Oops. Better update the D thing.
For the last couple of years I’ve been telling you to be more worried about deflation than inflation. Yeah, I get it. Everything costs more, especially if you’re on a fixed income or a hipster sweating through a bidding war on a condemned semi on a hot street.
But that’s not really inflation. At least, it’s not structural, and you should expect more of it now that the dollar has sunk to the 89-cent level making Harleys and lettuce more costly. As mentioned before, it’s entirely possibly to have rising prices in a world where growth has stalled and the economy is starting to deflate, with dropping demand and production. This ain’t good, because incomes lag costs and standards of living fall – further curbing demand.
Outside of the US, which is doing just fine, the world is in tough shape. In Germany, the only bright spot in Europe, industrial production’s abruptly fallen and business confidence along with it. In fact the ECB (central bank) is pumping money as hard as it can and has already cratered rates. Twelve per cent of Europe is unemployed – twice the jobless rate in the US, and Russia’s turning into a self-inflicted mess, where the ruble is rubble and stocks have tanked 20%.
The IMF today said the world faces a long period of sluggishness as it downgraded growth prospects. More significantly, it confirms cheap money is fuelling a credit bubble – that’s inflated Canadian real estate and overvalued stocks. Dilemma. Do rates go up to stop the unsustainable borrowing binge or stay low to keep the economy alive? No win.
So slow growth – even in China where the real estate gasbag is erupting – is killing commodities. Oil at $89 messes with Alberta and gold is barely above $1,200, after losing $700 in three years. This has the TSX bleeding, and should make homeowners in Calgary edgy.
Now we hear building permits in Canada fell by 27% and the retail business is tenuous. Target’s in trouble and Sears is for sale. Yesterday I mentioned 175 Canadian newspapers, 40 buildings, a printing plant and 2,400 employees changing hands for peanuts in a deal proving the media canary just croaked.
Meanwhile, says BMO (and a certain pathetic blog), half the housing markets in Canada are a swamp. No big price declines yet, just lacklustre activity and a tough time for sellers. Plus anemic job growth, high youth unemployment and a trade surplus that just shrivelled into a deficit.
What’s it all mean?
Think of a vice. The IMF and the Fed say US interest rates are still going to rise next year since things are moving ahead there. If that happens, the bond market will jack mortgage rates in Canada. But there’s no reason to believe the economy will be better or incomes higher – especially with low commodity values and elevated consumer prices. Thus, housing affordability drops and (I expect) prices, too. This is the middle class vice – squeezing net worth out between higher daily costs, falling equity and stagnant income. Millions will be caught in it.
How to skate through this scenario?
First, money gets more valuable when deflation occurs – but the kind we face is a pale version of the 1930s. It won’t last that long, either. Just enough to tip the balance against real estate, send shock waves through the oil patch and make thousands of kids wonder why they ever listened to their moms and bought condos.
Equities could outperform, with US markets leading the pack based on sustained corporate profitability and steady, unremarkable economic growth. Europe’s obviously a bargain. Emerging markets have a role to play, so long as exposure is risk-adjusted (the more volatility = the lower the weighting in your portfolio). Fixed income capital values may fall a bit as American interest rates creep higher, but demand for preferreds paying 5% with a dividend tax credit should mitigate any decline – and you still get paid every three months for owning them.
So, financial assets should be fine. No tanking. No soaring, Just the usual volatility and annual gains consistent with the past decade or so.
But more importantly, write this down:
Borrow short, if at all. Financing a depreciating asset with a long-term loan in a deflationary era is nuts. That probably includes houses in most Canadian cities. Not only are values likely to flatline or fall, but you’re paying back a loan in dollars that are more valuable than the ones you borrowed.
Trash debt. In times like these, get rid of non-deductible borrowings. Inflation raises incomes and makes loans easier to pay. Deflation does the opposite. Besides, if things go to hell and Vancouver houses do fall in value by 72%, you want the cash to buy one, right?
Pass on the risk. The best strategy when the Big D comes to town is to rent. This means landlords take the risk for potential depreciation of property values, while a struggling economy will cause market rents stabilize or even decline. Sweet.
Deflation is an ugly beast, with the power to destroy an economy faster than anything else short of war. We’re not there yet. But some days you can feel its breath.
184 comments ↓
I think I’ll start hoarding Cottonelle. Just kidding, I can’t afford the good stuff.
D is scary….
Watch out for the big D !!!
Lol seriously where do you get your blog pictures from ?
The question is how much of US stock price is reality and how much is due to stock buy-backs. I saw something a few days ago that said most cash rich US companies are devoting more cash to buy-backs than anything else. This tells me that they’re out of ideas and insiders are looking for ways to monetize prior to the wheels falling off.
As to the US unemployment rate, the flip side to that is that the jobs are crappy minimum wage jobs and that the labor participation rate is at a record low, meaning huge numbers of people have simply given up looking for work and are no longer counted in the “official” unemployment rate. Add them back in and it’s closer to 10% not 5.9%. Besides, anyone not find it stinky that BO announces a wonderful, fantastic, unbelievably good unemployment rate right before the US mid term election?
Evidence? WalMart just canned health care for their employees working less than 30 hours/week due to Obamacare costs.
It ain’t that much better in the U.S., they’re just more adept at lying to themselves. But then again, you don’t have to be good lookin’ to wina beauty contest as long as everyone else is just uglier than you.
the middle class Canadians are getting squeezed because the rich keeps getting richer, while the middle-class is getting crushed. there is no housing bubble, at least not in Vancouver and Toronto.
With cheap money, ya gotta pay the piper eventually…the piper always get paid….even when he’s out of breath.
Unlike knowledge, a little inflation is a good thing.
It was Sheik Yamani who kicked off price inflation big time in the early 70’s when, as spokesman for the OPEC oil cartel, he announced that oil prices would quadruple overnight!
Today trade unions ought to be leveraging real pay increases for their many members to get wage inflation started.
It that likely to happen? I don’t think so.
Alwyn
They think they want the big dirty D, they crave it, until it’s in front of their face, then they’ll realize it’s actually quite a scary, painful thing..
Be careful what you wish for…
Comment of the day: I have a very experienced Trader in the commodity pits in Chicago.
Telling.
Today’s wrote of the month:
“How in the H*ell do you get in front of a market like this?”.
He’s been trading since 1968.
No one ever looks particularly smart when the subject of these articles, but the last line in this one (money will appear because I need it) is something else:
http://business.financialpost.com/2014/10/07/millennials-lured-by-record-low-borrowing-costs-spurs-canadas-condo-boom/
Thick thumb and spell check did me in:
Pardon the repeat: In English this time.
Comment of the day: I have a friend who is an experienced Trader in the commodity pits in Chicago.
Telling.
Today’s quote of the Month:
“How in the H*LL do you get in front of a market like this?”
He’s been trading since 1968.
.
Garth, I feel I need to correct you.
First there absolutely is a solution to the housing bubble that doesn’t involve changing rates. Simply tansfer the liability off the CHMC books and back to the banks. The banks will immediately recognize the amount of unsecured debt and ask every mortgage holder to bring in an additional 20% of the mortgage immediately. Problem solved.
Secondly, the US cannot fully recover while the rest of the world goes to hell in a hand basket. Everything is too interconnected now.
What I would do for Vancouver real estate to fall by 72%!
Just heard a conversation from 20 mid 20s guys on the Seabus today…..they’re buying a condo downtown for $550k and hoping to flip it for $700k.
To quote one of the guys “We just gotta make it chic….”
Hipster Chic…..awesome.
Even financial assets might not escape if we are looking at a “new normal” whatever that is. Global growth rate this year has been downgraded from 4.0% to 3.8%.
Might be some bargains if the TSX keeps on sliding….8000 anyone?
Borrow Short?
Borrow short, if at all. Financing a depreciating asset with a long-term loan in a deflationary era is nuts. That probably includes houses in most Canadian cities. Not only are values likely to flatline or fall, but you’re paying back a loan in dollars that are more valuable than the ones you borrowed.
***************************************
True but the underlying mistake as I suspect you would agree is buying a depreciating asset at this time.
Also what is meant by borrow short here? It sounds like short term amortization. Great is you have the income for that. Going with a short term interest rate on a 25 year amortization will not help the problem?
Meanwhile Americans are advised to buy a house NOW and finance at 30 years. Keep in Mind America is different because they can get out of their 30-year mortgages if rates rise.
Warren Buffett quoted today:
“It’s (a 30 year mortgage) a 30-minute instrument if you’ve been wrong on interest rates and it’s a 30-year instrument if you’ve been right on interest rates,” says Warren Buffett, scratching his head over why folks aren’t lining up to get mortgages.
Buffett also said he expects a rebound in U.S. house building.
He thinks people should be buying and taking 30 year mortgages because if rates rise they win if rates fall they can refinance.
Rule No. 1: Always assume Buffett is correct
Rule No. 2: Don’t forget rule number one.
So, buy U.S. home builder stocks. Now. I already did.
I have 80k for a down payment ready should prices become sane vs. rents. I’d like to invest it as part of a balanced portfolio in the meantime, because I figure even if the markets go down and take my down payment with it in the event a housing downturn, that financial markets will likely recover much faster than the housing market will. Plus, a balanced portfolio would lose only 20% in a worst case scenario repeat of 2008. Does this plan make sense or am I off track?
#5 Ex-Cowtown
You may want to read the jobs report again. Underemployment is down, work week hours up. Most jobs created are full-time, part-time jobs are shrinking.
As for the timing… if the report was negative, you’d be saying it’s all going to collapse any time now, but it’s positive, so they must be lying to us. Man, just can’t make the doomers happy.
Let us witness the death of fossil fuel, oil guzzling, industrial man. It won’t be quick or painless, the fall of civilization never is. Around and around she goes…
@#6 Singaporean Investor
“there is no housing bubble, at least not in Vancouver and Toronto…..”
+++++++++++++++++++++++++++++++++++
I didnt realize medical marijuana was allowed in Singapore.
“Outside of the US, which is doing just fine, the world is in tough shape.”
The US is not doing just fine.
Way better than us. — Garth
Nice post Garth. Although I am sure many Canadians would find it scary. The unseen value of being diversified, balanced, liquid, and debt free is always priceless to me in so many ways. Most unfortunately, few can think, let alone live this way. And for a million excuses too, but not 1 good reason. I always put my Freedom First. Staying out of any ones control, priceless. Garth is helping us with financial advice on how to live life without becoming vulnerable to the masses way of handling their finances, which is insane. Just look world wide right now for the proof. Garth spoon feeds us that information too, so we can hopefully come to see the financial insanity that destroys people, and not become a victim ourselves of financially insane thinking. The current hundreds of millions of people who went down the path of financial suicide is living proof. Don’t go there.
In Canada we have experienced inflation as well as deflation over the last few decades, for example
Deflation: electronics, clothes, tv’s, stereos etc. You can buy clothes today like Polo by Ralph Lauren for a fraction of the cost you would have payed in the 80’s.
Inflation: Energy, food, taxes.
Basically the cost (necessity) of living is inflating because, I need to eat, heat my house, put gas in my car and pay my ever increasing tax bill.
I on the other hand can do without tv’s and gadgets.
For me I have experienced inflation in the need catagory and deflation in the want catagory
Garth, well stated advice for the working weary. Deflation is not our friend, neither is inflation. There is a bit of financial engineering that goes into most corporate balance sheets, and hence through their stock prices.
How to survive the near term? Kill borrowing if you can, kill off those high cost credit card balances if you have them.
Not using the card, and paying 10% of the balance every month kills the debt in 11 months. Cheapest growth in stagnant times! My best wished for all the working (and non-working) families out there. Unemployment sucks!!
#19 Godth
“Let us witness the death of fossil fuel, oil guzzling, industrial man. It won’t be quick or painless, the fall of civilization never is. Around and around she goes…’
++++++++++++++++++++++++++++++++++++
You may be one of the “Gods” but please do something about that lisp.
It’s making your predictions a tad …… morose.
Yup! and…. We’re all waiting for you to post your short position shares for FB, SmokingGirl!
From yesterday
#109 SydCixel on 10.07.14 at 1:16 am
“And who gave approval for “CMHC itself handed over $69 billion to the banks and in return took a mess of high-risk mortgages off their balance sheets?”
Was it not a certain minister of finance known as “F”?”
But only after running it by his boss, Stephen Harper. He’s the SH in the acronym “WTSHTF”
I agree with everything except that the US economy is doing ok.
Unemployment stats don’t account for those no longer looking for work aka given up, or are no longer eligible to collect benefits.
Shadow stats peg the true US unemployed at 22%.
It’s a house of cards that’s coming down.
Trash debt.!
Does this mean I should pay off that pesky mortgage before investing in this (what sounds like) volatile market?
I have 1.5 years left on my 5 year term at 3.7% … 150k left
thanks
“Buffett also said he expects a rebound in U.S. house building.
He thinks people should be buying and taking 30 year mortgages because if rates rise they win if rates fall they can refinance.
Rule No. 1: Always assume Buffett is correct
“
Buffet is quite delusional these days it seems. And Buffett’s only real claim to fame was being highly leveraged into the US economy when it was hot. That will be his downfall as well, assuming he lives long enough.
Thank you Garth. You speak the truth.
From what I’ve read from, the US recovery is better than the rest of the world. Having said that, it is precarious at best. A monetary collapse in China (due to a housing bubble built on speculation) could be the black swan event that collapses the worlds financial system.
Debt is the last thing people should have right now.
Outside of the US, which is doing just fine….. Really ?
The Last I checked they had to shamelessly print more money just to pay their (Govt.) Staff and keep their websites up.
Appearances can be deceptive – all that shines is not Gold !
“Simply tansfer the liability off the CHMC books and back to the banks.”
That’s not ‘simple’. That would effectively be viewed by the financial community as a sovereign default, as CMHC’s obligation to pay on defaulted insured mortgages is an obligation of the Government of Canada.
Paying ~$200B to bail out the CMHC will be difficult, but nothing compared to the consequences of a complete loss of confidence in the Government as a borrower.
#26 Grantmi on 10.07.14 at 8:37 pm
You called me Smoking girl… Are you an idiot.
A while ago I made references to, girly man, feminized man.
I was beat up and trashed by, lesbians, amazons, organic food toting bicycle chics, mom’s and daughters and granny’s all gave it to me.
I learned my lesson. I never used those words again on here.
Smoking Girl…. Oh man, they are coming for you… The way you used that word, demening and sexist, HUGE….. Oh boy..
Run while you still can…
So the big D may start throwing its weight around so people truly notice. People with liquid assets will probably pick up quite a few bargains so not necessarily all bad. One thing I’m wondering about though is how demographics will influence the mix. Canada has roughly 9 million baby boomers, the ‘youngest’ of whom will turn 65 by 2031. Now maybe the boomers will do things differently, but usually by the time most are in their late 50’s or early 60’s they have acquired pretty much all the ‘stuff’ they ever wanted. Many in fact begin to try to rid themselves of said excess, especially as they look to downsize their housing & haven’t the room for all that stuff any longer. If people are not buying but rather selling & not replacing what was sold, would that not exacerbate the slowing economy? Or at least draw out the time the economy slows down? Has not Japan had difficulties with their economy for decades despite historically low rates & is not Japan the leader in the aging population sweepstakes? If Japan’s difficulties can be at least in part be blamed on the increasing senior not actively consuming in large quantities any longer population, will not Canada, the USA et al also have the same issues?
Man, Conqueror of Nature, Dead at 408
http://thearchdruidreport.blogspot.ca/2013/12/man-conqueror-of-nature-dead-at-408.html
The last years of Man’s career as representation of the human race were troubled. “The war against Nature wasn’t going well by then,” Clio explained. “Man’s forces were holding onto the most important provinces and cities, but insurgencies were springing up all over—drug-resistant microbes here, herbicide-tolerant weeds there. Morale was faltering, and a growing fraction of Man’s forces in the struggle against Nature no longer believed in what they were doing. They were in it for the money, nothing more, and the money was running out. Between the costs of the war, the costs of Man’s lavish lifestyle, and the rising burden of his substance abuse problem, Man was in deep financial trouble; there’s reason to believe that he may have been engaged in outright fraud to pay his bills during the last few years of his life.”
Lots of religious discourse this evening at the greaterfool website.
Yes, I can agree that we are heading for a period of deflation. In fact, I would say we are well into it. I’ve been watching a few homes here in Victoria. They are languishing on the market with the price being discounted another $10k every week or so. New condos built in 2012 still for sale, but isn’t it almost 2015. I laugh when the realtors say the appliances have full warranty when I query they are already 3 years old.
The Big 3 are giving trucks away it seems, with the 2015s out but with lots of 2014s sitting on the market. Cannot believe how the price of clothes have fallen.
You’re right Garth, I get it but I know many don’t.
crowdedelevatorfartz asked yesterday…
@#100 Calgary Car Guy
Hey! Do you remember the huge hail storm in the summer of 1981?
GSL Chev City with its acres of new cars?
Hammered!
——————————————————————
Strange that you ask me that. I remember that storm very well as I was working at Universal Lincoln Mercury across Bow Trail from GSL! We had about 650 cars on our lot at the time and the only one not dented was a classic ’49 Ford that was traded in, lol. One of our top salesmen at the time went outside to try to rescue his prized Lincoln and got beaned by a hailstone. He dropped to the ground and was bleeding. A couple of other salespersons had to go outside and drag him back in.
The other very memorable thing for me in that storm was it was the only time I have ever seen “ball” lightning. Scary as hell. Giant balls of fire rolling through the clouds! Very clearly and vividly. They can actually drop down to the ground and roll, setting everything on fire in their path! Sounds crazy but true.
That storm was bad but the worst summer storm I ever saw in the Calgary area was one about 5 years ago. A little girl in downtown Calgary got killed by flying construction materials in downtown Calgary. I was living in a mobile home surrounded by trees at Chestermere (east of Calgary) at the time. Big branches were flying off the trees and beating the sides of the trailer. Non-stop lightning for about two hours. Scary as hell.
#”DeflationIsAnUglyBeast”… #LaundromatLessons… #SavedByTheBell?
http://youtu.be/33yN5wizvWA
Well what is it then..Deflation or inflation?History records that the most severe periods of inflation in developed economys have usually been preceeded by deflation,Why is this?? in deflation folks/buisnesses have the incentive to hoard cash which in turn reduces the velocity of money,economies start sucking the hind tit and in response the gov starts to ramp up money creation flushing the banks{inflating stock markets} and when this finally hits the streets along with all the hoarded cash from consumers hyperinflation rears it ugly head.
As the money dam breaks consumers will rush to commodities as they wont want to hold devalueing dollars,,,,,Is it deflation or inflation,or both??
Its Starting to get interesting out there.watch japan!
#30 Mark
glad to know I am on a website where we have someone who knows way more than Warren Buffett
IT’S OFFICIAL: Atlantic City’s Bankrupt Revel Casino Sold For $110 Million
It’s fine with me if the local Canadians cant afford buying properties in their own country. Let them get financially screwed. But there are more than enough wealthy foreign investors like me + few rich Canadian folks to sustain this RE bull market.
Alberta has lots of debt based activity going on and I am sure it is just getting rolling. Please all you huddled masses, pay up your debts early so We here in sunny Alberta can put it to use. Oil is capital intensive so low rates are a great time to finance those mega projects, ditto for housing and needed infrastructure. It is great fun working profitably with others money. Some refer to it as God’s work. I would not go so far.
Any thoughts on Northern BC? Unreliably informed by realtors® in Prince George that it’s hot right now.
Garth would you recommend fixed or variable rates right now?
Why would you not lock in 2.8% for five years? — Garth
Eh hmm! ok!
But.. off topic…. where is your post of your SHORT position on FB??
Dow fell 270 points, TSX down 1.3%.
Margin calls and stop losses are increasing.
XEG energy ETF down 2% in a single day and fast approaching the 52-week low.
I love days like today, but few do. A condo won’t depreciate 15% in 3 months, but the TSX could. It’s also impossible to peek at your condo “value” every day, like worried investors do.
This is why many don’t like investing.
The effect of oil prices on Calgary will be interesting. I wonder how long the companies there can keep paying the high salaries. Maybe longer than we think.
#25 crowdedelevatorfartz
Morose? Don’t worry about it; “it’s different this time”, so I hear anyway.
Garth preaches a prudent message but I am afraid he doesn’t have a good handle on the extreme level of delusion out there especially among people who haven’t seen a downturn.
I mean here in Regina we have people thinking houses will go as high as they are in Vancouver and their rational is that we are just catching up to the rest of the country and its the next silcon valley here.
I am afraid deflation will have to step in to restore reason. Pain is an effective motivator.
Mark, the Buffett Basher
Mark at 30 you just lost any remaining credibility.
John at 42, good comment.
Mark you clearly have some knowledge and intelligence but you don’t limit your posts to those probably many cases where you have good knowledge. Instead you want to take on everyone every time including, now, incredibly Buffett.
This is an example.
Where to start…
In his early 20’s Buffett turned about $10k into several hundred k while working at a lowish salary in Omaha and then New your. He came back to Omaha at age 25 bought a house and was prepared to support his family with just his own investing but then ended up forming a hedge fund style partnership.
The hedge fund was up 2611% from 1957 through 1968. The partners were only up 1403% because Buffett got 25% of everything over 6%. It never had a losing year. During this time the Dow rose 186%.
In 1969 the Partners were cashed out but received about a third back in Berkshire shares and perhaps more counting Diversified Retailing which was later merged into Berkshire.
Berkshire was around $45 at this time and has since risen to $205,000. that’s a 455,000% gain since 1969. Combining the two gives a total return in the order of 12 million percent for Buffett although “only” 6 million percent for the original limited partners.
His record is so far off the charts it is not funny.
Any explanations for his success that fail to recognize his tremendous skill are just rationalizations.
Buffett has noted that Berkshire’s stock has fallen at least 50% from peak to trough on four occasions. But that was in no way a downfall. Berkshire remained financially healthy each time and the shares recovered each time.
Anyone not learning from Buffett is letting a great opportunity pass by.
Go back and study Rule Number 1.
King of the Fractional Reserve Banking Nutbars
Wasted a half hour watching Martin Wolf on the Lang Exchange. Total nutbar. All bank bashing nutbars should look for his books.
#44 Grantmi on 10.07.14 at 9:55 pm
DELETED
Did we also not mention Buffet owned the railways and made tanker cars.
Take a look at a 10 year chart of CP and CNR to give you an example of how well he’s done with rail.
Mark your a nutjob
Bloomberg:
“Debt payments would eat up 52 percent of income for people holding mortgages insured by the government if loan rates rise by 2 percentage points.”
http://www.bloomberg.com/news/2014-10-07/millennials-spurring-canadian-condo-boom-bet-on-rates.html
Test, go back a few days and you will see the deleted link.GRANTMI
I wasn’t born yesterday, UCC thing going on..
I wish I was “delusional” like Mr. Buffet.
But seriously, the best part about Mr. Buffet is that he seems to be very modest and down-to-earth. That’s quite an achievement given his success. John Bogle is another good example of a down-to-earth financial guru.
“#30 Mark
glad to know I am on a website where we have someone who knows way more than Warren Buffett”
Yeah, he knows everything. Just ask him.
Howdy dawgs,
Seeking some advice, I;m looking to pick 5 sectors to diversify, what and which symbols would you?
Only looking for big companies no start up risky crap.
Thinking 1 bank, 1 utility, 1 consumer, 1 energy, 1 railroad or automaker
Chow and Thanks
If that wingnut Doug Ford gets elected, maybe he’ll start building subways subways subways; thus increasing the cost of Toronto housing to an infinite degree, but also refloating the local economy.
Who am I kidding? There is no money for subways. No new transit projects will be completed in the next fifty years in this country that aren’t buses.
“A condo won’t depreciate 15% in 3 months, but the TSX could. “
A condo can easily depreciate 15% in 3 months. In 2008 for example.
“Any explanations for his success that fail to recognize his tremendous skill are just rationalizations.”
As I said, Buffett adopted a certain devotion to dogma which has served him well. And he used an enormous amount of leverage to effectively bet on the expansion of certain large-cap US firms, particularly in the financial/insurance sector. Most of his investing has not been in a rising interest rate environment, where most of his leveraged investments would come under severe pressure. He largely eschews investments that perform well in a long-term rising rate environment, such as mining, and even, to some extent, technology.
There’s no denying that such has served him well in the past, but I wouldn’t confuse luck with skill. As usual, past results are not an indication of future performance, and dynasties do not last forever as they are bound to hit logical and mathematical limits.
“But more importantly, write this down:”
Garth, is it okay if I copy and paste your advice. I have forgotten how to use a pencil. Or, you could just tweet the advice so I can view it on my gadget.
#14 Chaddywack – who says he’d kill for a 72% correction.
Just curious. Do you have $250,000 in cash to buy that currently-$1-million Vancouver home? And if you do have that cash, will you have enough to eat too, if you’re suddenly unemployed? Because if prices crash 72% banks won’t be giving out mortgages and jobs willbe scarce. You don’t get a crash like that without a lot of other nasty side-effects. I think prices will go down 50% but am NOT counting on being able to get a mortgage if they do.
@#39 Calgary Car Guy
Yeah that was quite a hail storm. I lived up by SAIT and had quit my job that day.
Hopped off the bus and was walking home……whack!
“A golf ball? WTF?” I thought……
Whack! Whack! Whack! Whackwhackwahck! JeezusKeeerist ! HAIL!
I ran like the coward that I am for refuge under some elm trees and proceeded to watch cars, windows, roofs, buses, everything get smashed by golf ball sized hail. I barely rememebr the thunder and lightening because I was so amazed at the visually surreal destruction occuring everywhere I looked.
It lasted for about 30 minutes and then the sun came out….
Calgary weather.
gotta luv it.
:)
Sometimes I think Mark is really Garth’s pseudonym, so he can comment on his own blog.
I don’t know man,
ECB is not printing money, they only keep negative interest rates.
Market is down 8 % form tops and that is serious matter.
Investing in current conditions? I am thinking on sell half an stay on the sidelines…
@#36 Godth
I’d rather have my molars extracted without novacaine by a spastic dentist using a dull , rusty spoon than read a link to a fictional story about “man”.
Ebola in Spain now…….stay tuned.
With the big “D” are you still thinking we should maintain
60% growth?
40% fixed?
5% cash?
I have read with a deflation cash is king?
Mark, Mark, Mark…
Careful who you listen to about Buffett.
It’s not worth my time to educate you.
For god sakes is 60 years of success not proof enough?
Berkshire in fact has never been greatly leveraged. Yes the insurance float provides some leverage. But Gibraltar-like financial strength is how Buffett describes it.
You surely HAVE confused luck for skill.
Stick to areas where you know something. I have seen evidence you do know some things.
But your knowledge of Buffett is a beebee gun to my Bazooka.
#38 Bobby
Same situation here in the Surrey/South Surrey/Langley areas, probably exponentially worse given the thousands of condo, townhome, and teeny-tiny pressed cornflake rowhomes piling up on the market as we speak. There are probably @ 15-20 “new” developments in the immediate area that have been trying to sell “new” units for 2-3 years. Many new builds are taking years to sell, if they sell at all. Seeing more developments gone stale, behind schedule, and with work stopped, turning into ugly abandoned, overgrown vacant lots. Mexican stand-off time with new build pricing not helping, developers are in complete denial, offering every kind of perk thrown in as long as they don’t have to lower prices. It’s going to be an interesting winter. Signs of deflation everywhere. First time ever seeing Starbucks coupons for cheap drinks arriving in the mail, even they sense the average consumer is completely tapped out now. Lots of reverse-mortgage, debt-consolidation, and hungry realtor brochures in the daily mail. There is a tangible note of desperation in the developer marketing materials that is increasing with each mailer. Strange days indeed.
Thought: Is everyone going to want to live in Canada?
Think about it:
Europe is going to hell. A generation of disenfranchised young Europeans may be looking for a new place to thrive as Brussels sucks the life right out of them. I personally know some that already have (the vanguard of a new wave of Euromigration?) and they are looking more and more at Canada.
China has its eye on Canada with FIPA. We have lots of stuff they need. Look for even more Chinese coming ashore as business between Canucks and Hans increases. The first ethnic PM may be name Mrs. Leung.
Furthermore, China may become the epicentre of a new Asian economic crisis. Not to mention a political crisis if they decide it’s payback time against the Japanese for Nanking. The last Asian crisis and the handing back of the British drug port of Hong Kong to China drove droves of Asians to Vancouver and the GTA.
The Middle East may be blowing up as the Saudis do everything to get a pipeline and Obama obliges with a pretend war against ISIS. Even more Arabs and Persians might like to live here than do now.
California and many other places are losing their precious aquifers. Canada has more fresh water than everyone else––combined, I think. Pipelines? Likely, but what if the problem becomes acute too quickly? Like now.
Climate change may create environmental refugees from all over the world. Canadians know how to live in the heat, the cold, the dry, the wet. Also, if the world warms, that could be good for Canada. Longer growing season. More arable land. More real estate.
Obamacare is a scam, tempering employment and raising the cost of insurance. Medicare is stretched but functional.
In short, Canada is an island of political stability, environmental versatility, abundant resources, social cohesion, religious freedom, quality education. And Garth Turner. What’s not to like? Since the early 2000’s we’ve seen historically high levels of immigration. Could we see a super spike in the near future?
Sure, we just may go through a very severe depression. But could the Prozac be more people looking for a new home? What might that mean for Canada. The good? The bad?
I dunno. Just thinkin’.
#55 Arfmooocat – Railway tonnages are one of the greatest measures of how the economy is doing and Buffet knows this and one of the reasons for his move into the railway business. With price of oil going down and fuel costs being one of the biggest expenses for railways, this will only help to boost their bottom line.
Ya the US is doing just fine, close to 100 million folks not working, YEEKS!!!!, what happens when those folks down south stop getting the plastic card in the mail to pay for their food, did anyone see the last years black friday sales, people ran over eachother for cheap goods, when QE stops, and when People are forced to find a way to survive, things will change big time.
I am in Asia, Thailand and the malls are packed, things are happening all over the place, the Gov doesn’t tax the small business, and people have to work, nobody b gets anything for free, and that the way it should be, no bails outs, especialy big banks. If there was to be bail outs, it should have been for the people, but I don’t agree with that either, NOBODY SHOULD NOTHING FOR FREE, and what they did down south was to bail the rich, over and over and over, it hasn’t stoped, Iceland did their human duties, the bond holders lost and the bankers went to Jail, nothing here will change until we restore some sort of order, and rule of LAW, after 2008 nobody went to jail and the middle class is always made to pay.
what a life we life in, many recommendations by Garth are bang on, but only in a real free market, now people are scared to invest in anything, and I don’t blame them, because of the casino market atmosphere we life in, so take your chances and roll the dice, place your bets and hope for the best, meanwhile we have some to big to fail that can see the gamne before any of us do, how is that right, the fastest computers showing them the gamne ahead of us all, and they win, win win, and we are left with nothing, and they belittles us into thinking we are not smart and don’t undertsand this complex market, well my friend it is not that complicated, they just set it up that way to keep us , stupid, image the Detroit civil workers, lost 80% of their pension.
it’s not complicated, it is just a casino, and the house is set up to win, so go ahead and place your bets, you can go up for years, but can loose it all in one shot.
Buy farm land and pay shit off, and keep cash on hand, and hope you are one that is fortunate enough to have a good job, Wall Mart is not a good job.
It may be that we should have taken some lessons from the great depression of 1920-21…..maybe the world would not be in such a mess as it is currently in.
http://mises.org/daily/3788
TSX already 7% off it’s all time high which was just a few weeks ago, every day the miners, base metals, oil & related services getting whacked like crazy for most of the past two weeks. This correction has also been very unkind to some of last years’ Canadian Tech High Flyers.
This is where one matures as an investor. Nowhere to hide as commodities caught in death spiral, and “defensive” like bonds, REITs, utilities all are “interest rate sensitive”, in anticipation of upcoming fed hikes, and small cap growth stocks take a pounding, as dumb money flees into “safe” (and already overpriced) dividend blue chips.
Hopefully you’re well diversified so you can tune out the mugs game of all that market noise. Get out your chequebook or, at minimum, hang on. If you want to keep some powder dry, let’s see how low the bargains can go!
Give me a break with deflation. The price of everything you buy are going up pretty much every time you go buy it. Price are not even stable… They are going up and fast. There is no denying it.
I hope youre short US stocks as of now. Big wipe out in progress as QE nears an end. The money has been made, tme to bail or go short. Better prices coming in coming months.
Poor Garth, so smart, yet so… well smart but this deflation inflation thing is hard! Especially in the globalized economy.
Wages are deflating in North American because we are exporting all the jobs to China and Mexico where wages are slowly inflating but are still low in comparison.
Hockey equipment is a good example. When Bauer and CCM made all that stuff in Canada it cost a lot of money to suit your kid up for the national obsession. Now Rebock makes the skates in China and they don’t cost any more than a pair of soccer shoes. So is that inflation or deflation? Rink fees are local though, and they continue to go up up up and now everybody thinks their kid will play in the NHL if they just spend a little more on private lessons, so there is some sort of inflation there.
Stocks and commodities go up and down and up and down, but the lows are always higher over the long term and the highs are always higher. $10 oil has been put in the rear view, we’ll never see it again, and probably not $20 or $40 either (maybe $60 but I doubt it), but the $140 high will fall to higher highs. Gold might go back to $800 but it will also eventually pass $1900 (but I wouldn’t hold my breath. Give it 20 years though and it’s a sure thing.)
House prices could really deflate when mortgage rates rise and I believe they will absent wage growth. However the long term trend in all prices is always up up up if governments are allowed to borrow money they don’t have to repay. It can’t work any other way. this isn’t the same as when they borrow money they do repay, there is a difference there. For example if you buy a Canada savings bond (do those still exist?) then one day the government pays you back with either new borrowings or increased taxes. That’s not especially inflationary although it might be a bit. But if the central bank, which in Canada the government owns, buys the bonds it’s just money printing and it is extremely inflationary if the central bank can’t eventually find a buyer for them that has actual money. However this process can’t pump up wage growth if everyone prefers to ride a Yamaha rather than a Can-Am or a Harley. And even if you ride a Harley now you a riding mostly Japanese and German parts. I think they still make the frame and the gas tank. And the boss paint job. But they certainly don’t make the brakes or the shocks. Them would be the same ones you find on your Yamie only twice the price.
It’s all over the place. Who makes the shifters and the brakes on your fancy Rock Jumper mountain bike? Shimano, same as on all the other bikes.
Heck K2 is even making their skis in China now. Wage deflation here, inflation there. You can still buy skis made in Europe. My Elan 666’s (boss skis by the way but a bit heavy) are made in Slovenia. Where the heck is that?
There was a time when they made pennies out of copper but now it’s too expensive to make them out of zinc. This trend will continue indefinitely but it’s generally a slow process, with highs and lows that are much more disturbing. When house prices correct to wages many people will remember it for a long time. But we’ve already forgotten the penny.
Why would you not lock in 2.8% for five years? — Garth
With variable at 2.14%, some people like to roll the dice. It could be years in Canada before prime goes up .75%, and even then you’re only at break even.
Maybe Calgarians are already edgy.
I watch the listings for my old neighborhood in Calgary. The last couple of years, homes were selling as fast as they were listed. Presently, there are five slightly stale listings and one of them had a price reduction.
Indeed, the hysterical sell off is hysterical. Thx for all the sweet deals this week, and maybe next, on good company shares that have been put on sale. Yay for hysterical sellers.
Yesterday on BNN I heard some fool with a new book about the end of money say that the world was actually going to come to an end ‘soon’ , that it ‘was different this time’. If I only had a nickel for every time I’ve heard that in my long career as an investor. Yay, for the stupid lemmings who consistently panic and puke up shares like hair balls.
Did you hear? Canadian oil is no longer dirty and we can expect to multiply our sales to Europe by astronomical amounts compared to today’s numbers. Yay for the angry climate change goons who want to tax carbon out of the market. Ain’t going to happen….not with the EU cutting the greens off at the knee’s.
Climate change hysteria is dead in the rarefied circles of the EU Parliament. And panicked fools sold SU and COS like it was toxic waster yesterday, thank you Mr Market!!
I agree with Garth on one thing, that dividend paying blue chips will outperform, they have a history of increasing dividends. Plus in reality with the opposite of the hysteria is happening and economies are improving, the latest sell off will prove to have been the best buying opportunity in the past three years. Yay.
So, the entire market, including every balanced portfolio in the N. American system has fallen around more or less 4% in the past month, if you can’t handle a minor amount of volatility, you’d better pull out and put the money in a can under your bed.
@retired boomer
“Yes, Garth I too remember the days that Newspapers contained journalism”
You read the Federalist papers as they were coming out?
@Shawn #60 from yesterday
“Here they have characterized the CMHC buying back CMHC guaranteed mortgage backed securities as a subsidy. That would only be true if the securities were worthless. how could they be worthless when guaranteed by the CMHC.”
What were they worth if sold to private purchasers?
If the guarantee was good, why were not private purchkasers stepping up?
Would Ubers entry into the Vancouver bring inflation or deflation?
The taxi companies are slipping brown envelopes filled with cash to municipal politicians to prevent free market capitalism.
Please support Uber.
It does look like we are heading into a period of stagnation. I can’t think of a winning strategy but I do know that even if averages decline there are still winning ideas. My goal is to find them. The GFC is still fresh in my mind as the stock market then fell more than I thought was possible. With this in mind, I have been paying down my Line of Credit to reduce my leverage to the equity markets. I think having dry powder and waiting for things to settle out is a good idea for now. I also remember being 30; underwater on my mortgage with 2 toddlers, wife at home and unemployment staring me in the face during 1983 in Calgary. My stress level was through the roof and I don’t wish that on anybody. I have loathed Elliott and socialist thinking ever since.
On a historical note, Alberta has been the only province to declare bankruptcy (in the 30’s) giving rise to the Social Credit mantra which still haunts the province today. Newfoundland (and Labrador) declared bankruptcy 3 times as a colony of Great Britain. This was probably the major reason they decided to become a province of Canada (1949?) in a close vote.
Politics – what a game.
I agree with your deflation outlook, but your ETF recommendations scare me.
No sign of a RE correction yet based on sales of a very well known major builder in the GTA this past weekend.
45 out of approximately 80 townhome units sold at Bayview and Elgin Mills Richmond Hill, all at 900k ++ crazy. All Asian buyers.
Axiom condo project, Adelaide st. downtown T.O, 145 units sold out of approx. 280.
Aurora townhome project 3/4 sold out at new all time high prices for the area.
Nope, keep looking for the decline people, keep on looking.
@46 Mark…. put that thought out of your head, right now. The longest three years of my life were spent in that godforesaken s***hole of a city.
Deflation for the top 1% perhaps
History shows deflationary influences nail workers harder than owners, as they lead to reduced wages and jobs. Careful. — Garth
https://www.indiegogo.com/projects/road-to-justice-and-accountability-phase-ii#activity
Irvin needs some financial support to help in his fight against CRA. Please read the Indiegogo story.
Sorry Garth I scrolled too far down with the first paste up.
#88, they are all fools and will get killed buying a $900k townhome NORTH OF TORONTO!
70 shawn on 10.07.14 at 11:40 pm
Mark, Mark, Mark…
Careful who you listen to about Buffett.
It’s not worth my time to educate you.
==========================================
not willing to pontificate on buffet?
my my, things really are different here, eh?
The price of most everything you WANT is coming down as a consequence of demand and the ability to meet it through technology and economies of scale.
The price of most everything you NEED is going up as a consequence of demand and an increasingly relative limited supply.
In the last 100 alone of the approximate 200,000 years humans have inhabited this planet the population has grown from 1 billion to 7 billion. You do the math…
It is intellectually dishonest to speak of environmentalism without discussing population control.
We truly are nothing more than a virus upon the face of this planet, copulating to promote our own species growth eventually to the point that will extinguish us.
Ebola or a pathetic preoccupation with a pursuit of material things (cars, Harleys, big screen TVs, bigger houses)… it seems something is going to turn most of your lives into an all too meaningless short journey.
You don’t know when your time is going to come to an end. If you did it sure would make retirement planning a whole lot easier. But we are no better than any other species on this planet. Ney worse for virtually all others live for the day not for a future that may never come. You think that makes us better? I think it is what will be our undoing.
No one on their death bed said “I wish I had worked harder” or “I wish I had saved more money”.
#84 Setting The Record Straight
No, didn’t read the Federalist Papers as they were coming out. I’m older, but no contemporary of Madison, Hamilton
or John Jay. I have read the Constitution, does that count?
#79 nonplused on 10.08.14 at 1:00 am
There was a time when they made pennies out of copper but now it’s too expensive to make them out of zinc. This trend will continue indefinitely but it’s generally a slow process, with highs and lows that are much more disturbing. When house prices correct to wages many people will remember it for a long time. But we’ve already forgotten the penny.
_____________________________________________
While I generally agree with your statement that we are exporting good paying jobs to China and Mexico some jobs will never go. My company build high tech electronic logic control systems related to military, civil and aerospace. The general thought process here in our industry is that these local jobs are never going overseas. God help us if we ever got into a war with China, oh excuse me could you ship us some weapon guidance circuit boards before you start launching missiles at us?
Here is an interesting tidbit. Canada mints coinage for dozens of foreign countries.
http://www.coinscan.com/for/foreign.html
I miss the penny………………
I miss the dollar bill…………….
I miss the two dollar bill……….
Deflation is an ugly beast, with the power to destroy an economy faster than anything else short of war. We’re not there yet. But some days you can feel its breath.
_____________________________________________
I feel another war looming on the horizon. Wars always provide stimulus and create jobs. War is money. Sad paradox isn’t it!
29 Waldo on 10.07.14 at 8:42 pm
“Does this mean I should pay off that pesky mortgage before investing in this (what sounds like) volatile market?
I have 1.5 years left on my 5 year term at 3.7%”
Extend the term; your lender will blend the rates and you’ll likely wind up with a fresh 5-year-term at less than 3%.
#34 Smoking Man on 10.07.14 at 9:01 pm
#26 Grantmi on 10.07.14 at 8:37 pm
You called me Smoking girl… Are you an idiot.
A while ago I made references to, girly man, feminized man.
I was beat up and trashed by, lesbians, amazons, organic food toting bicycle chics, mom’s and daughters and granny’s all gave it to me.
I learned my lesson. I never used those words again on here.
Smoking Girl…. Oh man, they are coming for you… The way you used that word, demening and sexist, HUGE….. Oh boy..
Run while you still can…
_____________________________________________
Smoking Man don’t be a chickenshit just say the word Smoking Girl, so what! I think that this blog now has an open position for a Smoking Girl. Now we can have the complimentary version of Smoking Man from a female point of view. Could be refreshing!!! Alright Smoking Girl wheres are you out there, we need your input to balance out the insanity here!
everything fine in the housing market:
https://ca.finance.yahoo.com/news/canadian-housing-starts-rise-september-cmhc-123037894–business.html
………………………….
The six-month trend is running above the level consistent with demographic fundamentals, which is around 185,000, Mazen Issa, senior Canada macro strategist at TD Securities, wrote in a note.
“Unless the low interest rate backdrop changes, housing starts are unlikely to correct much in the months ahead,” he said.
With the Bank of Canada not appearing to be in a rush to tighten policy, TD sees starts only gradually easing to 192,000 by the end of the year.
……………………………….
Poloz will keep running the Ponzi at teh expense of the Ca dollar.
DBPPs are superior to DCPPs in the vast majority of ways. The idea that DCPP cut costs for companies and gov’ts is the only palatable reason to make the switch. And it’s a myopic rationale. But the long-term consequences of having an economy with predominantly DCPPs is not good as they are relatively terrible mitigating longevity risk, less good at achieving diversified risk-adjusted returns, and diversified contributions, and economies of scale. All DCPPs are good for is padding the bottom line of insurance companies and other managers of DCPPs.
One day, we’ll wonder where all the long-term investors went. They are slowly becoming extinct.
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/defined-contribution-pension-plans-more-costly-study-finds/article20971427/#dashboard/follows/
In addition, as more DBPPs go the way of the dodo bird, the average Joe’s housing equity will (and has) make up a larger percentage of retirement funding. We are seeing this with boomers today, and most likely their kids and Gen X. Thus, retirement savings will be volatile and risky for the economy on the whole.
http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/decline-in-housing-market-puts-retirement-savings-at-risk/article20971607/#dashboard/follows/
“Sometimes I think Mark is really Garth’s pseudonym, so he can comment on his own blog.”
Lol, good one, but I have neither facial hair, nor barely even half of Garth’s age.
Can’t wait for this to happen:
http://capitalistexploits.at/2014/10/replace-these-people-with-an-app-already/
#BeastlyWednesdayEclectica…
#StillTheHomeOfTheBrave…
[Reuters] – Letter from Fayetteville: Why this military town is having second thoughts
…”When a health insurance company announced it was setting up a call center downtown, more than 1,000 people applied for 107 jobs.”…
http://blogs.reuters.com/insight/2014/10/08/fayetteville/
#TheTaoOfTaipei…
[AlJazzera] – Taiwan’s elderly vs ghost-fearing landlords: Old Taiwanese struggle to rent apartments because landlords worry they will die at home and drive down property values.
…”In Taiwan’s capital Taipei, a real estate investment frenzy driven by affluent China-based expatriates has made the average house cost more than 15 times the average annual household income. It goes without saying, then, that many low and middle-income Taiwanese have been having a hard time finding a roof over their heads.”…
http://www.aljazeera.com/indepth/features/2014/10/taiwan-elderly-vs-ghost-fearing-landlords-201410772743611542.html
#BoxingSuburbia… #TaleOfTwoRoos…
[UK Guardian] – Kangaroos get into boxing match on quiet Australian street – video
http://www.theguardian.com/australia-news/video/2014/oct/07/kangaroos-boxing-match-australia-street-video
No worries chaps, we will be doing just fine too, once our RE markets will have their cathartic moment
TSX, why stop here, don’t be shy, go 6% lower and knock off all of 2014’s gains.
Devil’s A. # 94,
Solid post.
#69 Wilbur on 10.07.14 at 11:27 pm
With the big “D” are you still thinking we should maintain
60% growth?
40% fixed?
5% cash?
—————
I like a guy who always gives his 105%.
#99 Holy Crap Wheres The Tylenol on 10.08.14 at 9:54 am
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We did have a ‘Smoking Girl”, that woman from the beaches that hates her sons….I think she was banned from the blog.
#94 };-) aka Devil’s Advocate on 10.08.14 at 9:36 am
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There are more humans alive today than have ever existed….how’s that for mind-boggling.
#93 liquidincalgary on 10.08.14 at 9:35 am
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ya, Buffet is the guy who said to sell gold and buy farm land.
Sounds like a real kook to me.
#82 Uncle Chuckles on 10.08.14 at 2:24 am
———————————————–
In 1999 the ‘new millenium’ was going to cause planes to fall from the sky.
In 2001 actual planes falling from the sky was grounds to pick a war on a country that had nothing to do with the terrorists (who were from Syria), and dump interest rates to zero to prevent economic collapse.
Then we had the fiscal cliff (2, 3 times?).
In 2008/2009, the GFC was a bit scary, but now countries are on board with collaborating on stimulus (something that didn’t happen in the 1930’s).
Now stock markets are down… what’s the reason for the world ending today?
Russia’s turning into a self-inflicted mess, where the ruble is rubble and stocks have tanked 20%.
Anyone know the exchange rate between the Russian ruble, the English pound, and the American dollar?
It takes one pound of rubles to buy a dollar.
#23 Anson on 10.07.14 at 8:25 pm
This was well put and I have thought the same thing for quite a while … and it aint gonna change.
Folks, this is all by design. A fiat monetary system with low interest rates benefits those with the closest access to credit: the banks.
They use the credit to buy up everything of value. Everyone else gets crumbs – think high end restaurants serving the elite. All industries are merely supportive of the biggest financial players. This is why real estate is most expensive in major cities – that is where the banks are headquartered, and where financial jobs are located.
The middle class existed when we had a tight-monetary system constrained by gold. Value was created through WORK not through the issuance of paper. The moment the decoupling occurred in the 1970s the middle class began to deteriorate. Real incomes haven’t risen since then – 40 years of declining living standards!
The is no incentive for businesses to invest in capital equipment and improve productivity under this system. The only goal is to generate revenue in the simplest way: the issuance of credit and debt. This is why manufacturing has disappeared from Canada.
A strong dollar would mean that manufacturers could afford to purchase MORE commodities because they would be cheaper. They would invest those strong dollars into upgrading equipment. They would ensure productivity was constantly increasing in order to ensure they could sell their goods on the international market IN SPITE OF our strong dollar.
There is a conspiracy folks. The conspiracy is to destroy western democratic values. The big players on the international stage want to conduct themselves with impunity. They don’t want oversight and they want to know everything about your private lives. They don’t want you to have recourse when you are wronged – they want you to have NO RIGHTS but the right to shop and spend money. Preferably, money you don’t have so you become a debt slave – to them.
Demand a strong dollar. Demand we go back on the gold/silver standard. When silver was in our money, a gallon of gas cost 25 cents! Heads up, that same 25 cent coin from 1960 can STILL buy you a gallon of gas today!
There will never again be an asset-based currency system. You are as delusional as you are simplistically wrong. — Garth
Gambling big this time around. Switching to all equity portfolio for next 6 months. IF there are good gains, will chop off some holdings and buy fixed income stuff.
Need feedback. Please n thanks
Population
There are more humans alive today than have ever existed….how’s that for mind-boggling.
***************************************
Interesting, just what percentage of people alive today have never existed?
Anyhow I think I know what you mean but I understood the cumulative total of all dead people in history exceeds the number alive by a fair margin (like maybe 10 times). But they had maybe a 200,000 year year head start.
#116 calgaryPhantom on 10.08.14 at 12:30 pm
As Garth says, never exit an asset class fully. About a month ago, I re-weighted my portfolio from about 20% Canadian Equities down to 5%. Feeling pretty smart about that right now.
Cato the Non-Accountant
The only goal is to generate revenue in the simplest way: the issuance of credit and debt.
**************************************
said the man who apparently never took an accounting course in his life… on top of that in this context issuing credit and issuing debt are the same thing.
Sorry to hear you have stagnated for 40 years. Shoulda bought some bank shares I guess. It’s not too late.
You are correct that banks are the most profitable companies. Check the Forbes Global company list most at the top are banks. This has long been the case. Berkshire by the way is number 5.
Why do people moan the loss of the middle class? Don’t they want to be upper class? Go big or stay home?
Condo prices in downtown Vancouver (only in the downtown peninsula) still percolating up. New builds, e.g 999 Seymour….380k for 500 sq ft and NO parking stall. If you factor in 60k for a parking stall, that works out to $880 per sq.ft! Oh but you get a Juliet balcony (useless)…woohoo! All sold out except for 2 or 3 bachelor units (430 sq ft) with such bad layout that obviously even investors don’t find appealing. But what do I know….even my friend from HongKong bought one of the 500 sq ft NO parking unit. She just sold her HK 400 sq ft unit for $700,000 Cdn $ (!) and needed somewhere to park her windfall. And we think Van prices are nuts.
Went to the grand opening of Amazing Brentwood phase 2 ( phase 1 all snapped up), and the only white person there was Bob Rennie, the marketer for the project. Oh, I forgot, the photographer too. From the swarm of people, it looks like phase2 will also sell out in a flurry when sales open. But I have to admit this is desirable in that the skytrain station is accessible through the lobby.
‘White person’? — Garth
How a housing market decline could put Canadian retirement savings at risk
http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/decline-in-housing-market-puts-retirement-savings-at-risk/article20971607/
A housing market decline would put the retirement plans of many Canadians in peril, the CEO of Sun Life Financial is warning.
Baby boomers are too fond of debt and they haven’t experienced a period of rising interest rates before, Dean Connor says. Some of them think they’ve been smart in the housing market when really they’ve been lucky, he added in an interview Tuesday.
His advice to Canadians, especially those approaching retirement, is to pay down debt now and, if they have a mortgage, to lengthen the guaranteed interest term on it. The goal should be to be debt-free by retirement, Mr. Connor says. He will be making this point during a keynote address Wednesday evening at a pension reform summit in Toronto.
While Mr. Connor says he is not predicting a crash in home prices – in fact, he’s not sure what will happen in the Canadian housing market – he is certain that, at some point, interest rates will go up. And, all things being equal, higher interest rates usually drive real estate values down, he says. That frightens him because consumer debt levels are high and more than half of Canadians’ assets are tied up in real estate.
“The most vulnerable – i.e., the 1 million Canadians whose current debt servicing costs are 40 per cent or more of disposable income – may have to sell their real estate, crystallizing losses and setting back their retirement plans,” Mr. Connor says in notes for his speech. Others will find that it’s harder to save for retirement once mortgage rates rise.
Garth,
You are always one step too late, it is buy time soon as the solution is stimulus spending . We went from 85 billion per month to zero in way to fast a move.
sdl
#115 Cato the Elder, good post (minus the conspiracy part). It is fairly obvious that the monetary system has been corrupted to the benefit of the government elites and their cronies at the bank (why else would the government insure $900B of subprime mortgages at the CMHC for a mere pittance in compensation relative to the enormous risk!).
Fortunately, all fiat systems end up collapsing, and usually what ends up taking their place are systems of money, sometimes fiat, sometimes metallic-backed, that are far more fundamentally sound. And the real producers end up being handsomely compensated while those whose skills are limited to flipping paper are usually rendered paupers.
‘White person?’….Garth
I don’t know what the current politically correct description is anymore.
I think it is “people.” — Garth
Winnipeg Ground Zero #2
http://www.winnipegfreepress.com/business/New-homes-market-sees-big-drop-after-spike-in-August-278528561.html?cx_navSource=d-tiles-4
Listings are through the roof and new homes starts way down. Forget T.O. and Vancouver. Winnipeg Ground Zero and not just for mosquitos!
Forget it, the stock market is sliding again. Even energy stocks. Is going to be a blood bath by Christmas…
stop speculating on the markets people….isn’t a tad immoral to make $$ on other’s people back???
buy a house and live your life normally -like 50 y back
http://www.financialpost.com/markets/sectors/index.html
#112 Bottoms_Up
==========================================
Shawn? that you hiding behind a nom de plume?
I was told about this video at the coffee shop this morning.
http://www.youtube.com/watch?v=8lIdHNqX71Y&feature=youtu.be
Shawn: Why do people moan the loss of the middle class? Don’t they want to be upper class? Go big or stay home?
of all the stupid things you have ever said, this is the stupidest
Oh yes, FOMC CHICKENS OUT ON RATES HIKES
sights the strong dollar.. And the 3%Trashing markets took.
When are you ungrateful bastards going to start taking me seriously.
OK never, but god damn it my calls are good…
interesting read:
http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/decline-in-housing-market-puts-retirement-savings-at-risk/article20971607/?click=sf_globefb#dashboard/follows/?2322676
#110 Bottoms_Up on 10.08.14 at 12:00 pm
#99 Holy Crap Wheres The Tylenol on 10.08.14 at 9:54 am
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We did have a ‘Smoking Girl”, that woman from the beaches that hates her sons….I think she was banned from the blog.
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Scarey and at the same time sad. Too bad, but could she spell? Did she have the UCC connection thing going?
As I said, Cheers savers and people on fixed income!
No interest rates increase but likelihood to see some inflation, even encouraging it. We are so indebted that can’t afford interest rates increase, it is that simple.
Stock market (the only game in town) rebounding strongly after the Fed’s announcement (see bellow).
Garth, I give up, there would be no meaningful interest rates increases in short to mid term.
Whoever bought up to 2010 and can hang on to his/her job would be fine even in this gigantic bubble.
Yes, we all will pay with inflation and lack of quality jobs later on but frankly speaking, who cares?
Retirees are screwed anyway, they would be just double or even triple screwed.
And if we continue on this path of ‘insuring’ mortgages for people with no money we will actually see house prices increasing for a while despite all the fundamentals.
I give it two years and then would be moving on to US or Europe with all my investments.
Really not in a mood or condition to pay for baby boomers or penniless owners of million dollar homes bought with 100 %+ debt.
Drink while the party lasts but leave before the bill arrives.
https://ca.finance.yahoo.com/news/fed-officials-express-concerns-market-over-reaction-rate-180105752.html
WASHINGTON – Federal Reserve officials agreed last month that they would begin raising interest rates only when measures of the economy’s health and inflation signalled the time was right.
Minutes of the Fed’s discussions at the Sept. 16-17 meeting showed that they have moved away from linking any rate change to any specific period.
The officials were also worried that any change to the wording of the guidance could be misinterpreted as a fundamental shift in the Fed’s stance on interest rates that would trigger an unintended rise in market rates.
For now, the Fed decided to leave unchanged its statement saying that any increase in the short-term rate that it controls would not occur until a “considerable time” after it ends its monthly bond purchases.
https://ca.finance.yahoo.com/video/krugman-janet-yellen-making-exactly-040000591.html
One of the hottest topics in the world right now has to do with the strength of the U.S. recovery and when the Fed should raise rates. In a recent interview, Paul Krugman explains that the Fed should be in no rush to hurry, and that it should “see the whites of inflation’s eyes.”
#115 Cato the elder: “The[re] is no incentive for businesses to invest in capital equipment and improve productivity under this system. The only goal is to generate revenue in the simplest way: the issuance of credit and debt. This is why manufacturing has disappeared from Canada.”
Partly right.
There certainly *is*incentive for business to invest in capital equipment, R&D, training, etc. The trouble is that there is no incentive for the money-lenders to do so.
making paper from paper is a fools game and an doomed ponzi scheme. of course this is obvious to anyone with a shmeck, but for those who consume only what the MSM, educational system and their fathers tell them they can’t see it.
They own all the presses that count.
If US FED can pump the money into the system so that everything is fine now, why can’t the rest world follow the same suit? esp. why can’t Canada FED do the same?
Would that turn the deflation off for another X years?
Damn Norwegians, they are so smart.
http://www.bloombergview.com/articles/2014-10-08/europe-s-petrostates-fall-into-the-oil-trap
And on the pucture Yellen is wearing a necklace made of:
https://ca.finance.yahoo.com/news/fed-officials-express-concerns-market-over-reaction-rate-180105752.html
1. plastic
2. stones
3. rolled paper dollars
4. gold
Why would you want money backed with jewelry? — Garth
#121
But I have to admit this is desirable in that the skytrain station is accessible through the lobby.
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Perfect for a quick get-away for the burglars.
Did Bob Rennie mention that in his glossy brochure?
#120 Shawn,
Why do people moan the loss of the middle class? Don’t they want to be upper class? Go big or stay home?
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Well not everybody can stand on the top of the mountain at the same time Shawn. This is why a thriving middle class is truly important if one wishes a sustainable and healthy society including in economics and financing. Also said society should be so that even the lowest class is above survival levels.
Also if most or all of us were propelled into the upper class, that would just become the middle class with no lower nor upper class above or below.
Also not all people wake up daily in life thinking about how to make another $1.00. Sure money and a decent income is important but in reality most people including many of those who are delusional into thinking that they are entitled to be on top of the mountain, really do know most won’t.
It’s ok if one goes through life NOT being rich with money etc. Life is full of other riches, money is ultimately just a vehicle. Many rich people live and die miserably. Many are good actors to look as if life is so wonderful for them. Many a so called middle class person is also killing the vibrance of life by living beyond their means. Many low income folks are miserable too as the are unable to find or maintain a base floor so to speak.
BUT! in all classes we have those who are satisfied, in balance , in harmony with money, life, possessions and living.
It is amazing how well one can live life once they move beyond subsistence as long as they keep it as best as they can in perspective. Money and for many the never ending search to acquire more than they ever may need nor are able to credibly use can consume their time and life. It’s just a tool, an important one. WE ALL SHOULD RESPECT THE POWER OF MONEY! But I do not live my life only on the thought of money.
I am not rich, just a regular Joe like most of us here and most of those that we all know. I don’t get what I want all the time. I have squandered credit at times but thankfully not destructively so in my past. I have taken to heart trying to better find a balance between income, investing, wants, desires and spending. I may still make mistakes but I am never going to be reckless to the perversion of especially loose credit, marketing and hype B.S. with all too many peddling shite that I and we do not need nor often do not even really want all the time to me and us.
I’ve grown to value CASH! Cash equals freedom, credit equals obligation. NEITHER THE TWO SHALL PASS!
I’m ok with living my life and maintaining such in my household more to finding a better balance than for mindless (over) spending and never ending thoughts on how to get another G. Damn buck! In the end we all leave this place as we came, with nothing to take with us.
I bet most on their death beds before kicking it so to speak, rarely talk about the money they have and the shite they bought. Most will probably talk about things they did, people they knew and experiences big, not so big and even small that they did and shared with others.
Yin and Yan, trying to find it and keep it in balance is the real secret to life.
“There will never again be an asset-based currency system.”
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100% Agree.
Golden handcuffs, why would they?
Stocks up, US $ down after Feds issue garbage like this:
“Several participants thought that the current forward guidance regarding the federal funds rate suggested a longer period before liftoff, and perhaps also a more gradual increase in the federal funds rate thereafter, than they believed was likely to be appropriate given economic and financial conditions,” the Fed minutes said.
“In addition, the concern was raised that the reference to ‘considerable time’ in the current forward guidance could be misunderstood as a commitment rather than as data dependent,” they added.
“However, it was noted that the current formulation of the committee’s forward guidance clearly indicated that the committee’s policy decisions were conditional on its ongoing assessment of realized and expected progress toward its objectives of maximum employment and 2-per-cent inflation, and that its assessment reflected its review of a broad array of economic indicators.”.
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The pronouncements of the Oracle of Delphi were more concise.
Damn Economists.
“There will never again be an asset-based currency system.”
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I hear India is hoarding as much Gold as they can.
It may take time, but is possible.
No, it’s not. — Garth
Why would you want money backed with jewelry? — Garth
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Just pullling your leg, Garth.
I don’t really care about gold.
Miners might have good upside though.
My spouse shopped for COFFEE FILTERS at the NOFRILLS store…used to be a package of 200 then last year down to 150 and now down to 100? Package is half the size but only 20% cheaper so that means the price went up.
About RENTS in the GTA…why is it all those new 500 square foot SHOEBOXES are asking the same $1,400 rent ..Oakville; Markham; Milton; Vaughan how can there be pricefixing in newbuild condos?
Scaling New Heights
45 North said:
Shawn: Why do people moan the loss of the middle class? Don’t they want to be upper class? Go big or stay home?
of all the stupid things you have ever said, this is the stupidest
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Thank you, it is always good to reach new heights of achievement.
Us regulars gotta chum the water once in a while to keep things interesting.
#142Son of Ponzi
It sounds like Nostradamus, They are walking on a thin rope up in the sky and can do very little as they are boxed in liquidity trap. The only thing they can do is talk.
The significance of the message is big though, they clearly indicate that there is no intention to raise interest rates unless significant inflation shows up and the bond market revolts,
Knowing that the CPI is rigged and there are still mysterious buyers of treasuries out there it seems they think there is still some time.
The big problem with this approach is that they are slowly and gradually but surely depleting a very scarce resource of trust and influence, once depleted it is gone and then…
One can only lie or mislead that much. Then what one says becomes irrelevant. It is the fear that restrains the market players at this point. Once the fear is gone… The only thing that would remain is capital controls.
Giving it 3-5 years. But the stock market will survive.
“Storytelling does have the potential to rekindle an ideal of progress. The trick is not to confuse pessimism with sophistication or, conversely, to demand that optimism be naive. The past, like the present and the future, was made by complicated and imperfect people. Recapturing a sense of optimism requires stories that accept the ambiguities of history — and of life — while recognizing genuine improvements.”
http://www.bloombergview.com/articles/2014-10-08/peter-thiel-is-wrong-about-the-future
#111 B_U that is a popular fallacy, but incorrect. Estimates are 107 billion people have ever lived; a ratio of 15 dead to every 1 living human today. University of Google.
http://www.dailymail.co.uk/news/article-2097038/Are-really-people-alive-today-lived-Earth.html
#94 D/A we are a virus? Stop watching the Matrix.
Why would you want money backed with jewelry? — Garth.
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In post war Austria and Germany, gold jewelry was a hot item.
One heirloom necklace for a sack of potatoes.
The farmers made out like bandits.
Yeah, this looks a lot like post-war Austria. Grow up. — Garth
Re: #119 Shawn
You are correct that banks are the most profitable companies. Check the Forbes Global company list most at the top are banks. This has long been the case. Berkshire by the way is number 5.
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Banks aren’t the only ones with access to central banking credit. Large corporations like Berkshire also get preferential rates, as do home builders, insurers, etc. Ever notice when you walk into a retailer how they always want you to sign up for their credit card? Why do you think that is? The banking system is a big CARTEL. Free lenders (people who legitimately save money to lend out) can NOT compete with a system that is protected by laws and that can issue credit by decree (fiat). Bad money drives out good when the good (gold) is outlawed – please read about this it is called Gresham’s Law.
I used to respect Warren Buffett – and he has some sage advice – but then I learned that he got rich through cronyism. He didn’t get rich merely through merit – much of his wealth is deprived through his close relationship with government. Not only that, but much of his seemingly well-intentioned opinions, such as him not ‘believing in dynastic wealth’ and supporting inheritance taxes, is only for his OWN BENEFIT. He buys up a lot of companies that are sold simply because the burden of inheritance taxes would destroy them. These are small/medium sized FAMILY businesses that suffer – not his large corporate holdings. He ALWAYS ensures he gets the appropriate loopholes for his benefit (read about the Burger King tax inversion controversy). He isn’t a friendly grandfather, he’s a wolf in sheeps clothing.
He’s a great example of someone who benefits from big government and wants to perpetuate it – which is a shame, given the honest, upstanding beliefs of his former congressman father Howard Buffett (read about him, you will be shocked how much disdain his Warren had for his fathers honesty). Yes, his father understood the monetary system and how gold would prevent the kind of dishonest wealth accumulation his son acquired.
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Re: Garth
There will never again be an asset-based currency system. You are as delusional as you are simplistically wrong. — Garth
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Why is China buying up all the world’s gold? Current estimates are that their reserves now exceed the holdings of the USA. Of course, their public disclosures are significantly less. But if you add up all their domestic mining (which is never exported), as well as imports through Hong Kong etc. their holdings are massive.
The truth of what is happening is that Western central banks are undermining their own populations by selling off their holdings in secret. This is a TEMPORARY measure to keep the price down, which will only last as long as there are still reserves to sell. Once they run out, there will be massive price shocks and people are going to be VERY angry.
I agree with you insofar that politicians are not going to make the choice willingly. I believe it will be forced upon them by the market. You can ignore the markets but the markets won’t ignore you. Sooner or later prices are going to get out of hand, especially when China divulges their holdings and starts making serious demands about the current US dollar reserve system.
The whole world is suffering as a result of having to prop up the US dollar system. The US exports it’s inflation abroad by forcing countries to adhere to it’s reserve system. Yes, other countries currencies are weakening as well – but because they are making the same mistakes. All countries are inflating their currencies, not just the US. The US dollar is only supported by it’s military and the implicit threat that anyone that goes against it (Iraq, Libya, Afghanistan, Yemen, etc.) will be retaliated against. Unfortunately, nuclear powers like Russia and China can’t be strong armed as easily, and are making moves against it.
So, the FEDs release their cryptic pronouncements from their meeting 2 months ago, and the stocks and the Loonie go ballistic.
That’s why I stay away from this stuff. Too easy to manipulate.
And I was told the markets are forward looking.
This is the polar opposite of manipulation. — Garth
If everyone is ‘special’, then, by definition, no one is. (Unless we are all special in our own way. Awhhhh…)
If there was no middle class, what then? Just rich and poor? Well, that does seem to be the trend, doesn’t it. In fact, that’s been the reality for most of history. It’s funny how the rise of the middle class coincided with the coal-fired industrial revolution, and really accelerated with the petroleum-based economy.
Pray for cheap, abundant energy. That’s the key. We are no better, no smarter, no more enlightened, no more humane than our ancestors. All you need to create the society of the past is the same conditions as existed in the past.
Re: #152 Son of Ponzi
So, the FEDs release their cryptic pronouncements from their meeting 2 months ago, and the stocks and the Loonie go ballistic.
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There’s another thing you can expect to go ballistic for the foreseeable future: prices at your local grocery store. And if prices aren’t going up, package sizes are getting smaller (which is just another way of hiding it).
Politicians are going to screw us with inflation until it gets SO bad that not even they can hide it anymore. But until then, they’ll keep releasing bogus statistics about how cost of living isn’t rising and we need MORE inflation.
Wide scale theft is occurring and nobody cares.
“Large corporations like Berkshire also get preferential rates, as do home builders, insurers, etc.”
But some “large corporations” are quite dis-preferred when it comes to credit. For instance, BCE pays 3.5% on 5-year MTN’s. Residential retail borrowers can get 5-year money, net of underwriting expenses, at 2.5%. The biggest concern in the contemporary marketplace is all of the government-created preference towards real-estate backed debt (which largely doesn’t create jobs once the RE has been constructed) to the exclusion of debt granted to corporations that actually produce things, employ people, etc. Such as BCE. The government itself receives preferential borrowing as our system of ‘finance’ is structured around the government being the most credit-worthy borrower — borrowing at the ‘risk-free’ rate. Yes, government, which produces nothing, in our modern financial system, has less risk than a corporation that serves more than half of Canada with telecommunications services.
It seems that government has actually been creating a lot of the inequality that plagues our modern economy, and has been stifling economic growth.
The “Austrians” would call it manipulation.
In German, of course. :)
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“I give it two years and then would be moving on to US or Europe with all my investments.
Really not in a mood or condition to pay for baby boomers or penniless owners of million dollar homes bought with 100 %+ debt.”
Summarizes my thoughts exactly
#120 Shawn…
Simplified reply. Wasn’t it Marie Antoinette that said let them eat cake…? See how that turned out.
But I hear you… It’s not a zero-sum game so let’s push to make all of us wealthier!
Oh, but then we would have to sacrifice all of those short-term goodies and work harder/smarter… meh… ;-)
On gold and currency.
The debate about gold and gold-backed money is similar to the debate about inflation and deflation. As I have said before, and which Garth has given his imprimatur, we can, and do, have both inflation and deflation simultaneously.
The issue of gold and money is similarly complex. For you see, there are two forms of ‘money.’ There’s the crap currencies that governments force the people to use. We call these dollars, euros, yen, yuan, rupees, rubles, dinars, krona, francs, etc.
But at the international level, there is also gold. Governments and central banks have never abandoned gold, even though they may want to. In fact they hoard tons of it, and many govs have been hoarding as much as they can get. Why? Because, when everyone is using a basket of crap currencies that only have relative value (relative to each other), you need something else that is both 1) no one’s liability and 2) a stable measure of real value. So, when crap currencies are no good, or when you can’t trust the other guy, you always have gold to fall back on for final payment of things like oil.
Many regular folks today may not understand the value of gold. But rest assured, those doing the big international deals certainly do. In fact, a blogger, and self-styled ‘insider’ by the name of Another in the 1990’s claimed to have spilled the beans on the real nature of the international petroleum market, by claiming that much of the oil traded was actually traded partially with gold bullion. Is it true? I dunno.
But no matter what the truth is, you have to ask: If gold is just a rock, why do the world’s money masters hang on to it so tenaciously? Folks, the monetary system––the REAL monetary system–– that truly underpins the world’s economy hasn’t changed quite as much as we think. Don’t confuse the crap currencies we use with reality. Don’t forget, there are always different rules. One set for the rulers, and one set for the ruled.
Re: #160 Inglorious Investor
Interesting isn’t it that they continue to hold gold? According to Bernanke, it’s simply because of ‘tradition’. Not sure if I believe that. Bernanke has been wrong 100% of the time, and for someone involved at the ground floor, didn’t even predict the financial crash he helped create. Another overpaid idiot.
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Re: #155 Mark
Yes, government does nothing but destroy wealth. Their purpose is to exist as an impartial mediator in disputes and to ensure the rule of law. Instead, what we have today are busy bodies that meddle in the everyday choices consumers are making in the marketplace. That distorts capital allocation because it is being distributed for political reasons and not productive ones (productive being to serve the customer, political being to serve the egos of politicians). Which one makes us wealthier? It is obvious that capital allocation for the benefit of consumers is more beneficial, but we are getting less and less of that everyday as more academic childish cronies get elected.
#151 Cato the Elder
“Gresham’s Law” deals with ethics. It was the unethical use of coined money in the 15th century that gave rise to this law, i.e. “bad money drives out good.” Essentially a problem when you have two types of “commodity money” in circulation which are required under legal tender laws to be accepted as having the same face values for economic transactions. The artificially over-valued commodity money drives the other out of circulation i.e. the bad money drives out the good.
Nowhere in your RANT have you definitively outlined the good vs bad money. You ASSUME gold to be “good” and “paper” bad.
Such thinking is, well, pure Bullshit! That said, you are entitled to buy and howard your gold, as I am entitled to buy and hold whatever I wish to invest in.
If I want to own gold -and I do NOT- I know where to acquire it. China can do with their foreign currencies whatever they wish.
I have yet to be shown where the burden of inheritance taxes has forced the sale of any entity, or farm. Display an example if you have one, please.
You know, I wish I knew what to do. The recent election in Ontario proves that the system is going to be destroyed inevitably, but I can’t plan a way out (I’m young and haven’t been afforded enough time to acquire lots of money).
I mean, you had someone candidly pointing out the fiscal flaws in the debt, that public sector workers had to be drastically cut, and that changes needed to be made – but people didn’t vote for him. No, they voted for someone that promised MORE GOODIES (how do we pay for those? No need to think about that – they’re ‘free’!). Now we get to pay for ANOTHER PENSION PLAN that will be underfunded, costly, and inhibit job and wealth creation. Upsetting to know that I will be contributing to this legal ponzi scheme for decades of which I will not benefit.
Thank you low information voters! Wish I could move to Switzerland – less taxes, average income significantly higher, lax gun laws, better healthcare, referendums to reign in idiotic politicians, center of Europe. Oh well, Canada ain’t that bad compared to most.
Re: #162 Retired Boomer – WI
The artificially over-valued commodity money drives the other out of circulation i.e. the bad money drives out the good.
Nowhere in your RANT have you definitively outlined the good vs bad money. You ASSUME gold to be “good” and “paper” bad.
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The artificially over-valued money is our current fiat monetary system. It is artificially over valued by legal tender laws that FORCE IT’S USE. That’s a pretty good way to ‘artificially’ overvalued something, isn’t it? If you don’t use it, or you use something else, you go to jail!
I don’t assume gold to be good, history DEMONSTRATES it. For thousands of years of human history, well before governments were large or powerful enough to ensure compliance with a global paper money system, Gold and Silver were chosen by the MARKETPLACE. Voluntary transactions occurred with various things over the millenia from shellfish to giant circular rocks. However, gold and silver were eventually settled upon as the most widely adopted and universally exchangeable for trade.
Now if you want to REALLY know what ought to be used in transactions, why not eliminate legal tender laws? It would be a VERY simple experiment: legalize the use of ANYTHING for use as currency. The marketplace would quickly settle on something, or various things, but I’m quite certain it wouldn’t be paper and would most likely be something of value.
“Why is China buying up all the world’s gold? Current estimates are that their reserves now exceed the holdings of the USA”
They can’t use it to back their currency as long as they are export oriented. at most they can use gold as a hedge against their large US bond portfolio
Anyway China has its set of problems and I’m not sure their economy won’t stay behind the in the near-medium future
For those that are confused about the detrimental effects of a fiat (paper) monetary system, think about this very simple thing:
How much more effort does it take for the issuing body to add more zeroes to the end of a dollar bill? Practically nothing.
1$ bill > 10$ bill > 100$ bill > 1000$ bill > etcetera
Simply adding 3 more zeroes to the end of a 1$ bill gives you 1000 times more purchasing power and yet it require SIGNIFICANTLY less effort than 1000 times to do. You don’t have to be a genius to realize that the consequences of this can’t be good, even if you can’t put the pieces together.
Now, give that power to a bunch of low educated, never been in the private sector, popularity seeking politicians who lack common sense and you’re in for some trouble.
Mark: “It seems that government has actually been creating a lot of the inequality that plagues our modern economy, and has been stifling economic growth.”
Laying the smackdown on the government! I like it!
what about 0% loans… should I pay it off or invest the capital and use a LOC to finance any issues..?
“what about 0% loans… should I pay it off or invest the capital and use a LOC to finance any issues..?”
A “0%” loan usually means that you made a bad financial decision in buying something on credit. Unless its a true no-strings-attached “0% loan” such as a credit card.
For instance, if you bought a truck on a 0% loan on a 5-year term, and the prevailing rate for financing is 5%, this means that you paid 13% more for the truck than you otherwise would have paid if you accepted an all-cash deal up-front. Or you could have purchased the vehicle for 88.3% of the financed amount. Plus auto financing through a dealer is rarely tax deductible, while selling some of your investments, buying the vehicle in cash, and borrowing to replace those investments is fully deductible, and often financeable at prime or less. If you use a good broker that lends at 2%, your effective rate of financing can be as little as 1.2% assuming a marginal tax rate of 40%.
#161 Cato the Elder
“Bernanke has been wrong 100% of the time, and for someone involved at the ground floor, didn’t even predict the financial crash he helped create. Another overpaid idiot.”
saying that he has been wrong 100% of the time misses the point, i think.
this depends upon one’s perspective–if you have benefited from his “idiotic” policies (as many have)–he’s been 100% correct.
don’t let these sociopaths fool you into thinking they are stupid; this is exactly what they want.
“gas lighting”
Re: #165 Mike S
They can’t use it to back their currency as long as they are export oriented. at most they can use gold as a hedge against their large US bond portfolio
Anyway China has its set of problems and I’m not sure their economy won’t stay behind the in the near-medium future
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China could switch from export oriented to domestic oriented and their citizens could benefit from all the prodcuts they themselves are making. It would be a difficult transition, but MUCH more favorable than continuing to subsidize the West (which overconsumes and underproduces). In revealing their gold holdings officially, their currency would strengthen dramatically, giving their own population (who have large savings) a dramatic increase in purchasing power. This increase in purchasing power will allow them to consume their own products, which they mostly make for our benefit right now. I can assure you this will happen, maybe not overnight, but it has been happening for years and will continue to.
Regarding their own ‘internal problems’ – what they are facing is NOTHING compared to the west. They have all the worlds manufacturing facilities, practically none of their citizens are indebted, much of the worlds gold, and they are investing massively in infrastructure and resource plays around the world. Even if they were in trouble, at least their infrastructure is NEW and not in need of massive maintenance like our collapsing bridges are. They are like America in the 1890s. On top of that, they are liberalizing everything from political laws to economic ones, while we are continually passing more regulations.
Try doing this: look up Chinese production of any resource. It will BLOW YOUR MIND. Even things that you wouldn’t think that China would be suitable for (like Wheat production) they are number 1. They are number 1 in almost everything, it is INSANE. All this, and they are STILL growing massively each and every year, while the west is stagnating.
No, I can say quite definitively that China will dominate the globe for close to the rest of human history (like it has been for most of it already). The US did it for close to a century, and they only have 1/4 of their population!
Inglorious Investor # 160
“In fact, a blogger, and self-styled ‘insider’ by the name of Another in the 1990’s claimed to have spilled the beans on the real nature of the international petroleum market, by claiming that much of the oil traded was actually traded partially with gold bullion. Is it true? I dunno.”
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Here you go:
https://www.youtube.com/watch?v=YbKEwAXuiYM
Bingo!
That’s all you need to know.
You’ve got it figured out.
#171 Cato the Elder on 10.08.14 at 5:25 pm
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Umm, China has had 30 years to transition to a consumer economy and still hasn’t and its not going to either. People there save their money, they don’t spend it. New technology and revolution will render that place obsolete before that happens. You need to do a little more research.
While I buy that deflation is bad for governments and debt, I don’t buy into it for consumers. Falling prices encourages consumption; look at any store with a sale. The 1800s had rampant deflation, and it was also the most rapidly advancing and prosperous era in US history; people could keep buying more and had increasingly enriched lives because of it (as did the businesses).
People look to the great depression as a reason for avoiding deflation; imagine how terrible the depression would have been if prices were rising (well, ask the Germans)!
Falling prices do not come without falling wages. There is nothing good about this. — Garth
@#114 panhead
The english pound is somewhat irrelevant.
But the Russian ruble has devaluated quite a bit since January 2014.
Jan 2014 : 32 rubles to the US dollar
Sept 2014: 39.5 rubles to the US dollar
Linked to western sanctions, dropping oil prices, etc.
Well done Mr. Putin.
Can’t wait to see what he does to the economy in 2015.
Falling prices do not come without falling wages. There is nothing good about this. — Garth
Interesting. While true, what we are facing is increasing prices with stagnant or god forbid falling wages (millennials are experiencing this firsthand). While a debatable topic, I feel this is worse.
Re: #174 not 1st
Not sure if your post was serious, but I’ll react as such. What’s wrong with savings? Their savings are being invested in things like plant equipment, which is used to create the computer you submitted your post on. Our lack of savings is a big reason why we don’t have much industry left in our country.
Next time you go shopping, figure out what percentage of things came from China. And of the things that didn’t, what basic components came from China (example: car parts coming from China and only being assembled here). Most of what we buy on a daily basis comes from there.
China is being smart. They’re acquiring all the worlds wealth and securing a solid position for themselves on the down low. Why would they publicly announce their intentions? It would drive up the price of things they want like gold and silver. They’re also not being foolish enough to engage in military confrontations. They’re being assertive, but not dumb enough to jeopardize their rise.
I hate to break it to you, but what our schools have taught us is wrong. While we’ve all been neglecting all the physical work and instead lounging in offices, other places around the world have been creating REAL THINGS that we use on a daily basis. We’ve been extremely fortunate to live the way we do with relatively cheap imports. It is a geographic benefit we receive from the US military’s dominance around the globe, which is slowly being eroded.
Re: #175 Garth
Falling prices do not come without falling wages. There is nothing good about this. — Garth
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I have to agree AND disagree.
I agree insofar as our current monetary system will not allow wages to rise as the price of goods fall, because the money supply is being contracted (really, it’s being destroyed because when debt is paid off, the money disappears from our fiat monetary system).
I disagree because productivity increases mean that a worker can create more output with the same amount of labor. More output=cheaper goods. Also, because the worker is more productive with their time, a business can afford to pay them more as well. An example of this would be a giving a farmer who is using a hoe a tractor instead. Clearly, his output would multiply significantly and his costs in terms of labor hours for the same output would decrease. This would mean he could be compensated more for his time because he has output far more WITH said time. Unfortunately, this requires capital investment which has been on the decline for a long time as there is a lack of incentive to do so in an inflationary monetary system.
There is no science fiction in it. Figuratively speaking we are like a virus colonizing across the land ravaging the resources we feed upon not just for sustenance but amplified by our wanton consumption and waste for pleasure.
The hypocrisy of the human condition is pathetic and then we have the gall and audacity to post comments on this blog about how to improve our lot buying this stock or that house. We’re no better than a bunch of narcissistic single minded ameba doing that which we were programmed to do until we die.
That’s why I say live for today, carpe diem, you’re not here to save the world. The world (earth) will take care of itself. In the whole cosmic scheme of things we are insignificant.
The earth isn’t going anywhere… WE are.
It’s not a bad thing. It’s just the way it is.
Do, think, be, whatever floats your boat. If it infringes on others within the confines of social convention and protocol expect that you will be dealt with unless you find a workaround acceptable to the majority.
You ARE the programmer. Write the program. Beta test it and rewrite as necessary. You and I, all of us, learn from our mistakes but at the end of the day – we’re all dead.
Really quite liberating once you accept the reality of it.
Enjoy };-) Seriously, we live in Disneyland (again – figuratively) There are a swack of others who want what we have. Do you think they’re going to hold back because of the environmental consequences of a WHOLE WORLD GONE MAD. Not a chance. They want all that we have and more. Do you think the world can support it? Not a friggin chance.
We’re just at the leading edge. Google which countries bought the most cars last year, 10 years ago, 20…
Inflation, deflation… who cares… I welcome that challenge, a lot more than some of the others that are bound to come our way.
Rats in a cage…
Bears do it, dogs do it, fish do it, ants do it, slugs do it, coyotes do it, iguanas do it… why don’t we? Because we’re superior? Ya right. Not even close.
Ours is not to see what lies dimly at a distance but to do what lies clearly at hand. – Thomas Carlyle.
#88 bigrider
If you are talking about Treasure Hill homes at Bayview and Elgin Mills, then the prices where in the $700k area. Still no bargain but not exactly $900k.
Re #180 by };-) aka Devil’s Advocate
Awesome post. I agree with every word and loved how you wrote it. Thank-you.
#169 Mark.
Thanks. The 0% was no strings attached, happily. :)
Garth baby.. IT IS… inflation :) as expressed in credit available (since we’re not anymore on metal) i.e. interest rates.