Stocks just fell more. Bonds went up. Nobody should be too surprised. There’s likely more to come, so I hope you’re ready.
Not only are equity markets at a high level and prone to correct, with the Toronto and New York both ahead about 20% in a year, but there’s a lot for people to worry about. Ebola in Texas. Russians in trouble. China in protest. Terrorists in Syria. That’s just the headline stuff. Down deeper it’s worse.
The US Fed stops its stimulus spending in a few weeks, which means we’ll have gone from $85 billion-per-month to a dead stop in less than a year. That’s a helluva big tap to turn off. Scarier, consumers are getting tapped out. Real estate is starting to slag in the States (and here) and Canadian household debt’s bloating again. Incomes aren’t rising, so it’s bad news for economies which are 70% dependent on consumer spending.
This – lots of spending but no more income – means people are hooked on borrowing. So, seven-tenths of the economy is reliant on folks who, overall, owe vast sums and (as I mused yesterday), appear to have the financial IQ of border collies. Clever, but not a lot of long-term planning.
Meanwhile swaths of the world are flirting with deflation, commodity prices are being hammered and suddenly Alibaba, an e-commerce company you’d never heard of, is worth $200 billion. At least this week.
So, in a whacked world like this, how do you invest for both security and growth?
Time for a little review of what a balanced and diversified portfolio has done lately. Seeing this is the end of the third quarter of the year, let’s drill into the performance to date of an account containing 40% fixed income, and 60% growth assets. Regular, bored, comatose readers will know that I’ve broken down the holdings in this portfolio in the past, but to recap: the ‘fixed-income’ part (safe stuff) has four flavours of bonds (government, corporate, inflation-indexed and high-yield), plus preferred shares in a couple of banks and an ETF.
The growth part’s made up of ETFs holding equal portions of Canadian equities (large cap, small cap), US stocks (large, medium and small caps) plus international securities (Europe, emerging markets, large and small caps), and some REITs – real estate investment trusts. The portfolio also has a small weighting in alternative holdings, generally known as completion funds which invest in tactically, not geographically (financial services, for example, or health care).
Despite the dump on markets recently this portfolio (if fully invested) has delivered 6.59% in nine months, or an annualized 8.8%. The compound rate of return over the past almost-five years is 10.6%, so if you invested $100,000 at the start of 2010, you have $150,320 now. None too shabby, since 2011 was a disaster (the US debt ceiling crisis), and the past four years have contained a nice mix of wars, crises, panics, elections and mayhem. In fact, even with the crash of 2008-9, the 10-year give on this is 7.3%.
So where did the gains come from this year? Those high-flying and volatile stocks?
Nah. Bonds and preferreds. The safe stuff. Because everyone last year was convinced interest rates would rise (and they didn’t) bond prices popped while yields declined. Bonds and preferreds not only paid you interest and dividends, they also yielded capital gains. All in all, the fixed income jumped 7.3% so far this year. The growth assets, in contrast, were ahead just a bit over 6%. India was a stand-out, though, up 26%, while US small-cap issues tanked 6.5%.
What does this tell us? Simple. A balanced and diversified portfolio works. It adapts. It hedges. When certain asset classes fall, others rise. It blunts losses, just as it modifies gain. Overall, it reduces risk. Since neither you nor your genius, day-trading BIL have any real idea where things are headed, this is a peachy thing for those who need long-term growth, but also want to sleep at night.
Of course, it doesn’t run on autopilot, so you need to rebalance – selling winners, buying decliners and regularly returning to the ideal asset weightings. It goes against every emotion, but must be done. If you can’t, get someone who can.
Remember, buy-and-hold sucks. Unless it’s your marriage.
* * *
Well, this is too precious not to repeat, and what follows is from the Toronto Star. The local real estate cartel held a presser to blast Toronto for its double land transfer tax which is claims has made houses more expensive and hurt affordability. Yeah, just like realtor commissions – with the effect of adding 5% to the cost of houses which, for the last few years, have been selling themselves. This takes far more out of a real estate transaction than does the tax.
But we can’t talk about it. Realtors are above that. Especially el Presidente:
After various questions… James Tumelty, senior camera operator for Citytv, calmly asked Von Palmer (the cartel’s flack) a series of questions about realtors’ commissions.
(Board president Paul) Etherington did not enjoy them.
A transcript of the three-man exchange, some of which was inaudible on tape:
Tumelty: “For all the reasons that you said the land transfer tax hurts seniors…and for the reason that real estate prices have grown considerably…should real estate commissions be reduced too?”
Palmer: “I don’t think that’s a topic of discussion.”
Tumelty: “That’s the lion’s share…it’s that real estate commission.”
Palmer: “Right. There are some who choose to attack realtors in this process. Realtors are not the problem.”
Tumelty: “I’m not attacking, just asking a question.”
Palmer: “Fair enough. But the homebuyer pays the tax. People don’t work for free, by the way. Realtors provide a service. You have a choice to use a realtor or not use a realtor. But let’s not run away from the facts, though: the homebuyer pays the tax. That is the problem, because those are the people that are hurt. So it’s not a question of commissions or what we give up. The question is who’s hurt by this tax and who benefits when you start to take it out.”
Tumelty: “Same idea when they don’t have to pay the real estate fees.”
Etherington (interjecting from side): “You know what? That’s an inappropriate question. Who pays for you. Let’s end this conversation now, thank you.”
Reporter: “Whoa, whoa, whoa, whoa. He’s allowed to ask a question.”
Etherington: “Thank you very much. Inappropriate competition question. Not appropriate for this. Thank you very much.”
Reporter: “Sir, who are — you’re regulating the press conferences? If he wants to ask a question he can ask a question.”
Etherington: “Not a question that might be anti-competitive. And it’s not a proper question for here. Thank you very much.”
Reporter: “Sir, who are you?”
Etherington: “I’m the president of the Toronto Real Estate Board, Paul Etherington.”
You certainly are. And we won’t forget it.
168 comments ↓
Our economy is 70% dependent on consumer spending, prices on essentials are up, yet every employer, private and public alike, is fighting tooth and nail to suppress wages.
#204 Vancouver/Toronto R.E BULL on 10.01.14 at 6:22 pm
#200 Habs76-79 on 10.01.14 at 5:31 pm
With sky high mortgages (even based to relative incomes) and all sorts of other debts, I could not stomach such. The future is NOT KNOWN! I was in a previous marriage that I and my then wife were all feeling WOULD BE TILL DEATH DO US PART! It felt great for awhile but the bottom fell out in time and soon we split, WITH A MORTGAGE that neither her nor my income alone could fund. She packed up and moved out. Left me holding the bag of all our debts accrued together. I tried to cover these costs for a few months. But it was proving fruitless. I told my ex that I was going to have to declare bankruptcy and she being on the title of the mortgage and other debts would suffer too. Her reply “I DO NOT CARE!” She was shacked up with another guy by then.
Thankfully I as able to sell the place and make enough money to pay off most of our debts including the mortgage. IT WAS THE MOST STRESSFUL THING I EVER HAD TO GO THROUGH!
The financial worries ate me alive, adding the emotional mess of dealing with a separation and divorce was only more fuel on the fire.
My point here, is that going into such stratospheric levels of debt that I read, hear and see all too many people do today is utterly nuts and nothing in life, not any pie in the sky wants, nor desires, nor any toys are worth the possible bottom falling out, in any way life can kick you in the proverbial face!
Accepting that one can live nicely within their means and have much less stress for such, is worth more to me and my household today than any of the CRAP PEDDLED TO US AND THE NEVER ENDING OFFERING AND FILLING UP OF DEBT!
Nobody here knows what good or bad can happen tomorrow. If lucky none of you/us will have to deal with the crappolla hitting you. But some or many of you/us may. Too many wants (most needless), too many entitlements all equals too much accrued debt. IT IS NOT WORTH IT ANYMORE AT LEAST FOR ME!
I’m not suffering, I ain’t rich and that’s ok. I have some nice things, able to live nicely and yes I too have things I dream about but no longer lust for. It’s all ATTITUDE! Getting kicked in the proverbial teeth of life especially financially helps adjust one’s attitude.
Peace Out!
You’re right about markets softening.
I just did all the sums for September and saw a loss on my couch-potato portfolio.
Here’s how I did in recent months, the summer performed great. Wonder if others did similar…
Sept: -1.12%
Aug: +1.54%
July: +2.58%
June: +1.48%
I suspect October won’t be a stellar gain month either.
In the real estate game, it has always been more about getting the listing……..than selling the property.
Under the MLS scheme, any real estate agent can sell the house…….and the listing agent and broker will get their share of the commission.
The current 5% is ridiculous, given the value of homes today.
It isn’t home sellers fault, there are too many agents who hope to earn a living by selling a couple of homes a year.
I wanted to put a question about diversity yesterday but lack the iq to do it properly without being too sarcastic.
Thanks for this recap and I read that article today and thought damn…. apparently we can’t talk about commission yet every other security/asset requires full disclosure when dealing with them.
Ever watched “wolf of wall street”?
Its about time the caliber of reg’s they lay on wall and bay st. get laid into the RE game.
They are about as professional as a carnie at the fair, but the game they push has the same devastating effect on the country as unscrupulous stock-brokers.
Alibaba, an e-commerce company you’d never heard of, is worth $20 billion.
————————–
they should be worth something, they sent me a 100$ pair of nike trainers all the way from china for 43 bucks.
nice
talking to realtors lately and the market is completely dead…. also appraisers are being a little more careful with valuations now….. sounds like air coming out of the balloon!!!!
LOL @ the Etherington exchange. He would have done much better giving a friendly, open, non-defensive, and possibly illogical/made-up answer. Being the president, I’m surprised he hasn’t already come up with and rehearsed an answer to such an obvious question.
Shawn # 191, on Oct/1/14
“Certainly they should not follow your conclusions, among which were:”
“Most borrowed money comes from individuals, corporations”
“Everyone with money in the bank is a lender.”
—————————————
Yo…Smart guy, your criticising your own words!
—————————————
Shawn # 150, on Sept/30/14 copy and pasted, with relevant portions in {….}
“But almost all countries (the governments) are net borrowers. {Most borrowed money comes from individuals, corporations} and pension funds.”
“{Everyone with money in the bank is a lender.} Everyone with RRSPs that include bonds and fixed income is a lender. Pension plans are usually effectively lending 40% of their money.”
—————————————
Do you even comprehend what your typing? I’m done trying to have an adult conversation with someone, this ignorant. The BOE message is out there and that’s all I wanted.
————————————-
“I am trying to educate you and others. You are badly out gunned here my friend.”
————————————-
Not to day dude, not…to…day.
Everybody likes a “FREE” and open market, except the head of the Toronto RE Board apparently.
Strange, financial advisers are free to set their own compensation rates. The fees on ETF’s or mutual funds vary enormously and are not tied to their performance.
Though, not strangely, the ones with the highest fees do tend to deliver less return to you – the investor.
Unbelievably true, RE commissions work much the same way. Here, RE commissions are negotiable by contract.
You DO have choices, be educated about what you do in any transaction. The industry does NOT always have YOUR best interests in mind.
Caveat Emptor!!!
mr ringtone doesnt look too happy.
Bottoms-Up
Our economy is 70% dependent on consumer spending, prices on essentials are up, yet every employer, private and public alike, is fighting tooth and nail to suppress wages.
******************************************
Do you know what the other 30% is?
Get ready people! A 50% increase in hawkish interest rate rhetoric is just around the corner…
http://tinyurl.com/o22w8e8
Garth said: “So, in a whacked world like this, how do you invest for both security and growth? Time for a little review of what a balanced and diversified portfolio has done lately….[SNIP]…. What does this tell us? Simple. A balanced and diversified portfolio works. It adapts. It hedges. When certain asset classes fall, others rise. It blunts losses, just as it modifies gain. Overall, it reduces risk.”
Garth, this advice is fine for SECTOR-SPECIFIC downturns, but there are so many black-swans on the horizon threatning another 2008-like event (if not bigger), that it’s obvious the next down cycle will be across ALL sectors… Therefore, a balanced portfolio will protect you like it protected the average Canadian in 2008… that is MINUS 40% loss in their “diversified” portfolio, that took them YEARS to recover, even more if you adjust for inflation.
You are going to have a **itload of angry blog followers when they lose their shirts in the next financial crisis, which is looking more and more like it’s on the verge of manifesting (Q4 2014 or absolute latest Q1 2015). I guarantee it!
In 2008 the balanced portfolio declined by 20% while the markets gave up 60%. The balanced portfolio recovered in a year while it took stock markets seven years. Thus, it did exactly what it was designed to do. BTW, there will not be another 2008 in your lifetime. Unless you are seven, which seems strangely possible. — Garth
Well yes, that was precious. It seems Mr. E is used to being asked the *appropriate* questions …by that G&M columnist perhaps ?? Priceless.
Makes me think of a billboard I saw recently near new condo towers on Rideau street in Ottawa:
http://www.donttaxmydream.ca/
Oh, and I died laughing, reading this: Remember, buy-and-hold sucks. Unless it’s your marriage. ;-)
I’ve said it before and I’ll say it again. No correction until we see a hockey stick. I’m just trying to save you lemings. No hockey stick! No correction. Oh wait, hockey next week, you say. Ok, RE corrections starts next week. you heard it hear first.
bonds go up… yields back down… and so it goes until when exactly?
Most economists say about ten months. — Garth
It might also be noted that the land transfer tax is, well, a tax that then gets spend on public services. It doesn’t go into the pockets of a few real-estate agents who, frequently did little to earn their commission and who will likely not be spending it to the greater good.
The inevitable conclusion is nearing. Central banks have turned western democracies that were once free, prosperous, and independent into debt laden slaves to the banks.
The end game of this fraud perpetrated over many decades is a complete totalitarian state.
It is coming folks. Make sure you have a backup plan.
The government will have no qualms confiscating your wealth to appease the demands of the mob.
What a time we live in where capitalism is more rampant in communist China than America. Where a mere 20 years ago, political dissidents would have fled to America, they are now fleeing to former communist Russia.
An empire requires an emperor. And we are a client state of modern Rome (Washington). Don’t expect our weak-willed, unintelligent, and spineless ‘leaders’ to stand up for us when demands are made of them.
After all, they are going to be rewarded in the private sector at the big banks as ‘consultants’ for selling us out.
Farewell freedom – we hardly knew ye.
James Tumelty, senior camera operator for Citytv, is now on my Christmas card list for 2014.
Always fun to watch a snake-oil salesman dance when his feet are pressed to the hot coals of truth.
Which leads us to another timely addition to yesterday’s search for financial literacy questions:
Q: What is potentially the largest, yet entirely unnecessary, expense a homeowner may face when selling a home?
A: (The answer is blatantly obvious to even the most casual of observers).
OK, no more defaming the character of Border Collies!
Another sign that it’s happening…
A lackey for the Realtor I first had the misfortune of dealing with seven years ago called me today, totally out of the blue, asking to update their records with my latest information.
This is the same Realtor that never contacted me again once I put pen to paper on the condo they found me. When there was a complication, crickets. When I closed, not even a congratulatory email.
Suddenly they want to be my friend again after seven years of silence. This can only mean one thing…
Keep it simple folks…buy this fund and call it a day;
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05OHI®ion=can&culture=en-CA
(a) A one-asset strategy is asking for trouble. Mutual funds can, at will, stop redmeptions in times of trouble. (b) An MER of 1.21%, non-deductible, is too much. For less than that you should get an actual, living, breathing tax-saving advisor. — Garth
Price drops all over up my way. Anything over a million is getting hurt. Too many USED HOUSE SALESMEN , I mean real turds and not enough buyers, anyone want to gamble…. I mean invest in an asset based on the weather ??? Yea one more variable for ya.
Etherington (interjecting from side): “You know what? That’s an inappropriate question. Who pays for you. Let’s end this conversation now, thank you.”
Wow, did he really say that to the media? I guess that all those conspiracy theories about the media being shills for the real estate industry might be true after all.
@ Happy Renting #8: It looks like Paul Calandra has his first post-parliamentary spokes-gig all lined up!
Remember, buy-and-hold sucks. Unless it’s your marriage.-Garth
Ha
Only married dudes will get that…. Saying stuff like that from my experience gets you one, out jail for free card..
For when you need it.
“……So, seven-tenths of the economy is reliant on folks who, overall, owe vast sums and (as I mused yesterday), appear to have the financial IQ of border collies………”
=========================
As Garth probably already knows, Border Collies, while not exactly masters of supply/demand economics, usually make the top of most canine intelligence rankings.
The dumbest? Afghan Hounds, (ranking just slightly above any Canadian who voted for democracy, openness and transparency in the last federal election).
Love your summation of the RE interview Garth. Nuff said.
Now, the balanced and diversified Portfolio. I enjoyed reading it today. Got me thinking. To the mortgaged and indebted up to the nutz Canadians, I think there is a chance they got to where they are is because anything besides buying a house is just too confusing for them to grasp. And for the others who are maxed out on credit card, LOC’s, etc. , well, the beamer, the vacations, the clubs and restaurants, bling, fashion, and the YOLO, it just makes so much sense. Until TSHTF, and it will. No exception.
Buy Silver! You’ll thank me in the new year.
As you can see by your graph, we are debt fueled economy. Everyone knows this. Joe Owe even said today at a conference that there is no plan to pay back the debt but rather grow the economy instead. Don’t kid yourself, they will throw money at this thing rather then let it pop before an election.
Tonight on the Exchange with Amanda Lang, Hilliard Macbeth stated he expects house prices to fall by 40 to 50%.
In my opinion we are so far in bubble territory when it comes to Canadian real estate values that recent calls for corrections ranging from 40 to 50% no longer seem alarming or should I say unrealistic
Sam # 31,
I think its way to soon.
I’m looking for single digit silver before buying.
#25 PurrPurrjones on 10.01.14 at 7:25 pm
Keep it simple folks…buy this fund and call it a day
If you’re going to use a mutual fund instead of ETFs, the Mawer Balanced fund might be better.
The MER is only 0.96% and it has a 10 yr. return of 8.07% which is over 1.4% higher than the Beutel Goodman fund in your link.
http://quote.morningstar.ca/quicktakes/Fund/f_ca.aspx?t=F0CAN05MRR&culture=en-CA®ion=CAN
Garth,
what’s wrong with mentioning that you could offer your services for a 1% fee, instead of saying “hire an adviser”?
It’s your blog, your rules, your right to market your services and your decision of how many times to mention it on this blog.
I don’t mention it. — Garth
I have rrsp and non rrsp at td bank. I have a secured line of credit (secured to my non registered account) with them that was set up more than 5 years ago when i was still in the work force. My non registered account has grown since and i applied for an increase in the secured loc and was rejected. My intention was to use the loc to purchase a condo for my own occupation and to write off the interest against my rrsp withdrawals. I am retired. Any suggestions.
Get an accountant. — Garth
http://www.huffingtonpost.ca/2014/09/24/low-paying-jobs-canada-morgan-stanley_n_5877084.html
Canada Among World Leaders For Creating Crappy Jobs: Morgan Stanley (CHART)
Reduced workforce participation, part time jobs, TFWs, slow job growth in only one Province and over one in five of all jobs suck.
What is an appropriate percentage to negotiate paying a realtor? 4%? 3.5%?
A guy i’m working with in Edmonton
$400,000 mortgage
$30,000 personal loan
$7,000 on Visa
Typical Canadian
wow. I might start subscribing the Toronto Star !
… nah
Spending time in White Rock lately, lots of fresh “holes” in the ground and flipper/developers suddenly appear very active. Most of these future SFH’s are currently for sale at well over $ million. Hearing about other new builds already completed are starting to go to seed, not selling. On the other hand, am seeing Price Reduced” signs on some of the older, tear down pre-flip old cottages. A few luxury properties have recently sold after drifting down in price, others still languish despite repeated price drops over months and several years in many cases. Recently completed, and pre-sale new Luxury Condo developments are also still looking for buyers. I saw one ad claiming “Stage One Sold Out”, but there weren’t many units on offer to begin with. Others are still trying to sell units completed 1-2 years ago. There’s a ton of product on the market in White Rock alone, both over and under the magic $ million price point. This is an area in my experience, that has seen a lot of foreign investment in recent years. In this sense it has many parallels to my old Westside Van neighbourhood. It definitely feels like the dead cat bounce top is passed and we’re on the way down. Prices still sticky though on new builds. Average local incomes can’t support the types of properties being built here, it appears oversupply may already be a problem.
Balanced does do well very compared to S&P 500 and TSX
“The compound rate of return (on the balanced) over the past almost-five years is 10.6%, so if you invested $100,000 at the start of 2010, you have $150,320”
“In fact, even with the crash of 2008-9, the 10-year give on this is 7.3%.” ($199k)
******************************************
S&P 500 same period since start of 2010 100k is now $152,280 not counting dividends,TSX $144,459 also before dividends. Balanced looks good.
My return on $100k – $219,158 (with dividends). Mostly equities and some cash for opportunities a very concentrated portfolio. Some trading bought on dips, sold rallies.
S&P same 10 year period without dividends $135k Toronto $184k and bumpy. So yup, balanced nicely beat the stock indexes for the ten year period.
My return – $100k from ten years ago is now $388k (no lie, mostly equities concentrated portfolio, perhaps a lot of luck, not as bumpy as the index but dipped over 20% in 2008)
Well I beat the index and so that means someone else had to trail it. I thank them.
Bottom line, I totally agree the Balanced rocked these past 10 years and is a good approach indeed.
Palmer: “Right. There are some who choose to attack realtors in this process. Realtors are not the problem.”
http://youtu.be/q_wGGOjxHEA
“Only” down down 4.5% the past couple of weeks but realizing only too late I don’t have the stomach for (100% equity) volatility like I thought I did.
Want to move towards the balanced portfolio but want to recover a bit as I don’t feel comfortable crystallizing the decline from the past couple of weeks. It would also save me an insane amount of time reading stock forums to only think about rebalancing the allocations twice a year.
>>>#27 Smartalox on 10.01.14 at 7:28 pm
>>>[…]I guess that all those conspiracy theories about the media being
>>>shills for the real estate industry might be true after all.
Yes Virginia, people pay/pull strings or connections to have journalists publish pumper pieces or hit jobs.
Alibaba applies to become a bank in China:
http://blogs.barrons.com/emergingmarketsdaily/2014/03/11/alibaba-applies-for-banking-license-buys-control-of-chinavision-media/
Told you bastards to short Face Book. Oh Ya!!!!
Not to late, that bitch has a long way to go..
My goodness.
The president of the Toronto Real Estate Board has quite the attitude of entitlement.
I dare say THAT exchange may come back to haunt him.
Hubris and the fall………..
The deal of the year…
Revel a beauty casino property in Atlantic City was scooped by Brookfield, they paid 110 million. Cost to build, 2 billion…
It failed because of bad luck and stupidity. Bad luck, hurricane Sandy, keeped people away for 1/2 a year.
Stupidity, it banned smokers… Smokers are the world’s biggest gamblers and drinkers..
I hope Brookfield had enough sence to allow smoking…
Then they will get back the high rollers….
Believe me I know.
@20
“It might also be noted that the land transfer tax is, well, a tax that then gets spend on public services. It doesn’t go into the pockets of a few real-estate agents who, frequently did little to earn their commission and who will likely not be spending it to the greater good.”
You mean it gets spent on public sector bureaucrats and companies leaching off the taxpayer.
Leave it with the real estate agents.
Garth ,
Did you catch this on BNN ? Looks like the outsiders in the US see us as a ticking timebomb while the BNN interviewer once again gets defensive about Canadian real estate. She truly is an embarrassment to that channel. When will BNN wake up that bias interviewing alienates viewers in spades. The ship is going down but just be in denial and all will be OK. Pathetic.
http://www.bnn.ca/News/2014/9/29/Five-things-that-are-wrong-with-Canada-according-to-an-ex-Wall-Street-trader-.aspx
September 30 article in Globe and Mail “90% say life in Toronto is increasingly difficult for average people”
http://tinyurl.com/ng86gky
Even while most of the city’s inhabitants plan on staying put, the vast majority – 90 per cent – think Toronto’s becoming increasingly difficult for the average person to live in.
Garth,
Suppose you have a broker like Questrade, where buying ETFs is practically commission-free (a $1000 buy order on an ETF costs mere pennies, or nothing at all). Let’s also suppose you can contribute a fixed amount fairly regularly (perhaps monthly) to your tax-advantaged accounts. The question is, if one can maintain balanced amounts of each of the funds just by buying the right amounts, can you get away with not selling anything and paying the $5 (or more) commission to do so? Given the amounts involved, this is probably going to work well for a 30-year-old, but not so much for a 60-year-old. More to the point, does one sell just for the sake of selling the winners or does one sell to keep the proportions in line?
@#37 Samson
You need a separate holding company. And in such a case, you would need to hypothecate a cash security which is extremely uncommon for owner occupied real estate. Typically you only see cash security for letters of credit (bank guarantees) or companies with non traditional borrowing base (holdback A/R etc.).
My advice, rent the condo, save the $ on the accountant.
Correction, not Globe and Mail rather GlobalNews
Here is Tumelty’s twitter account. Feel free to tweet him kudos.
https://twitter.com/QPCamera
For you blog dogs who chirp on twitter, visit these links and retweet to spread the word. This Tumelty fellow is going to be a PR disaster for realtors this week.
https://twitter.com/ddale8/status/517383953070968832
https://twitter.com/robertbenzie/status/517396089381847042
https://twitter.com/jm_mcgrath/status/517392184107352065
Treasury Blondes having more fun lately. As I said a while ago I’m bullish on them till the new year.
To yesterday’s Q&A:
Which is the best stratagem for 30-sometings:
a) Beer before liquor never been sicker.
b) Liquor before beer, have no fear.
c) Boots & Bourbon
A lot of new condos being built just off the hwy to the ferry. I know these are arranged y ears in advance but, surely, they must believe there are buyers out there. Saw a sign that Ive never seen before “Trade Up”. Lots of traffic. Couldn’t stop to find out what the sign meant. Did it mean they’d take your house in trade plus some cash?
Or did it just mean, sell your place and buy this place? If houses really aren’t moving in the Victoria area, especially outside the city, and mortgage payments are pressing (there always have been a lot of flippers around, buy paint, cut the grass, flip) and if the flippers have been caught in a stagnant market, we might see some creative attempts to get out from under a big loan or mortgage.
#39 Suki
What is an appropriate percentage to negotiate paying a realtor? 4%? 3.5%?
—————-
Pay the lowest you can get.
Your agent will try to claim that by paying the higher commission other agents will be more willing to bring potential buyers to the house.
There are two reason why this is not the case.
1) everyone looking for a house through an agent will have access to the MLS and be checking every morning for new listings – when they see a new listing of interest they will be telling the agent they want to see it, not the other way around.
2) there are a billion agents in every city in Canada, any agent will be falling all over themselves to bring a potential buyer to a house whether its 3, 3.5 or 4%.
Also check out the guys offering to sell your house for 1%. The one caveat is on the 1% listing services – you may have to sweeten the deal for a buying agent.
Campaign notebook: Real estate board president blasts journalist over commissions question
http://www.thestar.com/news/city_hall/toronto2014election/2014/10/01/campaign_notebook_real_estate_board_president_blasts_journalist_over_commissions_question.html
#34 Blacksheep on 10.01.14 at 8:00 pm
Ain’t gonna happen.
anyone hear about this before?
http://www.cbc.ca/news/business/housing-market-a-bubble-set-to-burst-investment-expert-says-1.2784511
#61 Victor V on 10.01.14 at 9:33 pm
Dude, I’m a busy guy, run two small business, while at tax farm for 11 hours a day, it’s a hobby that funds my wife’s gambling addiction, and restricts by bottle time..
If I go on Twitter, I’m not chirping Realtors…
@nude selfies is where it’s at..
(Board president Paul) Etherington did not enjoy them.
—————————
SERIOUSLY THEY DID NOT ANTICIPATE A QUESTION ABOUT COMMISSIONS????
OK the Toronto Real Estate Board must represent a few thousand agents, who must pay hundreds of thousands in membership fees.
So they call a press conference to talk about the property transfer tax in front of the media, whose job it is to ask HARD questions.
And they are caught flat footed when a somebody starts asking OBVIOUS questions about their INSIDIOUS COMMISSIONS?
Did they not THINK about this stuff BEFORE HAND???? – obviously not.
The SIMPLE ANSWER WOULD HAVE BEEN…..
“……there is a proceeding currently before a tribunal and I cannot talk about that, but I can talk about the transfer tax.”
Next time they schedule a press conference they can call me and for $200 an hour I will BRIEF them on potential questions and answers.
Somebody should tell those BOZOS that how the BIG GUYS do it.
Garth
Stop dissing Border Collies. You need to be way more PC wrt to these pooches who regularly top the doggy IQ charts.
http://en.wikipedia.org/wiki/The_Intelligence_of_Dogs.
I am willing to bet that you wouldn’t have slipped on the ice and injured yourself had you had one of these dogs, and followed its lead.
2 things you are overlooking with your portfolio advice.
1. Currency risk for foreign holdings. Currency appreciation/depreciation can wipe out gains. Example, the Japanese yen is down around 10% recently which dented any market gains to be had from the Nikkei.
2. Your advice seems to focus only on people profiting when things are rising. Shouldn’t they be more creative and also profit when things are going down? After all vultures have their best feeds on carcasses.
So TREB thinks it’s ok to tax the seller on the transaction, but the city can’t tax the buyer.
Yeah Paul, you are a modern day Robin Hood.
Continued, I’m also writing the world’s shities best seller ever..
While taking care of the living dead at the nursing home.. And always looking at the clock to make sure I hit the LCBO before it closes.
So, seven-tenths of the economy is reliant on folks who, overall, owe vast sums and appear to have the financial IQ of border collies.
VanIsle Retiree : no more defaming the character of Border Collies!
Agriculture Canada hired border collies to scare the geese away from the farm.
http://www.cbc.ca/news/canada/ottawa/border-collies-enlisted-to-keep-geese-from-experimental-farm-1.1348328
” buy and hold sucks”
I guess so when it comes to financial assets, I will take your word for it.
It has been great for RE investors for the past 50 years and counting however
If you hold for 50 years, you make nothing. Some strategy. — Garth
Right, and the taxes the city collects are piled into a pyre and lit on fire? The tax is there because the city needs money, to provide services. Because people don’t work for free.
You don’t know what you’re talking about! SHORT FB. lol
oh! This is an indication to short it. http://scharts.co/1v8ZcXe
No volume and slight decline today like everything else.
Go ahead SM! Show us your short position. Put it up here.. or shut up!
(Full Disclosure. I don’t own any FB)
Etherington: “Not a question that might be anti-competitive. And it’s not a proper question for here. Thank you very much.”
Anti-competitive. Love the double talk, thank you very much. I’m sure this man votes conservative, because I know where I’ve heard this sort of thing before. Welcome to the land and time where up is down, right is left, and the only thing we can all agree on is any tax is bad because ‘grrr big government’ and the hell with everyone else.
Here’s the realtor ethos, taken right from the playbook of the politically connected rich people that will say anything to defend and enhance their rent-seeking behaviour, killing the middle class and dragging our economy in the gutter
Garth is right … most people don’t spend everyday looking at the markets, and nobody can call future ups and downs consistently.
The diversified portfolio makes the most sense for most people. Rebalancing is not as easy as it sounds and it’s best to have some good help on hand.
Many here are just smart enough to be dangerous to themselves.
#72 Grantmi on 10.01.14 at 10:22 pmoh! This is an indication to short it. http://scharts.co/1v8ZcXe
No volume and slight decline today like everything else.
Go ahead SM! Show us your short position. Put it up here.. or shut up!
(Full Disclosure. I don’t own any FB)
……..
Then Bet against the Smoking Man bastard..
Buy more.
“Of course, it doesn’t run on autopilot, so you need to rebalance – selling winners, buying decliners and regularly returning to the ideal asset weightings. It goes against every emotion, but must be done. If you can’t, get someone who can.
Remember, buy-and-hold sucks. Unless it’s your marriage.”
====================================
Truer words wuz never spoke… By no one, nowhere, no when, no how!
Thanks, Garth! Keep up all the good (and often thankless) good work!
#@Bottoms_Up/1… #MetaphoricallySpeaking… #’They’MightBeIn… #ForA… #VeryBigSurprise!… #MuchSoonerThanTheyThink…
http://youtu.be/AkEoHQrEqZQ
[NoteToGT: Sometimes the ‘DayJob’ overlaps with the recreation. I blame it on the BudWeisers. NoteToSM: You forgot the most important one, from an “attentive service” perspective… Smokers are typically the biggest tippers. Right. Back to work.]
If you hold for 50 years, you make nothing. Some strategy. — Garth
********************************************
Did you really say that?
Wealth is measured in money. Wealth does not need to be converted to money (sold) in order to exist.
Real Estate is and always will be wealth whether measured in dollars, pesos, Gold or seashells.
There are other reasons to grow wealth besides to fund short-term consumption. For example to build family generational wealth.
The man you responded to clearly spoke the truth as far as real estate being a great investment the last 50 years.
Also Buy and Hold most certainly does not suck, and certainly not over 50 year periods.
Balanced approach and rebalancing works. So will buy and hold if you hold indexes, though not always over relatively short periods like 10 years.
Life is not about accumulating unrealized capital gains. — Garth
Yes, well…if I “hold” an investment for 50 years be it RE or an Index Fund…..I haven’t realized a dam thing, until I sell it, (or a part of it, as with the fund). Tougher to split a home, right?
Are we having a hissy over semantics here?
Big O says “what bubble?”
http://business.financialpost.com/2014/10/01/finance-minister-joe-oliver-says-calgary-toronto-and-vancouver-distorting-housing-numbers/
Just as I thought! All Talk.. no action.
Come on SM.. Post your short position!!
Since you’re all knowing and all wonderful, you probably know how to take a screen shot. Here! You can us http://tinypic.com/ to make a link for all to see.
screwed you are? come-on, no house and STOCKS tanking????
I am 100% in bonds since May of course and 2 houses…hefty gains this year, double than 2013….
already many sold heir stocks and buy houses…the condo market is happy for now :)
SELLLLLLLLLLLLLLLLLLLL or not
Let the stock markets and RE tumble 70% and the bond market flatline. Good buying opportunities (not for RE).
*
#138 Cato the Elder on 10.01.14 at 7:00 am — “We are quickly devolving into: A pseudo-communist fascist/corporate state” . . . Think all the people dependent on government . . .”,
#197 bigtown on 10.01.14 at 5:09 pm — “ANSWER: C) the economy is de-capitalized and living standards are eroded to poor country levels”
— and —
#1 Bottoms_Up on 10.01.14 at 6:26 pm — “. . . prices on essentials are up, yet every employer, private and public alike, is fighting tooth and nail to suppress wages.”
Privatize the profits (here), socialize the losses. That’s how socialism works, and that’s where we’re headed — Soros – Obama.
Courtesy of the UN and A21, there must be a reason why western corporations are sitting on a few trillion dollars in profits, not reinvesting. By bullying the public (police brutality), the 1% enjoy the benefit of having subservient govts. make their lot better, the 95% (sheeple) are being constantly dumbed down and don’t bother to take note of what is going on, while ordinary folks (like us) are able to look after ourselves.
Then there is the usual BS carrying on thruout the world. Maybe Japan should avoid war with China.
@ #63 pinstripe
WOW, that about sums it up.
I think the media is latching on, now that its too late.
Garth, why dis Border Collies? I never heard Border Collie having trouble with his/her bankers. Sure, they are more interested in sticks and bones than a flat panel TV but they live relatively debt free and easy. They pick up work here and there herding sheep and that’s enough for them.
Oh and “buy and hold” isn’t the best marriage advice either. Maybe one day marriages will be as liquid as stocks. Certainly seems like we’re headed that direction. I think if a person wanted to, they could substantially leave their marriage in as little as a day these days with little consequence. And you might say “well yes but you shouldn’t do that.” And you might be right. But you can’t really know what your partner is planning to do. And just like a failed business partnership they usually try and abscond with all the assets and leave you with all the debt. Ah, the romance of love. $$$.
When I wanted to sell my house because it was “time” I was faced with a ludicrous 5%, $45k realtor commission + double land tranfer tax to buy another home ~30k LOL ..so 75k therabouts. The thievery is beyond believable. On top of that most of Toronto’s homes are in dumpy neighborhoods unless your into the 2 mil and up homes ..so i thought forget it and rented. It’s not perfect but I feel free of these crooks…now I’m learning about balanced portfolios.
$100k to 150k in 5 years?
I need to sack my portfolio manager…
Hang on now Garth!!!
My border collie pretty damn smart!!!
I would like to see Realtors completely replaced by an automated auction site.
All we have gotten from these thugs is milked.
They hide previous sale prices.
They hide the number of days a listing has been on the market.
They put an sign on the street for a listing that takes forever to sell but they wont pay for MLS listings. Then when it sells they list it as sold in one day to skew the market stats.
They manipulate sales statistics.
All the above amounts to theft. But in the carefully crafted corporate world this is considered simply salesmans licence.
Do away with them all. Use some bonded people who get paid per house showing just like the guys who install the sign posts.
We don’t need these salesmen. We just need the information.
Then every week there should be an auction. Simple.
Just sold my bungalow flip yesterday, here on the south coast of England. Bungalows are hot, everyone wants them and builders aren’t building any more as the footprint is too big. Classic supply and demand scenario.
The agent wanted the standard UK commission rate of 1.5% but I got him down to .6% plus GST. Helps that the big RE web portals such as Rightmove and Primelocation are privately owned and anyone can load on them.
Off today to Wiltshire to look for the next property.
Garth,
what’s wrong with mentioning that you could offer your services for a 1% fee, instead of saying “hire an adviser”?
It’s your blog, your rules, your right to market your services and your decision of how many times to mention it on this blog.
I don’t mention it. — Garth
Actually, Garth will drive more clients to his business not mentioning it.
This is not a commercial site. I write this drivel because I enjoy it. — Garth
Won’t somebody think of the realtors!?!
Bernanke ’05:
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html
Jo Owe ’14:
http://business.financialpost.com/2014/10/01/finance-minister-joe-oliver-says-calgary-toronto-and-vancouver-distorting-housing-numbers/
Smoking Man
What about your call to short HD?
That didn’t go to well did it..
60/40 does seem to be the gold standard, but I assume that would be for the pensionless. A DB pension is similar to an annuity, so it increases risk tolerance. That is why I am 100% dividend stocks and ETFs (Can and US). Most have provided consistent dividend increases and the taxation is preferential. By the way, there is a nice new play on US dividend growth, the DGRO ETF with a puny 0.12 expense ratio and over 250 holdings. A strong core US holding launched in June.
Buy and hold certainly doesn’t work for houses! I bought my house in 2010 from the original owner, who had it built in 1964 for $30k. I paid 212k.
According to this inflation calculator, 30k in 1964 has the same buying power as 212k in 2010:
http://www.bankofcanada.ca/rates/related/inflation-calculator/
Not to mention all the property tax paid and renovations that were made in the 46 years of ownership!
#81 Grantmi on 10.01.14 at 11:41 pmSince you’re all knowing and all wonderful, you probably know how to take a screen shot. Here! You can us http://tinypic.com/ to make a link for all to see.
……….
Here is your link….
DELETED
I love this strategy, you can’t argue the results. Growacet!
Inequality in charts (source: Morgan Stanley)
http://www.marketwatch.com/story/income-inequality-in-11-morgan-stanley-charts-2014-09-22
Me thinks someone is trying to sell a book! …no new news here.
http://www.cbc.ca/news/business/housing-market-a-bubble-set-to-burst-investment-expert-says-1.2784511
The housing market will not ‘burst’ nor will prices quickly decline by 50%. Yes, it is a book-selling message. There are more realistic things to worry about. — Garth
Unrealized Capital Gains
Response at 78:
Life is not about accumulating unrealized capital gains. — Garth
****************************************
Thank you for the restrained response.
True that is not the purpose of life for most people…
But it worked okay for Warren Buffett.
Some people here seem to think unrealized capital gain is the same as non existent capital gain thinking there is no profit until the thing is sold.
This attitude seems to confuse wealth and money.
To review
All (valid) money is wealth.
All wealth most certainly is not money
We MEASURE financial wealth in money but wealth does not have to BE money
Wealth in the economy FAR exceeds the sum total of all money.
Unrealized capital gains should be included in your net worth as long as you deduct any tax payable if it were to be realized.
Unrealized capital gains defer taxes and that can be a huge boost to returns over the long term.
#24 Ray Skunk on 10.01.14 at 7:24 pm
This is the same Realtor that never contacted me again once I put pen to paper on the condo they found me. When there was a complication, crickets. When I closed, not even a congratulatory email.
Suddenly they want to be my friend again after seven years of silence. This can only mean one thing…
++++++++++++++++++++++++++++++++++
Maybe they lined up an unpaid intern from the local College. I heard Garth does that too.
I am confused. Is this advice to invest in bonds and preferreds at historical low (suppressed artificially) interest rates?
If interest rates go up and they should there would be some significant capital losses on these investments, they are going to get creamed. In August there were over 130 billions in outflows from bonds.
It seems our credit driven economies (as opposite to investment driven, 70 % driven by consumption) can’t sustain increase in interest rates without some serious troubles (e.g. depression style crash).
But we are already deep in debt and are net importers running deficits with no manufacturing base and no savings. Japan is given as example for long sustained low interest rates but Japan had huge savings, huge trade surplus and huge manufacturing base and almost no debt in the begging of their fight with the fallout of the credit expansion that started 20 years ago.
Contrary to popular believes the current credit boom is not driven by savings. I gave some examples of debt to the tune of 4 trillions or more in Canada (federal and provincial governments, personal debt, corporate debt) while the monetary base is at 1.2-1.5 trillions, including deposits. If not for suppression of rates by central banks market driven interest rates would be much higher.
We are inherently building system risk, things could look fine for a while until we hit some threshold and then the avalanche starts.
We have to default on debt in some form (suppressed interest rates are default by itself as debtors can not pay market rates) by either explicit default and deflationary depression or by inflating away the debt.
Deflation is least likely hence advice on investing in bonds in the current conditions is strange. Bonds (despite their capital ‘gains’., hey bitcoin had capital gains as well..) are the last thing I would touch.
The bashing of stocks is strange, volatility is in growth stocks, not in dividend paying stocks.
There are good EFTs with 4-6 dividend payout despite the capital gains. How is buy and hold of these wrong? It is not.
The ETFs are doing the re-balancing for you, just build truly diversified ETF portfolio, balance once a year or less frequently based on simple allocation rules and wait it out.
Vendors like Vanguard are doing fantastic job of providing great ETFs with very low fees. Why pay advisors fees that could be north of 1 % for individual advisor, 2 % for your banks mutual fund?
You are naïve and inexperienced if you believe an advisor is involved only with managing a portfolio. A good advisor saves you significant tax, maps out the years to come, helps you finance kids and parents, advises on real estate, insurance, cash flow, savings, income-splitting, retirement and more. This lets you focus on career, family and enjoying every hour of your life, with less stress. — Garth
#96 Brandon on 10.02.14 at 8:26 am
That inflation calculator is a blatant lie.
30 k in 1964 are probably somewhere between 500 k and 1 million today based on commodity prices.
In 1964 oil was 3-5 $, gold was $ 30,
today oil is at 90, gold at 1.2 k.
CBC: “….Last week, Prime Minister Stephen Harper told a business audience in New York City that Canada is not facing a housing crisis. Bank of Canada Governor Stephen Poloz has acknowledged the risks in Canada’s housing market, but believes a soft landing is likely.”
*****************
Harper — still in denial.
Further to last…
I might add, since I don’t trust Steven Harper, he may just think he’s being shrewd.
“The game’s over. Hands off my Netflix”
http://www.theglobeandmail.com/globe-debate/the-games-over-hands-off-my-netflix/article20884087/#dashboard/follows/
You are naïve and inexperienced if you believe an advisor is involved only with managing a portfolio. A good advisor saves you significant tax, maps out the years to come, helps you finance kids and parents, advises on real estate, insurance, cash flow, savings, income-splitting, retirement and more. This lets you focus on career, family and enjoying every hour of your life, with less stress. — Garth
Garth, you are probably correct as it applies to the general public. I always assume people are financially literate and they are not…
I have a good accountant, built portfolio based on advice for a top professional but I have significant experience in the financial industry myself and prefer self-management mostly on the passive side, so far it has worked out great.
By the way to get the complete package as outlined above is expensive so it makes sense for the relatively rich. Most people probably won’t be able to afford it.
Wrong. That is what a client should expect to receive in return for paying a 1% fee (of assets invested, annually, potentially tax-deductible). — Garth
Climate change deniers are on “thin ice”. Pictures don’t lie.
http://news.nationalpost.com/2014/10/01/incredible-photos-show-35000-walruses-standing-shoulder-to-shoulder-on-alaska-beach-due-to-lack-of-sea-ice/
Did they take down that star article? It was head lining yesterday afternoon and now I can’t seem to find it…
So much for freedom of speech conflicting with monetary interests.
#94 OttawaMike on 10.02.14 at 6:42 am
Not all batman’s yield, out if first ear breached.
Their financial statements flat, yet it keeped trucking.
Right around the time of that call is when the Fed got heavily into buying equities, oh wait, that’s a conspiracy theory.
And I’m obviously inept at googling. Found the article again…
http://www.thestar.com/news/city_hall/toronto2014election/2014/10/01/campaign_notebook_real_estate_board_president_blasts_journalist_over_commissions_question.html
for those that are interested…
@ Sheane, could you give your percentage breakdown of how you would construct a portfolio? seeing how it is much easier to bash free advice than give it. Waiting…
#204 Snowboid on 10.01.14 at 5:59 pm
No question; was a time I was firmly in the doomer/gloomer camp along with the bulk of Garth’s Blog Dawgs. Which is why I am so relentless in playing the “Devil’s Advocate” on this blog, trying to help the rest of you see the light.
I know, birds of a feather flock together and my alternate point of view is not particularly welcome here. I know well my brashness is perceived as “trolling”. But really…
It just isn’t that bad and that which is can be ignored as it is not the driving force but rather a mere bump in the road.
Shawn,
No one ever talks about their unreallized losses.
“So, seven-tenths of the economy is reliant on folks who, overall, owe vast sums and (as I mused yesterday), appear to have the financial IQ of border collies. Clever, but not a lot of long-term planning.”
“Clever” is so short-term. Intermittent intelligence, often without long-term strategy and catalyzed by regurgitated slogans, clichés and meme- carefully spoon-fed by stealthy FIRE advertising.
Exactly what my dog mentioned to me yesterday. — Garth
Love to see an article on a housing downturn from somebody who is NOT selling books….doomers are always authors…they have to make bold and almost always wrong statements to get on the cbc to flog the books…. Garth this guys moving in your turf !
I am happy that more observers are beginning to share my view. The list includes major ratings agencies, the OECD and World Bank, Morningstar, The Economist, Capital Economics, Robert Shiller and most economists whose paycheques do not depend on saying otherwise. I don’t think any of them are selling books on it. — Garth
Realized gains and losses
Son of Ponzi said:
Shawn,
No one ever talks about their unrealized losses.
*************************************
Yes, I realize that. But it’s their loss.
There have been articles saying that Canadians have been feeling confident about their finances, partly due to their investments doing well.
TSX is down 7% for the high.
Will they feel less confident now?
How about Alberta? Energy sector is almost down 20%.
The TSX has gained 20% in the past year. Yeah. Feel bad. Especially after rebalancing and taking profits. — Garth
“The housing market will not ‘burst’ nor will prices quickly decline by 50%. Yes, it is a book-selling message. There are more realistic things to worry about. — Garth”
Based on his interviews he expects up to 40-50% drop over a period as big as 10 years
Anyhow I prefer to read his book than all the house pumping in the media
Hilliard MacBeth.
I wonder if that’s his real name or he was just fortunate to be born with a moniker that screams: “important financial author”.
I suppose Hilliard’s probably a straight up sort of dude, but I wont be buying his book because I already know exactly what it contains. We’ve covered that ground.
All we can say with reasonable confidence is that, for most people in major Canadian cities, residential real estate is extremely overpriced and unaffordable. It represents great risk and little value.
That’s a theme we can (and do) knock around here daily for free. Once again, Greater Fool delivers the goods while saving you hard earned book money.
————————–
BTW, I noticed a new trend in Vancouver yesterday. At a Fourth Avenue bus shelter I saw a huge advert for rental apartments in the West End in brand new 24-story purpose-built tower.
Someone has seen the future.
Why Interest Rate are Low
Sheane at 103:
Contrary to popular believes the current credit boom is not driven by savings. I gave some examples of debt to the tune of 4 trillions or more in Canada (federal and provincial governments, personal debt, corporate debt) while the monetary base is at 1.2-1.5 trillions, including deposits. If not for suppression of rates by central banks market driven interest rates would be much higher.
*****************************************
Correct that debt can and does exceed “money”. Much debt represents bonds which are not “money” but are savings.
One man’s debt is another man’s savings. Believe it. That debt is not owed to the tooth fairy. Though some is owed to central banks true. Not sure that is large compared to total debt in this world. But I concede some is owed to central banks who bought the debt by printing money.
Central banks certainly have had a big influence pulling interest rates down.
But there is also a huge glut of wealth available to be loaned. Whether it is demographics or what there is a lot of people with wealth to lend.
Both factors proably are at work
Understanding the reason for low interest rates is a fine intellectual pursuit and predicting rates could lead to money making opportunities.
There may be easier ways to get rich than by predicting higher rates which although logical has been a losing bet for a couple of decades now.
WILL IT END WITH A WHIMPER (NOT A BANG), INSTEAD?
That would be Canada’s on-fire housing market where everything is beautiful and low interest rates stilll allow pig-in-the-trough debtors to keep on dodging serious macroeconomic artillery because: they are, first, Canadian and, second, they are home “owners.”
So, are they really protected by those two virtues while some poor yankee schmuck is still paying the piper for “their” housing bubble’s unwind of 2007-09?
Not so fast there all you beavers, because…
…you need to check out this from CBC’s business show on Wednesday.
Hilliard MacBeth’s interview should be a must see for those who’ve recently purchased a concrete and glass condo box high up in yonder sky.
http://www.cbc.ca/news/business/housing-market-a-bubble-set-to-burst-hilliard-macbeth-says-1.2784511
ELSEWHERE IN MONEY-LAND…
The stock market, meanwhile, is doing the bidding of doomers everywhere (going down), especially since Europe’s central banker chickened out today on printing up more bonds, and so on, to attempt to “staunch” the economic disaster that is ALL of Europe right now.
The German DAX index was taken to the cleaners and it’s gonna get a lot more whatever as time goes by.
This is another economic knock at our bruised middle classes, I’m afraid.
What lies ahead?
Maybe St. Garth of Logical Outcomes knows?
@109 Kenchie:
it’s not global warming, it’s climate change.
How about this for your “thin ice”?
http://www.washingtonpost.com/blogs/capital-weather-gang/wp/2013/09/23/antarctic-sea-ice-hit-35-year-record-high-saturday/
continuation (sorry – hit the Submit button a bit too early):
There are global warming deniers, not climate change ones. Only very obtuse individuals will deny that climate change exists. It always existed and always will – with or without humans. It always killed some species and created conditions for the appearance of new ones.
You cherry-picked the story about walruses to prove your point. I cherry-picked the one about Antarctica ice to prove mine. We are both right – the climate keeps changing.
What did you want to prove?
#113Honey Dripper on 10.02.14 at 11:32 am
@ Sheane, could you give your percentage breakdown of how you would construct a portfolio? seeing how it is much easier to bash free advice than give it. Waiting…
What is you appetite for risk, expected returns and capital appreciation and investment horizon? How big is your portfolio?
#70 Italians love real estate on 10.01.14 at 10:20 pm
” buy and hold sucks”
I guess so when it comes to financial assets, I will take your word for it.
It has been great for RE investors for the past 50 years and counting however
If you hold for 50 years, you make nothing. Some strategy. — Garth
I did not mean to imply that you had to hold for the Full fifty years . I meant that if you had purchased land within the past 50 years or so and held for a period throughout those fifty years , you became very wealthy .
People I know bought land for a fraction of 1 percent 30 years ago for what it would sell today.
Buy and hold has worked quite mightily for them for sure
Why would a person invest in something that can be affected by some guys in black pajamas in the dessert?
What to buy in case of deflation?
Cash is king…so use any spare to pay down debt…you know the order; credit cards first, then LOC, then mortgages. Simple isn’t it?
My portofolios are down an aggregate 0.7% from abot august (last time I looked)
And for the love of pete, would the dog lovers here please read the entire sentence?! Collies are smart, but they don’t do a lot of long term planning. got that?
#120 Mister Obvious
BTW, I noticed a new trend in Vancouver yesterday. At a Fourth Avenue bus shelter I saw a huge advert for rental apartments in the West End in brand new 24-story purpose-built tower.
Someone has seen the future.
Saw a similar thing at West 13th near Birch (in between the hospital and South Granville). A totally-renovated rental apartment building, so totally I would have thought it was new construction, completely unoccupied with a large sign out front advertising rental apartments. Long time no see.
Garth,
what’s wrong with mentioning that you could offer your services for a 1% fee, instead of saying “hire an adviser”?
It’s your blog, your rules, your right to market your services and your decision of how many times to mention it on this blog.
I don’t mention it. — Garth
Actually, Garth will drive more clients to his business not mentioning it.
This is not a commercial site. I write this drivel because I enjoy it. — Garth
Oh, I know that. My point is more credibility is earned by not pushing a business agenda and an unintended consequence is more clients coming your way.
Kenchie # 109,
100 % agree. There is absolutely no denying, that the climate, is indeed changing.
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“At the time, the sea level was about 100 metres lower than it is today and the main island of the archipelago was twice as large.”
“That’s pretty much the exact archetype of what we were looking for,” he said. Based on radiocarbon dating from another archaeological site on the island, the weir could date back 13,800 years.”
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100 meter rise in sea level, divided by 13,800 year time frame = .007/meters or 7mm /1/4″+ per year, on average. This change my have also occurred, over a much shorter period.
Since we know, there was no fossil fuels being consumed, or pollution being emitted, 13,000 years ago, we can use this information to remember the planet is a living organism that periodically changes, sometimes very rapidly.
Humans being centrically minded, struggle to remember their irrelevance in the big scheme of things.
CBC Link:
http://www.cbc.ca/m/news/technology/earliest-sign-of-human-habitation-in-canada-may-have-been-found-1.2775151
Oh and those walry, are just snuggling to keep warm : )
#105 Daisy Mae
Would you like your politicians and government to spread panic instead?
The BEST INVESTMENT ADVICE you will ever get – directly from BUFFETT AND FOR FREE.
JUST A 2 MINUTE VIDEO
http://finance.yahoo.com/news/buffett-bought-stocks-wednesdays-big-134631323.html
The difference between buy & hold and rebalancing is usually 1% (advisor fee). Over many years, it makes a difference (just like those 2.5% pesky mutual fund fees).
Better make sure then that the rebalancing is worth more than 1% per year.
With the rise in the markets do you still feel that most investors should maintain a balance of 40% fixed income and 60% growth?
What percentage do you feel we should maintain in Cash?
Equity market swings have little impact on the decision to build a balanced portfolio. Cash? Just keep enough aroudn to seize opportunities when they arise – 5% is plenty. — Garth
“A good advisor saves you significant tax, maps out the years to come, helps you finance kids and parents, advises on real estate, insurance, cash flow, savings, income-splitting, retirement and more. This lets you focus on career, family and enjoying every hour of your life, with less stress. — Garth”
Oh yeah? Well, where do I sign up then? Seriously, how many advisors can actually do all that?
A year of dividends wiped clean in just 3 days. Wonderful…
#36 gladiator: “Garth, what’s wrong with mentioning that you could offer your services for a 1% fee, instead of saying “hire an adviser”? It’s your blog, your rules, your right…”
I don’t mention it. — Garth
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That is what is so admirable. He could…but he doesn’t. He’s so very honest and fair he will not take advantage. This is one man we can trust.
Surprised to see this headline today – huge increase in listings from Aug to Sep in Vancouver. What does it all mean??
http://www.news1130.com/2014/10/02/surge-of-people-listing-homes-in-metro-vancouver/
“Last week, Andy Yan, the researcher and urban planner with Bing Thom Architects, gave a talk at SFU’s downtown campus, during which he asked his audience a question.
Where, he asked, did they think Vancouver ranked among the country’s top 10 metropolitan areas in terms of median incomes for those between the ages of 25 to 55 with bachelor’s degrees or greater?
“It was the first time in my career of giving lectures,” Yan said, “when an audience gasped at the answer.”
The answer was:
Dead last.
And Vancouver wasn’t just last: It was last by a wide margin.
>>We are POOCHED, in Dampcouver.
#66 Poochmeister: “Garth, Stop dissing Border Collies.”
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Border collies are intelligent dogs…but they’re dogs. They can’t handle financial matters.
Happy half Century of Berkshire under Buffett
Buffett took over Berkshire on May 10, 1965. But he tracks his performance to the start of that first fiscal year which was 50 years ago today (give or take a day or two as sources differ on the exact date).
Since then the Book value per share (his favored yardstick) is up 732,084%.
The stock price is up about 1.2 million percent since he took it over. A 12,000 bagger and counting!
One interesting change has happened at Berkshire in the past year or less. He is now putting the Berkshire name on subsidiaries. Previously all acquired companies always kept their old names. Now some are starting to use the Berkshire name.
If Berkshire had its name on every company it owned people would be amazed at how often they would be bumping into Berkshire.
Doomers are wrong.
Real estate will be fine.
Doug Ford will win.
Harper will surprise, and win again too.
http://news.nationalpost.com/2014/10/02/federal-deficit-for-2013-14-more-than-10-billion-lower-than-first-projected-harper/
Told ya so !
What do any of those things have in common? Besides you? — Garth
“There may be easier ways to get rich than by predicting higher rates which although logical has been a losing bet for a couple of decades now.” – #121 Shawn
Predicting the direction of interest rates probably requires correctly predicting future inflation. Good luck with that. Predicting that CN and CP will continue to make bucket-loads of money running their duopoly on rail transport in a resource-rich country attached to the world’s largest consumer seems much more likely.
“A year of dividends wiped clean in just 3 days. Wonderful…” – #138 not 1st
A year of dividends reinvested in a discounted market. Even more wonderful.
new 5 year fixed at 3.04%….what??? over 3 ?!?!? OMG what will the hipsters do?!??!
#131 Blacksheep on 10.02.14 at 1:47 pm – it certainly did occur over a shorter timespan – likely less than a couple of thousand years (though the process isn’t straightforward – the loss of ice sheet weight causes the continental crust to rebound upward, altering rates).
Surprisingly enough, people who study the Earth’s climate are actually well aware that it changes over time – the real (not the strawman) question is whether the current change is over and above the natural background. All signs point to yes.
‘Climate change deniers are on “thin ice”.’
I am sure actual climate change deniers exist, they probably own oil and gas stuff. I do not.
For me, and lots of other silenced critics, it’s not that climate change is not happening, pretty obvious, but it is not happening because we burn fossil fuels.
There is a GIGANTIC fireball in the sky. We call it the sun. That is the source of the warming.
If it is oil and gas, why is the solution, proposed by our faux-leaders, to burn more gas, as much as possible even, and tax it?
My thinking goes far outside where most people go so here’s my thought.
The sun is the secondary mechanism involved in evolution. You learn about Darwin and Mendellian genetics and such, random mutations, benefits, increased fitness. Problem is: all the mutations happen around the same time and the changes in organisms occur rapidly. There is nothing random about it. In fact, I think it’s cyclic even. Almost every 25 000 years.
The last one?
25 000 years ago.
So there’s that.
There is someone, or something here that knows us better than we know ourselves.
mutations are caused by radiation
the sun radiates
it radiates hotter today than 200 years ago
so there is a powerful argument supporting my theory
The head of the world’s most prestigious financial body, the “Central Banks’ Central Bank” – The Bank for International Settlements – said recently the global financial system is currently “more fragile” in many ways than it was just prior to the collapse of Lehman Brothers, and that debt ratios are now far higher.
The do what this blog suggests – diversity, pay down debt, exit illiquid assets. — Garth
Food for thought (no pun intended):
In-N-Out doesn’t want to be McDonalds
http://www.bloombergview.com/articles/2014-10-02/in-n-out-doesn-t-want-to-be-mcdonald-s
@DaisyMae re: #142, “Border collies are intelligent dogs…but they’re dogs. They can’t handle financial matters.”
As compared to who? – the average Canadian?
The do what this blog suggests – diversity, pay down debt, exit illiquid assets. — Garth
Ridding debt is good, but diversifying within the banking system is not diversifying at all…
The bankers of all stripes have given Years of warning.
@Mike T, re: #149, ” There is someone, or something here that knows us better than we know ourselves.”
Who? — Garth Turner? :)
“Stocks just fell more. Bonds went up.” – I don’t get it. I thought bonds went down when there was a threat of rising interest rates. My bond funds all certainly went down. Where’s this thing that’s going to go up, that I might get some of it?
Garth, while I certainly agree with virtually all your parameters for a diversified investment portfolio, don’t you think it’s a wee bit misleading (not to mention rather pointless) to use past-five-year figures? I mean, virtually every stock market in the world hit its nadir in early-to-mid-2009, meaning that virtually every imaginable portfolio (except the ones stuffed full of bullion) has done rather well over the past five years. Give us a decade, at least, but preferably a back-tested twenty-five or thirty years.
Ten-year, 7.3%. That included the worst market crash since the 1930s. — Garth
Anson, can we please stop talking about a “Canadian” RE market? There is no such thing.
#96 Brandon – a decent wage in 1964 would have been $4.00 per hr or roughly $8000 per year or 3.75 times a persons salary for the $30,000 house. Today, salary to purchase the house you paid $212,000 would have to be around $56000 or $28.00 per hour. Seems that the house would have kept up with inflation at that price.
It’s time realturd’s wallets got whacked. Hard.
Oh, I forgot, it’s already happening.
Fools.
Bill Gable : Where did they think Vancouver ranked among the country’s top 10 metropolitan areas in terms of median incomes for those between the ages of 25 to 55 with bachelor’s degrees or greater?
The answer was:
Dead last.
that got my attention.
Mark Hanson writes about housing in California. He just wrote a piece saying that investors can leave the market very fast and he implies they are about to leave now.
this applies to Vancouver because it is being sustained by investors
Smoking man says he’s been posting here for 5 years & has 27 followers. Will Smoking man be up to 54 followers 5 years from now? Will Garth pass the gauntlet of this blog down to the next generation of Greater Fools by then? Surely, Garth will be right one of these years. But when?
#48 crowdedelevatorfartz on 10.01.14 at 8:55 pm
“The president of the Toronto Real Estate Board has quite the attitude of entitlement.
I dare say THAT exchange may come back to haunt him.
Hubris and the fall………..”
They truly believe themselves. This industry’s level of arrogance is astounding. I’ve seen it repeatedly, most notably in a classroom setting. When asked about reducing commissions in order to get a listing, this teaching puke actually said “I never negotiate. Ever. If they want to list with me, they pay full commission.”
These days, as others on this blog have experienced, many call out of the blue to “update their records”. This weirdness seems to have started earlier this year. All ooey-gooey gross, however, back around the turn of the millenium, two of the realtards we contacted never bothered to show up for a confirmed appointment.
Soooooo professional…..just don’t scratch too deeply.
http://wolfstreet.com/2014/10/01/this-chart-shows-how-you-get-screwed-in-the-stock-market/
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While the Stock market is likely the best place to make a return on your money using buy and hold stategies. Remember that Wall street is still Ground Zero for Criminal dishonesty in the entire world.
Ever notice how the term “real estate agent” is usually preceded by the adjective “sleezy” or “greedy”? No, just me?
What a joke. I don’t trust those guys as far as I can spit. Had to work with two in the recent months for various things – one is ok so far, the other one was a greedy piece of sh*& (yah I’m still somewhat bitter)
Might be a necessary evil in some cases but it’s too bad they don’t work harder at building a better reputation.
#104 Sheane, why exactly do you believe that “real” inflation should be based on selected commodity prices, i.e. gold and oil? Why not silver, which has barely doubled in price since 1964 (from $9.00 to about $19.00)? Or how about corn, which is less than five times as expensive (a buck a bushel in 1964 and around $4.50 now)? Or maybe copper, which is up 8.5 times (35 cents in 1964, three bucks now)? Silver and corn haven’t even kept up with the inflation figures you say are a crock (Bank of Canada: $100 in 1964 = $761.82 in 2014) while copper has marginally outpaced inflation. Not to mention that commodity prices are quoted in US dollars, which adds another wild card to the equation. So stop the cherry-picking, please.