Party time

LUBE modified

Nik Nanos regularly asks people about stuff he thinks is important. Like housing. “It’s a key forward indicator to be monitored,” the pollster says, “because the perceptions of real estate have been a key driver of confidence.” Of course on this pathetic blog we call that house lust, infused with hormones and sprayed with REALTOR® pixie dust.

Canadians have become so invested in this one asset class there’s now a permanent bias towards it. Even so, Nanos has just found, perceptions are changing. His polling shows the share of Canadians who think prices will rise over the next six months has fallen to 38%, which is the lowest number since April – and compares with 47% in July. It’s a huge move downward.

So 48.1% think prices will stay the same, while 11.5% believe they will fall. Frankly, that’s a surprising number – 59.6% who say real estate is going nowhere, or going down. Maybe what’s coming won’t be the massive shock that appeared certain.

This should be a big week for those interested in a long view of where it’s all headed. The Fed (the US central bank, headed by the most powerful woman on the planet) is holding a key meeting over the next two days, widely expected to be a prelude to the ascent of interest rates.

As you know, all the misguided wonks and metalheads who poured on here a year ago to say America would never stop its stimulus spending, or ‘QE’, were SOL. The Fed’s chopped its monthly bond-buying program six times so far, and all of this stimulus will be gone by Halloween. Imagine. Eighty-five billion a month, to zero. The stock market did not collapse. The economy did not stutter. Job creation was not impacted. In fact, GDP pushed ahead, corporate profits rocked, and the federal deficit is on the way to an 8-year low.

So now that QE’s over, ended in an orderly, well-signaled and resolute fashion, rates will be next. Most economists think Janet Yellen will flick that switch early in 2015 – about six months from now – and will tell us well in advance. Like on Wednesday.

It’s a big deal, of course. The cost of money’s been in the ditch for five years, purposefully driven lower to stimulate borrowing, drop financing costs and help pull back from the abyss of 2009. In the US, it’s worked. Corporations have recovered, made lots of money, hired 1.2 million people so far this year, paid more taxes and used cheap cash to buy back stock and each other. The economy swelled by 4% in the second quarter – sloughing off the Winter from Hell – while the US got closer to energy self-sufficiency and Europe got depressed.

In Canada, of course, it’s been party time! We used all this cheap money to (a) close useless factories with their smelly jobs and replace them with productive condos, (b) jump the cost of housing to unheard-of levels and, as a result, (c) hopelessly indebt the middle class with mortgages and LOCs that will (d) now reset at substantially higher levels – thanks to Mrs. Yellen.

The decision she reaches will have global implications. For Americans, higher rates will simply continue where tapering left off – slowly removing more of that massive stimulus applied so a 1930s rerun did not occur. For Canadians, now pickled in loans, it’s a different outcome altogether. Already the bond markets are signalling what lies ahead. Last week I gave you a glimpse into what’s going on with yields for five-and 10-year government debt. They’re popping, likely with more to come.

Fixed-term mortgage rates (unlike those for variables) are determined by bond yields, not by the Bank of Canada. Our bonds track US debt, and days ago ten-year treasuries broke through a key resistance level, suggesting there’s more to come. Partly this is in anticipation of the Fed’s next move, but also simply a reflection of an economy that is growing, inflating and in which investors are demanding a premium for holding fixed income assets.

Thus, long-term mortgage rates will likely rise soon. Regardless of what Ottawa does, that will continue throughout 2015 as the Fed finally moves. So all those people who told us America would never, ever stop stimulus spending can join all those who believed interest rates would never, ever rise.

The impact on real estate?

Simple. Once the masses see this happening, expect a surge in buying as fools rush to lock into low rates and high prices. Six months later, rates will be up and house values will be down. Many will learn it’s not what you pay that matters, but what you owe. They’ll have been caught in a trap of Biblical proportions. Verily.

Well, at least 11.5% of people get it. I think they’re all here.

168 comments ↓

#1 Nomad on 09.15.14 at 5:53 pm

“It’s more of a buyers’ market than a sellers’ market,” says Peter Squires of Winnipeg Realtors.”

http://globalnews.ca/news/1564369/listings-up-sales-down-in-winnipeg-home-real-estate-market/

#2 Happy Renting on 09.15.14 at 6:02 pm

Yay for being part of the 11.5%!

Not sure which paragraph triggered this thought, but today’s post made me grateful for our rent-controlled apartment. We pay maybe 20% less as a couple than we did as singles for two one-bedrooms, and for a nicer place. Highly underrated, rent control.

#3 Victor V on 09.15.14 at 6:02 pm

Why the coming ‘rates rage’ will wreak havoc across the globe

http://business.financialpost.com/2014/09/15/interest-rates-us-china/

The world financial system is at an inflection point as the U.S. and China both switch off monetary stimulus, a form of synchronised tightening by the “G2″ superpowers.

Bank of America has warned clients that the glory days of “maximum liquidity” are coming to an end, with sweeping implications for asset markets across the world.

The yield on 10-year US Treasuries – the benchmark price of global money – has already jumped 20 basis points to 2.54% since mid-August as it becomes clear that the US economy has survived its winter wobble and is moving into an incipient boom. Growth reached 4.2% in the second quarter, with the ISM manufacturing gauge near 30-year peaks.

Bank of America expects yields to jump to 3.1% this year, and 3.75% by the end of 2015 as the Federal Reserve raises rates in earnest. This implies a torrid rally in the U.S. dollar akin to the Fed tightening cycles of the early Eighties and the mid-Nineties, a stress test for the vast edifice of dollar debt in Asia and the developing world.

#4 devore on 09.15.14 at 6:14 pm

#175 TEMPLE

This is full of good stuff:

http://www.theglobeandmail.com/report-on-business/economy/why-a-lower-loonie-is-mostly-good-for-canada/article16287580/?page=1

It’s full of good stuff about how an overvalued CDN is not good for Canadian economy, and a more fairly valued dollar at .90-.80 will restore the balance that was lost.

This is nothing to do with a “cheap” dollar. The logical conclusion of your argument that a low dollar is good for Canada means a .60 dollar, or .50, or even lower dollar would be even better.

All it’s saying is that a fairly valued dollar, relative to things like productivity, balance of trade, etc, is good, and a dollar that is too expensive OR cheap is bad.

Which is exactly what I am saying.

Everyone in the world pays the same price for commodities. Unless they are subsidized by their government, or the local industry is nationalized (a form of subsidization) and forced to sell into the local market. From there, end consumer prices vary according to local taxes and supply and demand. I don’t think this in in question, right?

When the dollar is fairly priced, the local economy can reach a balance. When it is over- or under-priced, businesses and consumers are always operating under the assumption it will at some point revert. Things are very tenuous and in a state of flux; long term planning is difficult. This is not desirable.

#5 Joe Average, Vancouver on 09.15.14 at 6:19 pm

In other popular news : http://www.cbc.ca/news/business/almost-half-of-china-s-rich-want-to-leave-the-country-barclays-says-1.2766823#commentwrapper

#6 Dean on 09.15.14 at 6:25 pm

Would have preferred to be part of the 1% but I guess 11.5% will do.

#7 Steve French on 09.15.14 at 6:34 pm

We!

Are!

The 11.5 Percent!

#8 Shawn on 09.15.14 at 6:37 pm

Wealth is generated mostly in Cities?

A report on Nova Scotia’s economy concluded that wealth is generated mostly in urban areas. And not just in Nova Scotia. They mentioned that the proportion of the UK’s wealth generated in London is large and has been increasing.

It seems counter intuitive in many ways. But to the chagrin of many the wealth of all relatively free economies flows to the Cities. It seems that the value added in the Cities is huge.

A farmer may be scratching out a living but most of the other people in the chain between farmer and consumer make a better living than the farmer. And this result occurs in free markets. Apparently the value added by the middle men is larger than the that added by the farmer!

Vast numbers of people sit in offices and apparently just push paper and electronic messages around and yet the economy rewards them greatly. Apparently the economy, in its wisdom, finds that these people add huge value and generate wealth. It may be strange but it seems it is true.

I look at a huge City and wonder how it even manages to add enough value to feed itself. In fact it adds enough that City dwellers tend to have much more disposable income than rural folks.

We tend to think of manufacturing and mining and forestry and agriculture and fishing as being key wealth creating activities. Yet, often they can’t create wealth. (Ask Barrick shareholders).

City dwellers pushing paper seem more reliable creators of wealth?

Thoughts on this heresy from the rabble?

#9 Blacksheep on 09.15.14 at 6:37 pm

Mark # 166,

“Have to disagree here. Rising rates imply a weakening currency, not a strengthening currency.”
————————————————————-
Your skipping a few steps. You still haven’t explained how reduced new home sales, will cause rates to raise.
Reduced, new home sales is deflationary for reasons already mentioned.

#10 saskatoon on 09.15.14 at 6:39 pm

garth…

don’t you now have to qualify for a fixed rate…in order to get a lower variable?

#11 Detalumis on 09.15.14 at 6:39 pm

I take exception with the “close the messy factories and replace with condos” comment. Toronto and other cities certainly had a lot of derelict empty buildings well before the condo boom ever started. The factories emptied out by the end of the 80s so thank Reagan and Mulroney. The messy factories were never going to come back to central, transit accessible areas ever again. At least some use has come of them.

#12 LaughingCon on 09.15.14 at 6:47 pm

“As you know, all the misguided wonks and metalheads who poured on here a year ago to say America would never stop its stimulus spending, or ‘QE’, were SOL. The Fed’s chopped its monthly bond-buying program six times so far, and all of this stimulus will be gone by Halloween.”

Yeah, right – MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES:

http://www.treasury.gov/ticdata/Publish/mfh.txt

When FEDs chops the “Belgium” will buy.

Meanwhile from our friend UK:
http://news.xinhuanet.com/english/business/2014-09/13/c_126981640.htm
“statement of British confidence in the potential of the RMB to become “the main global reserves currency”.”

#13 Son of Ponzi on 09.15.14 at 6:48 pm

Not seeing the Gargantuas coming.
———–
From your 64th floor office, they look like ants.

#14 Son of Ponzi on 09.15.14 at 6:51 pm

About not having a 4th floor in buildings.
————-
I understand, the new building code in Vancouver will now require all floors be numbered 8.
8a, 8b etc.

#15 mortgagebrokeron on 09.15.14 at 6:51 pm

Garth have been following your blog for over a year…. its been good advice so far….. I was in a meeting today where Ben Tal from CIBC spoke…. he said the same thing you are saying in regards to interest rates, he said that liquidity is the key
so did the two bond portfolio managers…. they say a rate increase is coming, ….. Also just secured a lease on a nice house 4 bedroom, geothermal heating system, out in the country…. 1300 per month… This house is worth over 500000 easy probably closer to 600000 property taxes 5000 per year. I don’t even have to cut the grass…. I will own someday when prices are closer to actual real values I will vultch when it is time however no hurry!!….. However in the meantime staying liquid is the plan!!!

#16 Kris on 09.15.14 at 6:55 pm

Half of chinese millionaires plan to move to other countries in the next 5 years.
Canada’s number 1 destination…

http://www.cbc.ca/news/business/almost-half-of-china-s-rich-want-to-leave-the-country-barclays-says-1.2766823#commentwrapper

#17 TEMPORARY® Foreign Prime Minister on 09.15.14 at 6:57 pm

#8 Shawn on 09.15.14 at 6:37 pm
Thoughts on this heresy from the rabble?
=========================

Urbanites tend to regard wealth as a source of happiness.

Rural folk tend to regard happiness as a source of wealth.

Not hard to see why.

#18 Millenial-Falcon on 09.15.14 at 6:57 pm

wait for the the sea of liquidity to dry up then the economy lose momentum….everyone will sh;t the bed and the fed will panic and print again….then the party really begins.
all is not what it seems but as long as the music is playing you have to dance..just dont be the last one off the floor!

#19 Son of Ponzi on 09.15.14 at 6:59 pm

The impact on real estate?
———–
A flood of new listings as sellers will try to cash in “Before the Fall”, a horror movie coming to you next spring.

#20 raisemyrent on 09.15.14 at 7:03 pm

another one bites the dust!
talk about jumping in late.
a former co-worker used to live in a condo in Kits. If you thought that was risky enough, well, I’ve got news.
He just bought a TRIPLEX across from trout lake (Vancouver). He rents 2 out and lives in the middle (?). He also says they need “lots of work”, and didn’t go to a party Saturday night because he was working on a deck. I wish I could borrow their crystal ball.

#21 Whineppeger on 09.15.14 at 7:03 pm

CP came out with an article today that I believe will be the route many of today’s older homeowners will take to avoid losing their shirts on selling their homes.

http://www.winnipegfreepress.com/business/finance/new-rules-aim-to-reduce-default-rates-in-reverse-mortgages-amid-signs-program-is-rebounding-275161111.html?cx_navSource=d-top-image

I wonder what role reverse mortgages will play in subsidizing pensions in Canada.

#22 JacqueShellacque on 09.15.14 at 7:09 pm

Is it true that a financial institution can prevent you from transferring your RRSP from them to another institution if the contribution was done through an employer (note that the employer portion is not being transferred or considered for transfer)?

Scenario: RRSP (monthly contributions, matched by employer into DPSP) in one place, I want the RRSP in another. Holding institution says this can’t be done because the contribution is “member required”.

#23 Rainmaker on 09.15.14 at 7:09 pm

Garth, I know your thoughts on the impact of foreign ownership on RE prices… but thought this article was noteworthy…

If a lot of millionaires move here from China over the net 5 years, I would think it will have some impact on RE prices – to what degree I do not know…

http://www.cnbc.com/id/102001188

Some key excerpts….

Chinese millionaires plan to leave in droves: Report

“Nearly half of Chinese millionaires plan to move out of the country in the next five years….

….Their top destinations are Hong Kong, Canada and the U.S.”

#24 Mustafa on 09.15.14 at 7:14 pm

CIA economist says we’re headed for 25 year depression!

“When I use the phrase 25 year depression, it sounds extreme but it’s not. We had a 30 year depression in the United States from about 1870 to 1900…The Great Depression lasted from about 1929 to 1940. The U.S. is in a depression today.”

#25 Smoking Man on 09.15.14 at 7:20 pm

USA overnight rate.0.25
CAD overnight rate 0.75

Japan recently added a small sells tax and just crushed it’s economy again.

Record number of yanks on food stamps, middle class can’t break out. Yellen pumps the rate, she will crush what ever small momentum the recovering us economy is showing. If she does it, it’s more like a move to try and get businesses to really believe the economy getting better so they spend some loot and hopefully create jobs…

It’s a gamble..

As far as our export centric BOC governor, he has. 0.5 lead on USA, until exports or massive job gains. Not a hope in hell for a CAD rate hike….

Was and learn little tadpoles..

#26 Vancouver Frenzy on 09.15.14 at 7:21 pm

Ya but CREA just said today that…

https://ca.finance.yahoo.com/news/canadian-real-estate-association-raises-home-sales-forecast-133051891.html

#27 gladiator on 09.15.14 at 7:25 pm

Garth and fellow dogs, I will share something interesting with y’all.
A relative of mine owns an aquapark in an European country. During June, July and August, the business is great. However, come September, it suddenly stalls – it falls by 85-90% on average. Regardless of nice weather and warm temperature, people just stop coming to have fun – even on weekends and even with price reductions. I was discussing with him about this fenomenon and we agreed tha the so-called “season” is not about warm weather and sunny days – it is about people’s minds or perceptioms, if you will. In September kids go to school and the adults finish their vacation period/season.
The same thing affects the housing market: it will keep rising as long as the populace thinks it will keep going up. The financial factors play a role as well, of course, but the key factor is the public’s perception of this market. It wil, start falling when the majority thinks it has no more room to grow. Looks like that change has started.
Smoking Man is right on this one – it’s about what the people think. Sorry SM naysayers.

#28 TurnerNation on 09.15.14 at 7:28 pm

Worstjet is squeezing the sheeple. Their stock and AC’s jumped 6% today on this hold trick. File this under #Westjetittude.

“The Calgary-based airline — known for the intense brand loyalty it inspires among a portion of Canadian air travellers — shocked many of its devotees Monday when it announced it would begin charging a $25 baggage fee to some economy fare passengers.”

#29 TEMPLE on 09.15.14 at 7:29 pm

#4 devore on 09.15.14 at 6:14 pm

This is nothing to do with a “cheap” dollar. The logical conclusion of your argument that a low dollar is good for Canada means a .60 dollar, or .50, or even lower dollar would be even better.

That isn’t the logical conclusion because I never once said “cheap dollar.” The problem I have with your argument is that you seem unreasonably obsessed with “world prices” as an overwhelmingly negative factor in a correcting CAD.

Which is exactly what I am saying.

No, it isn’t. You are cranking up your worry engine over potential inflation of consumer goods and ignoring or downplaying the positive effects of a correcting CAD on other industries.

Everyone in the world pays the same price for commodities.

We know! You keep saying that, all the while ignoring all the ways we don’t actually pay world prices because of various programs and subsidies here. And, because of that, world pricing doesn’t really matter that much.

Things are very tenuous and in a state of flux; long term planning is difficult. This is not desirable.

I disagree with you here. I think the Dutch disease of the last 10 or so years has been far more distorting than the recent correction of the CAD.

TEMPLE

#30 JG on 09.15.14 at 7:34 pm

Looks like Home Depot has quite a few BDSM clientele. Just sayin’, from today’s pic!

#31 John Brydle on 09.15.14 at 7:36 pm

I get It! Thanks Garth.

#32 Smoking Man on 09.15.14 at 7:36 pm

Political correctness gone made..

Woman’s groups want to hang the NFL commisonair buy the short hairs, want him.

Allegedly he watched the rice video clip awhile ago..

When it came out, boom I watched it, I’m curious bastard, and prolific writer.. Book food….

I offered to show it to some dogs from the tax farm.. They refused.. But I’m sure when they got home they took a peek.

Before my take on it, let be perfectly clear, under no circumstances should a man ever strike a woman. Ever.

Not saying you shouldn’t tosse the TV out the window if she’s laying a beating on you… Brake a vase against the wall that’s fair game. Never hit a woman back..

When saw that video, she slapped him in the face as she walked by him. She hit him again when he walked into the elevator, before he hitter, she was going for him again.

Why has no one in the MSM ever brought up the wife’s aggression… It’s like it never happened.

Let’s go after the NFL commissioner would never lifted a hand…

Ridiculous….

#33 Realties.ca » Party time on 09.15.14 at 7:43 pm

[…] Source: http://www.greaterfool.ca/2014/09/15/party-time/ […]

#34 Cici on 09.15.14 at 7:46 pm

I’m here and definitely part of the 11.5%.

And that photo…oh my goodness…the Home Depot’s put a lot of effort into product layout.

#35 Waterloo Resident on 09.15.14 at 7:48 pm

Well, if US rates rise and ours does not, that will make our dollar fall, perhaps a lot. So if the dollar falls 50% isn’t that the equivalent of having our housing prices fall 50% if you were an American holding U.S. dollars during that time?

If that’s true then we don’t have to look forward to our housing falling in price, we simply look forward to moving ALL of our cash into U.S. dollars and then watching our Canadian dollar fall down to around 45 cents (vs the US dollar).

#36 bigtown on 09.15.14 at 7:55 pm

The Americans are leading the way in NATURAL GAS as a replacement for oil. Canada could be the leader. We already have LG plants in Saint John, New Brunswick. If Harper can come home and spend his time on selling our natural gas we can be the winner. Your Canadian buck will go through the moon. We can be so much better if we would focus on doing what we do best and start shipping the gas to our friends in China and maybe Europe. Being successful is POLITICALLY CORRECT. We need to retrofit the gas stations in the GTA and Canada to sell both oil and natural gas products.

#37 Kris on 09.15.14 at 7:57 pm

You really think you can hide the fact that you’re pro-chinese by deleting post about rich people from china coming here.
You’re a funny guy.
I’m sure history will prove that.

Actually, I’m anti-racist. Bye. — Garth

#38 Debra on 09.15.14 at 8:11 pm

I don’t get the picture. Is it because people would even dare finance $299 of purchases so why should they be buying that in the first place?? It doesn’t make sense.

#39 Ray Skunk on 09.15.14 at 8:12 pm

#21

I’ve been in the same boat. I was able to move my mixed employee/employer RRSP to a different institution for management once I quit. However, it had to be moved as one and couldn’t be bundled in with my personal RRSPs, it had to remain a separate and distinct LIRA.

#40 The Land Of The Living Sky on 09.15.14 at 8:14 pm

Is there anyone on this comment section has a data to the percentage of mortgages that is on VRM?

Please share.

I agree with Garth, there will be an influx of buyers to lock in for a cheaper Mortgage. This type of mentality is one of the reason why it is interesting to be a spectator for the months/years to come.

#41 Oakville Owner on 09.15.14 at 8:14 pm

Hi Garth,

Question for you.

10 yrs left to go on the mortgage.
Current prime minus 80 variable is up Nov 2015.

Should I lock in a five yr fixed sooner then later? If so when would you recommend?

Would love to sell and rent but not going to happen. Love my wife and kids.

Thanks

#42 Sheane Wallace on 09.15.14 at 8:16 pm

Lubricants? Some will need it.

#43 Nemesis on 09.15.14 at 8:17 pm

#PartayTime!…

#TheCurrentReMax™Version:

http://youtu.be/3AohA367VVk

#Vs.DushanbeStyle:

http://youtu.be/lIgBoMWocYc

[NoteToSaltierDogz: We’re not ‘OutOfTheWoods’ just yet… But we’re GettingThere.]

#44 Spaccone on 09.15.14 at 8:28 pm

#21 JacqueShellacque on 09.15.14 at 7:09 pm

Like #38, I transferred a work locked-in RSP plan out of Great West Life (IIRC) to TD Waterhouse but only well after leaving the employer that I opened the plan with.

#45 joblo on 09.15.14 at 8:31 pm

“In Canada, of course, it’s been party time! We used all this cheap money to (a) close useless factories with their smelly jobs and replace them with productive condos, (b) jump the cost of housing to unheard-of levels and, as a result, (c) hopelessly indebt the middle class with mortgages and LOCs that will (d) now reset at substantially higher levels – thanks to Mrs. Yellen.”

Ya but….I heard Harpo today and he says we live in the BEST country in the World & our countries ECONOMY is the ENVY of ALL other countries, so there!

#46 Rural Rick on 09.15.14 at 8:33 pm

#8 Shawn enjoyed your observations. My thought was cities create wealth by buying wholesale and selling retail in small convenient and pretty packages.
Most farmers are wholesalers creating few jobs so while they may be enriched their communities suffer. Farmers pay relatively low taxes and as a group have more political clout locally and federally than almost any other group.

#47 baddog on 09.15.14 at 8:42 pm

Ok Garth I finally took your advice. I opened up a trading account a little while ago and I have slowly started buying stuff. I have a rental that cash flows and instead of letting the money sit dead in a bank account I have so far puchased a couple of ETF’s and some preferred bank shares. I did some research but this stuff seems way over my head. I guess we’ll see how it goes. I definitely would never have had the nads to set this up were it not for your blog so I thank you for that. I sure hope that you continue to mention buying opportunities as you did with the REITs a while back.

#48 Daisy Mae on 09.15.14 at 8:43 pm

From Winnipeg: “House prices here are going up and up and up!! And no one is buying that I can see!”

#49 Daisy Mae on 09.15.14 at 8:46 pm

Because of you, I continue to play it ‘close to the vest’. Thanks, Garth.

#50 Freedom First on 09.15.14 at 9:10 pm

Lubricants, Rope & Chain, Screws, Tie Downs. Everything used to get Canadians into the sub prime mortgages they signed up for. Same as the U.S. and other countries whose citizens who were financially bamboozled. Everyone signed the mortgage of their own free will. That’s what their whole RE industries and accomplices say anyways.

#51 Shawn on 09.15.14 at 9:12 pm

Rural Rick’s post at 45

I could tell right away that Rural Rick at 45 was one of the more intelligent participants in this blog. I could tell this by the way he opened his post:

“#8 Shawn enjoyed your observations.”

He then said:

cities create wealth by buying wholesale and selling retail in small convenient and pretty packages.

I agree with that.

Really the only objective way to measure that someone is creating value in the economy is by looking at their profits. If someone can sell a product for more than their total costs (including overheads, a return on the cost of the assets tied up and their time), they can be considered to be adding value.

We often want to apply judgment such as judging some businesses (say grocery stores) to be more worthy than others (say massage parlors) but in the end it is the market that makes the judgment if it makes a profit it is adding value.

If a business is losing money it is basically a bit of a black hole which sucks in resources and does not produce at least the value of the resources sucked in. Barrick Gold’s mines are a good example.

Then there is the spin-off or multiplier argument. Let’s subsidize a money losing manufacturer because of the benefits to the economy. I don’t buy that argument. Too subjective. If a business can’t make a profit without subsidies it should close.

#52 Mark on 09.15.14 at 9:22 pm

“Correction: Not all countries need to be net exporters, and in fact, it’s impossible.”

Net exporters eventually turn to net importers, and vice versa. No country can perpetually be a net importer, nor a net exporter.

Canada has spent a long time as a net exporter. Eventually the Canadian dollar has to rise so that Canada is a net importer.

Likewise, the USA spent the much of the 20th century as a net exporter. And then flipped to being a net importer. Eventually the USD$ will weaken relative to the current crop of exporters, such that, the USA once again becomes a net exporter, and the current crop of exporters can become net importers.

Currencies of the exporters are always, over the long term, expected to rise against the importers. Short-term speculation, sometimes called ‘carry trades’ can delay the process, but eventually the market takes care of trades entered into that are offside of the real physical fundamentals.

#53 Mister Obvious on 09.15.14 at 9:22 pm

#17 TEMPORARY® Foreign Prime Minister

“Urbanites tend to regard wealth as a source of happiness.
————————–

I’m an urbanite. I tend to regard wealth as a source of choice. For me, freedom of choice is inextricably tied to happiness. If poverty has ever forced you into poor choices you’ll know what I mean.

#54 Mark on 09.15.14 at 9:26 pm

“Well, if US rates rise and ours does not, that will make our dollar fall

No, it will strengthen the Canadian dollar, as US rates rising imply that the US dollar is losing value, and the market is demanding a significant amount of interest as compensation for loss of the USD$’s purchasing power.

Canada’s RE market and Canadian domestic consumption slowing/deflating is profoundly supportive of the Canadian dollar. Canada is entering significant housing and domestic debt deflation. The USA is entering a period of inflation. The mismatch between Canada and the USA is highly supportive of a much higher Canadian dollar. Throw in a speculative mania, perhaps in the Canadian-dominated precious metals sector, and some US dollar dumping, and the CAD$ could buy $1.5 USD or more. An inversion of the circumstances in the 1990s.

#55 kommykim on 09.15.14 at 9:35 pm

RE: #37 Debra on 09.15.14 at 8:11 pm
I don’t get the picture.

JG at #29 gets it:
Looks like Home Depot has quite a few BDSM clientele.

#56 Gerry on 09.15.14 at 9:36 pm

Blame Yellen? Blame Harpo and the neocons, they are the idiots who introduced the home renno tax credit–people who can afford to renno kitchens don’t need a tax break– and the 40 yr amortization. They are the ones who have been selling us out to Chinese property speculators.

#57 takla on 09.15.14 at 9:43 pm

So garths crystal ball says this “great recovery” in the states will carry on unimpeded once the stimulas is completely removered by yellen.I hope he’s right and us Canadians can piggy back the states into renewed prosperity,job growth and a further increase in the bubbleing Canadian realestate industry,,,sarc off.
I don’t think anyone can forsee the future..not even of esteemed host,so I will save my comments for the newyear….and just lets see how the recovering economy weans itself from this record stimulas with a riseing interest rate enviroment

#58 kommykim on 09.15.14 at 9:44 pm

RE: #50 Shawn on 09.15.14 at 9:12 pm
Really the only objective way to measure that someone is creating value in the economy is by looking at their profits.

I disagree with that. That would mean that a retailer that has 10 competitors and sells bananas at $1 dollar a pound is adding LESS value than retailer with a monopoly selling bananas at $20 a pound.

#59 Flawed on 09.15.14 at 9:46 pm

Throw in a speculative mania, perhaps in the Canadian-dominated precious metals sector, and some US dollar dumping, and the CAD$ could buy $1.5 USD or more. An inversion of the circumstances in the 1990s.

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

Not a chance. When everything starts to really come unglued the USD will rise to the occasion. While the USD might be in bad shape……its in better shape than the other 192 currencies. And once the Americans stop using their smarts and ingenuity on war products and WMDs and start making cool shit again like they used to…..you watch how high the USD goes.

#60 Obvious Truth on 09.15.14 at 9:54 pm

No rate hikes in my opinion. There is hardly demand for money down here and growth is slow everywhere. Europe is bigger than the US. They are depressed. System is based on increased lending. Not sure how that works with higher rates. Are people really worried rates will go higher so they borrow now. Not likely. Red herring when change in wording was announced. Feels like They are trying to change the conversation. Let’s see if it works.

Inflation will come though. Bought granola bars yesterday and I think they are half the size.

That inflation could come with slow growth. Not good.

#61 Ben on 09.15.14 at 9:55 pm

Hmmm. Think I might get ready to get out of CAD if they plan to try and hold rates lower here for longer. They will get hammered.

#62 FormerSaskie on 09.15.14 at 10:09 pm

#37 Debra

Who is shopping at HD…? The house hornies.
Who has little/no money…? The house hornies.
Who will finance a small purchase b/c they can carry the monthly? House hornies.
Who will discover that they cannot afford the $60.00 monthly to HD? House hornies.
Who will be paying high interest to HD for some stupid shiny thing after the six months of interest free is up? House hornies.
Who is in bondage? You got it :) hornies.

#63 Trojan House on 09.15.14 at 10:13 pm

#53 Mark – “The USA is entering a period of inflation”

Oh yeah? How do you figure?

#64 High Plains Drifter on 09.15.14 at 10:18 pm

Politics will be considered by the Central Bank or maybe you think they are above such bloviation. Here in Alberta we know how the wheels get greased and there is plenty of good government jobs for those who deliver. We will need a steady hand on the tiller and no fast moves. Now you all take care and happy motoring.

#65 Nemesis on 09.15.14 at 10:25 pm

#BonusParTayShinto…

#”DickFers”…

http://youtu.be/eB8sG4smWbo

#&”TheAceTomatoCompany”:

http://youtu.be/Am08TULFUzU

#66 Casual Observer on 09.15.14 at 10:25 pm

No, it will strengthen the Canadian dollar, as US rates rising imply that the US dollar is losing value, and the market is demanding a significant amount of interest as compensation for loss of the USD$’s purchasing power.

That assumes USD weakness, however, a strong US economy could result in USD strength, if economic growth in the US continues to be much higher than other global economies, and foreigners are continually buying US assets.

As well, in addition to interest rates, the inflation rate of both the US and Canada will play a large role in determining whether CAD goes higher or lower versus USD over the medium to long term.

Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise.

The impact of higher interest rates is mitigated, however, if inflation in the country is much higher than in others, or if additional factors serve to drive the currency down.

The opposite relationship exists for decreasing interest rates – that is, lower interest rates tend to decrease exchange rates.

http://www.investopedia.com/articles/basics/04/050704.asp

#67 Arfmooocat on 09.15.14 at 10:28 pm

My millennial advice is don’t buy houses. They are obsolete in a mobile job market and limit your options.

You can actually have a ton of freedom if you simply jettison the ideals of the baby boomer generation with their debt, mortgages, and focus on mundane material possessions. They locked themselves into their own tombs and than talk like that’s a part of growing up.. sorry it’s not.

#68 Cherie on 09.15.14 at 10:30 pm

I don’t even need to see statistics, I’ve seen enough just in talking to the people in the neighbourhood that something ugly is coming. Stories from the teacher’s strike trenches are beginning to come out. Family gives up their house rental and moves into a basement suite because they are both teachers and can’t afford their rent anymore. Another family, dad got laid off and mom was a teacher on maternity leave, which was probably hunky dory for a while while everyone got together time, and then it’s time for her to go back to work in September and she’s on the strike lines and he’s still laid off. I’ve got friends that have gone from the frying pan into the fire, $30,000 loss on a condo, into a townhouse that is going nowhere. Friends in townhouses that used all their money to reno and can’t get their money back if they sell. The wheels are slowly but surely coming off. I can’t even look anymore. Not sure I realized how bad it was going to be until I started seeing with my own eyes how close people are to the brink. All the nicer big houses on large lots in my area have an RV parked out front. Who’s going to move up into those homes and bail out those Boomers? Mess. It’s a mess.

#69 Shawn on 09.15.14 at 10:34 pm

KoomyKin tallys bananas

Kommykin responsed to me at 57.

I could tell right away there was something wrong with the response because it started off with:

“I disagree with that.”

and went on to say:

That would mean that a retailer that has 10 competitors and sells bananas at $1 dollar a pound is adding LESS value than retailer with a monopoly selling bananas at $20 a pound.

*****************************************
Need a better example, there never has been nor will be a monopoly on bananas. Too many sources of supply. And they can’t ever be sold for outrageous prices because they are not an essential food and people would just eat other things.

Profit is not a perfect measure of who is adding value. But is the best available measure and it is objective.

Basically the wisdom of the market bestows a certain profit on each business and that is a measure of the value added and wealth created by that business.

Obviously this does not work for non-profits, charities, government and unpaid work. But for businesses the profit generated would seem to be the best available measure of value added.

#70 Kenchie on 09.15.14 at 10:36 pm

#2 Happy Renting on 09.15.14 at 6:02 pm
“Yay for being part of the 11.5%!

Not sure which paragraph triggered this thought, but today’s post made me grateful for our rent-controlled apartment. We pay maybe 20% less as a couple than we did as singles for two one-bedrooms, and for a nicer place. Highly underrated, rent control.”

Is your landlord a large institution?

#71 Cherie on 09.15.14 at 10:37 pm

Oh, and strangely, the family that moved to the basement didn’t see it coming. They were fine as long as they were working, but the strike came on so suddenly and unexpectedly, they had no time to save for the time off. That’s why it’s called an E-mer-gen-cy Fund, generally defined as some expensive, unexpected event.

#72 Mark on 09.15.14 at 10:41 pm

” “The USA is entering a period of inflation”

Oh yeah? How do you figure

Minimal domestic investment in manufacturing. Large trade deficits. The spectre of rising interest rates which further damages capacity amongst manufacturing firms that primarily finance with short-term debt (ie: GE). Pent-up demand for consumption. Significant and ongoing liquidation of capacity in retail and other consumption-related sectors. Overseas buying of USD$ is/will eventually turn to selling as well.

It doesn’t have to be a dramatic amount of inflation. The key is that Canada has a substantial amount of CPI deflation ahead of us as housing-related consumption comes to a crawl. While there is no correspondingly similar force in the USA. Also, very few CAD$ reside overseas relatively speaking, so little selling pressure there.

#73 not 1st on 09.15.14 at 10:42 pm

Garth, looks like Regina and Sask is going limp….

http://www.leaderpost.com/Regina+real+estate+market+bucks+national+trend/10206285/story.html

#74 Smoking Man on 09.15.14 at 10:43 pm

Mark I appreciate your contributions here, don’t always agree with you, but a poster of my stature, may easy turned you off, last thing I want to do is turn you off and make you run away..

Dude your posts are robotic, good content but void of emotions.

Tell me about your screwed up brother in law. Your alcohol father., your perfect mother coveting up for dad..

Can you finally be a human…

#75 visorman30 on 09.15.14 at 10:48 pm

#11 I believe that comment is a very specific reference to condo residents on King Street West in Toronto.

The issue was that condo residents had purchased nearby a very well established pig slaughterhouse and during the summer in particular the smell was not pleasant.

So obviously, the residents complained, made the front page of the Star and lobbied to have the slaughterhouse removed. Despite the fact that place had all the proper permitting and had been operating for many decades and employed many people the condo dwellers still felt the slaughterhouse should go.

The exact facts I may not have 100% correct, but this is my best recollection of the reference being made.

#76 loudobbs on 09.15.14 at 10:49 pm

Can’t expect rates to rise much with wage inflation. The little lady running the FED is an expert in Labour and already removed Mr.B’s employment target.

Factor in currency appreciation, and the desire for inflation and you get an extended period of low interest rates.

In addition Europe will not assist in world gdp growth and China slowing down and you virtually have limited interest rate increases until both Private and Public debt reach much lower levels. Essentially you are looking at a generational type event. So at least the next 10 to 20 years of low interest rates and deflationary pressures due to mainly debt and demographics.

#77 Kenchie on 09.15.14 at 10:52 pm

#12 LaughingCon on 09.15.14 at 6:47 pm

“Yeah, right – MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES:

http://www.treasury.gov/ticdata/Publish/mfh.txt

When FEDs chops the “Belgium” will buy.”

Haha, damn Belgium! So funny.

And

“Meanwhile from our friend UK:
http://news.xinhuanet.com/english/business/2014-09/13/c_126981640.htm
“statement of British confidence in the potential of the RMB to become “the main global reserves currency”.”

George (Gideon) Osborne is a sneaky devil. He’s going to stab David Cameron straight in the back on Friday, if there is a “Yes” vote in Scotland.

Anyways, It doesn’t say “main global reserve currency”. While it’s natural that the RMB sits in central banks reserves, since China is such a large trading nation, it’s not going to be the 2nd largest global reserve currency for a long time, unless the Euro falls apart (unlikely due to political will, not economic rationalism). And it is highly unlikely that the USD will be replaced by the RMB in the next half-century. After 2064, there may be a possibility. But by then, China’s population lead on the US won’t be as pronounced, and it will have several hundred million people less than India. One child policy is coming back to stunt their growth.

#78 Kenchie on 09.15.14 at 10:56 pm

#170 Kris on 09.15.14 at 4:40 pm
“#120 Jude on 09.15.14 at 8:30 am

When the US spent trillions to rescue housing, and failed, what makes you think the feds would succeed here? — Garth

GARGANTUAS IMMIGRATION WILL SAVE THIS COUNTRY, THATS WHAT !!!

I had no idea so many gargantuas were making their way here. — Garth”

Garguantas on horses with M-16s… scary ass stuff!

https://www.youtube.com/watch?v=BV2dcumgDvU

#79 Tony on 09.15.14 at 11:00 pm

Someone has been reading too many books of fairy tales. America will end up like Italy and Greece. Interest rates will turn negative in 2015 as America finally admits everything was total lies and the economy never emerged from recession.

#80 Smoking Man on 09.15.14 at 11:01 pm

#76 Kenchie on 09.15.14 at 10:52 pm

That’s not the real laughingcon, he’s a fake.

The real laughingcon.

Realtors must die, your going bankrupt scum Realtors…

#81 Nemesis on 09.15.14 at 11:02 pm

#Meanwhile,BackInBonnyOlde…

http://youtu.be/fm-dQxReMSA

#TheLongJohnVersion:

http://youtu.be/wLE9ytE0iR8

#82 Happy Renting on 09.15.14 at 11:04 pm

#21 JacqueShellacque on 09.15.14 at 7:09 pm

I think I had this when I moved most of my RRSP. Still at same company, employer portion and my contributions that were matched could not be moved, but my optional, non-matched contributions could be transferred.

#83 Happy Renting on 09.15.14 at 11:10 pm

#41 Sheane Wallace on 09.15.14 at 8:16 pm
Lubricants? Some will need it.

This comment = fantastic.

Debra #37 – assuming you are serious, I can tell you the websites you visit are altogether far too wholesome.

#84 Kenchie on 09.15.14 at 11:14 pm

#20 Whineppeger on 09.15.14 at 7:03 pm

“I wonder what role reverse mortgages will play in subsidizing pensions in Canada.”

It’s a topic that comes up often when I’m discussing RE with my family members. My position is that it will be somewhat limited (say 10% of boomers), while my Dad and uncle (boomers) think it will be significantly higher at about 20-25%.

Maybe Nik Nanos should do a poll (over the phone, of course) about boomers’ position on reverse mortgages?

Garth, pull some strings and get it done, please.

PS: As a millennial who thinks there will be inconspicuous political and economic warfare between boomers (trying to hold on) and millennials (trying to grab everything for themselves) over the next decade or two, I don’t feel sorry for any dumbass boomer who takes the reverse mortgage. And, assuming its interest rate is variable, I won’t feel bad for them if/when rates rise. No offence intended to any boomers out there. But caveat emptor whenever you see that old guy on the CHIP commercials on CBC NN. Don’t trust him!

#85 Son of Ponzi on 09.15.14 at 11:14 pm

So you’re saying that Canadian Home”owers” are
“roped, tied down and screwed”.

#86 Son of Ponzi on 09.15.14 at 11:23 pm

Smoking Man,
Mark is an Economist.
Dismal scientist, devoid of emotion, stares at graphs all day.

#87 Kenchie on 09.15.14 at 11:31 pm

#46 baddog on 09.15.14 at 8:42 pm
“Ok Garth I finally took your advice. I opened up a trading account a little while ago and I have slowly started buying stuff. I have a rental that cash flows and instead of letting the money sit dead in a bank account I have so far puchased a couple of ETF’s and some preferred bank shares. I did some research but this stuff seems way over my head. I guess we’ll see how it goes. I definitely would never have had the nads to set this up were it not for your blog so I thank you for that. I sure hope that you continue to mention buying opportunities as you did with the REITs a while back.”

That’s awesome, congratulations for taking a big step. Please change your name to “Gooddog”.

#88 Happy Renting on 09.15.14 at 11:35 pm

#69 Kenchie on 09.15.14 at 10:36 pm

Is your landlord a large institution?

Yep, owned and managed by a big corp. This building (built in 70s) has hundreds of apartments. Unlike a condo or a house owned by a single investor, I don’t really have to worry about being kicked out b/c the owner wants to move in. The landlord even takes credit card payments, no extra fee. Hello, Canadian Tire money!

#89 Kenchie on 09.15.14 at 11:47 pm

#51 Mark on 09.15.14 at 9:22 pm

“Likewise, the USA spent the much of the 20th century as a net exporter. And then flipped to being a net importer. Eventually the USD$ will weaken relative to the current crop of exporters, such that, the USA once again becomes a net exporter, and the current crop of exporters can become net importers.”

And you actually believe that the major net exporters of this world (Japan, China, Germany, S Korea) will somehow start importing US made goods in larger quantities than what’s going outwards? The Asian nations don’t have large enough consumption power to replace the exports and maintain the same economic activity. Germany straight up doesn’t need large amounts of lower quality American made goods, except for very niche things.

And that’s ignoring Africa’s potential as net exporting continent.

#90 Kenchie on 09.15.14 at 11:54 pm

#53 Mark on 09.15.14 at 9:26 pm
“Well, if US rates rise and ours does not, that will make our dollar fall

“No, it will strengthen the Canadian dollar, as US rates rising imply that the US dollar is losing value, and the market is demanding a significant amount of interest as compensation for loss of the USD$’s purchasing power.”
————————————

This only holds over the medium-term, and only if inflation is higher in the US than Canada. What matters is the real interest rate deferential, not nominal rate deferential. Hence, if rates rise in US, but not in Canada, and inflation is the same, funds will flow to the US in the short-term, pushing up the value of USD. An increase in the supply of loanable funds will push down US interest rates to equalize over the medium-term, as per RPPP.

#91 Kenchie on 09.15.14 at 11:59 pm

#59 Obvious Truth on 09.15.14 at 9:54 pm

“Inflation will come though. Bought granola bars yesterday and I think they are half the size.”

Shrinkflation! Google it.

#92 Fed-up on 09.16.14 at 12:07 am

#78 Tony on 09.15.14 at 11:00 pm

Someone has been reading too many books of fairy tales. America will end up like Italy and Greece. Interest rates will turn negative in 2015 as America finally admits everything was total lies and the economy never emerged from recession.
—————————————————————————-

With all due respect you are comparing Italy to Greece economically?

#93 Kris on 09.16.14 at 12:12 am

One thing you’ll never get sir Garth.
Canada has been sold, so any predictions you may make are therefore redundant since you base them on an old and inadequate academic formula.
Economic local fundamentals.???….dude…thats so last century…….bye

#94 Kenchie on 09.16.14 at 12:14 am

#74 visorman30 on 09.15.14 at 10:48 pm
“#11 I believe that comment is a very specific reference to condo residents on King Street West in Toronto.

The issue was that condo residents had purchased nearby a very well established pig slaughterhouse and during the summer in particular the smell was not pleasant….”

Couple extra facts: Management dun bucked up because they had locked-in their sales price of their output (pork products) at a below current market rate with forward contracts, but the culling of pigs across North America caused their input prices (piggies!) to increase. Thus, it was their own foolish attempt at playing hedge fund that brought down the slaughterhouse (and the good paying jobs), not the crazy vegans protesters and local condo-dwellers.

http://www.theglobeandmail.com/report-on-business/owners-move-toward-closing-torontos-last-abattoir/article18408976/

PS: The pig culling has also been blamed on bacon packaging going from 500g to 375g in the past year. (Shrinkflation, again! Basterds!)

#95 Christopher Lackey on 09.16.14 at 12:14 am

How many people have you heard bragging “I paid x for my house, now its worth y.” In fact it is only worth what someone is willing to pay for it today, and that could easily change tomorrow.

The relationship between risk and reward is greatly misunderstood in this country, as I suspect it is everywhere.

#96 Kenchie on 09.16.14 at 12:17 am

#78 Tony on 09.15.14 at 11:00 pm

“Someone has been reading too many books of fairy tales. America will end up like Italy and Greece. Interest rates will turn negative in 2015 as America finally admits everything was total lies and the economy never emerged from recession.”

Is that someone you?

PS: That sounds like an insult to the Greeks and Italians!

#97 a prairie dog on 09.16.14 at 1:16 am

Never would have thought that the most powerful woman on the planet was Janet Yellen.

You’d think it would be the mistress of the most powerful man on the planet, when she’s yellin’.

#98 Freedom on 09.16.14 at 1:31 am

Freedom from debt and real estate exposure is such a great thing! Cash will soon be king

#99 Mark on 09.16.14 at 2:42 am

“Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise.”

Nice ‘theory’, but in practice, it doesn’t work this way. The ability to run a low interest rate policy without inflation is prima facie proof of a strengthening currency. If low interest rates can no longer support an economy devoid of inflation, it logically follows that the currency is becoming weaker.

As I mentioned earlier, I challenge you to look at a list of high interest rate economies and see currency strengthening. For the most part, you can’t. Canada’s double digit rates much of the 1990s didn’t save Canada from going down to 63 cents. High rates in the US didn’t save the US dollar in the 1970s. India, Zimbawbwe, almost every country in Latin America at some point or another have seen high policy rates, yet constant currency weakening.

High rates offer the potential of removing malinvestment from an economy where it exists. But the real appreciation in currency occurs when domestic inflation or deflation is under control. And with a major source of domestic demand evaporating with declines in the housing market, Canadian inflation is going to be dead for years, leading to currency strength. Similar thing has been seen in Japan, where the high propensity to save in the wake of the collapse of the 1980s bubble has driven deflation and a strengthening Yen for much of the past 20 years, even with transitory periods of significant USD$ strength. Yes, in a zero-interest-rate environment, no less! The so-called ‘carry traders’ betting against the Yen have lost their shirts trying to use interest rate differential theory to justify shorting the Yen.

#100 juno on 09.16.14 at 4:25 am

Don’t count your chickens before they hatch.

Wednesday could be the TSN turning point. Probability of a rate hike is high. If the rates are raised, then the US dollar will continue its rise.

Canada will not raise, because they are in a catch 22 sitituation. Either blow the real estate market or let the coming inflation wipe out the poor.

The US has taken its fall, so raising rates, won’t concern them will popping a bubble. However, since 2008 we just inflated our bubble probably twice the size of the US, so when we fall, we probably will fall twice as fast as the US continues to grow.

The currency trader already know about it, and are starting to bail. Lets take a seat and watch the show in the coming two years

#101 };-) aka Devil's Advocate on 09.16.14 at 7:50 am

#97 Freedom on 09.16.14 at 1:31 am
Freedom from debt and real estate exposure is such a great thing! Cash will soon be king

Correct me if I’m wrong but wasn’t that the mantra on this blog circa 2008? Did it happen then? Hell no. Will it happen this time? Best way to predict the future is track the past.

#92 Kris on 09.16.14 at 12:12 am
One thing you’ll never get sir Garth.
Canada has been sold, so any predictions you may make are therefore redundant since you base them on an old and inadequate academic formula.
Economic local fundamentals.???….dude…thats so last century…….bye

Kris does have a point. It is a new economy. Monetary and fiscal policy on steroids. And who controls it all? Certainly not our governments nor the people. Thomas Jefferson saw the writing on the wall 200 years ago.

#66 Arfmooocat on 09.15.14 at 10:28 pm
My millennial advice is don’t buy houses. They are obsolete in a mobile job market and limit your options.
You can actually have a ton of freedom if you simply jettison the ideals of the baby boomer generation with their debt, mortgages, and focus on mundane material possessions. They locked themselves into their own tombs and than talk like that’s a part of growing up.. sorry it’s not.

Arfmooocat might have a valid point as well. It is, after all, a very different economy than that of hunter/gatherer which submitted to the efficiencies of agrarian which then fell to the yet further efficiencies of industrialism and then that to information technology… We are becoming more and more removed from the land. I wonder if that is such a good thing. Imperfect individual potato or identical processed Pringle potatoe chips?

#56 takla on 09.15.14 at 9:43 pm
So garths crystal ball says this “great recovery” in the states will carry on unimpeded once the stimulas is completely removered by yellen.I hope he’s right and us Canadians can piggy back the states into renewed prosperity,job growth and a further increase in the bubbleing Canadian realestate industry,,,sarc off.
I don’t think anyone can forsee the future..not even of esteemed host,so I will save my comments for the newyear….and just lets see how the recovering economy weans itself from this record stimulas with a riseing interest rate environment

FINALLY, someone who understands. “Ours is not to see what lies dimly at a distance but to deal with what lies clearly at hand” – Thomas Carlyle

Don’t miss the sun today worrying about the forecast of rain for tomorrow. How often has the weatherman been wrong? And he’s got a lot more scientific rationale for his predictions than any armchair economist.

SHIFT happens… learn to ride the tide.

#102 Londoner on 09.16.14 at 7:54 am

“In Canada, of course, it’s been party time! We used all this cheap money to (a) close useless factories with their smelly jobs and replace them with productive condos, (b) jump the cost of housing to unheard-of levels and, as a result, (c) hopelessly indebt the middle class with mortgages and LOCs that will (d) now reset at substantially higher levels – thanks to Mrs. Yellen.”

It’s taken Canada years to get to this point. With Canadian employment and GDP growth subdued, why do you think we’ll see sufficient wage inflation and economic productivity so as to allow the BoC to raise rates at the end of 2015? Poloz himself has said that his focus is more pro-growth then anti-inflation. Let’s put mortgage rates aside for a minute and just talk about monetary policy. How do think Canada will go from a low rate environment to a rising rate environment in just over a year? You keep avoiding the question. Just give us your opinion.

Where did I say the BoC would tighten with the Fed? — Garth

#103 LaughingCon on 09.16.14 at 8:24 am

RE: #28 TEMPLE

“ignoring or downplaying the positive effects of a correcting CAD on other industries.”
=====================================
Utter BS – that positive effect will be only for a few people (the very senior level execs in a few companies in a few industries), the rest of the population will be poorer.
And if a positive effect of devaluing one currency is good I wonder why you do not move to Zimbabwe to become one of their billionaires/trillionaires.

Stick a fork in “manufacturing in Canada”.

When you have the industrial powerhouse Germany having a population of 80.5M+ and served by 4.6M+ public servants and we have 3.6M+ public servants “mastering” a population of 35M+ we already have a big problem.
And this is further compounded by the fact that our public servants are ones of the best paid in the world – when you have a big chunk of the population paid $100k+ (or DB pensions of 60k+) the market for product and services will adjust to what this chunk of the population can bear and not a single sane person will set a new manufacturing shop and afford to pay his employees the wages and pensions afforded by the government.
So this is the Canadian economy – min 50% parasitic (governments of all shapes and forms and FIRE), peoples serving them and building them houses/condos, car services, cell phone repair, food services and the occasional digging of something off the ground and selling it worldwide.

FYI – in Ontario alone the insurance industry “contributes” more to the Ontario GDP than the manufacturing and agriculture together!

#104 Kenchie on 09.16.14 at 8:48 am

“Canada not as popular for foreign real estate investment as other markets”

http://business.financialpost.com/2014/09/15/foreign-exchange-head-has-eyes-on-overseas-real-estate-buyers/

#105 zeeman1 on 09.16.14 at 9:01 am

Garth, most US jobs lost during the downturn have been replaced with part time jobs. This is a fact. Average consumer spending power, and the ability to take on more debt is gonna be flat for years.

Us mortgage applications have crashed in recent months, so you’re right in pointing out that an entire generation has been scared away from the ponzu scheme.

The P/T meme is a myth. As for mort apps, most have been for refis, and with rising rates of course they would decline. Get better data. — Garth

#106 ozy: another SURGE??? on 09.16.14 at 9:06 am

“expect a surge in buying as fools rush to lock into low rates and high prices”

WHAT – another surge??? OK. promise to sell when my average SFH reaches 1.25 mil…

25% more to go – all in one surge next year I hope :)

The surge would last weeks, not months or a year. As usual. — Garth

#107 Kenchie on 09.16.14 at 9:07 am

I smell confidence in the (polluted) air!

http://www.bloomberg.com/news/2014-09-16/china-fdi-slides-to-four-year-low.html

#108 TS on 09.16.14 at 9:28 am

Can somebody explain to me what would happen in Canada if you owed $100,000 more on your property but were still making payments?

Would a bank let you keep making payments until your term was over and then ask for the difference between loan value and home value in cash?

Is there a situation where a bank would ever allow you to hold a mortgage for a higher value than the property is worth?

Mortgages are not demand loans, but term obligations. Do not expect a bank action against you if a property value falls below the mortgaged amount until the end of the term (unlike a secured LOC). However at that time the loan may be refused or modified. — Garth

#109 };-) aka Devil's Advocate on 09.16.14 at 9:33 am

The surge would last weeks, not months or a year. As usual. — Garth

Probably more like a frog in a pot of water rising to boiling temperature.

Think about it. At best a sale takes 35 to 55 days before it’s recorded as such as the buyer completes their due dilligence. And then there is time before completion. You’ve said yourself that real estate is relatively illiquid.

A shift takes time. Granted it does build momentum in either direction that eventually it moves with such speed that it catches many by surprise. But if you watch closely you can see it in it’s infancy – you can almost feel it. You will have fair warning provided you don’t get caught up in the emotion beforehand as so many will.

In my experience a Shift takes at least six months to materialize. The question is; Will it happen? Of course it will but; Will the market go up or down? And to that too the answer is; But of course the market will go up or down.

#110 Londoner on 09.16.14 at 9:54 am

“Where did I say the BoC would tighten with the Fed? — Garth”

You didn’t say it in this post but you’ve mentioned it in previous ones. Anyways, the question which still remains is – how do you see a shift to a less accomodative monetary policy without sustained wage growth and economic productivity?

The key danger is a growing credit bubble and the bank will move as soon as possible to contain it. Wait and watch. — Garth

#111 45north on 09.16.14 at 9:54 am

Cherie : I’ve got friends that have gone from the frying pan into the fire, $30,000 loss on a condo, into a townhouse that is going nowhere. Friends in townhouses that used all their money to reno and can’t get their money back if they sell. The wheels are slowly but surely coming off.

that got my attention, my in-laws (multiple families) have sold their properties in the GTA, they seem to have a shrewd sense of the market. One more property to go. The wheels in the GTA need to stay on for one more week.

juno : Probability of a rate hike is high. If the rates are raised, then the US dollar will continue its rise.

Canada will not raise, because they are in a catch 22 sitituation. Either blow the real estate market or let inflation wipe out the poor.

yeah, I see the choice – if you raise interest rates then housing prices drop – like by 50%. If you don’t raise interest rates then the Canadian dollar drops and the cost of almost everything goes up. I’m guessing the choice will be to raise interest rates. I cannot see any political party making the case that costs need to go up to protect the real estate market. Not Stephen Harper, not Justin Trudeau, not Thomas Mulcair.

#112 Rational Optimist on 09.16.14 at 9:57 am

Yesterday #162, Setting the Record Straight said:

“If the government uses policy to lower the exchange rate, thus produces a decline in our standard of living and is a subsidy to some export industries and those who work in them at the expense of the rest of the population.”

What policy? I think it could be said that the Canadian government has little ability to influence the exchange rate. The best they can do is to make comments alluding to timing of interest rate hikes.

We are talking about the Canadian dollar decreasing to a level justifiable by our rates of productivity.

#113 Tim on 09.16.14 at 10:03 am

Garth (or anyone who cares to answer),

What effect do you think this would have on fixed income investments?

Capital values decline as rates rise. But demand can mitigate that and interest/dividend payments are unaffected. — Garth

#114 rosie "moving forward" in the knowledge that, "this won't end well" on 09.16.14 at 10:39 am

” I think I”ll make money here.” How soon we forget.

http://in.reuters.com/article/2014/09/10/canada-economy-housing-insight-pix-graph-idINL2N0Q516V20140910

#115 DM in C on 09.16.14 at 10:47 am

Shrinkflation! Google it.

It’s true, and it’s rampant — pay attention and check the sizes of the packaging, as well as any time you notice ‘new’ packaging. Instead of 8 granola bars, you have 6 in a box, for the same price. The 24 of Coke is now a 20 pack at the same price. Those 2 for 1 deals are higher priced than the original packaging used to be.

#116 Italians love real estate on 09.16.14 at 10:49 am

Sales site at Kennedy rd and 16th markham, starlanehomes, Italian builders . Real estate office in charge of new home sales there also Italian owners ,had to send security last Saturday to get people to leave, who had lined up for the opening this coming Saturday. Arguments ensued.

Real estate declining in the GTA . Ya right .. Lol

#117 Daisy Mae on 09.16.14 at 10:51 am

#44 Joblo: “Ya but….I heard Harpo today and he says we live in the BEST country in the World & our countries ECONOMY is the ENVY of ALL other countries, so there!”

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

Yeah…so there! After all, it’s different here.

#118 Smoking Man on 09.16.14 at 11:02 am

Wanted carton illustration for book cover.
A good cartoonist or illustrator for this decades greatest fiction book ever written.

I would rather pay a blog dog than a stranger.
Especially up and coming young artist.

Image 1) four personal space craft with visible characters flying them.
Racing past Flamingo in Las Vegas. 10 feet off the ground.

Character 1) Bald handsome bastard, shades. 45ish Smoking

Character 2) Grey wavey hair, mustache thick rim glasses. 60ish hell use Garths pic as a template

Character 3) Jesus look alike 40 ish

Character 4) A young top gun Tom Cruise look alike shades.. 25ish

Image 2)
Focus on Beautiful woman, in Flamingo pool two fisting a
couple of beers, slightly cross eyed. Top heavy with tiny
tiny strings on bakini top. Other make drunks oggoling.
In the back ground a 300 lbs fat man, hovering 10 feet
above the pool doing an airborne version of the chicken dance. with a crowed gathered directly below cheering him on.

On the pool deck CIA guys in suites and shades. Looking at the fat man.

#119 Daisy Mae on 09.16.14 at 11:16 am

#85 Son of Ponzi: “Smoking Man, Mark is an Economist.
Dismal scientist, devoid of emotion, stares at graphs all day.”

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

Mark doesn’t have to get personal. Garth rarely does. We’re here to appreciate the advice and insight.

#120 Casual Observer on 09.16.14 at 11:58 am

I challenge you to look at a list of high interest rate economies and see currency strengthening.

Interest rates are only one piece of the puzzle. Looking at rates without also looking at monetary policy (QE, etc.), GDP growth and inflation only gives you part of the picture.

Also, if a country’s assets are in demand globally, then that too will put upward pressure on their currency.

The so-called ‘carry traders’ betting against the Yen have lost their shirts trying to use interest rate differential theory to justify shorting the Yen.

I agree. Just looking at nominal interest rates would give you the wrong message. You need to look at real interest rates. With deflation, even a nominal rate of 0% is still a positive real interest rate.

Even so, there are other things that factor into whether a currency will weaken/strengthen. With Japan, monetary policy was a big one.

Notice what the Yen has been doing since they announced “Abenomics”? I wish I had been short Yen over the last couple of years. Would have been a very profitable trade.

#121 Shawn on 09.16.14 at 11:59 am

Rumors of the death of manufacturing in Canada are greatly exaggerated.

In fact the sector is smoking hot.

http://www.statcan.gc.ca/daily-quotidien/140916/dq140916a-eng.htm?cmp=mstatcan

That is sales, not production, output or employment. It is what one would expect and hope for with the recent currency devaluation. — Garth

#122 Helen on 09.16.14 at 12:11 pm

re: #78 Tony on 09.15.14 at 11:00 pm

“America will end up like Italy and Greece”.

You don’t know Americans. The US economy will continue to recover because Americans are industrious. Young adults will take a boring job and a roommate before lounging their 20’s away with Mom and Dad. When American’s retire they pick up an “encore career” because they want to be productive. Italians and Greeks may “know how to live” but Americans know how to work and create.

#123 Helen on 09.16.14 at 12:17 pm

#117 Smoking Man

“Wanted carton illustration for book cover”

Do you really need an illustrator or are you painting a fun mental image? If you’re really looking, and can’t find a fellow blogger, I recommend posting your request on Fanbuilt.com It’s a Canadian founded website for creative people to find each other and collaborate. Go forth and be industrious.

#124 };-) aka Devil's Advocate on 09.16.14 at 12:40 pm

@ #119

That is sales (up), not production, output or employment. It is what one would expect and hope for with the recent currency devaluation. — Garth

It ALL starts with sales.

#125 Mark on 09.16.14 at 12:42 pm

“Even so, there are other things that factor into whether a currency will weaken/strengthen. With Japan, monetary policy was a big one.”

I’d argue that monetary policy in Japan has largely been useless in combatting the debt deflation, the corresponding increase in the savings rate, and the rising Japanese Yen. If “monetary policy” was effective, the BoJ would have achieved its policy objective of decreasing the value of the Yen. The charts show this mostly to be a complete failure since the popping of the RE and stock bubbles in Japan.

I don’t believe its going to play out in Canada like it did in Japan though. There is no stock bubble in Canada, and if anything, Canadian stocks are abnormally inexpensive. But its a good lesson how central banks can be relatively powerless to depreciate their own currencies as deflationary pressure sets in, especially from “the consumer” pulling back. Inefficient Canadian exporters that do not take advantage of the low cost of capital to modernize, will very likely die over the next decade. The manufacturing of low-value, low-tech trinkets is probably never going to return to Canada, as wishful as the thinking may be.

#126 Shawn on 09.16.14 at 12:45 pm

Rumors of the death of manufacturing in Canada are greatly exaggerated.

In fact the sector is smoking hot.

http://www.statcan.gc.ca/daily-quotidien/140916/dq140916a-eng.htm?cmp=mstatcan

That is sales, not production, output or employment. It is what one would expect and hope for with the recent currency devaluation. — Garth

*******************************************
I would agree it is not necessarily employment growth. No mention of that in the release.

The release did say it was driven by volume not price.

“Constant dollar sales rose 2.8% in July, indicating the gain was mainly due to a rise in volumes rather than prices.”

Sale prices do not change because the currency devalues. The product simply becomes cheaper to the foreigner buyer. — Garth

#127 Smoking Man on 09.16.14 at 12:53 pm

Hey Helen thanks,

I’ll give it a couple days here, after all, the books going to make this pathetic blog a hell of a lot more world famous than it is.

I’m feeling really good about it now after all the changes. , tested it out on a few power readers, my son’s wife is a literary agent, she loves, it begging me to let her present it. But want to keep independent, and original and void of restrictions and boundaries, it’s art.

I’ve book marked your link. Thanks again.

#128 Setting the Record Straight on 09.16.14 at 12:57 pm

@”#2 Happy Renting on 09.15.14 at 6:02 pm
Yay for being part of the 11.5%!

Not sure which paragraph triggered this thought, but today’s post made me grateful for our rent-controlled apartment. We pay maybe 20% less as a couple than we did as singles for two one-bedrooms, and for a nicer place. Highly underrated, rent control.”

You think that the government should steal from others for those who benefit from rent control?

No doubt you think CMHC is a great idea.

#129 LaughingCon on 09.16.14 at 12:59 pm

Re #120 Shawn
“Rumors of the death of manufacturing in Canada are greatly exaggerated.
In fact the sector is smoking hot”
====================================
Utter BS

Employed people – “manufacturing” Stats Canada Cansim table 282-0011 (unadjusted for seasonality):

Aug.2007 -2,089,800 (976,200 in ON)-0.9462 [1.0569]
Aug.2008 -2,032,100 (923,000 in ON)-0.9753 [1.0253]
Aug.2009 -1,793,500 (792,200 in ON)-0.9268 [1.0790]
Aug.2010 -1,786,800 (800,800 in ON)-0.9718 [1.0290]
Aug.2011 -1,826,400 (826,200 in ON)-1.0438 [0.9580]
Aug.2012 -1,850,000 (820,900 in ON)-0.9983 [1.0017]
Aug.2013 -1,804,400 (802,700 in ON)-0.9673 [1.0338]
Aug.2014 -1,777,000 (761,100 in ON)-0.9158 [1.0919]

Employed people in the manufacturing in Canada (in Ontario) and the BoC exchange rate on Aug.1 (or the day before/after if public holiday)

#130 Cici on 09.16.14 at 1:10 pm

Double oops: The BoC is no longer forcasting a “soft landing”: http://www.mortgagebrokernews.ca/news/canadas-market-not-as-healthy-as-believed-to-be-182049.aspx

#131 Casual Observer on 09.16.14 at 1:15 pm

If “monetary policy” was effective, the BoJ would have achieved its policy objective of decreasing the value of the Yen. The charts show this mostly to be a complete failure since the popping of the RE and stock bubbles in Japan.

I was speaking specifically about the period since “Abenomics” was announced at the end of 2012.

Since then, the Yen has weakened by 35% versus the USD.

You’ve made some thoughtful points though, and I thank you for sharing them.

If there’s one thing that I’m sure of, it’s that I do not know everything, which is why I always appreciate the chance to learn something new by exchanging thoughts with someone who has an opposing view. Cheers.

#132 Shawn on 09.16.14 at 1:16 pm

Rumors of the death of manufacturing in Canada are greatly exaggerated.

In fact the sector is smoking hot.

http://www.statcan.gc.ca/daily-quotidien/140916/dq140916a-eng.htm?cmp=mstatcan

That is sales, not production, output or employment. It is what one would expect and hope for with the recent currency devaluation. — Garth

*******************************************
I would agree it is not necessarily employment growth. No mention of that in the release.

The release did say it was driven by volume not price.

“Constant dollar sales rose 2.8% in July, indicating the gain was mainly due to a rise in volumes rather than prices.”

Sale prices do not change because the currency devalues. The product simply becomes cheaper to the foreigner buyer. — Garth

*******************************************
Yes, and production and output has gone up. Which ought to lead to more employment too, all else equal.

Sorry to parade on your rain.

#133 bobby on 09.16.14 at 1:31 pm

#98 Mark

Thank you Mark! The Double digit rates didn’t save currency from going down. I witness this in Eastern Europe in early 90’s.

#134 Blacksheep on 09.16.14 at 2:03 pm

Here are some numbers.

The Cad. housing sector employs / indirectly 25 % of the population. Home ownership now represents about 70 % population. When’s the next election, Oct/2015?

Nothing significantly changes with out a 2% rise in unemployment or a 2% increase in all lending rates.
It’s not 2009 and the US has 4% growth.

Smoking man recently reminded me, the game is rigged.

I’ve realized you don’t need to find out who’s steering the ship, you just need to get on board, as to which way the ships heading and enjoy the ride.

Life is truly too short to obsess about this shit.

#135 Mark on 09.16.14 at 2:07 pm

“Mortgages are not demand loans, but term obligations. Do not expect a bank action against you if a property value falls below the mortgaged amount until the end of the term (unlike a secured LOC). However at that time the loan may be refused or modified. — Garth”

Very true Garth. The practical result of negative or poor equity is that the loan will be subject to a higher risk premium incorporated into its interest rate. The “posted rate”, or worse, may very well be the only sort of loan available, as a new lender will understandably be very reluctant (or even prohibited) from taking on a new loan with poor or negative equity.

I think borrowers have become very used to being able to simply go to a mortgage broker and have them ‘shop’ for a better rate over the past decade. And with rising equity, of course, there’s been lots of lenders willing to extend credit. But as equity recedes, this game is up. A solid long-term relationship with a good quality brick and mortar bank may actually have value in the future, in being able to obtain a renewal based on one’s reputation, rather than simply numbers and ratios which are likely to be increasingly stretched.

Who knows, maybe dressing up the kids in suits, and respecting one’s bankers will come back into style. As opposed to the current scheme where the bankers trip over each other to give loans to anyone, trailer trash or not.

#136 Casual Observer on 09.16.14 at 2:28 pm

Do not expect a bank action against you if a property value falls below the mortgaged amount until the end of the term (unlike a secured LOC). However at that time the loan may be refused or modified.

I was in this situation in the 1990’s and was worried about this, but ultimately had no problem renewing the mortgage.

I even paid to break the 5 year term one time because I could renew it at a much lower interest rate .

I was able to switch lenders with no problems. The bank I was transferring the mortgage to wasn’t even concerned about what the appraisal came back at (it was lower than the mortgage owing).

The reason was that the mortgage was insured by CMHC, so the bank didn’t care what the value of the property was. They only cared that I made the payments.

If the mortgage was uninsured then I could see the banks being more stringent.

I have heard that TD Bank is going to start requiring borrowers to put up cash upon renewal if their uninsured mortgage dropped below 20% equity.

This was not the case if the mortgage was insured.

#137 Abin Batince on 09.16.14 at 2:29 pm

Mr. Turner,

I just read that insurers are increasing their rates by up to 40% for condos, especially if the building has 100+ units, mainly because of water damage due to poor construction quality and/or maintenance. Some companies even refuse to insure for water damage and raised premiums as much as 250 000$.

Too many claims I guess. I suppose new buyers might be scared off because of that, and current owners might get a raise in condo fees in the near future.

#138 gut check on 09.16.14 at 2:37 pm

they’re going to have to live somewhere:

https://ca.finance.yahoo.com/news/company-ceo-coo-disappeared-most-175013000.html

#139 Blacksheep on 09.16.14 at 2:39 pm

Mark,

“Who knows, maybe dressing up the kids in suits, and respecting one’s bankers will come back into style. As opposed to the current scheme where the bankers trip over each other to give loans to anyone, trailer trash or not.”
————————————————
Very telling comment.

#140 Nemesis on 09.16.14 at 2:39 pm

#aPurelyCoincidentalJuxtaposition… #OfAmusingReportage… #Opinion&… #ScholarlyDiscourse*

[CBC] – Rat problem grows at East Vancouver community garden

“As the sun went down, all the rats started pouring out of the boxes,” he said. “All over they started coming out… It was a little freaky, I’ve got to admit.”

http://www.cbc.ca/news/canada/british-columbia/rat-problem-grows-at-east-vancouver-community-garden-1.2767232

[Salon] – Ayn Rand’s capitalist paradise lost: The inside story of a libertarian scam

“Yes, you read that right,” the organizer chirps cheerily. “Those who become one of GGC’s Founders will be paid back … within three years of the consummation of their Founders Club participation (please contact GGC for the fine print and T&Cs).”… In what should be an unsurprising outcome, it didn’t turn out very well. That news comes (via Metafilter and Gawker) from a Canadian blogger named Wendy McElroy, who writes that she bought some property in Galt’s Gulch with her husband and then learned that it never had legal rights to the property in the first place.”…

http://www.salon.com/2014/09/16/ayn_rands_capitalist_paradise_lost_the_inside_story_of_a_libertarian_scam_partner/

[FT] – China takes anti-corruption drive overseas

…”In an operation labelled “Fox Hunt 2014”, the party’s Central Commission for Discipline Inspection, a shadowy organisation with a controversial human rights record, has set up a dedicated office to investigate allegedly corrupt officials who have absconded or sent relatives and assets abroad.

Beijing-based British, US, Canadian and Australian diplomats say they are all under increasing pressure to assist with the Fox Hunt campaign. Hundreds of officials and their associates have taken flight from China amid President Xi Jinping’s ever widening anti-corruption campaign. “…

http://www.ft.com/intl/cms/s/0/6ec199d0-3cc5-11e4-871d-00144feabdc0.html?siteedition=intl

*[DissidentVoice] – The Rise of Philanthro-capitalism: What passes for progressive [Vancouver] city politics today

…”Over three election seasons, Vision took in $1.1 million from its top 10 corporate donors, most of whom were real estate corporations and luxury goods marketers. Half of the B.C. Liberals’ top 10 2012 campaign donors were also top donors to Vision, including key real estate giants like Wall Financial, Redekop Construction, and real estate marketer Bob Rennie, who plays media huckster and fundraiser for both Vision and the B.C. Liberals. These corporate donors are not pro-labour. Under the name Five Boys Investment, Lululemon yoga capitalist Dennis “Chip” Wilson contributed $50,000 to the B.C. Liberals in 2012 and $50,000 to Vision in 2011. According to Forbes, Wilson is the 16th richest person in Canada with a net worth of US$1.8 billion. He is also a public Ayn Randian who produced a tote bag with the slogan “Who is John Galt?” referencing Rand’s super-capitalist literary manifesto Atlas Shrugged. David Aisenstat, a restaurateur and CEO of the Keg steakhouse chain, gave $100,000 to Vision in the 2011 election before red-baiting the NDP in the 2012 provincial election.

The single biggest donor to Vision Vancouver, however, is not a McCarthyist captain of industry. It is an ideologically driven group of wealthy social reformers: our philanthrocapitalists. No single person within the philanthrocapitalist group donated as much as the corporations, but they are a narrow ideological group, closely rallied around a common project, whose collective contributions are immense. A group of at least 49 individual donor groups affiliated with philanthrocapitalism donated more than $400,000 to Vision in just the 2008 and 2011 elections.”…

http://dissidentvoice.org/2014/09/the-rise-of-philanthro-capitalism/

#141 Mark on 09.16.14 at 2:44 pm

“I was speaking specifically about the period since “Abenomics” was announced at the end of 2012.

Since then, the Yen has weakened by 35% versus the USD.

Ummm, wouldn’t you blame a severe increase in energy imports, and a significant domestic burden of rebuilding after the earthquake for much of this? Rather than “Abenomics”?

USD$ has definitely benefitted as a ‘safe haven’ with all the Euro problems, but such can’t continue indefinitely.

#142 Kenchie on 09.16.14 at 2:52 pm

#128 Cici on 09.16.14 at 1:10 pm
“Double oops: The BoC is no longer forcasting a “soft landing”: http://www.mortgagebrokernews.ca/news/canadas-market-not-as-healthy-as-believed-to-be-182049.aspx

This made me think. I get emails from my former mortgage broker on a weekly basis (wasn’t always like this). All it says is the posted rates and “our rates”. He used to work for $RY as a mortgage specialist. And he did very well. But now he is a part of the “Mortgage Alliance”. The frequency of the emails feels like he’s drifting up shiza’s creek sans a paddle…

#143 Shawn on 09.16.14 at 2:56 pm

Manufacturing in Canada is on the Rise

Laughing Con at 127. Thank you for excellent statistics showing manufacturing employment has been down slightly even as (as Stats Canada said) sales dollars and volumes are up.

So not only volume is up but productivity is up!

I would look for employment in the sector to stabilize or rise over the next year.

#144 Shawn on 09.16.14 at 2:57 pm

Okay, okay, it was down more than slightly. But still the sector is hot, sales and volume wise.

Surely we all own some stocks that will benefit?

#145 Holy Crap Wheres The Tylenol on 09.16.14 at 3:23 pm

132 Blacksheep on 09.16.14 at 2:03 pm
Here are some numbers.
The Cad. housing sector employs / indirectly 25 % of the population. Home ownership now represents about 70 % population. When’s the next election, Oct/2015?
Nothing significantly changes with out a 2% rise in unemployment or a 2% increase in all lending rates.
It’s not 2009 and the US has 4% growth.
Smoking man recently reminded me, the game is rigged.
I’ve realized you don’t need to find out who’s steering the ship, you just need to get on board, as to which way the ships heading and enjoy the ride.
Life is truly too short to obsess about this shit.
_____________________________________________

While Smoking Man reminded you the game is rigged don’t ever get on a boat with him! Alcohol and boating whoo what a mix!

#146 Holy Crap Wheres The Tylenol on 09.16.14 at 3:26 pm

#136 gut check on 09.16.14 at 2:37 pm
they’re going to have to live somewhere:

https://ca.finance.yahoo.com/news/company-ceo-coo-disappeared-most-175013000.html
__________________________________________
The old Shanghai switcheroo.

They will probably end in in Canada!

#147 Casual Observer on 09.16.14 at 3:31 pm

Ummm, wouldn’t you blame a severe increase in energy imports, and a significant domestic burden of rebuilding after the earthquake for much of this? Rather than “Abenomics”?

Sure, let’s throw that into the mix too.

You’re making my point for me. The point being that there are many more factors accounting for exchange rate fluctuations than just interest rates.

#148 The American on 09.16.14 at 3:51 pm

I’m afraid that Tony here has a twisted obsession with America, being that half the posts created by Tony are U.S.-focused and based in zero facts or sources to back up Tony’s America-obsessed rants. In fact, I just looked up “Tony” in the Urban Dictionary, and here is what it says: “An American-hating and obsessed Canadian who cannot back up ridiculous claims against the U.S. Often arrested by the Canadian Mounted Police for being found hiding in the bushes at night, furiously masturbating to photos of the U.S….”

I’m not kidding. It really says this.

#149 Kris on 09.16.14 at 4:02 pm

#84 Son of Ponzi on 09.15.14 at 11:14 pm
So you’re saying that Canadian Home”owers” are
“roped, tied down and screwed”.

NO THEY’RE NOT.
FOREIGNERS WILL BUY UP EVERYTHING WHILE SIR WILL CONTINUE TO RENT UNTIL THE DAY YOU DIE.
I WANT TO DIE IN MY OWN NEST.
OVER AND OUT.

Promise? — Garth

#150 Cato the Elder on 09.16.14 at 4:06 pm

Garth with all due respect, it’s a little premature to call metalheads wrong. We’re still flying high in an airplane kept aloft by low interest rates, wait until it’s made a safe landing to applaud the captain (Fed chairman).

I am completely certain rates won’t rise because the blame could be directly attributed to the Fed for the coming collapse. What they are trying to do instead is create a war abroad (as is usual in declining empires) that they can shift the blame for the coming hardships.

And regarding QE – it was never reduced – the purchasing program was shifted to the European Central Bank instead. They’re funneling money around behind closed doors to give the appearance of stability.

A debt problem can’t be solved with more debt. Unfortunately, that’s the only tool central banks have. The only way out of this is to let the system collapse, and honest, hard work.

#151 Son of Ponzi on 09.16.14 at 4:16 pm

Apparently, Canadian Car sales for August were at the same frothy level as they were in August of 2008.
Deja vu all over again?
Sorry, lost the link.

#152 Cato the Elder on 09.16.14 at 4:29 pm

The thing I find odd about pretty much every economist the world over is their obsession with a weak currency to ‘increase’ exports. Don’t they realize that increase is temporary? After current inventories are sold off, the manufacturers have to buy raw materials on the world market to start over again. And when they do, the price of those raw materials in the weakened currency is now higher than before.

It’s an endless cycle: weaken currency, sell current inventory, pay more for raw materials, high prices of manufactured goods, weaken currency, repeat….What a terribly flawed policy. And the worst part is, because manufacturers are relying on a perpetually weakening currency to sell current inventories, they don’t invest in capital equipment to increase productivity/lower costs. No wonder our factories have shut down.

#153 Son of Ponzi on 09.16.14 at 4:30 pm

The World’s Most Powerfull Women?
Gotta be Merkel.
She’s got the fate of Europe in her hands.
If she decides to pull the plug, lights out in the Western Hemisphere.

#154 Mr. White on 09.16.14 at 4:34 pm

Tracks my long held belief. I bought low and sold high. I am a renter. My rent has remained basically the same for 4 years. Meanwhile my very conservative ROI is north of 8% for the money I had laying around in a house. I have zero debt. I intend to have zero debt. But I have a pile of cash that I can deploy when I buy a house for 1/2 of its current value within 5 years in the city of my choice around the world.

Cash is king.

#155 Cato the Elder on 09.16.14 at 4:37 pm

#151 Son of Ponzi

Merkel answers to the money masters, just like Obama does. Yellen is more powerful than both. There is no legislative oversight of central banks which have successfully convinced the public that they require ‘independence’ (which is really a code word for secrecy). Sure, they give the occasional testimony at hearings, but they don’t divulge much. And try getting an audit of their activities – a great way to jeopardize your political career.

#156 Kenchie on 09.16.14 at 5:10 pm

Food for the blog dogs:

“Credit gets you a new TV, not Economic Growth”

http://www.bloombergview.com/articles/2014-09-16/credit-gets-you-a-tv-not-economic-growth

#157 Mark on 09.16.14 at 5:33 pm

“The thing I find odd about pretty much every economist the world over is their obsession with a weak currency to ‘increase’ exports.”

Its a sound theory. Suppress domestic consumption so that there’s more of a surplus to export. Presumably domestic production is value-added, ie: the cost of the imported goods and services used in production are less than the value-added goods can be sold for.

Where such a theory runs into trouble is when capital intensity is high. A weakening currency tends to cause the “cost” of capital to rise. This is the problem that has plagued Canada for quite a while — the cost of capital for Canadian businesses has chronically been above that of the United States, due to our weaker currency, and hence, the drive towards productivity enhancement and big ticket capex has been commensurately more difficult.

The situation in Canada is that we are a chronic net exporter. The housing market and housing-related consumption has been a giant driver of domestic demand over the past decade. Significantly reduce that domestic demand (ie: through a housing downturn), while the export industries remain relatively intact (and in the case of the oil and gas sector, continue to grow rapidly) and where else really is there for the Canadian dollar to go but much higher?

Personally I’m amazed at the sort of ‘inferiority’ complex that Canadians have, as though my comments and predictions that we eventually will see a $1.5 USD = $1 CAD currency valuation, are some sort of ‘impossible’ blasphemy. Or all the ‘economists’ that parade themselves and claim that the ‘fair value’ is under parity, without bringing any meaningful data to the table. There even was a fool on RFD who claimed that Big Macs (yes, the disgusting hamburgers, err… “sandwiches” as their purveyors like to call them) are predictive of international currency movements.

#158 Cheese and crackers on 09.16.14 at 5:49 pm

Italy floats the idea of slashing wages to remain competitive…..an excellent idea. All the while the shell game swirls around faster than the eye can see….in Europe…things are looking none too good. But…the upside is that most world leaders have boycotted Obama’s ‘Climate Change Summit’ in NYC.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100028145/only-a-monetary-nuclear-bomb-can-save-italy-now-says-mediobanca/

Our civic servants would hardly notice they’d fallen from one pampered cloud to the next.

#159 Blacksheep on 09.16.14 at 5:56 pm

“Alcohol and boating whoo what a mix!’
————————————————
Nonsense!

I’ve always enjoyed water, women & wine.

#160 Kenchie on 09.16.14 at 6:13 pm

#151 Son of Ponzi on 09.16.14 at 4:30 pm
“The World’s Most Powerfull Women?
Gotta be Merkel.
She’s got the fate of Europe in her hands.
If she decides to pull the plug, lights out in the Western Hemisphere.”

Double-check what Western Hemisphere means…

http://en.wikipedia.org/wiki/Western_Hemisphere

#161 Kenchie on 09.16.14 at 6:22 pm

#147 Kris on 09.16.14 at 4:02 pm

“#84 Son of Ponzi on 09.15.14 at 11:14 pm
So you’re saying that Canadian Home”owers” are
“roped, tied down and screwed”.

NO THEY’RE NOT.
FOREIGNERS WILL BUY UP EVERYTHING WHILE SIR WILL CONTINUE TO RENT UNTIL THE DAY YOU DIE.
I WANT TO DIE IN MY OWN NEST.
OVER AND OUT.”
———————————–
Sounds like someone is sensitive about risks facing Canadian homeowners…

Best of luck with your wishes though.

#162 Kenchie on 09.16.14 at 6:26 pm

#148 Cato the Elder on 09.16.14 at 4:06 pm

“I am completely certain rates won’t rise because the blame could be directly attributed to the Fed for the coming collapse.”

Ahhh, overconfidence bias.

http://www.forbes.com/sites/forbesleadershipforum/2013/01/08/three-ways-overconfidence-can-make-a-fool-of-you/

#163 Dean on 09.16.14 at 6:27 pm

“Apparently, Canadian Car sales for August were at the same frothy level as they were in August of 2008.
Deja vu all over again?
Sorry, lost the link.”

Sub prime car loans are all the rage.

Anyone that can fog a mirror qualifies to buy a car.

This is fueling the same stupid behavior that sub prime mortgages did in the US.

#164 Kenchie on 09.16.14 at 7:45 pm

#157 Mark on 09.16.14 at 5:33 pm

“Personally I’m amazed at the sort of ‘inferiority’ complex that Canadians have, as though my comments and predictions that we eventually will see a $1.5 USD = $1 CAD currency valuation, are some sort of ‘impossible’ blasphemy.”

And you think that Americans will buy Canadian made products at $1.50 instead of substituting for domestic production or other nations’ products? Name one product that can be produced in a Canadian factory for 66% of the cost of it being produced in a US factory?

I wouldn’t say it’s impossible (nothing is impossible), but it’s very highly unlikely that the Canadian dollar will appreciate to those levels. At minimum, we would need to stop being massive net exporters to the US. It’s not an inferiority complex, but rather a more realistic assessment of the realities of the two countries’ production probability curves.

PS: Lots of snow and cold weather is not conducive to economic efficiency.

#165 jess on 09.16.14 at 7:47 pm

china free trade zones
http://www.scmp.com/business/banking-finance/article/1592715/anti-money-laundering-crackdown-shift-onus

…” Angry and out-of-pocket Hong Kong homeowners now challenging the city’s government to stand up to alleged construction sector bid-rigging …

=

#166 Kenchie on 09.16.14 at 8:03 pm

#88 Happy Renting on 09.15.14 at 11:35 pm

“#69 Kenchie on 09.15.14 at 10:36 pm

Is your landlord a large institution?

Yep, owned and managed by a big corp. This building (built in 70s) has hundreds of apartments.”

So you’re probably benefiting at the expense of some boomers’ pension plan.

#167 Cato the Elder on 09.16.14 at 9:20 pm

#148 Kenchie

Re: Overconfidence bias

We’ll see won’t we? I’m actually very prone to overthinking that my assumptions may be incorrect, not the other way around.

But I am well aware of wishful thinking. And that governments lie. And that the statistics they publish are more grounded in politics than truth.

You think inflation is running at <3%? Ever buy groceries? Gas? Pay for housing? It's more like 10%. As long as they don't admit the truth, they can't be blamed for not doing anything about it.

#168 M on 09.17.14 at 3:30 am

Garth, Fed won’t taper. Or if they ll taper they’ll un taper elsewhere. Boyz will keep printing. Even so the bond market at some point will make its move. No matter what the fed does. US did not recover and is not recovering. Hike in stocks’ nominal value are just the dineros tza boyz are printing, jobs are the part timer crappy ones. Ur faith in Uncle Sam is only matched by the commies central committee in the 5 year plan :)
The market in the end will win by pushing the bond yelds up no matter what. ..but it’s not the Fed s wisdom . Of course we all realize that Canada is the pimple on the camel s ass when it comes to volumes. When is happening..housing in the big white north will go off the cliff. Hole in the ground vs 30 years of housing depreciation with former winning hands down. Stockton California will look like a joke.