’s prize for most idiotic post! :-)

#102 Old Man on 06.21.14 at 10:58 am

I have a Senorita in Mexico who wants to kill her computer repairman. He repaired her computer and it won’t work for her, and he is afraid to come back because she is screaming at him. The men in Mexico are afraid of the Amazonas because they are cowards to standup to a real woman. Now if she can keep her connection up might be able to solve her problem as we don’t need another murder; might just be her time clock is out of sync or something else. I will try, but she seems to be down now and has a gun. :(

#103 Joe2.0 on 06.21.14 at 10:59 am

Come on in.

According to the UN statistics.
Canada has averaged 538,000 immigrants a year over the past 13 years.

Link? — Garth

#104 Millenial on 06.21.14 at 11:00 am

Hey Garth,

Did you see the application form for this Peel Ownership Program?

http://www.peelregion.ca/housing/home-in-peel/apply/Home-in-Peel-Affordable-Ownershio-Program-Application.pdf

Under ‘Proof of Income’ the boxes to check off include: ODSP and Ontario Works! LOL, I hope that is just a screening tool to weed out those folks! Those people don’t need to be buying condos in Mississauga.

#105 Nemesis on 06.21.14 at 11:01 am

#SillySaturday2 #HauledOntoTheCarpet! #”WeAreNotAmused.” #Formalism,Bureaucracy,Hedonism&Extravagance!

[FT] – Red carpet welcome for China leader falls short

…”According to two officials involved in preparing the visit, China expressed concern that the red carpet from the steps of Mr Li’s aircraft to a VIP holding area was not long enough. “They saw a diagram of the arrangements at Heathrow and complained that the carpet was three metres too short,” said one official…

…On the second day of Mr Li’s visit, a Chinese newspaper controlled by the People’s Daily, the Communist Party’s main mouthpiece, derided Britain as a “narrow-minded”, “prejudiced”, “petty” “declining empire”.”…

http://www.ft.com/intl/cms/s/0/f38e1532-f867-11e3-815f-00144feabdc0.html?siteedition=intl

#106 chapter 9 on 06.21.14 at 11:08 am

#21 Waterloo Resident
Do you have your health? Are you fit? You are rich!!!

#107 David Hawke on 06.21.14 at 11:29 am

Gee Garth, I wish you would quit picking on Kia, love mine even when at 15 yrs old she has the odd Oops moment.

https://picasaweb.google.com/101406064280344293884/Kia?authkey=Gv1sRgCPaXvZ3ciMeaYw

#108 Cici on 06.21.14 at 11:38 am

#50 Smoking Man

No, I’m not a blonde, and all charts bore me.

What does pique my interest though is the fact that the chief economist of a major bank is saying that the inflation ship has sailed, because in my mind, that’s a sign they’d like interest rates to lift just a bit to make up for slowing demand in new mortgages.

#109 Ralph Cramdown on 06.21.14 at 11:47 am

Non-traded REITs were questioned the other day. I’m negative on them, because most of them are sold to investors by selling a disadvantage (lack of liquidity) as an advantage (no volatility like that nasty stock market!)

I suppose that there are some good ones out there, but they’re probably the ones we’ve never heard of, because the biggest marketing budgets are spent by the ones with the highest fees.

Here’s a cautionary read from FINRA, a US regulator. US rules are different from Canadian ones, but most of the principles are similar.
http://www.finra.org/investors/protectyourself/investoralerts/reits/p124232

The new colloquial term for these and similar investments is “Murder Holes.”
http://www.basonasset.com/murder-holes-built-to-fail/
wealthmanagement.com/investment/staying-out-murder-holes

#110 BillyBob on 06.21.14 at 11:48 am

re: the “roboadvisor” sites, as a Canadian citizen, non-resident, I inquired into whether I could use their services and the answer was…

no.

So not sure why it’s even being suggested on a Canadian finance blog?

“Who may open an account on Wealthfront? -Any individual 18 or over, who is a legal US resident or a US citizen (with a permanent U.S. address) may open a Wealthfront account.”

#111 liquidincalgary on 06.21.14 at 11:52 am

@ 50SM

wow, we are in agreement. CAD in rally.

interest hikes

#112 liquidincalgary on 06.21.14 at 11:54 am

…interest rate hikes not far behind? which will just reinforce higher CAD??

…interesting times indeed

#113 Happy Renting on 06.21.14 at 11:56 am

#86 Steven on 06.21.14 at 7:04 am

Oh man, “genocide white Canadians”? I haven’t had enough coffee yet to be reading comments of a nature such as yours.

That comment should never have been posted. The individual making those racist and homophobic remarks has been banned from this site. I apologize for having missed this. — Garth

#114 Happy Renting on 06.21.14 at 11:58 am

#87 Stickler on 06.21.14 at 7:10 am
” people without money shouldn’t be buying stuff that costs $300,000.”

…I remember, not so long ago, $300,000 was a lot of money.

========

It still is, if you actually have to earn and save it. I believe a lot of people who are terrible with money have never really had any to begin with. Ditto with their parents. No one to learn from, nothing to practice on.

#115 Ralph Cramdown on 06.21.14 at 12:03 pm

#94 Castaway — “You might want to think this auto rebalancing thing through a bit further. Unless you like paying someone to withdraw from your performing assets to invest more in poorly performing ones. Think about it.”

As long as you’re not paying them too much, it works.

If there was only one way to make money in the markets (e.g. culling losers quickly and letting your winners ride), everybody would be doing it… and it wouldn’t work any more.

If you think rebalancing doesn’t work, then hie thee to a spreadsheet and prove it to yourself. Here’s the raw data you’ll need:
https://www.callan.com/research/periodic/

How can anyone believe letting a robotic program rebalance makes sense? If you don’t think alpha exists, you are naive. — Garth

#116 liquidincalgary on 06.21.14 at 12:14 pm

@ #71sheanne wallace

you keep chattering about inflation.

what if certain areas of ‘wealth’ deflate more quickly, and at higher valuations, than your piddly little inflating areas?

it’s about NET inflation/deflation.

the US went through this exact scenario a few yrs back.

i was reading MISH back then.

#117 Ralph Cramdown on 06.21.14 at 12:22 pm

#102 Old Man — “I have a Senorita in Mexico who wants to kill her computer repairman. He repaired her computer and it won’t work for her, and he is afraid to come back because she is screaming at him.”

Watch as much porn as you want, Old Man, but no need to bore us with the plot summaries.

#118 Aggregator on 06.21.14 at 12:23 pm

China’s commodity imports have financed its property bubble

 
Where's all this hot money coming from? Read that article to get up-to-speed with what's really going on in China as RE developers scram like rats from domestic RE projects and commodity funding schemes to invest in countries like UK, Canada and Australia.

Between the $4.4 trillion shadow banking sector loans and commodity financing deals used to finance real estate developments, the financial system has become so complicated that even China's central bank is clueless to knowing where the implosion will come from.

This resonates with what Russia did in the 1990s, as they, too, denied they had a credit crisis and went on assuring markets that the RUB (a fixed exchange rate) could be managed. In 1998, Russia defaulted on its debts as markets realized they were at the point of no return. The Russian Crisis 1998

Why are communist and fascist regimes more unstable and likely to default? Because they promote and try to force their economies in a linear upward path (Charts) against the natural business cycle that follows a law as fundamental as gravity: what goes up, must come down.

The reality is — the more they fight it, the more the business cycle moves against them and makes the next crisis even larger then the last.

#119 Emma Zaun - GreaterFool Unpaid Intern #007 on 06.21.14 at 12:55 pm

Well Garth, aren’t you just so fat and happy with yourself, proud to bursting that Thursday’s “Who are you?” posting has now made it to 800 comments and a gazillion hits.

Well you didn’t do it, you Montgomery Burns wannabe, WE did!

Interns screened and packaged all those posts, deleted anyone claiming to make more money than you per your instructions, and put them online in a timely manner, deleting the usual idiots.

We worked through the night, and are still catching up today on that one infernal f$&^%^#ing post.

It’s supposed to be our weekend, for chrissakes!!!

Well….THAT’S IT, you Gordon Ramsey imposter!!

We are holding meetings over the weekend and will be choosing UNIFOR or CUPE by next week.

Things are gonna change around here!

You make this boss look like an enlightened Buddhist spiritualist by comparison.

http://www.youtube.com/watch?v=KLAa-kxM8lE

Comb the crumbs out of your beard by yourself!

Rub your own damn ankle. :( :(

Slave Driver!!

(P.S. Don’t think we haven’t heard about your talks to bring in temporary foreign workers. We’ll be in touch with the Toronto Star the moment that happens)

(P.P.S. Montgomery Burns is way hotter, and Michael Scott is way smarter than you!!)

#120 liquidincalgary on 06.21.14 at 1:17 pm

some food for thought :

Cannacord Genuity US Portfolio Strategist Tony Dwyer says not to expect the market or economy to peak for another 3+ yrs.

“if any cycle has proven it takes an inversion of the yield curve and shut down of credit to have a recession, it is this one.”

“we have gone through a near collapse of the Euro Zone, a sharp slowdown in Emerging Markets, a ‘fiscal cliff’ and weak emloyment – and not had a recession.”

he believes this proves his thesis that only an inversion of the curve should cause a recession. as such, he doesn’t expect a market peak for at least another 4 yrs. the market typically peaks eight months ahead of a recession, and a recession is at least four yrs away. if the FED holds to what they say, and doesn’t raise rates until end 2015, dwyer says it would take a year of rate hikes to bring short rates up enough to invert the curve, the mean inversion is 15 months. that means that absent a sharp rise in core inflation the fundamentals suggest we remain early in this economic cycle.

are canadian markets going to lead the way with higher rates, more quickly then, or do we continue to be the tail of the wagging US dog

#121 Hulot on 06.21.14 at 1:29 pm

This busts Garth’s theory that Demographics will fuel Boomer home selloff in the near future.

Boomer Housing Bust Ain’t Happening Yet

http://www.bloombergview.com/articles/2014-06-20/boomer-housing-bust-ain-t-happening-yet

Never did I say it is underway now. This is tomorrow’s market-maker, suggesting smart people prepare today. I gather this will exclude you. — Garth

#122 Joe2.0 on 06.21.14 at 1:43 pm

#103 re Garth

Link?

My mistake, the UN link refers to international migration in Canada since 2000 7 million.
Re Immigration Canada the average yearly immigration into Canada is 250,000

http://www.immigrationwatchcanada.org

As stated here many times. Immigration levels have not changed in years. — Garth

#123 Hulot on 06.21.14 at 1:45 pm

And Garth, looking at the healthy average salaries and net worth of your readers, they can easily absorb a rate hike. So you are wasting your time preaching to them.

The market cannot. Higher rates will depress valuations in all categories. — Garth

#124 T.O. Bubble Boy on 06.21.14 at 1:53 pm

@ #82 OffshoreObserver on 06.21.14 at 2:03 am

Yes – I understand that the leading U.S. “Robo-advisors” are not yet in Canada. There are a couple of startups with similar concepts, and you also see the ETF providers like Vanguard launching basic “advisor” products as well (in the U.S. for now).

#125 Joe on 06.21.14 at 2:04 pm

The discussion about RE in Canada should be stopped

For several years prices go up and will go up………
Who is talking about pick today will be looser in long term
If you want to buy house you have to do it now….
Hyperinflation will literally eat your debts without any pain.. The debtors will be winners
The savers and basement dwellers still losers…
Garth is warning you like a doctor who puts fear on you…
You can’t go trough life with a fear…all the time
Total nonsense..

There will be no hyper-inflation. Yes, nonsense. — Garth

#126 Ralph Cramdown on 06.21.14 at 2:10 pm

#115 Ralph Cramdown — If you think rebalancing doesn’t work, then hie thee to a spreadsheet and prove it […]

How can anyone believe letting a robotic program rebalance makes sense? If you don’t think alpha exists, you are naive. — Garth

I think I’ve been misconstrued.

I believe that:
– alpha exists
– most active investors who try to generate it will end up contributing to somebody else’s
– many investment advisors who sell it will collect most (or even more than 100%) of it for themselves rather than their clients

My post wasn’t about robo-advisors, just about rebalancing. I think the fundamental dichotomy of investing, which every investor needs to choose, is whether they think they (or their advisor) can beat the markets, or whether aiming for the market return is the goal. In the former case, absolute, after-fee performance is the target. In the latter, low fees wins.

Robo-advisors are aimed at lazy clients who don’t think they can beat the markets, or even be bothered to rebalance without prompting. Rather like target-date funds, they aim to take half a point or so off your assets in exchange for helping you do something you might otherwise not do. I’m too cheap (and arrogant) to use them myself, but then I change my own oil. Many investors could probably do worse, and many probably will.

The goal of investing is not to ‘beat the markets.’ It’s to keep capital secure while generating sufficient returns, in a tax-efficient way tailored to an investor, to achieve personal goals and financial security. All else is gambling and gimmick. — Garth

#127 Joe on 06.21.14 at 2:19 pm

Car Sales are up , luxury brands are selling like a hotcakes,
real estate hot like never before, oil prices up,
food prices up, gold up……….
Question ? Who is buying? Real people are buying and they are not fool….
We are talking about economic downturn…it is joke…
Even during best economy people were never buying houses like that, cars , travel like today
You think that government will allow for default on housed for about million people.
That would be disaster…
They will be helping people with their debts to keep economy flowing ..it is obvious..
If you live with fear you loser…..
Actually from my observation if you have more debt they love you and helping you…

#128 TurnerNation on 06.21.14 at 2:22 pm

Was hoping be ‘800th?’ the other day.

May the doggie breath of one thousand blog dogs curse kando realtors.

#129 Hulot on 06.21.14 at 2:35 pm

#121

To prepare for what, Garth, 2025, as the article suggests? You and I don’t even know if we’ll be alive tomorrow.

I have three plates and 20 screws in my leg. Titanium. Speak for yourself, mortal. — Garth

#130 Sleepless in Victoria on 06.21.14 at 2:37 pm

Ralph Cramdown is on fire today!

#131 Shawn on 06.21.14 at 2:38 pm

The Goal of Investing

The goal of investing is not to ‘beat the markets.’ It’s to keep capital secure while generating sufficient returns, in a tax-efficient way tailored to an investor, to achieve personal goals and financial security. All else is gambling and gimmick. — Garth

***************************************
Agreed… with some caveats

For some the “personal goal” is to get stinkin’ rich. For example those with excellent pension plans can swing for the fences with their other investments if they wish to.

Yesterday we learned may visitors here have family income of $250k plus. Some of those people may be able to achieve very high levels of investments such as more than $5 million. We learned that the variation in comes is staggering. The variation in wealth in senior years is and will be even more staggering.

Keeping capital secure seems to have different meanings. For some it means no market fluctuations. So they cling to GICs and savings accounts. They would avoid bonds and perpetual pref shares even if the cash return was stable.

Some measure capital security in real dollars.

Some measure capital security in the long term and are not concerned much with short-term market fluctuations.

When Warren Buffett says rule number one is don’t lose money. He means don’t invest in things with any real chance of losing you real (after inflation) dollars in the long term. He is perfectly happy to accept market fluctuations in the short term.

Reaching for alpha is of course attempting to beat the market, that is the definition of alpha. Most advisors will try as few like to admit they can’t do it.

Buffett has written (50 years ago) that the service that most advisors and mutual funds provide is diversification and NOT alpha and he thought and thinks that is perfectly okay. His own goal was always to beat the market but he felt that very few could do it.

Every dollar that an advisor encourages a client to invest is almost certain to be worth a heck of a lot more (even after fees) in the long term than a dollar that was simply spent.

It’s a huge market out there and it has room for many approaches.

#132 Habs76-79 on 06.21.14 at 3:48 pm

#125 / #127 Joe.

Joe, Joe, Joe… You’ve already lost even though you don’t know it.

Inflation does not automatically pay down or wipe out your accumulated debts. It essentially lowers the value of currency, but your acquired debt remains. If you lack an ability to facilitate prudent repayment of said debt, all the inflation in the world won’t help you. Next, if via inflation you only continue to inflate your acquired debt to higher levels you are still gonna lose. AND GET PROVERBIALLY SMACKED IN THE FACE!

You can talk till the cows come home about the value of say your home rising substantially. If the debt load you carry is becoming burdensome to repay your house’s net worth ain’t gonna fix it. If you think that say for discussion here your house being worth $500,000 with say you still having a $300,000 mortgage, has any credible day to day value, well try this experiment.

Go to your local grocier, load up your shopping cart full of food. Hundreds or even thousands of $$$ worth. Go to the check out lane and pull out your last assessment of your house and tell the cashier your house is worth (again say for argument sake) $500,000 and that you are good for the money, so can the cashier let you leave without paying cash? SEE WHAT THE CASHIER TELLS YOU! You won’t be leaving with a shopping cart full of groceries.

As to the govt. being able to stop an unraveling of an over priced housing market. HAH! you put too much faith in a govt. being able to do so. If such was so why then could not all the power of the President and Congress in the USA stop their historic housing melt down?

Harper here in Canuck land may think he is a King, but he ain’t and likely will find out sooner than later, that he’s not.

But hey man you keep on believin.

I’ll put up again a favourite quote I like to use.

The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.

Winston Churchill.

#133 John Prine on 06.21.14 at 4:22 pm

Was in my local credit union today talking about the huge increase we got in gasoline at the pumps yesterday and how this may tip a lot of peoples financial situation from bad to “I can’t pay” The teller told me that she remembers the eighties when people came in and just handed their house keys over the counter and walked out. They had a real estate board with their repossessions for sale in the lobby.

#134 Entrepreneur on 06.21.14 at 5:06 pm

A lot of intelligent bloggers…informative.

With my past experience with government interference, such as mentioned above, means that “there is trouble in them hills.” Also, like someone said “it starts off good but the greedy ones get in.” Talking about groups that are in power.

#135 Smoking Man on 06.21.14 at 5:10 pm

#108 Cici on 06.21.14 at 11:38 am

In the eyes if central banks.
inflation is Job Growth. small labor pool means higher wages.

although the herd thinks when the boc talks inflation its prices going up.. It’s a wrong assumption.

Chief Economist. Does that empress you..

Check out my calls vs his in the last four years..

#136 Casual Observer on 06.21.14 at 5:12 pm

#97 Mark – “Food and retail unleaded petrol are what, around 10-15% of an individuals’ consumption basket? Maybe a few of those are going up, but lots of other stuff is going down. The methodology for calculating CPI is rigorous, and if inflation was really as high as some claim, the bond market would have puked a long time ago.”

“If you don’t see inflation, then you have been focused on hedonically adjusted consumer price data: The markets for assets and commodities tell a different tale.” – David Rosenberg

I don’t know where interest rates would be if CPI methodology hadn’t changed from 1980 and the official reading was 10% instead of 2%, but if I had to guess, I’d say rates would be higher.

The bond market doesn’t “see” any inflation, partly because it’s being manipulated by Central Bankers buying their own government’s bonds in an attempt to keep rates low.

They are also purchasing the sovereign bonds of other countries using what has commonly been referred to as “beggar-thy-neighbor” type policies, where exporting countries try to gain an advantage over their trading partners by lowering the value of their own currency.

The difference this time around is that many countries are trying to do the same thing and you end up with a “race to the bottom” currency war.

No Central Bank wants a strong currency because it is deflationary. They want to create inflation because they think it will motivate people to buy things and create GDP growth.

They don’t realize that by creating inflation, consumers are able to purchase less, not more, because wages do not rise in lock step with price increases.

Consumers have been trying to keep up with rising prices for housing, food, fuel, etc. by using credit to make up the difference due to stagnant wage increases.

For those that think wages have kept up with inflation, just remember that forty years ago, a family could afford to own a house (not a condo), a car, buy groceries, and take an annual vacation on one average income. Nowadays this is difficult to do with two average incomes.

As costs rose, rather than accept a lower standard of living, people chose to add a second income and to increase their debt levels, and keep going.

When the consumer debt bubble in Canada stops inflating and starts going in the other direction, we could end up with a tug-of-war between inflation and deflation, whereby prices for housing and other “credit-dependent” purchases are falling, while prices for commodities such as food and fuel are rising.

I don’t know what the solution is, but the problem is too much debt. Inflation or deflation, either way, it has the potential to be very disruptive to the economy and to peoples lives.

#137 Mark on 06.21.14 at 5:28 pm

“Hyperinflation will literally eat your debts without any pain.. The debtors will be winners”

Two problems with this:

a) Nearly all Canadians are on mortgages which adjust their rates very quickly. The first whiff of inflation, and wham, those rates shoot to the moon. The banks will have repossessed the house far before their debt is devalued.

b) There’s no evidence of inflation, nevermind anything resembling hyperinflation. Hyperinflation is caused by a shortfall in domestic production capacity relative to consumption. No risk of this happening either. However, this is a typical setup for deflation, especially as debt expansion slows.

#138 Mike T. on 06.21.14 at 5:32 pm

‘And Garth, looking at the healthy average salaries and net worth of your readers, they can easily absorb a rate hike. So you are wasting your time preaching to them.’

Oh Dear

if you think that those posts represent anything to do with Canadians and the ability of the market to absorb rate hikes, well….I guess that is what you think

People thought the Earth was flat because they were told over and over again it was flat

Smart people looked at the round moon, the round sun, the round stars, the round other planets and decided for themselves

#139 Herf on 06.21.14 at 6:11 pm

Interesting that Josie didn’t mention the verse that precedes 1Ch. 4:10. Taken out of context, it seems it might forebode the fate of many of the Jabez’s who buy into Josie’s and Peel Region’s real estate spiel and enticement:

NAU 1 Chronicles 4:9 Jabez was more honorable than his brothers, and his mother named him Jabez saying, “Because I bore him with pain.”

or in the King James version:

KJV 1 Chronicles 4:9 And Jabez was more honourable than his brethren: and his mother called his name Jabez, saying, Because I bare him with sorrow. {Jabez: that is, Sorrowful}

#140 Sheane Wallace on 06.21.14 at 6:20 pm

#116 liquidincalgary

inflation applies to prices of consumer’s good and services, not to the prices of investable asset classes.

#141 sheane wallace on 06.21.14 at 7:08 pm

#137 Mark

Nope, this is how it works:
Expansion of money supply is fact, through bond purchases and loans, you don’t ‘see inflation’ because stats are bastardized and velocity of money is yet to pick up. Once it does, inflation shows up in a big way.

The ONLY WAY TO HAVE DEFLATION IS DEFAULT ON DEBT which obviously is not going to happen se let’s get ready for stellar inflation.

Gas at 1.44 today. It was 1.19-1.24 in the early spring

#142 TurnerNation on 06.21.14 at 7:09 pm

What’s money? I live in time. Would like this blog asking about time.
(Sure after 11yrs on Bay St. – I keep it swept, free of litter and lines repainted – I collect an above-median salary.)

But work ~8 hrs a day – usually eat lunch at my desk area by choice though I could leave for 1hr; no weekends, no evenings. The PATH is my playground, everything is here.

Commute time from home:
– 18min walking.
– 10min streetcar.
– 5 min taxi.

Leaves plenty of time for other things…wouldn’t trade it for anything.

#143 Spectacle on 06.21.14 at 7:11 pm

Wow 807 blog comments, great work Garth!

Frightening thing is, I’m sick in bed, running fever of what feels like 600 degrees from a nasty virus going around, and I read every “who are You ” entry (807) and all of today…….. I’m sick! No, I’m sick……

Re: #10 Sheep on 06.20.14 at 7:54 pm
We have changed the name of the TFW program. Most sheep won’t notice… transfer 85% of the TFWs into a new category called “International Mobility Program”.

Then we will cut TFW program entrants by half! 50%!!!

My reply: great mention #10 Sheep. There is an even more frightening financial aspect to this, and of great relevance to Garth’s blog. The “International Mobility Program” will bring competition to Canadians job security. Welders, oil field workers, pipeline workers, engineering, architecture, computer /IT workers, banking/insurance etc etc. by “International Mobil Workers ” who want to come to canada to earn a better (or any) wage! It’s open season on your future job in some respects.

Basically all of those $100,000 careers will face dilution.

Who in our Realestate buying nation will be grabbing all of those retiree and flippers homes? Yes, those people are not TFWorkers at TimHortons, and arguably they will be buying realestate here to some extent. The clincher is, That next generation moving up in careers, won’t be .

It’s a job security ender for the Canadians as we knew it, for many sectors of the economy. ( I don’t have a link, my fever and lack of energy today) but it was also referenced several blogs ago. Its an extension of “UN Agenda-21”. Google and Youtube it yourself, it’s essential knowledge for us blog dogs.

Regards all

#144 liquidincalgary on 06.21.14 at 7:12 pm

@ #140 sheanne wallace

can you read a balance sheet.

do you know what one looks like.

#145 liquidincalgary on 06.21.14 at 7:17 pm

and again to sheanne

learn the true definitions of deflation/inflation

one is an expansion of credit/debt, the other an exact opposite.

easy-peasy

#146 Mark on 06.21.14 at 7:26 pm

“The bond market doesn’t “see” any inflation, partly because it’s being manipulated by Central Bankers buying their own government’s bonds in an attempt to keep rates low.”

Yet Garth tells us tales, almost every day, of how Canadians are so disproportionately over-weighted GICs, cash deposits, and the like. Corporate balance sheets are full of cash, which, despite all the advice of professionals, according to you, is losing a lot of value.

Only problem is, it doesn’t add up. Inflation is not high, it is barely existent. The average Canadian has never enjoyed a larger consumption basket. Inflation-protecting assets aren’t particularly in demand. Most ‘inflation’ appears simply to be imaginary.

As for quality adjustments or hedonic adjustments, of course they’re necessary. The new Honda you buy today will likely deliver a significant multiple of service life compared to the Chevy you bought 35 years ago, require far less maintenance, and burn less fuel and oil. It simply wouldn’t be fair to not adjust for quality.

You’re correct about credit growth and deflation though. We’re seeing credit growth somewhat stall, largely due to falling housing prices and a reduction in borrower and corporate confidence, and this is why the economy is pretty much on the precipice of deflation. Raising BoC policy rates against such a backdrop would be a travesty.

#147 Mark on 06.21.14 at 7:30 pm

“prices for housing and other “credit-dependent” purchases are falling, while prices for commodities such as food and fuel are rising.”

Sure, that’s happening, but energy inputs and food have almost never been such a small portion of the average Canadians’ income.

As for your comment about vacations, they’re cheaper than ever, despite record energy prices, due to the deflationary impact of technology (ie: airplanes like the 777 and the 787 Dreamliner) and extreme competition in that sector.

#148 Mark on 06.21.14 at 7:53 pm

“The ONLY WAY TO HAVE DEFLATION IS DEFAULT ON DEBT which obviously is not going to happen se let’s get ready for stellar inflation”

Nope, merely a slow-down in expansion of debt in excess of an expansion of the economy’s ability to produce will generate deflation (which appears to be happening in Canada!). In other words, over-investment. Of course, debt contraction through defaults is extremely deflationary, and as housing prices continue to fall, we’ll see some of that happening as well. It is important that the BoC is ahead of the curve on this, in fighting deflation, rather than letting things get to the point where significant defaults, especially in the CMHC subprime mortgages, occur.

#149 brainsail on 06.21.14 at 8:05 pm

#136 Casual Observer on 06.21.14 at 5:12 pm

“For those that think wages have kept up with inflation, just remember that forty years ago, a family could afford to own a house (not a condo), a car, buy groceries, and take an annual vacation on one average income. Nowadays this is difficult to do with two average incomes.”

Yes, a very important observation. Recently I read that during the seventies that in a typical household the male was the breadwinner and only 20% of the wives needed to work to make ends meet. Today that has flipped to 80% wives working. Wish I had still had the link.

#150 devore on 06.21.14 at 8:08 pm

#18 Seeing it from both sides

700+ sampled from a cross section of the nation make waaaaay above the 60k+ median. AND …. the majority seems to be in their 30′s. If that is to be believed, then real estate prices are not overdone.

I don’t think you understand how statistics work. You should look into some book learnin.

#151 Mark on 06.21.14 at 8:13 pm

“Was in my local credit union today talking about the huge increase we got in gasoline at the pumps yesterday and how this may tip a lot of peoples financial situation from bad to “I can’t pay””

I’ve lived in the same neighbourhood for most of my life, in a few different houses. When I was a kid, the 1 car family was pretty much normal. Maybe an old beat up pick-up truck or winter beater every 3 or 4 houses, if even. But nothing more than that. On a working day, the block was pretty much emptied of vehicles.

Today, in the same neighbourhood, most people have at least 3 vehicles, often SUVs, pick-up trucks. Summer cars, winter beaters. Parts cars, partially wrecked vehicles, and classic cars in the garages If there’s an adult child or even a student in the family, that usually entails at least another vehicle out on the street. The block looks like a veritable used car lot, and its quite a panic when the City tries to do street cleaning.

So if the price of petrol is going up, perhaps people have some choices to make, to cut back. Because obviously petrol has been so cheap relative to the cost of living that people have taken on lifestyle choices of having many, many vehicles.

#152 Tony on 06.21.14 at 8:19 pm

Re: #6 Sheane Wallace on 06.20.14 at 7:47 pm

The price of natural gas and oil will fall dramatically in the future resulting in deflation in Canada. As well all the commodities will also fall in price.

#153 Tony on 06.21.14 at 8:23 pm

Re: #45 JOe on 06.20.14 at 10:37 pm

The unemployment rate will climb, wages will fall the housing market will tank and deflation will run rampant… get a clue.

#154 Brian on 06.21.14 at 8:24 pm

Garth, you are wrong that RE will have a correction.

1) People are required to be qualified at higher rates when applying for mortgages. Therefore when rates goes up in 5 years time, they will be fine.

2) You can’t walk away from mortgages in Canada.

3) People will stay put if anything when they can’t sell at the price they want.

4) No mass or panic sell off

5) There may be a chance that RE will be devalued due to inflation but not in absolute value. Most realistic scenario is price would stagnate.

I know. It’s different here. — Garth

#155 Ralph Cramdown on 06.21.14 at 8:25 pm

More related to robo-advisors, viz the fallibility of human decision making:

http://www.alphaarchitect.com/blog/2014/05/13/white-paper-trying-hard/

#156 jess on 06.21.14 at 8:31 pm

another game to watch the HFT “skimmers”
From Pam Martens article:

…”July 17, 1996, the U.S. Justice Department charged the biggest names on Wall Street, names like Merrill Lynch, JPMorgan and predecessor firms to Citigroup, with price fixing on the electronic stock market known as Nasdaq.”

The Justice Department felt the firms were so untrustworthy to make a fair electronic marketplace that as part of its settlement it required that some traders’ phone calls be tape recorded when making Nasdaq trades and it gave itself the right to randomly show up and listen in on the traders’ calls. The scandal made headlines for years and revealed that the price fixing had been going on under the unwatchful eye of regulators for more than a decade.
===========================

rigged /skimming?

Business Media Virtually Blacks Out His Hearing On High Frequency Trading On June 18, 2014
By Pam Martens and Russ Martens: June 19, 2014
http://wallstreetonparade.com

=

The hearing is titled: “Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading in U.S. Stock Markets” a Flash Boys’ Enablers Under Oath Tomorrow in U.S. Senate Hearing
By Pam Martens: June 16, 2014
====================

← FINRA Bombshell: Biggest Wall Street Banks Are Trading Their Own Stock in Dark Pools
http://wallstreetonparade.com/2014/06/after-charges-of-running-a-price-fixing-cartel-on-nasdaq-in-the-90s-wall-street-banks-are-now-trading-their-own-stocks-in-darkness/

1996, the U.S. Justice Department charged the biggest names on Wall Street, names like Merrill Lynch, JPMorgan and predecessor firms to Citigroup, with price fixing on the electronic stock market known as Nasdaq.

The Justice Department felt the firms were so untrustworthy to make a fair electronic marketplace that as part of its settlement it required that some traders’ phone calls be tape recorded when making Nasdaq trades and it gave itself the right to randomly show up and listen in on the traders’ calls. The scandal made headlines for years and revealed that the price fixing had been going on under the unwatchful eye of regulators for more than a decade.”

#157 Casual Observer on 06.21.14 at 8:34 pm

“…hedonic adjustments, of course they’re necessary.”

Hedonic adjustments, in my opinion, are used to mask the consumer’s drop in purchasing power. People don’t care that a 2014 base model car has more bells and whistles than one you could buy 35 years ago.

The fact that you can’t buy a new “bare-bones” base model vehicle similarly equipped to a 1979 model makes it largely irrelevant. Your cost for basic transportation went up – period.

It always surprises me that hedonic adjustments never seem to go the other way. Take housing for example. A condo is not the same as a single family house with a yard.

When statisticians say that housing is affordable for the average family because they can afford to buy a two bedroom condo instead of a 3 bedroom house, they’re not taking into account the lower “quality” of housing that people can afford.

It’s kind of like when they use substitution for CPI components that have risen in price when calculating the cost of the “basket” of goods. Like when steak has risen a lot, so they assume that people will buy hamburger instead.

That very well may be true, but to say that because they bought a cheaper cut of meat, their purchasing power has stayed the same is only true in the sense that they “spent” the same amount. The fact is that it was for a lesser cut of meat doesn’t get factored in.

All that being said, it’s largely irrelevant because it doesn’t seem to matter to anyone other than the average wage earner whose standard of living keeps falling because wages don’t keep up with their rising cost-of-living.

The bond and stock markets don’t seem to mind the discrepancy and that’s all that matters…right?

#158 Aggregator on 06.21.14 at 8:34 pm

The methodology for calculating CPI is rigorous, and if inflation was really as high as some claim, the bond market would have puked a long time ago.

Firstly, you know why pension fund managers (major bond buyers) like inflation understated? Because it makes real returns look better and, that way managers can pay themselves higher salaries and reap more bonuses. As a fiduciary, as long as they're beating headline CPI, they can't be sued. Otherwise they could care less what the real cost of living is. Secondly, the government forces pension funds to buy domestic bonds by law.

Alas, the looting of pension savings has already begun. All those hedge fund managers that were bailed-out and lost money are heading for savers' savings.

Massachusetts pushes for managed accounts with hedge funds

New York Pensions to Add Hedge Funds to Reduce Volatility

Wall Street fees paid by NY pension funds rise 28%

Pitty to Gen-Y as all those paychecks going towards retirement savings will be lost in purchasing power through inflation and gov't taxes. How the Government Uses Inflation to Tax You

The government regime is not here to help you. They want your money. And they'll do whatever it takes to get it.

#159 devore on 06.21.14 at 8:40 pm

#53 wallflower

Region of Peel program – would it not be the Peel tax payers supporting this program?

It’s a regional program, so city tax payers (ie property tax payers) are footing the bill. I sure hope all their municipal services are all well funded and functioning well, and teachers or garbage men aren’t setting up to go on strike anytime soon, for such a largesse to be granted to people with no money.

Canadian taxpayers are holding the bag on all these mortgages given to low income people who can barely make rent and don’t have $2 to rub together in their savings accounts.

#160 Tony on 06.21.14 at 8:43 pm

Re: #141 sheane wallace on 06.21.14 at 7:08 pm

You have it completely wrong while Mark has everything or mostly everything right. You’ll figure out in the near future when the price of almost everything falls.

#161 Tony on 06.21.14 at 8:51 pm

Re: #132 Habs76-79 on 06.21.14 at 3:48 pm

Likely his real name is “Joe” which would tell you his nationality and approximate age. That would explain everything.

#162 devore on 06.21.14 at 9:00 pm

#125 Joe

Hyperinflation will literally eat your debts without any pain.. The debtors will be winners

Except this has never been the case. Perhaps in some rare individual cases, but in aggregate high inflation wipes out borrowers, who are faced with sharply rising costs (and interest rate costs on new or rate adjustable debts) rising faster than incomes, which ALWAYS lag inflation. In particular, debt growth historically outpaces debt retirement.

On the country/sovereign-scale, rising interest rates and inflation/devaluation are also NOT a good scenario, because as debt matures it is rolled over into new debt, at new interest rates, and existing debt service is dwarfed by new debt service in any case, because, again, expenditures and debt growth outpaces debt retirement.

Inflation wiping out debt is simply a fallacy borne out of economic ignorance.

#163 Nemesis on 06.21.14 at 9:02 pm

#SaturdayNightCocktailRomance. #ForAllTheSaltierDogz. #WhoRespondedToTheDukeOfLunenberg’s. #GeneralCastingCall. #*&EspeciallyForDameCatFood’sMainSqueeze.

http://youtu.be/sdUx9bxe3CA

#*OhWhatALuckyManBonusZenForMainSqueezes

http://youtu.be/QP5URqCyVKI

[NoteToGT: FirstTime for ELO’s “LuckyMan”? SoundCheck @ UBC’s WarMemorialGym prior to the HeadLiner. That would be Joan. TheBaez. NoS**t. AllTixWereJustAToonie. Seriously. That’s Nominal vs. AdjustedReal, Ralph. Although, by the end of Joan’s PlayList… Our ‘real’ was definitely readjusted.]

#164 devore on 06.21.14 at 9:06 pm

#125 Joe

In hyperinflation, it should be said, there are no winners. Again, if you actually paid any attention to actual history, instead of your made up theory crafting, you would know during hyperinflation you literally cannot give away property and durable assets. No one wants them. People use all their money and assets and convert nearly all of it to survival necessities like food. There is no money to buy houses, of which there will be billions of square feet suddenly vacant.

#165 Big Brother on 06.21.14 at 9:28 pm

Smoking man is at a casino again he’s talking about blondes. It’s in his programming!

#166 palebird on 06.21.14 at 9:51 pm

#97…. lot’s of other “stuff” is going down in price regarding inflation? What other stuff? What you may fail to realize is that the Feds use “core” items to calculate inflation. Problem is they conveniently drop several key items to keep the rate lower than it actually is. What do you require (priorities) to survive in this modern life most people have created for themselves? You need fuel/electricity for heat and hot water in your abode. Because we live in the great white north. You need fuel/electricity for numerous items including cooking, lights, appliances. This is all in keeping up with the times you understand. You need gasoline or diesel for your vehicle so you can get to work or wherever you have to go. Everybody is going somewhere. You also need food and you need clothing. It boils down to the fact that the items you need most to survive as a modern person in this modern world are energy based. And energy is inflating rapidly. Who knows where it is going but doubtful if it is coming down any time soon. So these items are what you require to live your modern life. Just about everything else is fluff and window dressing. Now if you lived off grid in the bush and spent all your time hunting/ fishing and living with candlelight well energy would not concern you so much and your inflation rate would be close to zero. You would not have any time to worry about it anyway as you would be fixated on the coming winter and how you will survive.

#167 jess on 06.21.14 at 10:00 pm

will IT maintenance fees lead to > health care costs —> lead to rationing?

Wednesday, June 11, 2014
Canada: Province-wide electronic medical record computer system ‘glitch’ causing patients to be turned away from care

http://medicinehatnews.com/news/local-news/2014/06/10/system-failure-has-docs-patients-upset/

http://www.theregister.co.uk/2014/06/17/nhs_blamed_for_major_data_blunders_with_sale_of_patient_info_to

http://www.nakedcapitalism.com/2014/06/ugly-truth-electronic-health-records.html
http://hcrenewal.blogspot.ca/2014/06/canada-province-wide-electronic-medical.html
http://medicinehatnews.com/news/local-news/2014/06/10/system-failure-has-docs-patients-upset/

#168 Pope Nosty666zzVlad the Snugglebombed on 06.21.14 at 10:09 pm

#95 Nemesis on 06.21.14 at 9:52 am — “#BonusConspiracyZenForPapalSnugglyButtocks”

Ahhh, the delights of Black Sabbath and the joys of Bat Out Of Hell. Classical music, no? You are very gracious, my dear Nemesis but I have been totally fixated on Brazil 2014 and the surprises / upsets / eliminations and high quality of the games.

After the debacle of South Africa 2010, I had a brief chat with the Almighty and asked her to allow a lot more fun to be included, which has been answered.

Adding to your ZenFun which you supply daily, I return the compliment. Despite there being a farm animal in sketch #2, there is none of that funny business going on here, as this is a family-oriented show. Put your attention toward a different direction — here and here!

#169 Blacksheep on 06.21.14 at 10:09 pm

Habs #132,

Yes…our man Winston, talking about truth.

Look into the sinking of the Lusitania. (Creature from Jekyll Inland, I think)

You may see him in a less favourable light.

#170 devore on 06.21.14 at 10:09 pm

#29 Smoking Man

If not, just play teacher again and say, today you are all invited to brag, you won’t be judged today…

It’s not about being “allowed”, it’s about being invited/solicited. Polite people have the social decency to wait until someone queries them before “bragging”, you just do it on a daily basis whether anyone asks or not (and, hint, they’re not).

#171 Habs76-79 on 06.21.14 at 10:13 pm

#147 Mark

Sure, that’s happening, but energy inputs and food have almost never been such a small portion of the average Canadians’ income.

———————————————

Maybe for you Mark…

If I may.

10-12 years ago the price of a litre of regular gas out here in the Fraser Valley, near Vancouver was between $0.90-$1.00. Our dollar was worth about $0.70-$0.75 US then. Today gas by the litre ranges between $1.36-$1.46 Litre and our CDN. buck gets you $0.92 US.

15 Years ago gas was between $0.55-$0.65 Litre with a then 65 cent CDN dollar.

15 years ago my cable bill was $20.00, 10 years ago cable with internet was $40.00 today and I don’t buy the top tiers, nor faster internet speeds it’s more than double of 10 years ago.

10 years ago my cell bill was about $25.00 today going for the least talk/data plan I pay more than double.

10 years ago 4L of milk cost me between $2.00-$2.25. Today it’s over $4.50 WHICH IS DOUBLE.

So Mark you can say costs of such things are smaller input to the household income but I think most regular folks like me HAVE NOT see a doubling of incomes in the last 10-12 years.

#172 Sheane Wallace on 06.21.14 at 10:13 pm

145 liquidincalgary

I suppose your brain should be unfrozen, it is summer after all.
———————

from wikipedia:

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.[1] It can be defined as too much money chasing too few goods. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.[2][3] A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time.[4]

In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e., when inflation declines to lower levels).[2] Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.
…………………………
credit expansion and contraction determine the amount of money created or destroyed but you need to add VELOCITY OF MONEY in order to determine potential demand and impact on price levels.

With current levels of extended debt both personal and governmental CONTRACTION OF CREDIT IS NOT POSSIBLE WITHOUT DEFAULT OR BANKING CRISIS.
As velocity of money dropped in order to support aggregate demand central banks printed and private banks loaned money out.
Unfortunately THERE IS NO WAY TO RECYCLE BACK THESE NEWLY CREATED MONEY WITHOUT SEVERE ECONOMIC CRASH.
Simply put (idiot’s guide to banking): With credit driven currencies IN ABSENCE OF ORGANIC GROWTH they need to print and lend out more and more new currencies in order to get the old debts paid or else … everything collapses through defaults.

Unfortunately control of velocity of money is not that easy and you can see that at the gas stations today.

The point is that inflation is coming and there is no way to avoid id. period. It most likely will be severe.

The whole gamble is that the economy will restart somehow however in changing world and rising BRICS along with the outsourcing this is highly unlikely.

# 144 liquidincalgary
Yes, and the relevance of balance sheets to the discussion is…?

#173 saskatoon on 06.21.14 at 10:16 pm

#46 Aggregator

this is a good point, agg..

obviously if i bought a steak 50 years ago at the grocery store…and bought one today…the two (if compared) would be VASTLY different.

today’s steak is fed GMO grain (and dead cows), injected with hormones, covered in dyes, and bloated with antibiotics.

i compare apples to apples; to do otherwise (like government inflation numbers) is not only idiocy, but high treason.

#174 Ralph Cramdown on 06.21.14 at 10:20 pm

I see the inflationistas are back. I will now present some government statistics, which are no doubt all lies.

Consumer energy spending as a % of GDP:
http://research.stlouisfed.org/fred2/graph/?g=DV2

Consumer energy+food spending as % of wages and salaries:
http://research.stlouisfed.org/fred2/graph/?g=DV4

#175 Sheane Wallace on 06.21.14 at 10:22 pm

#160 Tony

you read too much mainstream crap.
Inflation is defined as official central banks policy.
Falling food and services prices? that would be fantastic.

Everything that is desired by someone else in this world – oil, gold, commodities, organic food is going up in prices.

Everything that matters is going up in prices – health care, drugs, education.

everything that is local and does not matter as well as everything that is credit driven goes down in prices.

Stock market is going much higher in mid to long term.

Good luck, you will need it.

#176 Nemesis on 06.21.14 at 10:28 pm

“How can anyone believe letting a robotic program rebalance makes sense? If you don’t think alpha exists, you are naive.” — Gartho AKA DukeOfLunenberg

I made much the same argument… SomeWhereElse… OhSoManyYears ago… Fortunately, they’re SmarteningUp. SortOf.

“I have three plates and 20 screws in my leg. Titanium. Speak for yourself, mortal.” — DukeOfLunenberg

Lo que un bastardo con suerte! Just try that on the NHS. Or the VA, for that matter. For the rest of us… there’s DuctTape. Just kidding. DIY job. ChromeVanadium. Used my LeatherMan and a SolderingIron.

“I’m too cheap (and arrogant) to use them myself, but then I change my own oil.” – [email protected]

Guess what I was doing earlier today, Ralph?

Well… after first removing TheBeast’s FuelTank to access and replace the secondary plugs [two plugs per cylinder, much like an OldeFashioned aeroplane’s] – NGK PlatinumTipped PMR8B. X2. PS: Mobil1FullSyn – [email protected]~$CDN68. [email protected] Every 5K km. FirstWorldProblems. Everyone should be so lucky. Seriously.

#177 Sheane Wallace on 06.21.14 at 10:31 pm

#152 Tony

I am getting bored, all this discussions have already happened just do a little research.

Commodities are real food are going much, much higher. Cost of drugs increase on average of 8 % per year.

What we see are the first indicators of inflation (energy and food), there is much more to come.

Smart money already saw it an jumped on the stock market train, it is going much, much higher.

#178 Sheane Wallace on 06.21.14 at 10:42 pm

there would be no hyperinflation, just wipe-your-wealth inflation (200-300 % in 5 years which technically is not hyperinflation) which will be more then sufficient to impoverisher 90 % of the people who will do nothing to protect themselves as by the time they realize what is happening it would be too late.

simply put: to support current levels of debt and as we can’t afford housing crash we need to support current valuations through inflation. Congratulations savers.

#179 Sheane Wallace on 06.21.14 at 10:46 pm

#173 saskatoon

don’t even go there :).

Organic tomatoes I bought today cost $ 11 per kilo.

#180 Shawn on 06.21.14 at 10:56 pm

Living Standards

#136 Casual Observer on 06.21.14 at 5:12 pm

“For those that think wages have kept up with inflation, just remember that forty years ago, a family could afford to own a house (not a condo), a car, buy groceries, and take an annual vacation on one average income. Nowadays this is difficult to do with two average incomes.”

*******************************************
this comment must come from someone not old enough to remember the 70’s and its high unemployment and truly high inflation.

Traditionally the 50’s is mentioned as the era of the one income family. By the 70’s “the pill” was invested and widespread and wives stopped having so may kids and dozens of labor saving devices made it possible for here to work outside the home. And lot did.

The standard of living in Canada is perhaps close to double what it was in 1974.

Two or three cars, instead of one, house is twice the size with twice the bathrooms and half the people.

Yeah people took vacations in the 70’s. Driving vacations with a tent or tent trailer or in some cases a trailer. Growing up in Nova Scotia in the 60’s and 70’s I never heard of anyone going to Disney or the likes. Most kids leaving high school had never been on a plane. Almost no one stayed in Hotels or Motels on a trip. On a vacation the Mom had to prepare all the meals, people did not eat in restaurants.

MacDonald’s only arrived in Nova Scotia in the mid 70’s and then with very few locations at first. Halifax sported two English channels on television plus a French channel. Little things like dozens of channels on TV actually do contribute to living standards. Most People worked very hard, believe me.

Nowadays there are more than twice the products to buy as compared to the 70’s.

If people were satisfied with a 70’s standard of living they could get by on one income. Most are not satisfied with that at all.

The best time to be alive in the history of the world is today. And tomorrow will be a little bit better.

#181 kILlaBoY50 on 06.21.14 at 11:05 pm

#179 Sheane Wallace on 06.21.14 at 10:46 pm

Organic tomatoes I bought today cost $ 11 per kilo.

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

If you can afford organic tomatoes, you’re doing pretty well. Or you’re just a fool.

#182 Aggregator on 06.21.14 at 11:05 pm

#174 Ralph Cramdown

I see the inflationistas are back. I will now present some government statistics, which are no doubt all lies.

Ralph you're doing Keynesian calculations and looking at everything in aggregate as if everyone is the same. Try breaking it down by quintile and you'll see it like an Austrian.

StatsCan Transportation Expenditures (203-0022)

2011 Total of Quintiles Transportation $11,229
2011 Fourth Quintile Transportation $14,189
2011 Highest Quintile Transportation $18,912
2011 Lowest Quintile Transportation $4,595
2011 Second Quintile Transportation $7,392
2011 Third Quintile Transportation $11,068
   
2011 Total of Quintiles Food $7,795
2011 Fourth Quintile Food $9,112
2011 Highest Quintile Food $11,934
2011 Lowest Quintile Food $4,112
2011 Second Quintile Food $6,331
2011 Third Quintile Food $7,503
   
2011 Total of Quintiles Food + Transportation $19,024
2011 Fourth Quintile Food + Transportation $23,301
2011 Highest Quintile Food + Transportation $30,846
2011 Lowest Quintile Food + Transportation $8,707
2011 Second Quintile Food + Transportation $13,723
2011 Third Quintile Food + Transportation $18,571

Total After-Tax Income By Quintile (202-0707)

2011 Total of Quintiles Total Income (after-tax) $54,000
2011 Fourth Quintile Total Income (after-tax) $62,800
2011 Highest Quintile Total Income (after-tax) $112,500
2011 Lowest Quintile Total Income (after-tax) $17,300
2011 Second Quintile Total Income (after-tax) $31,800
2011 Third Quintile Total Income (after-tax) $45,600

Food + Transportation Expenditure as a Percentage of Total After-Tax Income

2011 Total of Quintiles 35.2%
2011 Fourth Quintile 37.1%
2011 Highest Quintile 27.4%
2011 Lowest Quintile 50.3%
2011 Second Quintile 43.2%
2011 Third Quintile 40.7%

OK?

#183 Ralph Cramdown on 06.21.14 at 11:05 pm

#157 Casual Observer — “Hedonic adjustments, in my opinion, are used to mask the consumer’s drop in purchasing power. People don’t care that a 2014 base model car has more bells and whistles than one you could buy 35 years ago.

The fact that you can’t buy a new “bare-bones” base model vehicle similarly equipped to a 1979 model makes it largely irrelevant. Your cost for basic transportation went up – period.”

Let’s do this one together. Median family income in 1980 was $24,287. A 1980 Honda Civic with the base 55 HP engine sold for US$3,699, or C$4,352 with an 85 cent dollar as we then had. 17.9% of a median family’s income.

Median family income in 2013 was 76,000. A Nissan Micra is stickered at $9,998 — 13.2% of their income. Airbags, ABS, double the horsepower and better rust protection.

The Bank of Canada says $9,998 in 2014 dollars is equivalent to $3,449 in 1980.

#184 Teacher's Ass-istant on 06.21.14 at 11:09 pm

This program used to be maximum $10,000 per house and $280,000 purchase price I think it was. I believe this is the second year with the higher amounts. By the way it’s up to $15,000, that doesn’t sound like everybody gets that much.

At any rate it does seem a dangerous trap for the participants no matter how well intentioned it is. What happens if the roof starts leaking or the furnace quits? At this price point there are a very limited amount of houses, there are a few in Peel Region. Most likely it’s going to be a condo even if it’s a townhouse. I it’s a freehold townhouse you’re right back to shouldering all the costs on your own should something happen. How about those special assessments that keep popping up in these places, give us $15,000 by sush and such a date. One would think it could create a real difficulty for someone who needed this program to get in the market.

None of this even takes into account that when the real estate market finally has the enevitable correction the places at this end of the market will suffer the biggest loss and be the least diserable when the currently higher priced places come back to some semblance of reality.

When someone says “Hi I’m from the government and I’m here to help” it’s usually best to just politely remove yourself from the situation.

#185 Nemesis on 06.21.14 at 11:13 pm

#ForNaughtyNostyVladPapalSnugglyButtocks. #MayYouNeverBeBombed*. #*FromAbove. #AllOralSelf-Administrations. #AreOffiCIAllySanctioned.

http://youtu.be/nnS9M03F-fA

That was the final tune that night. Ovation. Standing.

And then it was, ‘BusinessAsUsual’ for the NextFortyYears.

Fortunately, the times… “They Are A Changing”…

http://youtu.be/e7qQ6_RV4VQ

#186 Son of Ponzi on 06.21.14 at 11:14 pm

#131 Shawn.

Yesterday we learned may visitors here have family income of $250k plus. Some of those people may be able to achieve very high levels of investments such as more than $5 million. We learned that the variation in comes is staggering. The variation in wealth in senior years is and will be even more staggering.
————
All we learned was that in the blogosphere every one can be a Buffet.

#187 Teacher's Ass-istant on 06.21.14 at 11:32 pm

All of the discussion of inflation and the CPI prompts me to ask the following.
When a package of bacon (for instance) has been reduced from 500 grams to 375 but the price stays the same how does that get calculated. People are buying more bacon and Maple Leaf or whoever has improved their bottom line and people can afford to buy more so obviously they have more expendable income? Therefore Harper’s plan is saving us all so vote for the Conservatives again? This is happening with all kinds of products by the way.

Seeing there are no rules compelling GMOs to be labeled you don’t know if you are eating them or not. I can almost guarantee you are eating at least some given their proliferation. If you eat anything with corn or a corn dirivative product (almost impossible at this point) you are eating GMOs. Or beef because most of our livestock is being fed corn despite the fact that cattle left in a pasture surrounded by accessable corn with leave the corn alone because that is not what they naturally eat.

Organics really aren’t much better and many tests have been done where people picked the non organic fruit or vegatable by taste and appearance. Even to the degree where the item was cut in half and people were told one half was the organic version and the other was grown regularly. Yep you guessed people ate for instance one half of the same banana then the other half and insisted they knew which was the organic one despite it being one banana cut in half. The certifcations for organic are not as good as they would have you believe either. It’s just marketing in many instances although there are reputable growers who do their best.

#188 Piccaso on 06.21.14 at 11:37 pm

In butthole Bonneyville, Alberta working and gone tomorrow to some other hard to find Alberta town.

Met the ex from 30 years ago tonight… we were both kids and the marriage lasted 1 year.

Her brother inlaw was/is a real estate salesman, was always into real estate in this area and now owns a Remax. He took a bust when the oil sands never happened the first go. But he’s done extremely well since and so has everybody else on her side of the family. There all multi millionaires because of real estate in the Bonnyville, Cold Lake, Fort Mac area.

He’s telling family to sell all the rental houses, because it’s over. There’s a 1000 oil jobs being eliminated and more cuts coming, your transient worker is disappearing.

I thought that was interesting to hear but I thought this was even more interesting coming from the ex who has tons of money and toys… “it doesn’t mean shit cause you can’t take it with you”

She has Crohn’s disease.

#189 Ralph Cramdown on 06.21.14 at 11:40 pm

#182 Aggregator — “Try breaking it down by quintile and you’ll see it like an Austrian.”

Thanks, Agg, those numbers are interesting.

#190 Mark on 06.21.14 at 11:47 pm

“The fact that you can’t buy a new “bare-bones” base model vehicle similarly equipped to a 1979 model makes it largely irrelevant. Your cost for basic transportation went up – period.”

No, not at all. If a vehicle lasts 2-3X longer before it requires a major shop visit, requires very little in terms of rotable items, and burns half the fuel and uses a fraction of the oil — the drop in the cost of ‘basic transportation’ is quite significant. Hedonic adjustments reflect such.

#191 Observer on 06.21.14 at 11:55 pm

Mark Carney told to rein in mortgages
Nordic regulators call for swift action to prevent crisis as Bank of England Governor Mark Carney expected to announce new measures to rein in mortgage lending

http://www.telegraph.co.uk/finance/bank-of-england/10917307/Mark-Carney-told-to-rein-in-mortgages.html

#192 jim on 06.21.14 at 11:56 pm

Garth,

1st timer here.

Just bought my first home; 2+ bedroom, 2 rear parking, detached(20’x85′) 2 story home in Hamilton Pier 4/North End waterfront area, 7 min walk to GO Train in the spring, for $177K, %20 down, FSBO. Job in Burlington.

Should I be scared?

#193 Habs76-79 on 06.22.14 at 12:06 am

#180 Shawn,

Yep people as an avg. or more so anecdotally may have more things today (cars, electronics, toys, travel further for vacations etc.) than say in the 70’s but to do that they all too often need TWO steady income earners and a truck full of credit to use.

If people are financially better off today than say the 70’s there would be no need for a second steady income or worse piling up of debt.

You see back in the 70’s MOM & DAD took on debt much more carefully. Houses may have been smaller for many but families came through just fine thank you. Oh yes they still had ample food on the table, toys for the kids, decent clothes, maybe a new car and maybe a camper or money saved for a driving vacation. Disneyland was not a yearly thing but maybe a once in a while thing. A decent motor home cost maybe $20,000-$25,000 back then.

Yes, house holds still had hi-fi’s, most better quality than the most of the Chinese crap many pick up at Wally World today. Yes, maybe only a 20-26 inch T.V. but so what? It was what they were use to as a family unit. Kids were enrolled in hockey, softball, soccer, music lessons, Cub scouts, Girl Guides and/or Cadets much like today. Maybe the house only had a max. of 12 channels on t.v but there was always something to watch unlike today with 200 channels and one flipping endlessly up and down the program guide.

So today with crushing debt, stress at work, buying too much CRAP we often don’t need, Facebooking, Instagramming and TWEETING 24 effing 7 we are not better off, just some things different but with all too much weight on our proverbial shoulders.

Back in the 70’s most people knew their neighbours and even had neighbourhood barbeques. Kids more often came home from school with mom at home and then awaited dad coming home so that dinner could be had.

So other than technology making many things easier, life today and real buying power incomes are not better for most today than say in the 70’s.

#194 Habs76-79 on 06.22.14 at 12:20 am

#183 Ralph Cramdown.

I can easily recall back in 1980 a litre of gas for that Civic cost between $0.20-$0.25 Cdn out in the Fraser Valley. 50 litres to fill up the Civic cost you $12.50. The Micra you note here at $1.45 litre Cdn. at 50 litres will cost you, $72.50 or $60.00 more. That alone is a price gap well above the two median incomes you used in your post. Your median gap increased by 3.16 times. At $12.50 x 3.16 that Micra should only cost you $39.50 to fill up, not $72.50.

#195 Mark on 06.22.14 at 12:51 am

“Smart money already saw it an jumped on the stock market train, it is going much, much higher.”

Exactly. If the 1990s are any model, the TSX could spend the next decade tripling, while house prices go down. The speculators have largely left the housing markets in the GTA and GVR, leaving only a few delusional Realtors behind to push the view, with incomplete and opaque “statistics”, that housing prices are still going up. Thankfully, most are smart enough to see past that, but if they can rope a few suckers in, that’s a few extra dollars in their pockets.

I’ve lost count of how many Realtors have sworn up and down that the stock market would crash if RE crashes. This chart shows that there is no truth to such, and that the TSX is significantly inversely correlated with Canadian RE:

http://pacificapartners.ca/blog/wp-content/uploads/2013/05/Stock-vs-Real-Estate-Long-Term-SP-TSX.png

#196 Son of Ponzi on 06.22.14 at 12:57 am

#133 John Prine on 06.21.14 at 4:22 pm
Was in my local credit union today talking about the huge increase we got in gasoline at the pumps yesterday and how this may tip a lot of peoples financial situation from bad to “I can’t pay” The teller told me that she remembers the eighties when people came in and just handed their house keys over the counter and walked out. They had a real estate board with their repossessions for sale in the lobby.
—————-
Had the same experience as a loans officer in the 80s.
VanCity almost went bankrupt.

#197 Mark on 06.22.14 at 1:19 am

“In hyperinflation, it should be said, there are no winners. Again, if you actually paid any attention to actual history, instead of your made up theory crafting, you would know during hyperinflation you literally cannot give away property and durable assets. No one wants them. People use all their money and assets and convert nearly all of it to survival necessities like food. There is no money to buy houses, of which there will be billions of square feet suddenly vacant.”

Exactly!!! In Weimar Germany, for instance, an ounce of gold (okay Garth, don’t spank me) could buy an entire apartment block. Real estate prices collapsed because debt collapses in a hyperinflation as nobody wants to lend in return for devalued fiat currency.

The producers, particularly those with the means to hang onto to their productive assets, especially in areas like food, are the big winners. Everyone else gets destroyed.

#198 benchwarmer on 06.22.14 at 2:03 am

I’ve noticed every major centre has now set up a program like this. Who is co-ordinating this scheme? Tax payers are going to left holding the bag on the federal and municipal level.

#199 liquidincalgary on 06.22.14 at 2:32 am

@ #172 ‘the great’ sheanne wallace

my head needs to be unfrozen? ooo, owch, good burn you old wordsmith you.

and you should get your head out of your Cliff Claven!

i will if you will.

if you don’t like the accepted definition of inflation/deflation check out old Tokey’s. i can’t believe i am agreeing with him more often, and actually understanding him much better than Role.

on balance sheets. would you trust one produced by the inquisitor or one produced by the acquirer? why or why not? afraid they may have inflated their assests in order to get a better price, hmmm?

get a life man, it’s midnight on a saturday night

#200 liquidincalgary on 06.22.14 at 2:38 am

@ #175 Sheanne Wallace

“Everything that matters is going up in prices – health care, drugs, education.”

maybe relative to your salary.

get a better job…see if you can pick up a better outlook on life while you are at it?

#201 joe average on 06.22.14 at 2:50 am

“There’s one way to avoid the impact of inflation on household credit consumption — raise minimum wages. That’s where we’re heading next.”

Minimum wage increases only serve to increase prices over all. Case in point..welfare suites……every time the rate goes up…the landlord raises the room rate in lockstep with the increase.

Wages are not at to root of the credit crisis…..the ZIRP is the root of the credit/inflation crisis. When the inflation QE has created finally circles back to North America after it’s barnstorming tour of the developing economies…we’ll see the same inflation here they’ve had there…….most in the 30% to 50% range.

#202 palebird on 06.22.14 at 3:31 am

#180.. I was a teenager in the seventies and I remember well. Times were a lot leaner but,, all things being equal,I think they were better in a lot of ways. Some people call it a higher standard of living but I really don’t think so. Many more choices yes but are they quality? You actually believe going to Disney Land or World is money well spent? A”vacation” in one of the many resorts where you can sit on the beach or in the pool and get silly on cheap alcohol. That is not quality time. It is a waste of time. Kids addicted to smartphones, etc.. It is turning us into a very placid tuned out society. We are not using all of this information and technology to advance ourselves, we simply look for the easiest way out. Not good.

#203 Waterloo Resident on 06.22.14 at 3:43 am

Watch these 2 videos:
‘Jeffrey Rubin On Why High Oil Prices Stop Growth’
( https://www.youtube.com/watch?v=DyGJzftXafU )

‘ Must watch!!! Peak Oil and Economic Contraction’
( https://www.youtube.com/watch?v=auHJlWwwTKk )

and you will realize how totally screwed we are today. You will quickly realize that in less than 4 years we are going to see the price of gasoline his $3 per Liter, maybe more.

And the cost of food in the stores will easily quadruple in price. and interest rates will rise to to 12% in government’s vain attempt to try to ‘kill’ inflation.

My advice: Buy a natural gas powered car (Honda makes those; a natural gas Civic), eat less food, walk or bike ride to work in the summers if possible, and rent a house. That way you’ll weather the coming storm okay.

#204 Casual Observer on 06.22.14 at 4:29 am

this comment must come from someone not old enough to remember the 70′s and its high unemployment and truly high inflation.

I do remember the 1970’s. I lived through the entire decade, and my personal experience was that every family I knew (including my own) was able to own a single detached house with a yard and at least one recent model vehicle, buy food for the family, and take an annual vacation – all on one income.

By my recollection, and by asking family members who were home owners during the 70’s what their houses cost and what they were earning at the time, I estimate that the average house cost about 2.5-3.5 times the average annual salary.

StatsCan data seems to back this up. Average weekly earnings in 1971 were $137.64 ($7157.28/yr.) Average cost for a new house (NHA) was $22,094 ($4588 land, $17,506 structure). This works out to a little over 3 times income.

If we skip ahead to 1975, average weekly wages in Canada were $203.34 (about $10,575/yr.) and average cost of new housing (NHA) in 1975 was $35,492 ($7246 land + $28,246 structure).

Over those four years, house prices jumped by about 60%, but wages jumped by 48%, so this still works out to only 3.35 times an average single salary in 1975.

http://www.statcan.gc.ca/pub/11-516-x/pdf/5220020-eng.pdf
(Series S311-322. Selected housing unit cost series, 1951 to 1976 – pg. 59)

http://www.statcan.gc.ca/pub/11-516-x/pdf/5500095-eng.pdf
(Series E49-59. Average weekly wages and salaries, industrial composite, by province, 1939 to 1975 – pg. 16)

Today, latest average weekly wages are $933 ($48,516/yr.) and the average house price across Canada is $416,584 (8.59 times income), and this average includes not only new homes, but resale homes. I suspect if it were only new homes the average price would be higher.

http://www.statcan.gc.ca/daily-quotidien/140529/dq140529a-eng.htm

http://creastats.crea.ca/natl/

I’ll admit that the houses were smaller then, and the cars weren’t as technologically advanced, but I think that today, any family on an average single income would find it near impossible to purchase the same 1970’s size house and similar vehicle while buying gas, heating their home, putting food on the table and taking an annual vacation (even if it’s just camping).

http://www.theglobeandmail.com/report-on-business/rob-commentary/the-sad-demise-of-the-one-income-family/article4199558/
The Globe and Mail article quotes a Wall Street Journal report, which mentions that house prices have recently fallen to 360% of household income, and this obviously hasn’t happened here…yet, but I think the report is still relevant for Canadians.

It mentions how incomes for Canadian and American families have been stagnant since about 1975, while costs have continued to rise. This goes a long way to explaining the situation we are in right now.

#205 Casual Observer on 06.22.14 at 5:08 am

#183 Ralph Cramdown
A Nissan Micra is stickered at $9,998

Wow, I had no idea you could still buy a cheap car like that. I guess I haven’t really been paying attention.

I’ll have to eat my words on that one, but my point still remains.

Many hedonic adjustments are subjective at best, and could be irrelevant if the “lesser quality” version is no longer available for purchase.

BTW, in 1982 we bought a bare-bones Honda Civic 4 door hatchback brand new, and it cost closer to $6000 CAD. So the fact that a bare-bones Micra can be had for around $10,000 today is quite impressive.

Having said that, I still believe that on par, families today have a tougher road ahead of them when it comes to almost everything else they have to buy.
http://www.theglobeandmail.com/globe-investor/personal-finance/2012-vs-1984-young-adults-really-do-have-it-harder-today/article4105604/

#206 OttawaMike on 06.22.14 at 5:33 am

#157 Casual Observer on 06.21.14 at 8:34 pm
The fact that you can’t buy a new “bare-bones” base model vehicle similarly equipped to a 1979 model makes it largely irrelevant. Your cost for basic transportation went up – period.
—————————————–
There is a plethora of examples of consumer items that have gotten much cheaper even without the so called hedonistic upgrades taken into account.

I bought a base Dodge minivan in ’93 for $17k all in. New model has 6x the air bags, extra doors, larger engine and almost the same price today. Just bought a hi eff washer, top rated model $625 delivered taxes in.

Asian airline ticket, regular price today is same as what I paid on sale 10 yrs ago. Flat panels, stereos, tools way too many examples of increased purchasing power in spite of our food and energy inflation.

#207 liquidincalgary on 06.22.14 at 7:06 am

@ Mark

thank you for your late, yet incisive posts!

#208 Bargains everywhere on 06.22.14 at 7:18 am

#183 Ralph Cramdown on 06.21.14 at 11:05 pm

Ralph, I generally agree with your comments but you are doing exactly what the government is. Why select a smaller Nissan Micra? Apples to apples would be Honda Civic to Honda Civic. Base pricing for a 2013 Civic was $15,440 which would be equivalent to 20.3% of median income. HST didn’t exist back then so when you include the extra tax today that percentage is even higher.

#209 liquidincalgary on 06.22.14 at 7:19 am

@ #205 Casual Observer

wait garth, you may enjoy this one:

another comparison…remember the ‘Countache Wing’ from the mid ’80’s??

it was the all new Hyudai Pony. 6000. same price as the ‘Wing’

#210 World Traveller on 06.22.14 at 7:32 am

I always hope that Canada will not become like Spain, today’s post indicates that we are heading in the same direction. I fear for this country.

#211 tell it like it is on 06.22.14 at 8:10 am

#204 Casual Observer on 06.22.14 at 4:29 am

I lived through the entire decade, and my personal experience was that every family I knew (including my own) was able to own a single detached house with a yard and at least one recent model vehicle, buy food for the family, and take an annual vacation – all on one income.
___________________________________________

this is quite correct. my father worked at a factory. my mother took care of 3 kids. they bought their house in down town toronto (riverdale) in 1972 for $22K. one salary. managed a summer long european vacation couple of years later. HOUSE PAID OFF IN 10 YEARS!!

inflation is RAMPANT. people that talk about cpi as inflation are clueless. everything costs more. you NEED two income families to survive today. it’s a fact.

#212 Ralph Cramdown on 06.22.14 at 8:28 am

#194 Habs76-79 — “I can easily recall back in 1980 a litre of gas for that Civic cost between $0.20-$0.25 Cdn out in the Fraser Valley. 50 litres to fill up the Civic cost you $12.50.”

So YOU were that guy staring into space while he pumped 50 litres into a car with a 40 litre tank! :-)

Comparing how far you could go on a fraction of your income would be trickier. That old Honda had good highway fuel economy for its time, but not today. But it was so light that, as an in-town grocery getter, it might still be competitive.

Here’s Statscan’s take on our fuel purchasing power:
http://www.parl.gc.ca/content/lop/researchpublications/prb0755-e.htm#purchasing

…but only through 2007.

#213 Ralph Cramdown on 06.22.14 at 8:57 am

#208 Bargains everywhere — “Apples to apples would be Honda Civic to Honda Civic.”

Really? Compare the length, curb weight and 0-100 times of today’s Civic to 1980’s. No comparison. As Americans got larger and richer, the North America spec Civic completely changed market segments.

#214 Ralph Cramdown on 06.22.14 at 9:28 am

Chevrolet Chevette / 1976+ Pontiac Acadian
Hyundai Pony
Volkswagen Super Beetle, Rabbit
Chevrolet Sprint
Suzuki Swift
Geo Metro
Honda Civic, 1st and 2nd generations

This is an automotive segment from a bygone era — cars that were, above all, cheap and good on gas for the time. People who haven’t driven them have no idea how unbelievably slow and crappy they were compared to today’s cars. Nonetheless, many commuters put 200, 300 and 400,000 kilometers on them to save money. Driving one was an outward admission that you were poor (or very cheap).

If Canadians have it harder today than when these cars were thick on the ground, it’s because they no longer accept that kind of compromise. Most of today’s smallest cars are sold on style and recommend or require high octane gas (I’m thinking of you, Fiat 500 and Mini). Typical econoboxes are so much better than these cars of yore that if you never drove them, you wouldn’t believe it, and if you did, you’ve probably forgotten.

#215 Aggregator on 06.22.14 at 11:06 am

#205 Casual Observer

Many hedonic adjustments are subjective at best, and could be irrelevant if the “lesser quality” version is no longer available for purchase.

Correct. Subjective is the keyword and why it is impossible for StatsCan to calculate many items based on preferences. Perhaps a better way to measure auto inflation is to include operational costs ex fuel, i.e., drivers license/parking/ticket/emission fees, insurance, etc. as a percentage of the average car price.

#201 joe average

Minimum wage increases only serve to increase prices over all.

Correct. And by hiking minimum wage the gov't pushes more workers into a higher tax bracket to collect more revenue. Even though it will cost more jobs from the private sector, they can just offset it with more spending on public sector jobs. With the Libs now in control of the largest province again, public spending is set to soar and home prices (and property taxes) are set to keep moving higher as governments scramble to generate more revenue.

Provincial and Local Government Revenue

Provincial and Local Government Budgetary Balance

You can't have deflation in a country that favors and begs for more government spending. Ontario's election says it all.

#216 Millenial on 06.22.14 at 11:26 am

Hey Garth,

I walked past Postal Station K yesterday, you know, the heritage Post Office on Yonge just north of Eglinton.

The place is completely cleared out. No postal trucks in the back, place is empty when I looked in the window. Another condo she’s a comin’:
http://www.blogto.com/upload/2013/07/20130722-PSK-Front-Wide.jpg

Literally within a 10 minute walk of Postal Station K I can think of 6 condo projects currently under construction. And I can think of 2 condo proposals, you know, with those white City of Toronto signs, that I’ve seen at least.

#217 Keith on 06.22.14 at 11:29 am

The family in the seventies had true economic advantages that will never be seen again. Strong labour laws for workers, higher union density, long term job security, pay increases above the cost of living, opportunity to pay off debt with inflated dollars.

My inlaws came to Vancouver in 1967 from Portugal with five kids, went to work in a sawmill and a hotel. House was purchased 18 months later for 13,500 paid for in full four years later. Couldn’t speak English, grade school education.

I grew up in Victoria in the 60’s and 70’s, a close friend’s father had to leave school in grade eight when his father passed away. Worked for the newspaper as a press operator, owned a house in Oak Bay (a pretty nice neighbourhood) had three childred, wife was mostly a stay at home parent. Everyone had long term job security, a real pension (not a defined contribution investment account) and a proper benefits plan.

There is no question that from a technology, entertainment, and consumer durable products perspective life has improved substantially. Add in better medical treatment in most aspects of health care and there have been great strides made in the human condition. The declines in job and economic security I would argue more completely define current life.

The death of the private sector pension plan for a defined contribution plan and the costs of home ownership on the average family income represent a gigantic loss in net worth of people that we haven’t seen since prior to world war two. When the baby boom generation retires and starts using the pension and medical benefits they are legally entitled to, there won’t be an economic base to tax and pay for it. Storms are coming.

#218 Brian on 06.22.14 at 11:29 am

I know. It’s different here. — Garth

No you don’t get it. People don’t care all the technicalities (ie price rent ratio, debt to gdp).

People need stability therefore they buy and not have to deal with rental troubles. You don’t treat the house as an investment. If it does drop value well guess what? You ride and wait it out.

That’s why the mass is right and you will be proven wrong. We are not that special. We are humans.

#219 Son of Ponzi on 06.22.14 at 12:07 pm

Yeah, the Micra is back.
Was a great little car. Traded in my Pinto for a new one.
Fun to drive and didn’t explode.
Drove it into the ground and then gave it away as-is.

#220 Son of Ponzi on 06.22.14 at 12:27 pm

Bought a new 77 VW rabbit, panama brown.
First model with fuel injection.
Lot’s of problems. But drove beautifully.
Worst car that I ever test drove: Chevette.

#221 4 AM Sunrise on 06.22.14 at 12:40 pm

#193 Habs76-79 on 06.22.14 at 12:06 am

The cost of education certainly has gone up. I went to school in the 80’s and I remember school supplies were supplied by the – gasp! – school! A family didn’t have to go to Grand & Toy (remember them?) and buy pencils. Fees for field trips were nominal. Band class was practically free. Ditto sports. Nowadays, I hear that schools periodically hit up parents for money.

#222 4 AM Sunrise on 06.22.14 at 12:48 pm

#202 palebird on 06.22.14 at 3:31 am

A trip to Disneyland is money well-spent. Let’s take off our cynical blinders for a second and remember that for this child that grew up in the 80’s, Disneyland IS the happiest place on earth. They don’t call the staff Imagineers for nothing. (Disclaimer – my town used to be 1/4 airline employees and my dad was one of them. The schoolyard question wasn’t if you’ve been to Disneyland, but rather how many times you’ve gone there.)

#223 Tony on 06.22.14 at 1:26 pm

Re: #210 World Traveller on 06.22.14 at 7:32 am

You won’t have to worry about that as Canada exports junk whereas Spain exports top quality products similar to both England and Germany.

#224 citizen one on 06.22.14 at 1:44 pm

Massive tax hikes for sewage treatment will hit Victoria homeowners hard.

http://www.vancouversun.com/news/Astounding+Victoria+area+lurks+sewage+mess/9963842/story.html

Rat infestation in Vancouver out of control

http://www.vancouversun.com/news/Astounding+Victoria+area+lurks+sewage+mess/9963842/story.html

Downtown hotels and condos alive with bedbugs

http://bedbugregistry.com/metro/vancouver/

Murder capital of Canada

http://blogs.vancouversun.com/2014/06/20/man-killed-in-targeted-slaying-inside-south-surrey-house/

Downtown Vancouver a junkie, violence, mentally ill war zone

http://www.canada.com/vancouversun/news/story.html?id=d78bacc6-eb86-464c-9a4a-19059d083792

http://www.bucksuzuki.org/images/uploads/docs/Hidden_Killer.pdf

http://www.straight.com/news/vancouver-coastal-cites-32-food-outlets-year-rodent-pest-or-cockroach-infestation

Talk to the pest control guys and they’ll tell you it’s an epidemic……talk to Shitty Council and they’ll tell you they don’t live in the city…..

Violence against women is also epidemic…especially in the dark walkways of Stanley Park….very scary.

http://globalnews.ca/news/1355349/woman-sexually-assaulted-while-jogging-in-stanley-park/

Why would anyone chosse to live in a rat, roach, cockroach infested, crime ridden, violent craphole like Vancouver?

#225 Blobby on 06.22.14 at 1:45 pm

Ive just read and re-read this post multiple times, and im still none the wiser as to what this peel program is, or how it “benefits” (or doesnt benefit) people.

.. I guess im a bit dim.

#226 Shawn on 06.22.14 at 2:09 pm

About the 70’s being so grand. Every era had its whiners. Its winners and its losers.

Given a choice of any time and place to be born in the history of the world I would pick today and I would likely pick Canada. (There are probably better places in the world to be born but I don’t have enough knowledge of them and would take my chances with Canada.) The U.S. would be just fine as well.

What would any of you pick? Especially those who think they have it so hard today.

Average living standards continue to rise. Some people don’t do well. That will always be the case.

I was just reading in the Globe and Mail about 50,000 children having come across the Mexican border into the U.S. in the last eight months or so. Many unaccompanied by parents. They came from various poor countries. THOSE kids recognize a higher standard of living and opportunity when they see it.

#227 OttawaMike on 06.22.14 at 2:13 pm

More examples of cheaper goods:
Tariffs came off garments in 2005 for the NA market, remember buying a pair of Levis in the 70’s when they were still made here? We never had the selection and pricing of clothes that we have now.

Furniture. When I got married in 1984, a dining set and sofa cost the same amount as today. granted again the quality is not the same as it is all off shore made now.

I was redoing a bathroom back in 93 and upon opening the wall came across a Toronto Star newspaper from ’72. I had just purchased the new Dodge minivan and in the paper was an ad for the a Ford LTD wagon and a position at the new Pickering nuclear plant very similar to my job at the time. The wage to car ratio was identical and I would say that ratio has improved in favour of the buyer today.

The major reason for our mandatory 2 income families now is to satisfy our higher living standards. Children in expensive activities, larger homes, multiple vehicles, mandatory post secondary education for the kidlings…

#228 Habs76-79 on 06.22.14 at 2:26 pm

As to quality of life comparisons. Notice how many who champion “today” being better do so only on/or with THINGS to buy and such. Well folks it’s all relative.

In 1980 that Honda Civic was viewed in the same light of desire and want as a 2014 Nissin Micra. To each person of both eras the feeling of ownership would be very similar given each person’s reference standards of the time.

This type of quality of life comparisons are from decades of brainwashing where we are to attribute the things we can buy as to a level of life’s quality. But life is much more than that.

For me as a child growing up back in the 70’s-80’s, coming home from school each day to find my mother there doing what moms do is a way better quality of life feeling than some POS product one could buy/own. Waking up early in the morning and going out fishing with my dad was way better than any thing I could get. Oh don’t get me wrong things are nice and nice things are nicer but whether one buys a 1980 Honda Civic or a 2014 Nissin Micra, a 1980 Cadillac or a 2014 Cadillac. To each the novelty of pride in new ownership wears off and likely just as fast.

So yes, for most families life was as a family unit, as kids being kids, moms and dads being moms and dads, life was as a level of family and social quality better in many ways back then than it is today where you have latchkey kids, helicopter parents and more STUFF N’ JUNK we do not really need nor for many appreciate today. Yes, we have some cool technologies and things from such today but notice with how many people, show little respect for caring of said items. THROW AWAY SOCIETY! RINCE AND REPEAT SOCIETY! Today it’s much worse than 30-40 years ago.

I’m not saying it was all $hits N’ Giggles back then and not all families back then were great. But in a snapshot of society life’s quality was better in many ways, firstly socially and even things we had as again things attained even back then were all relative to reference point we each all had. Things most often NOT bought on credit but with GOOD OLD CASH!

I was thinking how some things are today. You can hear or read about people saying they have hundreds or thousands of Facebook friends, where they often post the most intimate of life details for all to see, but they probably could not tell you much if anything about their physical neighbours. That is a snapshot of life’s quality for many today and quite a SAD ONE!

#229 Habs76-79 on 06.22.14 at 2:54 pm

Oh yeah and more thoughts.

Back as a kid of the 70’s and 80’s I with my neighbourhood friends could just go out and set up a street hockey game. NO PROBLEMS! Oh, maybe Mr. Grumpy down the block if he saw you pick up the tennis or hockey ball off his grass would curse ” Get of my grass” But how often today do we hear how kids are not even allowed to set up a street hockey game.

I could get together with my buddies, yell up to my mom or dad that I’m going out on a bike ride with ” So n’ So” At worse they’d ask “Where are you going?” Or they’d state “Be back in time for dinner.”

My buddies and I could walk up and down our street to and from each person’s back yard with our air rifles (pellet guns) to go and shoot old plastic models or pop cans and NOBODY blinked an eye. Today the FREAKING LOCAL SWAT team would probably be down on kids carrying such.

Oh yeah, I hear from the ignorant, “It’s more dangerous today.” NO IT’S NOT! No accepted stats would back that up. Life is not more dangerous today for kids in any regard of a bad man, bogy man or such getting to them. There may be different concerns and such today but not more.

I and my other siblings were doing this sort of stuff in the Fraser Valley in and about the time one Clifford Olsen was killing kids not too far way from us. My parents nor my friends’ ones did not freak out but trusted us making better decisions.

Hell I know of people today with 14-15 year old kids HIRING A FREAKING BABY SITTER FOR THEM! JEEBUS! my then older brother was about 12-13 or so would baby sit myself and my younger sister back then NO PROBLEMS!

Quality of life is more than FREAKING THINGS ONE CAN BUY and FLAUNT to other idiot friends!

#230 Rabbit One on 06.22.14 at 3:16 pm

>#229 Habs76-79

Totally agreed with what you’ve said.
I as a parent of 13 years old, myself grown up in
late 60’s and early 70’s as a child / teen,
(I grew up outside Canada though)
there is nothing more dangerous today compare to
those years.
Whatever in this day’s over-protection on children is just getting insane.

What I found sometimes is many parents cannot confirm their existence without children these days. “it’s all about kids….” they say, but it in fact is all about them!
Strong co-dependency I see on these parents.
Children can do things without YOU!

#231 World Traveller on 06.22.14 at 3:35 pm

#229 Habs76-79 on 06.22.14 at 2:54 pm

you said a mouthful ,pal. When they said “The meek shall inherit the Earth, apparently they meant every last person on this planet. Don’t eat gluton, eat gluton. exercise, no wait! exercise is bad for you. What is the point of being able to live much longer these days if you’re scared of your own shadow?

#232 rosie "moving forward" in the knowledge that, "this won't end well" on 06.22.14 at 3:47 pm

Forget about the 70’s, best to concentrate on the 2020’s and onwards.

http://lygsbtd.files.wordpress.com/2012/02/baby-boomer-cartoon-1qzbymy.jpg?w=500

#233 Vangrrl on 06.22.14 at 3:59 pm

Habs #228:
Since we’re tripping down memory lane…
I remember a typical conversation between my parents on a Friday afternoon, must have been in the late 70s/ early 80s:
Mum: ‘We’d better get to the bank before it closes.”
Dad: ‘Oh yes, how much cash do you think we need for the weekend?’
Haha… There were no ATMs yet and banks were closed all weekend, no wide credit card use, basically people just lived more within their means.
As a child I thought my mum was helicopterish but she was nothing compared to parents nowadays! I could bury my brother in 4 feet of snow before she’d come outside to check on us… Good ol’ days.

#234 Tony on 06.22.14 at 4:02 pm

Re: #6 Sheane Wallace on 06.20.14 at 7:47 pm

China is imploding, all commodities except the precious metals will collapse in price. China is starting to unload most of their gold but are rigging the comex future prices higher (the opposite of what they were doing while accumulating gold). This is very deflationary especially for Canada which is a commodity based country.

There is actually nothing more deflationary than you. — Garth

#235 Andrew Woburn on 06.22.14 at 4:04 pm

Although I am no fan of government sponsored inflation, I am wary of confusing inflationary price changes with changes in supply and demand.

The discussion of the inflation in house prices since the 1970’s needs to take account of the increase in population and the much greater increase in urban densification. Googling StatsCan shows that Canada’s population in 1970 was 21.2 million rising to 33.3 million in 2011. In 1970 the rural population was 5 million and stayed almost flat at 6 million in 2011. In 1971, Canada’s 10 largest cities held approximately 4 million. In 2011 it was 10 million.

Population increased 150% but the major city populations rose 250%. The demand for urbanization was initially buffered by conversion of farmland to suburbs, but around the largest cities, there is little left within reasonable commuting distance. House prices will reflect shifts in interest rates but we’re not going back to 1970 house price to income values anytime soon.

#236 Vangrrl on 06.22.14 at 4:05 pm

http://www.theglobeandmail.com/life/atms-40-years-of-24-hour-dough/article1205709/

Fun read :)

#237 Tony on 06.22.14 at 4:13 pm

Re: #177 Sheane Wallace on 06.21.14 at 10:31 pm

You’re hopeless, you will be live proof of the old adage live and learn in the near and distant future. Believe it or not the main reason I read Canadian blogs is to see responses to financial questions and do the opposite of what the average Canadian does.

#238 Mister Obvious on 06.22.14 at 4:17 pm

#233 Vangrrl

Right you are. There was no banking on weekends.

And when the banks were open it was only from 10 AM to 3 PM Monday to Thursday (hence the old fashioned term “banker’s hours”). Of course, on Friday, they would give working people a break and stay open until 6:00 PM so they could cash their checks.

I remember it was always a mad scramble on payday to make it to the bank after work before 6 and stand in long lines just to get some cash.

#239 Habs76-79 on 06.22.14 at 4:18 pm

#233 Vangrrl,

Yep, even without such conveniences my parents were able to socialize with neighbours and friends. They’d write a cheque to buy groceries ever Saturday as me and my younger sister would tag along trying to entice then into buying us some junk food LOL!

Major purchases were done with more thought and care. If it was to be cash should mom and dad spend such, or if BY GOD they put it on credit, should they really need or want to buy whatever it was?

I saw my first bank machine (ATM) in summer 1984, We were on a family driving vacation in our nice but modest motor home through western Canada. In a Mall in Regina myself watching my dad using a bank machine for the first time.

My family’s quality of life and those I saw of my friends etc. all looked pretty darn good. No, we as kids DID NOT get all we wanted, when we wanted. Nope, we sure the HELL heard the word NO! I also recall hearing. “Maybe for Christmas.” ” Maybe for your Birthday.”

We all came out ok! :-)

#240 Rainclouds on 06.22.14 at 5:11 pm

Insightful “journalism” from the local fishwrapper. Or More “news” from nowhere….you decide

http://www.theprovince.com/business/mortgages/wait+dilemma+first+time+homebuyers/9960333/story.html

#241 palebird on 06.22.14 at 5:13 pm

#214..Ralph you are right they were for the poor or very cheap. Good thing about them is they could all be rebuilt in the driveway by a decent mechanic. Almost all of them were driven into the ground but that is what they were for. The modern ones tend not to get driven into the ground as the owners cannot afford to get them that far. I never owned any of them. I did not have much money but I had mechanical skills so I bought powerful cars from the sixties for cheap (not necessarily muscle cars although there were some of those too) and had a whole lot of fun along with out of favor motorcycles too. I had friends(male and female) who had no mechanical aptitude and they drove those little pieces of crap. Drawback? was I had to wrench a lot on my time off while these other characters had “fun”. Actually I had a lot of fun and still do.

#242 Ralph Cramdown on 06.22.14 at 5:41 pm

“Was a great little car.”

Oh yeah, I forgot about the Mazda GLC.
And the Renault 5 “Le Car” come to think of it.
The Ford Festiva.
The VW Fox.
Skoda.
The Lada Signet (a Russian made Fiat 124, sold in Canada from 1978).

You young punks got no clue how bad things were.

#243 TSL on 06.23.14 at 11:01 am

There is a false statement by Garth here:

“…the private sector does a fine job at providing rental accommodation…”

For families with children (or planned/on the way) the rental market is almost non-existent in many locales.

Canada’s home rental industry has been almost totally scaled down to a very low s/ft average. A huge number of buyers now could never find rental accommodation due to the lack of any supply. It is almost all apartment style rentals unsuitable for family housing.

As a result almost all supply built is sold to mortgaged households not buy-to-let. The entire public infrastructure of schools, daycare, etc. is entirely premised on local homeowners, not renters.