Pay attention

DISTRACTED modified

This week the expected happened. Despite the cracks developing in their markets (cited on this heretical blog some hours ago) realtors from far and yon have trumpeted higher year/year prices. In Toronto, Vancouver and Calgary it was same old. Up and away. Buy now or buy never.

In Toronto, for example, the local board claimed this (as reported by the Financial Post muppets): “In the much sought-after detached home segment of the market, the average sale price reached $902,428 in the city of Toronto proper, a 14.7% increase from a year ago.”

Awesome. Sounds as if the thing’s exploding like a wardrobe malfunction. But in fact the average SFD in 416 was $1,012,172 in April, which means it’s now 10.8% less than four months ago, when mortgage rates were a little higher. In fact when you parse the numbers, it’s clear detached home sales in a bunch of places are stagnant or declining, while condos have revived.

Why? Simple. Most people can’t afford detached houses, with families reaching debt saturation. Just this week Equifax told us overall consumer debt – including mortgages – grew an unhealthy 7.2% in the second quarter, compared to the same period last year. We now owe $1.45 trillion (twelve zeros), as opposed to a mere $1.35 trillion last year.

Think about it. Debt’s up 7.2%. Toronto house prices swelled 9% while in Calgary a detached house has risen 10%. Meanwhile inflation is just 2.1% and family incomes are lagging at 2%. Those doing the best are in Alberta – where wages have increased annually by 3.3%.

Starkly, people cannot afford what they’re paying for houses, based on their incomes. So they pay what they can, and throw the rest on credit. Thanks to record low interest rates, payments on accelerating debt are low enough to keep the party going – egged on by realtors who will tell you this will probably go up forever and Xbox economists who say rates can never rise.

But nobody borrows their way to prosperity – unless you happen to be a bank and print all the money.

Even that sucks sometimes.

Let’s divert to Europe for a few exciting paragraphs, where you can get a taste of what happens when reality catches up to illusion. In case you were not aware, most of Europe is teetering on the brink of deflation, with homeowners taking it on the chin.

For example, in France housing starts have dropped to the lowest level since 1998, and the government is freaking. This week it offered massive capital gains tax breaks to encourage people who own land to sell it to developers. It’s largely scrapping rent controls, just six months after bringing them in, and will be giving interest-free loans to first-time homebuyers for at least three more years.

In poor Greece, property prices are still 30% to 50% below pre-crisis levels, and in the second quarter values declined by 7.1%. That was good news – the smallest quarterly decline since 2011. Spain will give you residency status if you buy a place for five hundred thousand euros. Hell, beautiful Malta will confer full citizenship upon you for purchasing a property the same price as a slanty semi held together with bug spit on Toronto’s Danforth.

Of course there are hot spots – like Munich and London – but for most of the folks in most of the EU countries, home ownership has turned from an asset into a burden, and a great way to piddle away your retirement funds. The problem there is not dissimilar to ours – a sputtering economy, structural unemployment, too much household debt and not a lot of remedies left now that interest rates have hit bottom.

Germany, the biggest economy on the continent, just shrank 0.2%. Inflation last month across Europe was a piteous 0.3%. Wages in Britain are swampy. Unemployment in Spain is at 1930s levels. So the European Central Bank has dropped its key rate to 0.05%, and bank deposits are now at minus 0.2%. Yesterday the Bank of England left its key rate at a rock-bottom 0.5%, amid predictions things are about to get a lot slower. (Even the latest US job numbers are a tad disturbing.)

Here’s the point: There comes a moment when interest rates just don’t matter anymore. Mortgage loans can go to zero, yet real estate stagnates or declines. If folks are pickled in debt, jobs are scarce, wages are flat and people no longer believe houses will be worth more next year than now, they stop buying.

By the way, did you hear realtors in Toronto tell you this week that August sales were 17% lower than in July? That it was the weakest month for transactions since February? That sales volumes since the Spring have collapsed by 31.4%?

I didn’t think so. They told you to look at the shiny thing, instead.

153 comments ↓

#1 TurnerNation on 09.04.14 at 8:34 pm

Furst from the Least Coast trip this week?

#2 Victoria Real Estate Update on 09.04.14 at 8:35 pm

Let’s take a look at the city of Victoria’s housing market. The city of Victoria is one of Greater Victoria’s core municipalities.

. . . . . . . . .Single Family Home Prices. . . . . . . . .
. . . . . . . . . . . . . . Victoria. . . . . . . . . . . . . . . .
. . . . . . . . (Percent Below 2010 Peak). . . . . . . . .
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0%. . . .* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-3%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-4%. . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . .
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-6%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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-11%. . . . . . . . . . . . . . . . . . . . . .*. . . . . . . . .
-12%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-13%. . . . . . . . . . . . . . . . . . . . . . . . . . .*. . . .
———————————————————————————
. . . . .03/10. . .03/11. . .03/12. . .03/13. .12/13. . .

This chart was put together using SFH median price data for Victoria (averaged over 3 months to smooth out monthly price fluctuations). By the end of December 2013, SFH prices in Victoria had fallen 12.7% below March 2010’s peak level. Note that December 2013 was the last month that median price data was available for Greater Victoria.

SFH sales across Greater Victoria have been well below average since 2010, and Victoria has followed that trend.

Prices generally fall when sales are slow. The relationship between slow sales and lower prices is well established and has been clearly evident in virtually every housing market downturn worldwide for decades. The data for Victoria supports this.

There are many near-peak buyers in Victoria with underwater mortgages who are stuck in their homes, unable to move up the property ladder. This helps explain slower sales. The same thing happened in the US as prices declined there.

Let’s take a look at what’s happening on the front line in Victoria. 157 Olive Street in Victoria continues to sit on the market with no buyer.
* asking price: $599 K, ($24 K below current assessed value)
* 3 beds, 1 bath, 1,190 sq. ft. with major renovations throughout
* located on a quiet street, blocks from the ocean
* garage

The average Victoria house sells for about $600 K. Many of these houses are nothing more than old shacks.

For approximately a fifth of that price ($120 K) it is possible to buy a much bigger and newer house in a number of US cities that are desirable for their summer-like winter weather. This shows that Victoria’s housing market is extremely overvalued. Canadians have been buying vacation homes in California, Arizona, Texas and Florida for decades to escape Canada’s cold winters. No Canadian city offers year-round summer-like weather.

Examples (with min. 3 beds, 2 baths, min. 1,800 sq. ft., of above ground, main (primary) living area and an attached double garage):

Florida:
$110 K, Lehigh Acres, FL
$127 K, Palm Bay, FL
$128 K, Vero Beach, FL

Arizona:
$116 K, Florence, AZ
$126 K, Maricopa, AZ
$123 K, Casa Grande, AZ

Texas:
$115 K, Humble, TX
$133 K, Dallas, TX
$124 K, Converse, TX

Girls and guys, don’t buy a house at Victoria’s current bubble prices. Continue to rent and watch Victoria’s housing bubble deflate. Don’t bail out a house flipper who probably helped push prices into bubble territory. Holding off from buying now will help push prices lower. Tell all of your friends.

Until next time – Cheers!

#3 suede on 09.04.14 at 8:41 pm

hands up if you like when a new month comes and dividends are put into your account.

also bc teachers strike will not be good for RE if it carries on for a couple more paychecks.

#4 JSS on 09.04.14 at 8:43 pm

Based on what’s happening in Europe, and taking into consideration some economic similarities with Canada, are we now headed towards a lower prime rate?

No. — Garth

#5 Retired Boomer - WI on 09.04.14 at 8:46 pm

“A slanty semi held together by big spit on Toronto’s Danforth”

Glad to see my spell checker is not the only near-sighted on in use in the world. That chuckle aside, what this spells is hardly a laughing matter to hundreds of owners, and might be buyers.

Prices are being manipulated, and the seller who is waiting might never see a better chance for a long spell.
The potential buyer might be best described as a bird about to be plucked of his money, or credit in the majority of cases.

To me, it is all just nonsense. Especially after a thirsty Thursday at the Vault. Well, back to the Packer game!

#6 totalinvestor.com on 09.04.14 at 8:47 pm

US T bonds are falling, maybe this is the top.

http://postimg.org/image/tkfs8ziqh/

#7 Bob Rice on 09.04.14 at 8:47 pm

Canada is, at this time, still quite a bit better off than most of the EU. The cost of living there is still astronomical…

Ya, right. Compare a Van house to one in a Euro city of the same size. — Garth

#8 bill on 09.04.14 at 8:47 pm

gee – they forgot to mention that the crappy sales figures Garth.
I wonder why….

#9 april on 09.04.14 at 8:48 pm

” Condos have revived” Garth does this mean condo prices start increasing while house prices are dropping?

Sales. — Garth

#10 Mark on 09.04.14 at 8:48 pm

“But nobody borrows their way to prosperity – unless you happen to be a bank and print all the money.”

If you can’t beat ’em, join ’em. To put it bluntly, buy Canadian bank stock!

Here’s the point: There comes a moment when interest rates just don’t matter anymore. Mortgage loans can go to zero, yet real estate stagnates or declines. If folks are pickled in debt, jobs are scarce, wages are flat and people no longer believe houses will be worth more next year than now, they stop buying.

Indeed. And as lenders lose confidence, eventually even policy rates won’t have much effect on the market either. As seen in the USA where, despite 7 years of extremely accommodative policy, the economy and the housing market mostly remains comatose.

#11 prairie person on 09.04.14 at 8:49 pm

Just got my strata notice. The strata fee has just about doubled. From 800.00 a year to 1576.00. This is because of the new rule that we have to create a sinking fund to take care of future expenses. Garth has warned about condo fees, etc. These aren’t condos but houses within a strata development. Doesn’t matter, though. The Victoria RE board has just released figures showing that house prices in Victoria are going up, up, up. In spite of the posts by gloomer Victoria Real Estate Update. We’re all going to be rich, rich, rich. And, if we’re lucky get out without too much of a haircut.

#12 Mark on 09.04.14 at 8:50 pm

“Based on what’s happening in Europe, and taking into consideration some economic similarities with Canada, are we now headed towards a lower prime rate?”

Policy rates, sure, the BoC is likely behind the curve in lowering them now. But don’t expect the banks to pass much of that onto their overly indebted and increasingly weakening residential real estate collateral customers.

The BoC will not lower its rate. Period. It even removed the ‘soft landing’ language in its current statement, suggesting the bank sees an asset bubble. — Garth

#13 bill on 09.04.14 at 8:51 pm

”hands up if you like when a new month comes and dividends are put into your account.”
just going to check my ‘account activity’…
yup thought so -yeah our hands are up.

#14 Timmy on 09.04.14 at 8:53 pm

RE#2
There’s a reason the prices are so low south of the 49th: it’s America…Also air conditioning and water bills will be going through the roof soon. These cities are unsustainable. I’ll be many won’t be able to afford the utilities on their homes soon.

#15 Italians love real estate on 09.04.14 at 8:54 pm

DELETED

#16 mark on 09.04.14 at 8:59 pm

@ #2 LOL for your deposit you can buy a whole house.

#17 CPG on 09.04.14 at 8:59 pm

Garth. Did your wife have a talk with you about your excessively bullish views?

#18 kandaramaran on 09.04.14 at 9:00 pm

why is low inflation bad?

I remember, ‘growth’ comes from inflation.
/sarcasm off

#19 Freedom First on 09.04.14 at 9:02 pm

Canadians handling their finances with one leveraged asset is akin to a bad boxer leading with his chin. Both are highly vulnerable to getting knocked out.

RE worship by the masses world wide is all Greek to me. Insanity. No exception.

#20 Fred on 09.04.14 at 9:03 pm

#13. I guess Italian’s that like real estate didn’t like this blog today

#21 Randy on 09.04.14 at 9:09 pm

What’s a mortgage ?

#22 Sebee on 09.04.14 at 9:11 pm

I would love to hear more about Japan. I still cannot process the 1.3 trillion total mortgage amount in Japan vs. 1.2 in Canada.

#23 CPG on 09.04.14 at 9:13 pm

Great Dane dined on 43 socks; all were removed in successful surgery

http://www.latimes.com/nation/nationnow/la-na-nn-great-dane-dines-on-43-socks-20140903-story.html

That was relevant. — Garth

#24 kandaramaran on 09.04.14 at 9:13 pm

#2 Victoria Real Estate Update

look at the price to rent ratio for these houses.
100-120.

Here is more like 300-400.

#25 kandaramaran on 09.04.14 at 9:16 pm

#22 Sebee

yes we can, yes we can, yes we can.

But he meant they, not us.

#26 Ford Prefect on 09.04.14 at 9:24 pm

Just a data point on prices in Comox Valley but at least unlike HPI it is reliable.

Acreage plus house and outbuildings sold FSBO for $740k in 2009. New owner put in at least $400k in improvements.

Two months ago this very desirable property was listed through Royal LePage by a motivated seller for $975k. Crickets. Today, three price drops later, it is listed for $869k. Obviously the off the top loss, never mind opportunity loss etc., is around $340k if seller gets current ask.

#27 Happy Renting on 09.04.14 at 9:25 pm

#3 suede on 09.04.14 at 8:41 pm

My hand is up! The amounts aren’t big, yet, but I’m working towards that. Maybe a full-time rentier in a decade or two? I guess I can’t put that on a resume as my “career objective”…

#28 John Mounfield on 09.04.14 at 9:28 pm

Hands up!!!!!!
Capital appreciation is through the freaking roof and getting me worried. I know “you can’t time the market” but I’m very jittery.

#29 Smoking Man on 09.04.14 at 9:29 pm

The BoC will not lower its rate. Period. It even removed the ‘soft landing’ language in its current statement, suggesting the bank sees an asset bubble. — Garth
……….

Altho I’ve been calling a rate cut for the last two years, I have to agree with Gartho. Trade surplus reports of the last two months will translate into higher job numbers.

Shrinking Labour pool eventually Translates to higher rates.. Now the Cad dollars strength will slow it.

No rate cut, anytime soon, but bonds are over bought a bit. So pressure building on fixed rate mortgages.

While you bastards watch real estate, I’m studying for the best place to be when USA, Russia and Isreal unload all there nukes…. Found an island in the Pacific that might do it.

#30 Habs76-79 on 09.04.14 at 9:30 pm

An analogy if I may.

I get some gangster thugs to grab you. They take you out to the middle of know where. Waiting for you is a huge cylinder buried in the dirt. They stick you in it, no way for you to get out. They bring a garden hose and start running water into this big cylinder, again you are stuck inside.The water pours in at lets say a rate of a foot every 5 minutes. Ok, ok your worried but meh it’s still only at your ankles. You figure that someone, somehow or something will help you get out of this cylinder.

After 20 minutes the water is now 4 feet high. Yeah, you are worried but hey you got 2 feet to go before you are covered by the water. These thugs do what looks to be favour to you, they slow the rate of water down. It’s now trickling at a 1 ft. per 30 minutes, or now at a 25% rate that it was previously. At first you feel better, it’s not rising very fast. This lower rate may give you confidence that someone or somehow you will escape the fate you look to be soon having.

30 minutes later the water level is now 5 ft. high. Only a foot to go before you are swamped and soon drowned. That lower rate of flow does not make you so confident anymore. You begin to worry more and more.

The thugs come back, laughing at your seemingly bad fate. They do you another favour they lower the rate of flow of water to a mere trickle. It will now take 2 more hours to swamp you and inevitably drown you.

You take little comfort and now begin to beg for mercy. Slowly the water now inches up to first your mouth. At this point it really does not matter for you if they keep it at this mere trickle rate or if they just turn on the water full blast. You are surely near done.

You all see my analogy? Sorry to write so morbidly but that is the talk many people may need to read or hear today.

Emergency low interest rates have not saved gross debtors from themselves. In fact they GORGED ON DEBT funding a lifestyle and a vision THEY HAD NO RIGHT TO FEEL ENTITLED TOO! Be you rich, not so rich, middle income or poor. If you flaunted a lifestyle BEYOND YOUR MEANS! with cheap credit even at emergency rates to bury yourself in debt that may be insurmountable, YOU WILL SOON BE AS DROWNED BY IT AS MY POOR SOLE BEING LITERALLY DROWNED BY MOBSTERS, IN MY ANALOGY ABOVE!

It does not matter where Central bankers send or keep over night rates at. WE ARE LIKELY DONE! Nations/societies that fund fake growth on gorged debt levels will probably be toast.

WE ALL WILL SUFFER but the bigger debtors will suffer worse.

You can’t believe in a free market economy if you feel people in power either govts or central bankers can stop the inevitable negative parts of a cycle.

We do not have anything like a free(er) markets. We have rank CRONY CAPITALISM! And it’s gonna crash regardless of what central bankers, leaders of countries or anyone does now. Many years of kicking the (debt) can down the road sees us about to kick this can towards a BIG DEAD ENDED WALL!

Live beyond your means, thinking YOU ARE ENTITLED will be painful to you in the end.

Remember folks CASH IN HAND EQUALS FREEDOMS. DEBT IN POCKET EQUALS OBLIGATIONS.

#31 crossbordershopper on 09.04.14 at 9:36 pm

You cant compare europe with canada. my cousin in italy lives in a 200 year old stone house that he inherited from his dad who got it from his dad. stone, not the crap we live in here and pay 4 times as much and needs a total overhall after 30 years or so.
society is totally different, sure there are no jobs there, but life is easy with no mortgage, the big stress is out, you just need pocket money to have a coffee and relax.
no condo fee etc. he drives a vespa, 133 euro insurance a year. i pay that a month for a car here. etc etc.
completely different way of life, historical context, family affiliation, social structure etc. completely different.
my trinidad friend saves 60 percent of his income, he said he pays little tax and stuff doesnt cost much there. so whats that got to do with canada, nothing, thats the point.
Buy the biggest house you can afford, get a 2.34% mortgage, work hard dont get sick and pay it off. if it goes down 10-20 percent who cares in 20 years its yours, some foreigner will give you money for it. The canadian ponzi scheme is alive and well. the only reason why someone would want to come to canada is because its lousy over there or a woman or a job. they dont come for the weather or tim horton’s.
all this details about interest rates, and job creation, or bla bla bla noise. who cares, its just like sports stats. change players performance with financial and its the same ratio’s etc being discussed.
I dont listen to the fan 570 or bnn anymore,

#32 Italians love real estate on 09.04.14 at 9:38 pm

Prices for SFH in the GTA will be higher 1 year from now, 3 years from now and much higher 10 years from now. My prediction.

Why you ask ? Because the GTA is not Europe and the demographic here and the thought processes of those who live here are far different.

Is that better Garth? Do I avoid deletion now?

Yes, but you are still boring and add nothing to this blog. — Garth

#33 Nemesis on 09.04.14 at 9:38 pm

#SpeakingOfLondon… #&Munich… #AnOverdueHomage… #ToHolyCrap’sDaddy[AmongOthers].

http://youtu.be/Kdl5TaZhU2s

[NoteToGT: I know… I know. Should’ve posted on the 10th July. Hey, like, I’ve been busy. OK?]

#34 East Van on 09.04.14 at 9:38 pm

Concerning Europe and the next crash:

http://www.counterpunch.org/2014/09/02/central-bankers-in-a-deep-hole/

#35 Uh Oh Canada on 09.04.14 at 9:40 pm

Our housing bubble is massive and it will out due the Europeans and the Americans. Finally, Canada can be first in something. We can all be proud when we make it in the history books.

#36 DJG on 09.04.14 at 9:42 pm

Comparing August sales to July or spring sales is exactly what you’d criticize the realtors for if the numbers were reversed (for example, if they were touting strong sales in May vs. August). Sales in August of this year were up (by 6.5%) compared to August of 2013. In turn, July sales were up by 10% over July, 2013. Detached sales numbers were up marginally over 2013 in both 416 and 905.

Let’s also take that misleading “sales have collapsed” claim and compare it to some historical data:

2006 May sales: 9,434
2006 August sales: 6,976 sales (collapse!)

2007 May sales: 11,146 sales
2007 August sales: 8,059 (another collapse!)

2008 May sales: 9,411 sales
2008 August sales: 6,318 sales (wait, it’s collapsing every year!)

2009 May sales: 9,589 sales
2009 August sales: 8,035 (the years of collapse slow here)

2010 May sales: 9,470 sales
2010 August sales: 6,232 (back to the collapse)

2011 May sales: 10,046 sales
2011 August sales: 7,542 (yea, this is getting too predictable now)

2012 May sales: 10,850 sales
2012 May sales: 6,418 sales (we end with a collapse)

So in virtually every one of the last eight years, sales have “collapsed” from May to August. From experience, I accept that you won’t acknowledge this data with anything other than a nasty deflection, but you are not an idiot. You know that this data exists, and you know that it’s perfectly normal for sales volume to be much lower in August than in May. I don’t actually know if even realtors would be this brazen in their attempts to manipulate their audience.

Actually I used April and August as data points. Sales have declined for each of those month. The 17% drop from July is significant. This is not a robust market. — Garth

#37 Shawn on 09.04.14 at 9:45 pm

Dividends…

So let’s say you are retired and a dividend / fixed income investor / yield pig and you just collected an average month of dividends and income. Say a half percent (6.0% per year).

But this month let’s say the market value of your portfolio is down 2%. (before any withdrawal)

So is your net return the 1/2 percent or is minis 1.5%?

What would your financial advisor be required to report as the total return for the month (assuming he was required to report that?)

How do you feel about the month?

Would some of you really be able to totally ignore the market value drop? Let’s assume the investments are high quality, none are about to go bankrupt.

Having always measured my portfolio’s return by its market value I think I would have trouble ignoring the 2% market value loss.

But some of you would be okay with it? Consider it just noise?

What if two years go by, the 0.5% per month is still rolling in but now the market value is down 20%. Do you still feel okay? In fact the yield on the market value may now be more like 7.5% though it is still 6.0% on your original value.

Did anyone living on yield have this sort of thing happen in 2008? Were you okay when your prefs went down to $14 from $25.

I just wonder… since one of these years I might focus more on income investing.

#38 Happy Renting on 09.04.14 at 9:45 pm

#168 Harry Wilson on 09.03.14 at 11:18 pm

Mr. Turner, what prevents less scrupulous investors, say someone with $1M to invest, from putting 10% into the hands of a fee-based advisor, paying them 1% on that $100K and watching what they do, and then doing the same themselves with the other $900K? (Sorry if that’s a dumb question; if it was a clever one, someone likely would have asked it by now.)

It’s an interesting question, so I’ll take a stab at it.

Such behaviour is like pumping the sales rep at a full-service electronics shop for knowledge and recommendations, then buying your gadget at Best Buy for 10% less. Eventually, the marketplace stops offering information at that price point or within a business relationship under those circumstances. I haven’t checked around, myself, but I recall lots of blog dogs saying advisors they approached have a $500k minimum. If it’s to prevent behaviour like that, I say, fair enough.

Beyond that, the handling you get for a $100k portfolio may differ drastically from what you’ll get for something much bigger. With more loot you can go for more sophisticated diversification and strategies (rather than a four-ETF portfolio you can add in some high-yield bonds, small caps, some metals, and other stuff too complex to be worth your while if your portfolio is small.) At $1M you may qualify as an accredited investor, with access to stuff small fish like me mostly just get to read about. Theoretically, worth the extra $9k a year to be correctly advised of the opportunities available.

#39 Shawn on 09.04.14 at 9:47 pm

I should have said the portfolio is down 2% and then 20% after the withdrawal. The intention would be a pot of money that stays roughly flat while you collect and spend all the income. Except the market pushes the market value around…

#40 Larry Laffer on 09.04.14 at 9:55 pm

But wait! All this is irrelevant. Starting on March 4th 2015, a 25-years Great Depression will start. Really!

http://moneymorning.com/ext/articles/rickards/secret-bankruptcy.php?iris=252776&utm_source=taboola&utm_medium=referral

Uh, that was entertaining :)

#41 devore on 09.04.14 at 9:57 pm

#18 kandaramaran

why is low inflation bad?

In our economic framework, low inflation means low growth. Whatever “growth” and “inflation” are and whatever they measure and whatever the causality, outside of obvious edge cases they are closely linked.

#42 Inglorious Investor on 09.04.14 at 9:57 pm

“There comes a moment when interest rates just don’t matter anymore.”

Yes, this is what I wrote about on this blog back in… whenever it was, it was a while back. Bob Prechter, the head deflationist at Elliot Wave International refers to this phenomenon as ‘jaguar inflation.’ It’s the point where society reaches debt saturation and no amount of real free money can entice them to borrow more. At some point not even giving away free Jaguar cars to everyone will stimulate the economy.

Is this a good thing? The end? Perhaps we will reach some ‘bottom’ and then rise up from there? I don’t think so.

Up until now the government has been using various monetary and fiscal policies to entice people to pledge every last cent of their future wealth to the banks voluntarily. However, when the people stop borrowing altogether, the government will simply resort to confiscation to feed the machine.

This is what the bail-in legislation is for. This is when governments will force pension funds to buy their debt. This is when the money printing machine will swing into high gear and they switch from debt monetization to outright, uncollateralized, un-backed money printing.

What looks like a painful deflation at first may suddenly morph into the most painful inflation (if not outright currency collapse) we’ve ever seen.

#43 Guy on 09.04.14 at 9:58 pm

What is wrong with deflation? It means my earnings will buy more! After having been hit by inflation all my life, I have no issues with deflation.

Inflation is basically a deflation of the dollar value. Deflation, therefor, is an inflation of the dollar value. That is the way the market place works.

Deflation hits wages as well as prices, but does not reduce debt. Nightmare. — Garth

#44 the Jaguar on 09.04.14 at 10:09 pm

Seeing cracks in the luxury home market. Even those in areas of the country with stronger economics (AB) won’t be unscathed. The madness of taking on jumbo mortgages. It has been said before….it can’t end well.

#45 Inglorious Investor on 09.04.14 at 10:10 pm

#3 suede on 09.04.14 at 8:41 pm

“also bc teachers strike will not be good for RE if it carries on for a couple more paychecks.”

Thought: The longer the BC teachers strike lasts, the more likely the government will cede to their demands. However, whatever gains the teachers will have been rewarded will have been eaten up by their time on strike until the next round. Everybody “wins.”

#46 will on 09.04.14 at 10:10 pm

yup suede #3 the dividends just keep pouring in. love it. bought more preferreds and some common just the other day.

I work for a publicly traded company. when dividends are declared I always make a point to thank my colleagues – as a shareholder – for all their hard work and commitment and dedication. A few probably hate my guts. in fact they may think me an arrogant prick. but I don’t care. they don’t make the link between shareholding and ownership. it’s my way of clueing people in to what it’s all about. it’s less mysterious than they think. load up I tell them. load up. I’m an owner and you’re not. and you should be. unless you’re ok with just working for wages. nothing wrong with that, but why wouldn’t you want dividends? I get pushback all the time and it completely mystifies me.

so yup, hands up to dividends pouring in.

#47 Spaccone on 09.04.14 at 10:11 pm

>#7 Bob Rice on 09.04.14 at 8:47 pm
>Canada is, at this time, still quite a bit better off than
>most of the EU. The cost of living there is still astronomical…

—————————————————-

Yes, probably mostly if you go there as a gringo. There are endless amounts of economical sleepy towns (1/2-1/3 Toronto prices) that most people live in. People there whine and may legitimately have less cash on hand than us, but I think they sit pretty pension-wise…20%-30% employer social security contributions and very high annual limits vs. our paltry 4.95% and extremely low annual limits…plus I know at least places like Italy get a 13th extra whole-month paycheque…so the salary differences at face value are very deceiving. Of course, I prefer more cash in my hands to invest for myself instead of giving to the government, which is why I’m not happy about the ORPP.

#48 NostyVlad the Snugglebombed on 09.04.14 at 10:12 pm

Speaking of Europe, Military Spending This may be the straw that broke Germany’s back, and they decide to team up with Russia and China.

“They told you to look at the shiny thing, instead.” — Garth

With regards to the heading, art thou referring to my Fillmore’s Studebacker Hawk? (Bill will be able to help you!)
*
#138 Abin Batince on 09.04.14 at 12:57 pm — “News report that the federal government will be in the black for the 2014-15 fiscal year.”

It’s approaching an election year (federally). What else are they going to say? That the economy’s in the shitter, and maybe we should abandon ship? The lying CPC would be telling the truth (for the first time), but there’s not much else to believe from them.

#136 Holy Crap Wheres The Tylenol on 09.04.14 at 12:50 pm — “Assuming it will be a dry runway and given YTZ is at elevation is 567 feet it should take between 5250 and 6250 feet to land a 747. The longest runway at YTZ is 3988 feet, so Kudos Smoking Man!”

Check this out for a very short take off. Must have been one helluva landing! Ever heard the extended but unreleased version of Gimme Shelter? Neat take!

#90 Smoking Man on 09.03.14 at 11:05 pm — “Gross ending…..”

Speaking of revolting — Here is a classic example of the right hand not know what the left is doing. John “Bomb Everyone To Hell and Back” McCain (plus this), and Joe “Bomb Everyone To Hell and Back” Biden. Good examples in avoiding politics at all costs. Further examples — Porky Poroshenko (Ukraine), Beverley Eckhert; Well lookkeee here — California’s Man-Made Drought; Obama lifts ban The headline should also include — “at the same time that 11 jetliners (plus MH370) have gone missing.

#49 Helen on 09.04.14 at 10:14 pm

Two more business have closed on upper Lonsdale this week (not on the block being leveled for condos). Ellie’s Candy Lane and Blue Seas Fish Market. It’s starting to look like Las Vegas ’07. – first the commercial real estate emptied then the house went dark.

#50 Helen on 09.04.14 at 10:17 pm

…Lonsdale is the main street that runs through North Vancouver.

#51 Singaporean Investor on 09.04.14 at 10:17 pm

“purely anecdotal and speculative…

was talking to MIL last night, and she heard that immigration specialists and lawyers are getting busy again in Richmond – apparently the recently announced China-fication of the political system in HK is causing some there to start looking at their options. Lots of Canadian citizens in HK that took out citizenship as a “plan B” back in the 90’s… if they were to suddenly act upon it due to some crackdown, things could get interesting. That group doesn’t need to jump through immigration hoops as they’re already citizens, and can move here whenever they like.” – westcoastfella

#52 Inglorious Investor on 09.04.14 at 10:18 pm

Guy on 09.04.14 at 9:58 pm

“What is wrong with deflation?”

Garth is right. In an economy where the people’s money is debt, and debt levels are too high, deflation is harmful. Only those who have lots of cold, hard cash, and no debt, and keep their jobs or don’t need to work can benefit.

For most people it will mean incomes that fall faster than prices, such that goods and services get more expensive in real terms anyway.

See, because of our maniacal monetary system we the people are caught between the vice of inflation and deflation. I’ll let you decide which one is the ‘rock’ and which one is ‘the hard place.’

#53 Nemesis on 09.04.14 at 10:19 pm

#DoesLightningEverStrike… #TwiceInTheSamePlace?

http://en.m.wikipedia.org/wiki/Bikini_Atoll

[NoteToSM: Ooops: http://youtu.be/mjI8AxZnrx8 ]

#54 GTA Girl on 09.04.14 at 10:32 pm

Heard from a big developer that there are 900 condo projects in planning for the GTA over next few years. Not 900 units, 900 condo projects.

He admitted most are for investors.

This is what isn’t being discussed, these investor clusters with cash buying into projects, flipping among themselves in weird ponzi. CRA, where are you?

While the Harper govt rattles it’s paper saber at Russia and Middle East, it’s off shore Russian/Bulgarian & middle eastern (Iranian) hiding their money in these projects.

Things are much scarier than what analysts are speculating. This same developer ended the conversation with “And I wouldn’t touch any of these crapily built condos”

#55 Nemesis on 09.04.14 at 10:33 pm

#DidHabs76-79Say,”HullBreach!”?

http://youtu.be/kTzHFCIxWa0

[NoteToSaltierDogz: Survivable. But not pleasant.]

#56 Guy on 09.04.14 at 10:34 pm

It would seem that the system is broken. The Keynesian experiment isn’t working and has only been a benefit to a few and a wealth confiscation of the many.

How is it possible to move the manufacturing to China, build the products there and ship it here and it is cheaper to do it that way than to build it here?

One can say that it is the price of labour. In my travels, I’ve noticed that countries that have a lower cost of labour also have a lower cost of living. For us to compete, it would require a lower cost of living which means deflation wouldn’t it?

#57 West Coast on 09.04.14 at 10:37 pm

You mentioned Europe – Apparently the Greek government now accepts real estate in lieu of cash if you have taxes you can’t pay. The current saying in Athens is that if you want to inflict never ending pain on your children, just give them some property. Mind you the Greeks didn’t pay property tax in the past and now they do. So you can imagine how much fun everyone is having – this in a country which historically has the highest home ownership rate in Europe.
The Greeks got the Euro – the banks opened their wallets and encouraged one and all to spend, spend, spend on property – this is the result.

Mind you, if you’ve got deep pockets, good nerves and are into commercial property you might want to check out what the vultures are up to!
http://online.wsj.com/articles/investors-returning-to-greeces-real-estate-market-1409673877

#58 Victoria Real Estate Update on 09.04.14 at 10:39 pm

# 11 prairie person

“The Victoria RE board has just released figures showing that house prices in Victoria are going up, up, up. In spite of the posts by gloomer Victoria Real Estate Update. We’re all going to be rich, rich, rich. And, if we’re lucky get out without too much of a haircut.”

Really?

Let’s take a look at the board’s August single family home benchmark numbers:

* single family home prices in Greater Victoria were down month over month in 14 of the 17 areas tracked by the board, even in one and up slightly in 2

* overall, the board’s SFH benchmark price was down 1.3% for the month of August

Examples:
Victoria: – 1.1%
Oak Bay: – 1.5%
Saanich East: – 1.2%
Saanich West: – 1.8%
North Saanich: – 1.1%
Sidney: – 1.9%

What is the board’s benchmark methodology all about? A quote from them helps explain that:

“At the heart of the MLS® HPI is the concept of the “benchmark” home, a notional home
that has the most common features of a typical home in a given area. The benchmark
home does not represent any actual house, condo or townhouse, but merely provides
an identical example to track changes in market value.”

Some say that this methodology is almost purely subjective. Whatever it is, it definitely shows that SFH prices across Greater Victoria were down in the month of August.

#59 Dave on 09.04.14 at 10:46 pm

Interesting re: North Vancouver. Ive noticed an increasing # of businesses going belly up in vancouver. Seeing more commercial places empty. The vibe is very similar to the US when i was there in 2008. Time will tell – but i smell a fall coming.

#60 Ole Doberman on 09.04.14 at 10:46 pm

But Garth what about international capital flows?

I think money is fleeing Europe and parking in Canada to protect it from bail ins.

Maybe that’s why prices are going up regardless of domestics fundamentals which are RE negative.

Thoughts.

#61 Soma on 09.04.14 at 10:49 pm

Most of the Europe and west in General will continue to have stagnant economies for foreseeable future.

Tables have Turned

India, China will be net exporter of not only low value consumer goods but Hi-tech and Armaments, competing head on with EU/US for share of conventional and futuristic weaponry, including drones etc

Invest in those economies or be screwed and you have no choice but to “sell your house” – which BTW is a disgrace in those cultures

– Prophet Soma

#62 RayofLight on 09.04.14 at 10:49 pm

#23 CPG. There goes the alternate universe theory for missing socks.

#63 Helofox on 09.04.14 at 10:51 pm

“Deflation hits wages as well as prices, but does not reduce debt. Nightmare. — Garth”

So on the flip side, Retired with a defined benefit pension, no debt and cash on hand then means that deflation is good?

#64 Victoria Real Estate Update on 09.04.14 at 11:00 pm

#24 kandaramaran

“look at the price to rent ratio for these houses.
100-120.

Here is more like 300-400.”

Not sure what you are saying here.

If you want to use price-to-rent ratio to determine whether or not a housing market is overvalued, you must compare the historical ratio to the current ratio. The Economist does this.

Since 2000, house prices in Victoria have increased dramatically, leaving gains in rents far behind. Victoria’s current price-to-rent ratio would be much higher than its long-term average, making Victoria’s housing market extremely overvalued.

House prices in the states mentioned above (especially in Florida and Arizona) corrected significantly from the bubble highs reached in 2006. Rent gains since 2000 in these states have tracked price gains for the most part. The current price-to-rent ratios in these states wouldn’t be too much higher than their long-term price-to-rent ratios. So, unlike Victoria’s housing market, housing markets in these states are not extremely overvalued.

It definitely shows up in the examples I provided in my first comment.

#65 Chilli dog on 09.04.14 at 11:07 pm

I drove through Richmond BC today. It is exploding with commercial activity. Not only is there not a single vacant commercial spot in sight along the main thoroughfares….a giant new Mega Mall with major tenants of the international kind just broke ground. This will add another commercial center to the already dozen major malls already there.

Richmond is Shanghai Two if anyone doesn’t have the pleasure of visiting. The airport is minutes away and the in bound flights from China are chockers. This is an entirely Asian community now….no other ethnicity is to be seen on the streets….and the money is obviously flooding in is Chinese..along with the exploding population. All these people need a place to stay…there are very few rentals…..not a significant number of for sale signs.

The reason Europe is sagging is because they’re importing the poorest of the poor from the Middle East and Africa. There is no economic growth from that community. Who wants to immigrate to Greece anyway…only the dregs of N Africa seeking an easy welfare cheque in the EU. It is different here….and the proof is in the booming economy. It just happens to be transacted in Mandarin. House prices are going up as demand outstrips supply. I lost track of the number of cranes on the skyline.

And Garth…we have discovered the source of global warming…an absolute winning argument for the climate change advocates.

https://vine.co/v/ML1WeFQbmBJ

#66 PeterfromCalgary on 09.04.14 at 11:21 pm

One thing that could really blow up this bubble is the Strait of Hormuz. Couple of well placed ocean mines and it could total wreak the global economy. Even here in Calgary it would result in a six month boom followed by years of recession as the global economy and oil prices crash after the initial huge price increase in oil.

#67 PeterfromCalgary on 09.04.14 at 11:25 pm

Islamic State, new cold war, Vietnam and China fighting over ocean territory, Egypt, Libya, Strait of Hormuz, Iran nukes, Israel, Gaza. What could possibly go wrong?

#68 NotAGreaterFool on 09.04.14 at 11:28 pm

MSM is reporting the Big O is requesting transaction fees on credit cards be scaled down 10% by Banks & Credit Card companies. Also, reported by the MSM , Banks must disclose more information on collateral mortgages. Can you smell an election is coming?

What is the Harper government doing about the big elephant in the room (housing market + condo economy

#69 vangrrl on 09.04.14 at 11:36 pm

Malta… I plan to spend the winter there. Adios, Raincouver winter!!
#31 Cross Border Shopping: ‘The big stress is out’… You said it! My mum has a 3 bedroom flat by the sea in Sliema, was once the location of my grandma’s house, so no mortgage, no rent fee. My parents only spend a couple months there every winter and go back to Ontario… so why let it sit empty?!!
Cappuccinos are $2 in Malta, the cost of a regular coffee in Van. That was actually the first thing I looked up.. :)

#70 Terrier on 09.04.14 at 11:47 pm

High end homes in Thornhill are collecting dust. At least 5-6 properties in my neighborhood are sitting there since October last year. Two other were pulled off the market … no bites for more than a year and a half.

#71 Realties.ca » Pay attention on 09.04.14 at 11:56 pm

[…] Source: http://www.greaterfool.ca/2014/09/04/pay-attention-3/ […]

#72 Nomad on 09.04.14 at 11:58 pm

France “will be giving interest-free loans to first-time homebuyers for at least three more years.”

This is what I fear would happen here if enough people are in trouble: the government helping to keep buyers motivated (and therefore keeping prices artificially up).

Today a relative told me that I should sell my stocks and buy a house, because next year that 700k house will be worth 70k more. So annoying:
– really believes the past will keep repeating itself
– she could be right

Real-estate has become a common topic of conversation in Toronto. Really getting fatiguing.

Help my sister shop for a house in Quebec this weekend. She’s offering 90k less for an 880k four bedroom house in the best area of the city. Lots of sellers, few buyers. At least that’s encouraging.

#73 Carpe Diem on 09.05.14 at 12:13 am

#45 Inglorious Investor

— Everybody “wins.”

How about the parents having to pay daycare or quit their jobs to stay home?
How about the kids not being educated?

No one wins in BC. Prices for RE is far to high for anyone to win.

I sold my place in 2008, moved to Ottawa and never looked back. We can fish, kayak, beach in summer and slide, skate and ski in the winter. Winter can be sunny lots during winter!!!

But RE isn’t a stress in this place.

People make more here than Vancouver + lots of people have pensions to look forward to!

We don’t have to deal with Vancouver Housewives! I live among the rich and the housewives here a super nice! Even the professional hockey player wives!!!

But the BC kids … they are not getting the education they deserve!

Ottawa has awesome schools too!!

I live in the forth biggest city in Canada.
But sure feels like the best city to live in Canada, for a family!
I lived in the third biggest city, Vancouver.
It was great when I was single but with a family it sucks!

#74 Casual Observer on 09.05.14 at 12:30 am

In my travels, I’ve noticed that countries that have a lower cost of labour also have a lower cost of living. For us to compete, it would require a lower cost of living which means deflation wouldn’t it?

Not necessarily. Productivity (output per worker) can be higher and allow a domestic business to be competitive with offshore.

If a domestic factory can produce ten times as many “widgets” per worker than an offshore manufacturer in the same amount of time, wages can be ten times higher, all other things being equal.

The downside for factory workers is that there are fewer jobs and the ones that remain require more skills to operate advanced equipment (automation).

#75 Ronaldo on 09.05.14 at 1:02 am

#28 John Mounfield on 09.04.14 at 9:28 pm

”Hands up!!!!!!
Capital appreciation is through the freaking roof and getting me worried. I know “you can’t time the market” but I’m very jittery.”

So take some off the table, no sin in taking profits. At beginning of January my U.S. portfolio was up over 35%. Sold and put the proceeds into Energy and Global Precious metals sectors. Energy portion currently up 16.6% and PM’s up 29.3% and I’ve just done another rebalance.

#76 InvestX on 09.05.14 at 1:12 am

You’ve been noting these seasonal drops for years now but prices have kept marching up overall.

Has the downward trend begun this time?

#77 Derek R on 09.05.14 at 1:17 am

#52 Inglorious Investor on 09.04.14 at 10:18 pm wrote:
“What is wrong with deflation?”

Garth is right. In an economy where the people’s money is debt, and debt levels are too high, deflation is harmful. Only those who have lots of cold, hard cash, and no debt, and keep their jobs or don’t need to work can benefit.

Agreed. Garth is absolutely right here. I’d also add that it’s not just wages and prices that drop. It’s also profits. As a result business bankruptcies rise too. While a few people and companies may benefit from deflation, the majority suffer.

#78 sirtokealot on 09.05.14 at 1:32 am

Not having a sinking fund for future expenses is a recipe for disaster.

“Just got my strata notice. The strata fee has just about doubled. From 800.00 a year to 1576.00. This is because of the new rule that we have to create a sinking fund to take care of future expenses. ”

There are many things that can creep up and you don’t want a huge special assessment when for ex…insurance premiums jump…landscaping fees increase…snow removal fee’s, roof leaks…etc etc etc . It’s the smart thing to do. $131 p/m is dirt cheap as far as it goes. Toronto condos can be up to $2 dollars a sq ft.

#79 Bailing in BC on 09.05.14 at 1:39 am

I was walking along Upper Lonsdale just this afternoon and noticed the same thing. A couple of empty businesses have their eviction notices posted on the door. These businesses are not just closing down, they are flying the coop in the middle of the night, leaving debts in their wake.

#80 Cha Ching on 09.05.14 at 1:53 am

#38 Happy Renting
“Beyond that, the handling you get for a $100k portfolio may differ drastically from what you’ll get for something much bigger. With more loot you can go for more sophisticated diversification and strategies (rather than a four-ETF portfolio you can add in some high-yield bonds, small caps, some metals, and other stuff too complex to be worth your while if your portfolio is small.) At $1M you may qualify as an accredited investor, with access to stuff small fish like me mostly just get to read about. Theoretically, worth the extra $9k a year to be correctly advised of the opportunities available.”

No.

Totally made up shot in the dark.

Terrible comment.

Keep renting.

#81 Mr Stats on 09.05.14 at 2:34 am

“…..In case you were not aware, most of Europe is teetering on the brink of deflation,…”

Drivel.

NO IT’S NOT. All the people with a vested interest in the financial industry want more QE so they push asset values higher. Nothing more.

Whats wrong with deflation? Let prices go down.

#82 Mr Stats on 09.05.14 at 2:36 am

“…..Deflation hits wages as well as prices, but does not reduce debt. Nightmare. — Garth”

So let those worry who have debt. Why should I?

#83 Tony on 09.05.14 at 2:45 am

The exact same thing will happen in America because all the citizens already know everything the government tells them is total lies. No country has lied their way to prosperity and America will not be the first.

#84 bdy sktrn on 09.05.14 at 3:29 am

Deflation hits wages as well as prices, but does not reduce debt. Nightmare. — Garth

but a dream for savers. imagine if retirement costs were cut by half, we could be retired right now.

the kids would be allright, lower pay but lower costs, a more competitive country.

the debt piggies get roasted, and the rest adapt. (and need less debt to buy a house or a clinic or a machine shop)

but as i;m not in EU i won’t get so lucky i think.

#85 bdy sktrn on 09.05.14 at 3:41 am

Invest in those economies or be screwed and you have no choice but to “sell your house” – which BTW is a disgrace in those cultures

– Prophet Soma
——————————
glad it;s no disgrace to do so here.

something you could do with your bugspit/mouldy/slanty tax free gains –
mig29 supersonic/aerobatic 45min whoopie rides are about 20k a pop.

after 10 or 20 rides they might get old, but maybe not.

what better way to blow off re bubble hot air?

#86 bdy sktrn on 09.05.14 at 3:42 am

http://www.flyfighterjet.com/fly-mig-29-russia-sokol-nizhniy-novgorod-moscow/

#87 bdy sktrn on 09.05.14 at 3:46 am

Invest in those economies or be screwed

——————–
never hear much about brics/emerging in the typical portfolios discussed here.

but it sure seems the growth/inflation will continue there, while stagnation rules mature economies.

50% bric exposure too much?

#88 Flawed on 09.05.14 at 3:53 am

Canada is, at this time, still quite a bit better off than most of the EU. The cost of living there is still astronomical…

Ya, right. Compare a Van house to one in a Euro city of the same size. — Garth

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

Plus post secondary is practically free (no student loans), healthcare is exemplary, infrastructure is fantastic, education is phenomenal. But yes, it costs allot to live there. Too bad the boobs running this country can’t take the “tens of billions” they get from resource revenue and put it into the govt services you get in Europe. But this is Canada……it’s different here. Public servants make more than the private sector along with a million dollar pension when they retire. So keep paying 60% in taxes (in BC) for crap suckers……

#89 Londoner on 09.05.14 at 6:28 am

“Xbox economists” I like that. You would do well to hire a few.

Ya, right. Compare a Van house to one in a Euro city of the same size. — Garth

While you’re at it compare the wages and unemployment rate in those same Euro cities. There’s a reason London and Munich are hot spots and the same applies to Canadian cities.

The BoC will not lower its rate. Period. It even removed the ‘soft landing’ language in its current statement, suggesting the bank sees an asset bubble. — Garth

The BoC will raise or lower rates as it sees fit, based on the data it receives on the measures it tracks. Making generalized statements like this just shows your bias. There currently may not be any signals for a rate cut but neither are there any indications for an imminent rise.

You guys keep looking at interest rate rises as if it’s going to trigger some sort of house price correction. But why look at it that way? Rate rises, when they come, should take place in a period of economic expansion and be accompanied by real wage growth and low unemployment. House prices may or may not follow the same path. Who cares? Economic growth would be good for all Canadians. Stop cheer leading a house price correction and focus on what matters.

What do you not understand about ‘The BoC will not lower its rate. Period’? — Garth

#90 Italians love real estate on 09.05.14 at 7:31 am

#32 Italians love real estate on 09.04.14 at 9:38 pm
Prices for SFH in the GTA will be higher 1 year from now, 3 years from now and much higher 10 years from now. My prediction.

Why you ask ? Because the GTA is not Europe and the demographic here and the thought processes of those who live here are far different.

Is that better Garth? Do I avoid deletion now?

Yes, but you are still boring and add nothing to this blog. — Garth

Boring is ok with me Garth. Bricks ,mortar and dirt. That’s me.

I will leave the excitement of ETF’s , P.U.T’s, M1, M2 , M3’s , ABC and 123 ‘s to you and your stock market aficionado’s.

#91 jess on 09.05.14 at 8:08 am

management consultants indeed!

…”using corporations set up in Belize and the Virgin Islands that obscured their involvement and circumvented U.S. usury laws.”

… make millions of dollars a month in small loans to desperate people, charging more than 600 percent interest a year, said the ex-employees, who asked not to be identified for fear of retaliation.

Secret Network Connects Harvard Money to Payday Loans
By Zeke Faux Sep 4, 2014 1:17 PM ET

#92 jess on 09.05.14 at 8:29 am

Channel Stuffing

..”
You get your distributors to buy more product than they need so the company’s sales and revenue appear to be greater than they actually are,” explained Special Agent Stephen Callender. “They were creating sales on paper that didn’t exist in reality.”

Beginning in 2005 and continuing until 2009, Baker orchestrated a series of end-of-quarter transactions involving distributors who willingly received more of ArthroCare’s product—a specialized needle used in back surgeries known as a spine wand—than they expected to sell.

The distributors agreed to stock their shelves with the extra devices because ArthroCare made it profitable to do so. Distributors were given a fee for taking extra product or given generous terms to pay for the devices. Some were told they could return the spine wands at no cost if they didn’t sell.

This long-running misrepresentation of sales gave ArthroCare the appearance of significant growth, and its stock price climbed—even as Baker lied to investors and analysts about ArthroCare’s relationships with its distributors….”

http://www.fbi.gov/news/stories/2014/september/a-case-of-corporate-greed/a-case-of-corporate-greed

=
Hedge Fund Manager and CPA Administrator for $40 Million Ponzi Scheme Convicted by Jury
Defendant Stole Victims’ Money to Build Personal Mansion Through Belizean Shell Company

…”According to filed court documents, court proceedings, and today’s sentencing hearing, beginning in April 2007, Simmons began soliciting victims to invest in Black Diamond for supposed trading in the foreign currency exchange market. From April 2007 through September 2009, Simmons and his co-conspirators induced over 400 victims nationwide to invest more than $40 million in Black Diamond through a series of false representations, including bogus claims that Black Diamond was generating profits of more than 48 percent annually in the foreign currency trading market.
…….
On April 27, 2011, a criminal bill of information and a Deferred Prosecution Agreement were filed against CommunityONE Bank N.A. related to its failure to file a suspicious activity report (SAR) and maintain an effective anti-money laundering program. As court records show, Simmons was a customer of CommunityONE and used various accounts with the bank in furtherance of the Ponzi scheme. However, according to filed court documents, the bank did not file any suspicious activity reports on Simmons, despite the hundreds of suspicious transactions that took place in his accounts. The bank agreed to pay $400,000 toward restitution to victims of the Ponzi scheme that operated through accounts maintained at the bank.

#93 Londoner on 09.05.14 at 8:36 am

US non-farm payrolls 142k – wow! Here we go…

#94 Stumpy on 09.05.14 at 8:52 am

Seems the bears can’t agree on their story.

Some bears (Garth and others) have been claiming there are two markets, one below $1M and one above $1m, and that the market above $1M has eroded due to CMHC rules. Sales have dried up above $1M.

Then there are other bears like Mark (as recently as yesterday) and others who claim the numbers we see are not real and are skewed by the “sales mix”, and that the higher end home sales are artificially driving the numbers higher.

So which is it guys? Can’t have it both ways.

#95 Toronto_CA on 09.05.14 at 9:12 am

A drop of 111,000 private-sector workers in August for Canada? Is that not extremely alarming??

#96 Shawn on 09.05.14 at 9:12 am

Good News?

The labor participation rate – of particular interest to the Bank of Canada – slipped to 66.0 percent, the lowest since November 2001.

Does this mean the long-anticipated life of leisure has been achieved? At least for 34% of people of working age (15 to infinity)?

#97 rosie "moving forward" in the knowledge that, "this won't end well" on 09.05.14 at 9:14 am

Thank God for the self employed or this would be panic time.

http://ca.reuters.com/article/businessNews/idCAKBN0H016G20140905

#98 DJG on 09.05.14 at 9:14 am

Big deal, you’re comparing April to August instead of May to August. As I’m sure you know, the sales drop from April to August is no different this year than it is in virtually every other year on record.

There is also always a big drop from July to August. For example, in 2012 it was 15.2%. In 2013 it was 11.4%.

Everyone with half a brain knows that housing is overvalued relative to incomes and rents. You don’t need to deliberately misrepresent the data to make this point, unless you really are just playing to the conspiracy theorists on this site.

#99 crowdedelevatorfartz on 09.05.14 at 9:16 am

hmmmmmm
Standard Life Assurance Corp (SLAC) of Scotland has flogged its entire Canadian operations to Manulife for 4 Billion dollars.
Standard Life has been in Canada since 1825. (Montreal Headquarters)
It has dumped all its property holdings, life insurance, pensions, benefit plans, etc..
Wonder what that will do to the unemployment rate in Montreal. Roughly 1000 employees in Mtl. and another 1000 across Canada……..
Standard Life head office is in Edinburgh .
Scotland has a separation referendum in less than 2 weeks and the “separatists” appear to be neck and neck with the unionists.
Coincidence?
Apparently several large companies in Scotland (Royal Boank to Scotland, SLAC, etc) are seeing a drop in their share values……
Interesting times…….

The seperatists just dont get it.

#100 Ray Skunk on 09.05.14 at 9:35 am

…and then Constable Martell jumped in his car and drove home, happily texting his wife for the entire duration, knowing he’s above the law.

#101 PJ on 09.05.14 at 9:51 am

All those trillions of cheap dough pumped into the system just to get those kinds of economic results. Awesome!

#102 Daisy Mae on 09.05.14 at 9:53 am

“Just this week Equifax told us overall consumer debt – including mortgages – grew an unhealthy 7.2% in the second quarter, compared to the same period last year. We now owe $1.45 trillion (twelve zeros), as opposed to a mere $1.35 trillion last year.”

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

…and we lost 11k jobs in August.

#103 Skytrain on 09.05.14 at 9:56 am

Grim jobs numbers in us and canada 111,000 actual jobs lost, with an extra 100,000 civil servants to pay for. Ouch.,,,,

ECONOMY: CANADA
Canadian economy loses unexpectedly loses 11,000 jobs …
Trade surplus rose to $2.6 billion in June, Statistics …
Canadian dollar on course for a long-term grind lo …
Bank of Canada keeps rate on hold, frets over household …
Canada’s housing market among most overvalued in …
Canada manufacturing growth at nine-month high in  …
news/canada »
OTTAWA (Reuters) – The Canadian economy unexpectedly lost a net 11,000 jobs in August from July as well as a whopping 111,800 positions from the private sector, Statistics Canada data indicated on Friday.
The jobless rate stayed at 7.0 percent. Analysts forecast that 10,000 positions would be added after the gain of 41,700 in July.
Full-time jobs dropped by 2,300 from July while part-time jobs decreased by 8,700. The labor participation rate – of particular interest to the Bank of Canada – slipped to 66.0 percent, the lowest since November 2001.

#104 Tony on 09.05.14 at 10:20 am

Re: #93 Londoner on 09.05.14 at 8:36 am

Imagine how bad the “real” figure must be. America must have lost jobs last month just like Canada did. Interest rates to turn negative in both Canada and America.

#105 Grantmi on 09.05.14 at 10:21 am

While we LOST 11K jobs last month.

http://bit.ly/1pSCELL

#106 bigrider on 09.05.14 at 10:27 am

Italians love real estate, all posts.

You ask whether or not others are from Calabria when its you that is most likely from there.

I agree with Garth that you provide no value other than the fact that you provide a window , unfortunately, into what is symptomatic majority thinking towards RE amongst a group of people who, yes, have been very successful with RE.

What is most unfortunate for you, is the fact that the long term trend for RE gains, driven by a long term downtrend for interest rates and government policies that favour RE ownership at the expense of all else is most likely over.

It is also most likely that we have entered a new bull market for equities to which you have admitted no understanding or interest of whatsoever.

#107 Smoking Man on 09.05.14 at 10:56 am

Garth you’re the best.

Last night I post, I’m calling for huge job gains. Damn I got wrong big time.

You vanished the post, my near record accuracy of calling shit intact. Thanks.

The dogs would have made me eat that one.

But OK I get it.

No ww3, end of days, asteroids topics.

I’ll behave….

#108 Daisy Mae on 09.05.14 at 11:02 am

#11 Prairie Person: “This is because of the new rule that we have to create a sinking fund to take care of future expenses…”

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

A contingency fund. Yes, it’s important. Our strata fees are relatively low. However, we’ve budgeted $100,000 for 2015 to mow lawns…as well as a little pruning/fertilizing. Irrigation costs over and above. Point is, if we converted to xeroscaping in this semi-arid environment, we’d save a fortune in maintenance — but ‘can’t teach old dogs new tricks’. *sigh*

#109 Mister Obvious on 09.05.14 at 11:31 am

“Bricks ,mortar and dirt. That’s me.”

That’s all of us. Especially the ‘dirt’ part. I hate to throw a wet blanket on the party but dirt is everyone’s final destination.

Buying dirt will not buy immortality. Granted, neither will ETF’s, preferred shares or bonds. But those can buy infinitely more freedom of choice while one still inhabits this world.

We will all return to terra firma soon enough. Why not fly free until that day? Why bind yourself to a specific patch? Especially when, in Canada, most of your countrymen have lost sanity regarding its actual value as determined by any accepted historical metric.

Residential real estate has become mug’s game. But fortunately, no one is forced to play. There are excellent investment alternatives and this blog is dedicated to discussing them.

In the four years I have been reading this blog you could well be the first commenter to be deleted simply for being tedious. No small feat. Many before you tried but have long since given up and moved on.

Of course, we do still have Smoking Man…

#110 joblo on 09.05.14 at 11:31 am

79 Bailing in BC on 09.05.14 at 1:39 am
I was walking along Upper Lonsdale just this afternoon and noticed the same thing. A couple of empty businesses have their eviction notices posted on the door. These businesses are not just closing down, they are flying the coop in the middle of the night, leaving debts in their wake.

Ya think this has anything to do with the foreign investors immigration program?

#111 Derek R on 09.05.14 at 12:00 pm

#82 Mr Stats on 09.05.14 at 2:36 am wrote:
“…..Deflation hits wages as well as prices, but does not reduce debt. Nightmare. — Garth”

So let those worry who have debt. Why should I?

Because deflation makes the people that you are lending money to less likely to pay you back; it cuts the profits of corporations that you invest in, so your dividends take a hit; and it makes them more likely to go bankrupt, taking your invested money with them…

#112 Toronto_CA on 09.05.14 at 12:24 pm

Party like it’s 1982!

“The fall of 111,800 private-sector employees amounted to 1.0 percent, equaling the record month-on-month drop seen in April 1982. ”

So it was tied for the worst ever % drop in private-sector employment in Canadian history; and what little employment growth we have is part-time or self. I’d say this won’t end well but it seems so cliche at this point.

#113 Mark on 09.05.14 at 12:37 pm

“Then there are other bears like Mark (as recently as yesterday) and others who claim the numbers we see are not real and are skewed by the “sales mix”, and that the higher end home sales are artificially driving the numbers higher.

So which is it guys? Can’t have it both ways”

Ultra-high-end (ie: >$1M) is such a small portion of the overall Canadian market, even in the big cities, that it is not statistically relevant to the conversation.

What has happened over the past year and a half since Budget 2013 is that the subprime buyers, ie: those requiring CMHC insurance because they can’t bring an acceptable down-payment to the table, have been subjected to much higher standards. Which has caused a significant drop-off in lower-end activity.

Higher end activity (but not necessarily ultra-high-end) remains reasonably strong. Boomers trading significantly paid-up houses amongst themselves. Etc.

Of course, as any decent RE economist will tell you, eventually the absence of FTB’s and a relative starvation of credit, will flow into all segments of the market. But as it stands, high-end (ie: $600k-$1M) has only seen a minimum in price declines, and minimal to no decline in activity.

#114 Mark on 09.05.14 at 12:40 pm

“OTTAWA (Reuters) – The Canadian economy unexpectedly lost a net 11,000 jobs in August from July as well as a whopping 111,800 positions from the private sector, Statistics Canada data indicated on Friday.”

Is there any doubt that this is a good setup for a decrease in BoC policy rates, combined with an increase in the risk premium the banks charge their increasingly less-creditworthy borrowers?

The question is, how far behind the curve will Poloz allow the BoC to be, until he finally relents and lowers the policy rate?

The Bank will not drop the rate. — Garth

#115 bill on 09.05.14 at 12:42 pm

#48 NostyVlad the Snugglebombed on 09.04.14 at 10:12 pm
Nosty you have a studebaker hawk….wow I dig the fins!

#116 gut check on 09.05.14 at 1:02 pm

“…are we now headed for a lower prime rate?”

If your bank is pushing the longer term fixed products at a lower or equivalent rate to the variable products then it’s a safe bet rates are not moving upward.

I mean our banks are golden, right? They make money hand over fist, correct? So if you look at it from their POV and you keep in mind that they are the predator and you are the prey, well, seems to me you’ve got your answer.

#117 Create Ruckus in Calgary on 09.05.14 at 1:17 pm

So what is the solution then in Calgary if rents are more than cost of mortgage ownership? Should a person then wait? Is this really a solution?

By the way, that photo is yet another example of police harassment. In Calgary the wonderful city council decided to make school zones 7:30am to what 9:30 pm? One reason: Cash grab.
Screw photo radar: https://www.phantomplate.com/
http://www.beatthelight.com/

Pretty soon there likely will be province sanctioned daily colonoscopies with the your drivers id stamped on your forehead also just to exist in society.

#118 bill on 09.05.14 at 1:23 pm

#48 NostyVlad the Snugglebombed on 09.04.14 at 10:12 pm
however if you spelled it ‘studebaker hoch’…..
he would be the ‘fantastic new superhero of the current economic slump”?
[sorry to disappoint some of you its not smoking man…]
although ‘some say he might be Zubin Mehta…’

#119 Mr Stats on 09.05.14 at 1:25 pm

The employment figures are a lie…to set up for lower rates.

We have 20,000 openings a month. The International Mobility Programs, TFW’s say so.

#120 don on 09.05.14 at 1:50 pm

Would the government ever backtrack to 30-35 year amortizations or relax the limits again to stop the carnage if things started to go south?

How could they not?

Never happen. — Garth

#121 statistics Canada on 09.05.14 at 1:58 pm

We here at Stats -Can, as we like to call it, take exception to these scurrilous articles from the MSM. Trevor, our intern- remember him from last month- well Trevor assures us that it was not him this time. He has fully adopted our secret motto, the quote about lies and statistics, anyway, the numbers stand, for now.

http://business.financialpost.com/2014/09/05/scotiabank-calls-statistics-canadas-august-jobs-report-very-fishy/

#122 Mark on 09.05.14 at 2:06 pm

“If your bank is pushing the longer term fixed products at a lower or equivalent rate to the variable products then it’s a safe bet rates are not moving upward.

Canadian banks hawk anything they can earn a spread on (as they generally do not speculate on interest rate changes and run duration-matched books with minimal interest rate risk). So I personally wouldn’t go as far as to state that there’s any strategic “plan” by the banks to put people into one sort of debt structure versus another.

I personally believe that BoC is going to lower their policy rate in response to an increasingly deflating economy (yes, I know, Garth probably hates me for saying it!). But I wouldn’t look for actual retail rates charged to customers to fall much, as credit-worthiness increasingly becomes an issue in a falling house price, falling job-opportunity environment. As risk increases, so too does risk premia demanded by lenders.

In short, a great setup for bank profitability, but terrible if one owes a large amount of money to the bank and won’t be getting much if any relief from such. This is why a lack of diversification and “putting it all in the house” is so toxic.

#123 bdy sktrn on 09.05.14 at 2:07 pm

Mark—————–high-end (ie: $600k-$1M)

this is high end for condos in 416/604

it’s off the bottom of the scale for sfh in vancouver or much of central toronto.

ALL vancouver sfh mtgs are CMHC free, but for a sliver of the very worst.

#124 economictsunami on 09.05.14 at 2:10 pm

Argue with the message, not the messenger…

Labor Participation Rate Drops To Lowest Since 1978; People Not In Labor Force Rise To Record 92.3 Million…

http://www.zerohedge.com/news/2014-09-05/labor-participation-rate-drops-back-lowest-1978-people-not-labor-force-rise-record-9

53 Million Temps: All You Need To Know About The “Jobs Recovery”…

http://www.zerohedge.com/news/2014-09-05/all-you-need-know-about-jobs-recovery

#125 Mike in Toronto on 09.05.14 at 2:16 pm

#113,

“But as it stands, high-end (ie: $600k-$1M) has only seen a minimum in price declines, and minimal to no decline in activity.”

Not sure if you’re speaking nationally. For Toronto, double your prices for “high end”. $1.2 – $2M

The MLS only shows 322 houess in “Old Toronto” between $600k and $1M. Most are crapshack semis or crack-house Scarborough bungalows. Under $600 and they’re fixer-uppers or tear-downs.

OTOH, $600k will get you a 2br condo at Bathurst and Bloor overlooking the trash bins. Not sure about the condo fees.

The market was insane in 2010. Now it’s tulip-mania stupid.

#126 maxx on 09.05.14 at 2:27 pm

What if a great swath of the re buying public just told these cheap excuses for human beings to osculate their own posteriors by incrementally invoking the “buy never” mantra.

……the squealing would start in a nanosecond and be so enjoyable that “buy never” might just become substantial reality.

#127 jess on 09.05.14 at 2:45 pm

early repayment clauses in the €45 billion of EFSM, EFSF and bilateral loans from EU countries?

http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2014021100057?opendocument#WRE03250

http://www.irishtimes.com/business/economy/ecb-resists-irish-plan-to-repay-imf-bailout-loans-early-1.1918250
=============

Ireland’s two-year yield turns negative: Bloomberg article here.
http://www.bloomberg.com/news/2014-09-05/irish-two-year-note-yield-declines-to-record-low-on-ecb-stimulus.html

#128 Italians love real estate on 09.05.14 at 3:14 pm

Mister obvious # 109

In an effort not to be tedious or repetitive I will change topics a bit.

I think that the stocks markets are going to take another shellacking like they did back in 2008/9 and even if they don’t , there is one thing I am certain of and that is investors will behave much like they always do, that is , selling into the fray.

The beauty of less liquid types of investments ( that shall remain nameless in an effort not to be tedious..lol) is that they save people from their own emotionally driven mistakes.

I actually think that there could be a way for people to make money in financial investments with greater success than RE.

Simple. Don’t mail anyone a statement or give them online access to the value of their accounts and make it very difficult and tedious( that word again) to sell just like RE.

Then and only then might be people do the same I. That arena as RE

#129 Cocoabean on 09.05.14 at 3:21 pm

Didn’t think Garth even believed in Peak Debt…

#130 Shawn on 09.05.14 at 3:28 pm

Stats Can Job Accuracy

They say:

Every month, the LFS collects data from a random sample of 56,000 households to obtain data on the labour force. The sample consists of six panels of dwellings. Each panel is contacted on six consecutive months or survey occasions. Every month, the oldest panel is dropped and a new panel is introduced.

Okay… so if the 56,000 households. Say 100,000 jobs at most. Increase the job count by jut 1, what is that extrapolated to the population of say 15 million jobs?

It’s 150 jobs… So say the accuracy of the household survey is plus of minus 2%. That’s 2000 jobs plus or minus. Now extrapolated to the population that would be plus or minus 150 times that or 300,000.

Yeah I don’t need a statistical study to tell me you can’t accurately count tiny variations in 15 million or so jobs with this survey.

Just think about it. If you try to count a very large number like 15 million, what is plus or minus 15,000? It’s plus or minus 0.1%, and I just don’t think you get as accurate as plus or minus 0.1% with a survey.

They need to count something more accurate like the number of CPP accounts with active deposits in a month. that should be an exact count. Why are we using a sample here? Just count the income tax or WCB or CPP remittances.

#131 A fan of garth on 09.05.14 at 4:06 pm

Chilli dog
U r comparing Richmond bc to Shanghai? Clearly you haven’t been in Shanghai.

#132 Casual Observer on 09.05.14 at 4:11 pm

I personally believe that BoC is going to lower their policy rate in response to an increasingly deflating economy (yes, I know, Garth probably hates me for saying it!).

If house prices start going south and foreclosures rise, then I would agree with you.

The BoC is going to want to help borrowers remain solvent in order to minimize the losses that CMHC will face on it’s mortgage insurance.

They’re at 1.0% and everybody else is near zero. They’ve got some room to drop it, even if it’s only 0.25-0.50%.

The bank will not lower its key rate. End of story. The bank fears a credit bubble more than people losing their equity. — Garth

#133 espressobob on 09.05.14 at 4:38 pm

#128 Italians love real estate

It’s obvious the markets are good at playing you! Not that RE could take a good shellacking like they did back in the late eighties? Nah.

#134 Harry Wilson on 09.05.14 at 4:57 pm

re #38 Happy Renting:

Thank you for your response, Mr. Renting, from another happy renter.

I had a second, related, question, but I didn’t want to get greedy. Since it’s a new day, I’ll ask; it may have the same response, depending on the individual’s circumstances.

Diversity is good in all things, especially, as espoused on this site, in personal finance. Have many people diversified in choosing financial planners, dividing their fund in half and putting it into the hands of two completely unrelated persons? Would this be a good hedge against one planner turning out to be a slug? While this would leave you as a smaller fish in a financial planner’s pond, would that be offset by the security of having two fish in two separate ponds? (I’ll stop with the metaphors now.)

Even if the answer is no, this may be a good argument to make to anyone considering a self-destructive move, like handing their entire life savings over to one of the shadier financial outfits.

If you want integrated holistic management of your assets with maximum tax efficiency, no portfolio overlap or duplication, effective retirement and estate planning, tax avoidance, and the integration of things like children, real estate and insurance into your overall strategy, this is a bad idea. Managing your money and making it grow is but one part of what a good advisor does. — Garth

#135 Mike S on 09.05.14 at 5:32 pm

If you want integrated holistic management of your assets with maximum tax efficiency, no portfolio overlap or duplication, effective retirement and estate planning, tax avoidance, and the integration of things like children, real estate and insurance into your overall strategy, this is a bad idea. Managing your money and making it grow is but one part of what a good advisor does. — Garth

Sure who doesn’t want that, but finding an adviser who you can trust with your entire savings is not an easy task

I prefer to manage my own finances, not for layman though

#136 Mister Obvious on 09.05.14 at 5:41 pm

#128 Italians love real estate

One man’s ‘shellacking’ is another man’s long-awaited correction.

If one is overextended with only a sliver of RE equity (like many recent purchasers) then a 10% correction is a shellacking indeed.

In the world of investing outside of residential RE, a 10 to 15 percent correction every few of years is expected (or should be) and even welcomed by financial planners eager to put sidelined money to work.

In today’s environment (of insane overvaluations)financial illiterates listen to their parents tired mantra (conceived in earlier, inflationary decades) and buy at any price because they expect, and believe they are entitled to, perpetual gains.

To add insult, there is no realistic rental income steam to mitigate any capital losses. No such stream exists because of the insane evaluations mentioned above that keep cap rates in the dumper.

Around and around it goes.

#137 Harry Wilson on 09.05.14 at 5:42 pm

re #46 Will

Something I’ve always wondered is how good an idea it is, to own shares in the company that you work for. Even if you receive them at a discount, or as part of your pay package, is it a good idea to hold them?

For the sake of argument, let’s say someone works at a company called Snoretel, amassing shares in the company. During their ten-year employment, the company has gone from a superstar to a smouldering hole in the ground. Our hero is one of the last to lose their job, followed only by the guy who screws the plywood over the windows. The day it happens, he has to come home and break the news:

“Bad news, Honey. It finally happened; I lost my job today.”

The S.O. offers these comforting words: “Well, don’t worry; at least we still have our savings.”

“Uh, that’s the other thing I need to talk to you about…”

P.S. I’m not trying to be mean, Will, but try not to gloat too much, or inappropriately; remember, you have to work with these people. Several years ago, my department was ‘right-sized’ out onto the street. One day at lunch we were standing around outside, and a salesman told us that it was good that they were turfing us, as he was a shareholder, and it was good for his returns. While this may have been true, he’ll never know how close he came to having his rude bits ‘right-sized’, but since we were just days away from our golden handshakes, we let it go.

———————————————-

Sorry for straying off the day’s topic twice, Mr. Turner, but I’m just in a talkative mood. The plywood guy boarded up the crack-house next door this morning, after a court-ordered eviction, and I’m bubbling over. (How sad is that, when you’re excited about living next door to a boarded up house?)

Also, thanks for your answer to my previous question, some things I hadn’t taken into consideration. I see that planning for minimizing income tax would be especially difficult, if the left hand didn’t know what the right hand was doing.

#138 gimme shelter on 09.05.14 at 6:07 pm

“Malta… I plan to spend the winter there. Adios, Raincouver winter!!”

Great plan… I have one more pocket stuffing commute to Texas and in 3 weeks I will snowbird to Bangkok and be sunning my buns in Thailand for the 6 months of crappy Canadian winter. Working remote of course. Just in a different time zone. More Canadian professionals are doing this…I meet them everywhere. The internet has set us free. Clients call…we talk…we send them a bill… If you’re not in the new groove….you must be a dinosaur.

My 2 bed condo there is 1500 sq ft….gorgeous mega city view…fully serviced and luxury furnished ….higher internet speed than Canada…4G…great satellite tv…..all the channels… I get to watch all my shows and international news on line….like BNN is $34 bucks for live streaming 6 months….air con…marble floors…wrap around balconies….overlooking an Olympic sized pool….great modern transpo…ultra cheap cabs…wild outdoor markets with thousands of vendors…wonderful people and culture…no honking…no road rage….surrounded by several western style fantastic shopping malls…and lots of Thai style shopping area’s…..floating markets….and out of this world cheap food. …etc etc etc . And….now with service like FONGO we have no long distance charges at all. All in …under a grand a month. Its all 15 minutes from the international airport.

#131….FOG…God gave you a brain…use it.

#139 Italians love real estate on 09.05.14 at 6:11 pm

#133 espressobob on 09.05.14 at 4:38 pm
#128 Italians love real estate

It’s obvious the markets are good at playing you! Not that RE could take a good shellacking like they did back in the late eighties? Nah.

Hope you bought back then or found yourself illiquid enough not to be able to sell. Nah.

#140 Italians love real estate on 09.05.14 at 6:17 pm

#136 mister obvious .

My post was clear . It is the behavior of financial market investors at times when the market is falling and by the way which Garth has mentioned himself which is the demise of success for the average financial market investor . Most sell. Period.

It is precisely liquidity and the ability to value ones financial assets by the second which I hold , is to the detriment of the average investor and the reason for an average lack of success.

RE enjoys not only an emotional appeal as Garth has mentioned, over and over but also a psychological advantage for precisely the reasons most would view as a drawback, namely for two illiquidity and lack of immediate valuation

#141 bill on 09.05.14 at 6:24 pm

#131 A fan of garth on 09.05.14 at 4:06 pm
no kidding eh!
chilidog: get on google earth and check out Shanghai at street level. and then scoot over to Tokyo and have a look there.
those are mighty dense population centres.
Richmond?? not even close.

#142 KAC on 09.05.14 at 6:28 pm

#65 Chilli dog on 09.04.14 at 11:07 pm
I drove through Richmond BC today. It is exploding with commercial activity. Not only is there not a single vacant commercial spot in sight along the main thoroughfares….a giant new Mega Mall with major tenants of the international kind just broke ground. This will add another commercial center to the already dozen major malls already there.

Richmond is Shanghai Two if anyone doesn’t have the pleasure of visiting. The airport is minutes away and the in bound flights from China are chockers. This is an entirely Asian community now….no other ethnicity is to be seen on the streets….and the money is obviously flooding in is Chinese..along with the exploding population. All these people need a place to stay…there are very few rentals…..not a significant number of for sale signs.

The reason Europe is sagging is because they’re importing the poorest of the poor from the Middle East and Africa. There is no economic growth from that community. Who wants to immigrate to Greece anyway…only the dregs of N Africa seeking an easy welfare cheque in the EU. It is different here….and the proof is in the booming economy. It just happens to be transacted in Mandarin. House prices are going up as demand outstrips supply. I lost track of the number of cranes on the skyline.

————————————————-

Sorry, you need to check your prices. Richmond’s house prices are lower now than they were two years ago. Here are the official stats:

MLS benchmark “detached” prices for Richmond:

Richmond, BC    April 2012   $1,026,500.         
Richmond, BC    August 2014  $989,900. 

source: http://www.rebgv.org/home-price-index

So much for the rush of immigrants driving up house prices! What a terrific investment – NOT.  Bet over a million bucks and lose $36,600 in equity (plus all the taxes and other carrying costs) in just over 2 years? 

#143 bill on 09.05.14 at 6:35 pm

Chillidog
check out Hong Kong on street view instead of shanghai.
apparently the Chinese government hasnt let google take the pictures yet…I wonder why?
still zoom in and have a look though.

#144 KAC on 09.05.14 at 6:41 pm

#123 bdy sktrn on 09.05.14 at 2:07 pm
Mark—————–high-end (ie: $600k-$1M)

this is high end for condos in 416/604

it’s off the bottom of the scale for sfh in vancouver or much of central toronto.

ALL vancouver sfh mtgs are CMHC free, but for a sliver of the very worst.

According to the latest stats from MLS the average Detached benchmark price in Greater Vancouver is just under a million bucks, but it used to be higher a couple of years ago.

Your claim about the low number of CMHC mortgages in Vancouver is a real tough one to believe. It goes against everything I’m hearing and I live in Vancouver. Can you please provide your source.

#145 Entrepreneur on 09.05.14 at 7:13 pm

Debt to me means living beyond your mean, any kind of debt. Short term debt is okay but only okay. Buying a house through the bank is beyond your means (within reason).

As for deflation, it is fine if a person stayed out of the debt game. We will “roll with the punches”; we will find good buys; we will open a small business, etc. Life goes on.

Victoria Phone Book 2007/2008 yellow pages for small business is 952 pages. How many pages now in 2014/2015? Small business is the backbone for a community; it reads the health and well-being of people.

#146 Daisy Mae on 09.05.14 at 7:38 pm

#14 Timmy: “Also air conditioning and water bills will be going through the roof soon….”

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

This should curb water waste! Gotta get hit in the pocketbook if you want to get the public’s attention.

#147 Kenchie on 09.05.14 at 7:58 pm

#131 A fan of garth on 09.05.14 at 4:06 pm
“Chilli dog
U r comparing Richmond bc to Shanghai? Clearly you haven’t been in Shanghai.”

Guaranteed he is a white guy.

#138 gimme shelter on 09.05.14 at 6:07 pm

“Great plan… I have one more pocket stuffing commute to Texas and in 3 weeks I will snowbird to Bangkok and be sunning my buns in Thailand for the 6 months of crappy Canadian winter. Working remote of course. Just in a different time zone. More Canadian professionals are doing this…I meet them everywhere. ”

What percentage of the Canadian population do you think can replicate this? 0.01%? 0.02%?

#148 Daisy Mae on 09.05.14 at 8:14 pm

#120 don: “Would the government ever backtrack to 30-35 year amortizations or relax the limits again to stop the carnage if things started to go south? How could they not?

Never happen. — Garth

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

Hasn’t the government done enuf damage?

#149 Kenchie on 09.05.14 at 8:31 pm

#145 Entrepreneur on 09.05.14 at 7:13 pm

“Victoria Phone Book 2007/2008 yellow pages for small business is 952 pages. How many pages now in 2014/2015? Small business is the backbone for a community; it reads the health and well-being of people.”

Phonebooks are not a barometer of economic activity anymore. They aren’t even printed in some places.

#150 Into the wind on 09.05.14 at 8:55 pm

#147 K….. Lots of working professionals doing the ex pat thing. Especially Canadians….since there is no industry work for professionals in Canada and only the public service otherwise…which most of us wouldn’t touch with a ten foot pole…..You gotta have some pride right? Its a bigger sub culture than you’d think. Working remote is ‘The Thing’ these days. Plug in and it’s easy to find contract work worldwide. Of course you have to have credentials that are saleable.

There are the 320,000 Canadians with One Million in Cash to invest over and above real estate worth ( bona fide millionaires) according to Stats can. The average net worth of this group is 3.4 million. Of course we have many worth many more millions and even a few billionaires…but ‘averages are very deceiving to the great unwashed.

So these and the working boho professionals add up to few more Canucks who’ve made it out of the drudgery than you suggest…..I’d say one point something percent. It’s an interesting lifestyle…try it out.

Or….apply some serious thought to how you plan you’re personal life. Don’t get sucked in to the consumer lifestyle. Save your money, invest it wisely, and you’ll be out before you know it. See you at the airport amigo.

#151 Waterloo Resident on 09.05.14 at 8:58 pm

Today I was just in a car accident, but with the way everyone is hurting financially these days, I’m not going to lay any charges because really, we all need some relief.
First of all, the traffic was stuck for 15 minutes because of a massive car accident ahead. I was in the passing lane, and a van to my right was in the slow lane (in town, everyone stopped.)
The van to my right turned into McDonalds and I thought to myself I might as well go get some fries, so I looked ahead; everything clear. I looked to my right, and behind me; everyone stopped, everything clear, with a nice large opening to my right. So put on my turning signals and slowly turned Right, towards the McDonalds entranceway. I was looking to my right, making sure I wasn’t going to turn in to the way of any approaching cars, but since everyone was stopped there was no problem.
THEN CRASH !!!!
A guy way out in front saw the van going into McDonalds and he put his Infinity into reverse and reversed about 6 car lengths right into the side of my car while I was 90 degrees to the road. The cops say it is a highway offense to drive in reverse on ANY provincial highway ( Victoria Street in Kitchener is also considered to be ‘Highway 7″, so it is both a 4-lane street ‘AND’ a provincial highway at the same time.)

Anyways, I saw my door was kind of caved in and lots of scraps. The metal of the frame was even bent, preventing my door from opening. But with a few pounds from a trusty sledge hammer and the metal is straight enough that the rear door can open and close again normally.

I have just ‘LIABILITY’ insurance, nothing else. No Comp or Collision. He’s at fault (according to the special investigations officer). So really, his insurance ‘SHOULD’ pay. But look at it this way: My car is a 2006 model, and according to the insurance companies it has almost ‘NO VALUE’. Fixing it will cost more than it’s worth, so what do companies usually do in that case: They scrap the car and give me a cheque on the value of the car, and in my case that would be about $500. Heck, might as well just drive it the way it is. I’m just going to spray paint the areas of bent mental where the paint tore or flaked off, get a 4 wheel alignment, and its good to go. See, the way insurance companies work these days, EVERYONE is always PARTIALLY at fault. I could be standing still and get rear-ended by some guy and the insurance companies will lay blame on BOTH SIDES, that way they can jack up the rates of BOTH PARTIES and they make MORE MONEY $$$$ . When that happens, the insurance company would not only double my rates next year (for an accident that was the other guy’s fault), but they would scrap my car and give me $500. I’m getting a new Golf 1.8T next year, and I need my old bucket to get me through another winter, so I’m not telling my insurance. I told the police at the collision center all of this and they agree with everything I said and that doing so is 100% okay legally, and probably the best way to go.

So yes, the economy is slowly falling into a depression, or drawn out recession, but I’m doing my part to help keep both my insurance and the other guy’s insurance to affordable levels.

Take care, and God bless.

#152 Entrepreneur on 09.06.14 at 12:45 am

#149 Kenchie…”Phonebooks are not a barometer of economic activity anymore.”

Maybe that is the problem.

#153 Vlad on 09.07.14 at 2:11 pm

As Casey Stengel once said – “When you see a fork in the road, take it”.
So when you see a fork in our economic road ahead, take it. It’s as good advice as any other that I’ve heard and makes as much sense.