Ask most people if they’re middle-class and they’ll answer, sure. Rich people say so. Struggling people say it, too. The truth is the middle’s in serious shape and at this rate, in a generation or two – like the polar ice cap, barn owls or cable TV – it could be gone.
Real estate’s certainly to blame, along with financial stupidity. The masses have gambled on a single-asset strategy and taken on unconscionable debt doing so. Meanwhile most Canadians couldn’t tell you what a preferred share is, how a pension works, or even know they can invest inside a TFSA.
Here are the results, based on StatsCan data and filtered by the Broadbent Institute (yeah, I know. Lots of lefties, but the data is straight.).
- The top 10% of people by net worth (housing plus investments, less debt) have grown their wealth 42% in the last nine years.
- But the net worth of the bottom 10% of Canadians has shriveled by 150%. They now owe more than they have, by about five grand.
- The bottom 50% of the population (that’s the middle class, right?) own 6% of the stuff. The top 10% have 47% of it.
Note this has nothing to do with income, and everything to do with assets. So when we layer on the fact 70% of Canadians have houses, and we’ve just come through a real estate boom, it doesn’t mean everyone’s benefitted – since the bump in equity has been equaled by a surge in debt. Besides, houses don’t pay you to own them. No interest like bonds, distributions like REITs or dividends like equities or preferreds. Real estate also costs a ton of money to buy (witness the double land transfer tax in Toronto) and big commission bucks to sell.
Plus, you have serious overhead with a house – property taxes, condo fees, insurance and maintenance. A portfolio has zero, with the possible exception of an advisor’s fee – which is mostly tax-deductible. Of course, you have to live somewhere, and that’s not free. But the wealthy have learned having too much of your net worth in one asset which pays nothing and costs a lot, is dumb. So, most don’t. And this helps account for the massive divide now opening up between them and the mortgaged plebes.
Let’s also remember this disparity has happened over a period when interest rates have been in the ditch. That’s been to the benefit of the indebted and the detriment of the rich. Cash or near-cash investments earn less than the rate of inflation these days, while mortgages abound in the 2% range. This’s encouraged normally intelligent people to borrow to excess, as if there were no consequences. It really means they’re consuming future net worth to buy assets now. Once rates normalize, those asset values will fall, and the jig will be up.
So, if you think this gap between the wealthy and the struggling is unfair, immoral, destructive and obscene, just wait. It’ll get far worse, and likely have political consequences. Since the wheels came off in 2008, the government’s encouraged people to take on big debt and buy real estate – so politicians here wouldn’t have to spend massively as the Yanks did.
It worked. We bought it.
Next year (says Joe Owe) the feds will have a small surplus. And Canadian families will have record debt. In contrast, Washington still has a fat federal deficit, but the American middle class has paid off more mortgage debt than we have outstanding in the whole country. I’m just not sure Canadians – who think they’re so superior to Americans – understand. In fact, I’m sure they don’t.
This leads me to believe 2015 will be one tough mudder of an annum for the Canadian middle class. Mortgages will cost more by next summer, even if the Bank of Canada thinks the economy’s too weak to jack its key rate. The housing market will continue to lose strength, as is now happening in major regional markets like Montreal, Ottawa and Halifax. Cheap oil will extract a big toll in Alberta. And relentless debt accumulation, without steady income growth, means most families will devote most of their income to staying alive, while saving and investing a pittance.
Meanwhile financial assets look poised to grow far faster than house prices, even in the trendy bits of Toronto or Vancouver. The US recovery’s gaining speed, corporate profits are swelling and Europe’s printing. Since the moment when so many people decided to sell their mutual funds (March of 2009) and buy semis, equity markets have gained 160%. Real estate has also advanced, but on the back of extreme leverage. Worse, most people who have seen their houses rise in value have not cashed in the gain. They expect more. But they’ll soon get less. And so the wealth canyon will widen.
Your friends and neighbours will ignore me, of course. They have a single-asset strategy. They trust bricks, not stocks and think they’re cool. Too bad.
The greatest accomplishment of any society is the building of a healthy, expanding middle class. But when the top 10% own almost half the stuff, and the rest measure wealth in countertops and crown moldings, it ain’t working.
Richer rich and cheaper houses ahead.
168 comments ↓
The problem is it isn’t the government that ‘builds the middle class’. The middle class is an organic process of the free market functioning the way it should.
Our government interferes too much and doesn’t do a good enough job at protecting what it should: private property and contract law.
Instead, our government passes legislation rewriting contracts, issues currency that becomes more worthless by the day, interferes in the price mechanism, and confiscates private property.
With the ease of capital flows available today, it would only take 10-20 years until we were the wealthiest nation on the planet on a per person basis if we did the right things.
Those right things are politically impossible, however. We are a democratic mob – and when 51% say they want something, even when it’s wrong, evil, ill-advised, or dangerous, they will get it.
Liechtenstein has the best system of government on the planet. A monarch that can’t propose legislation, but can veto anything the parliament passes. That means he serves as a ‘check’ on mob rule. And because he wants to preserve his position in society, he is charged with preserving their cultural identity and limited government framework.
What we really need is a politician that can stand up there and say:
“I don’t give a damn what 80% of you think – you can’t vote to steal someone else’s labour. You can’t vote to send someone else’s kids off to war. You can’t vote to grant yourself privileges. You can’t vote to limit your neighbours behaviors unless they’re hurting you. Now, get to work – you all have a lot of consumption to pay off.”
But this is not possible. I’m afraid we are going to devolve into a poorer and poorer state, with no real tangible improvements, for the rest of time. And all the while, people will be clamoring more and more for more government – not realizing that was why the problem started in the first place.
Our biggest mistake was when we went off the gold/silver standard, and let the bankers buy up everything with their own printed money.
First ;) Great blog Garth.
Nice Garth. My daily dose of financial sanity. In a sea of Canadian financial insanity. Thank you.
Personally, being liquid, balanced, and diversified, with cash, cash flow, income streams, and no debt, is always conducive to having peace of mind. But then, being self supporting since being a teenager, along with my siblings through life’s circumstances, has been my greatest teacher. I have always placed Freedom First. Priceless. Now that is what I call valuable. and I believe that Garth has, and is, helping many people achieve true wealth. True wealth has never been having 1 highly leveraged asset, like a house. And there is nothing wrong with home ownership, as Garth teaches, if you follow his rule of 90. The smart people do, the sheep, well, they have recently been slaughtered world wide by what Garth wrote about today. Fact.
Well said, Garth. Only reason that the government doesn’t have much debt is that they got us poor saps to take on a humongous amount.
And cool? We’re freezing. So much so that things are about to drop off.
hoping to sell in alberta. The listings are down so it may be providing a base. Hopefully garth is not right regarding the low oil prices having an adverse effect on housing and housing prices but I think that he will be right in the end.
Hopefully that program to teach the youth about this in school is underway ? It will take a long time and some considerable suffering before this starts to even out.
The house-horny Mme Shellacque continues to be on my case about buying a house (we rent). I won’t budge (Why would I? My investments, though modest to this point, have been earning over 11%p.a. for years). At the risk of sounding like a smug a-aperture, I tell her she’ll one day thank me for not buying a house, and those friends who own houses whose pictures on Facebook over which she drools will either rue the day they sold their futures to acquire them, or won’t be smart enough to know how much they’ve thrown away. On a macro level, I fear for the future of our Society itself if we don’t stop accumulating debt to acquire what is essentially valueless crap.
The greatest accomplishment of any society is the building of a healthy, expanding middle class. But when the top 10% own almost half the stuff, and the rest measure wealth in countertops and crown moldings, it ain’t working.
Richer rich and cheaper houses ahead.
____________________________________________
Shall we consider 2014 annus mirabilis, while we should expect 2015 to be annus horribilis?
So Keynesian was the way to go. I never would have believed it 5 years ago. I’m still not sure I do.
furrrst?
I am pretty sure that the accumulation of assets in the hands of a very few has to do with primarily with mercantilism, central banking, and regulatory capture.
Garth is right about the financial illiteracy of the masses though.
I thought things looked rough in Canada a year and a half ago. Now there even talk of 30 dollar oil. Geez.
I’m waiting for the next shoe to drop, other than interest rates, that ones a given.
Problem with debt is the same problem as being fat. If you owe 300k what’s another 10k. If your 300lbs, ” what’s another 10lbs? Might as well eat that box of chocolates. I’ll lose weight next week”.
People who have assets protect them. Just like a person who excercises and realizes how dam hard it is to burn 500calories. They refuse to eat shit, just as a person with assets refuses to give them away.
First!
Couldn’t agree more with Garth – nice blog
Yes, the smart people buy financial assets which will grow even more and the barbarians (Putin, ISIS) buy gold and introduce (or hint at) gold backed currency:
http://www.telegraph.co.uk/finance/commodities/11226240/Putin-stockpiles-gold-as-Russia-prepares-for-economic-war.html
https://twitter.com/zaidbenjamin/status/532916905322250240/photo/1
“Note this has nothing to do with income, and everything to do with assets. ”
Which is why the kids are getting hit hardest by all this.
Another good article. FYI. It’s “exact” a toll, not extract. Ironically.
Tonight Garth has nailed the only thing that truly disturbs me. What will be the dynamic of the society that surrounds us over the next ten years? A society that will be sporting a great smouldering hole where the middle class used to live.
Thanks to Garth and several other very financially astute people whom I have heeded in the previous ten years, I need not tread where many others are destined.
But regardless of my somewhat ‘secure’ situation I will still inhabit the same world as everyone else and I’m not convinced it will be a particularly pleasant place to spend time, regardless of one’s resources.
I think the smug and the conspicuous will be the first to feel some unpleasant heat. I plan to remain humble and sympathetic toward those people who are good at heart but simply victims of their own naivety.
Schadenfreude would be ill advised.
It is indeed cool!
Just moved from US due to a family situation. SHOCKED to see what people pay and what they get in real estate here in Canada. Houses in nice areas of vancouver and suburbs which go for $700k+ you can get for $400k in similar locality(crime, schools,facilities,etc).
Car insurance is nuts(only one car insurance company ICBC – communism/free country??, gas price(thought there was plenty oil here, where is it?), food expensive and guess what salaries for professional jobs pay <75% of what is paid in US…….what's government doing? It is crazy out here and if somebody think that is what it takes to stay away from US gun laws, you better try US out by living there few months. Excuses!!
I love Canada with most of family here, but can't wait to move back….
Garth, what kind of impact do you see with low oil price for consumers, aside the loss of revenue for the feds and Alberta? Jobs shed out west? I don’t think a few pennies at the pump will translate into buying elsewhere in the economy. We’re too screwed to make a difference I think. Hopefully our kids will learn something from this mess. Might take a generation to fox it.
Generation to fix it.
I’m waiting for this day.
Garth, no soon enough for cheaper housing ahead
#Meenawong2014 Whoot!
have you folks heard of GLOBALIZATION…
RE prices will forge ahead, leaving a trail of DEBT behind.
I have made a lot of dough on this trend, so I am bullish for 2 more years. Then we’ll reassess.
Good luck. Don’t let bed bugs bite. Don’t sleep your life, I mean! There’s still stuff worth buying, hurry up.
A generation of poor young people AWAITS you ahead
Re#18
There’s a reason hosuing is so much cheaper in the states: the middle class has been screwed badly and there is very few good paying stable jobs. MAny Americans are stuck with one or two low wage jobs. Now with the Republicans controlling the House and the Senate I wouldn’t want to live there regardless of how cheap it is.
What a dumb (but telling) comment. — Garth
Garth:
You are right about how most Canadians have too much net worth in their house and too little in other assets, but are wrong about net worth having nothing to do with income. Are you telling me the person working at a minimum wage job can accumulate the same net worth as a doctor or lawyer, making 200 grand or more, of the same age?
Now where did I say that? — Garth
The heir of entitlement is like a cult in this country; we must own a home; whatever the cost.
We need a personal finance course as a mandatory credit in secondary schools nationwide and Garth would provide the curriculum.
Sounds reasonable to me.
For those pining for a Canadian SEC
Did not anyone read about the madoff case??
http://www.forbes.com/sites/eamonnfingleton/2013/06/04/heres-one-reason-why-east-asians-think-america-is-a-basket-case/
The truth is the middle’s in serious shape and at this rate, in a generation or two – like the polar ice cap, barn owls or cable TV – it could be gone.
Real estate’s certainly to blame,-Garth
+++++++++++++++++++++++++++++++++
If real estate is certainly to blame then why is the middle class in the good ol US of A dissappearing at a faster rate than that of Canader even though the home ownership rate in the US is dropping and the home ownership in OUR FAIR COUNTRY is on the rise.
I don’t expect you to print this but can’t you see you are stretching on the home ownership thingie.
I covered this a few times: US families lost $6 trillion in net worth in the real estate crash. We’re begging to be next. — Garth
#11 dienekes on 11.13.14 at 5:24 pm
Incredibly insightful comment re: fat and debt. Both battles involve discipline, delayed or foregone gratification, effort, and an element of chance (benefit or harm from one’s natural inclinations.) My body doesn’t look nearly as good as my balance sheet does!
The poor in the country eke out an existance on a bit of work and a lot of social assistance. Their plight is unlikely to change. The top own assets and businesses and continue to acquire them.
So what defines the middle class? jobs. This group has all the jobs and does whatever they can to hang on to them while they use whatever disposable income they have left to buy depreciating consumer items.
But a job is not an asset. Its not perpetual and you don’t control it and it can’t be passed on to your family like a real asset can.
In the next while, many jobs will be eliminated and this group will cease to exist. Companies will find whatever ways they can to reduce costs and cut employees most notably automation will cull a lot of people out. There are TON of people between 50-60 just praying they can hang on for 5-10 more years and get to their pension. Many won’t get there.
To survive in the future, paying assets on your best bet.
Policy makers would have anticipated this. Guess they were hoping for the rest of the world to help us grow. How many times have we heard that.
Governments have traditionally helped regular workers in recessionary times. Otherwise wealth gaps increase.
Doesn’t excuse behaviour but it was definitely foreseeable by those in charge of our countries finances and banking system.
This post describes the situation in canada perfectly. But it’s clearly to late for most and nobody believes it anyway.
When this middle class person hits the bottom which could be sooner than I want
I will buy a toy pistol and rob a teller in a bank and then go sit down in the bank and wait for the police.
I will be guaranteed a bed and 3 meals a day in jail.
#16 Mister Obvious on 11.13.14 at 5:48 pm
But regardless of my somewhat ‘secure’ situation I will still inhabit the same world as everyone else and I’m not convinced it will be a particularly pleasant place to spend time, regardless of one’s resources.
I think the smug and the conspicuous will be the first to feel some unpleasant heat. I plan to remain humble and sympathetic toward those people who are good at heart but simply victims of their own naivety.
Schadenfreude would be ill advised.
Totally agree. When hard times fall even the richer among us will still have to see the suffering (and anger) of those around us. If you aren’t visibly assisting the less affluent, at least keep your head down so as not to attract too much hostility.
We would all be better served by trying to arrest the hollowing-out of the middle class.
You guys are crazy man.. how can middle class families even think about investing anyways.. rich people get rich because of their advantage in society (volume / tax / investment) ..middle class has to choosw between investing housing food car travel..rich ppl invest their large left overs … cant really compare ..house is their only way to get anything meaningful as investment because you can live in it and hope for appreciation with 5x leaverage.
3 percent dividend is not going to be worth while to middle class with 100k to play with
Never forget when I was working near Les Cedres, Quebec.
Level grade crossing with only signs – no arms. Westbound train finishes and then car ahead starts forward. Eastbound on second track was hidden from view! Classic.
Garth: “Real estate has also advanced, but on the back of extreme leverage. ”
But so have equity markets, also via leverage (margin).
Just curious: has CDN margin debt tracked CDN real estate debt?
I’m sure I don’t know.
Garth, can you quickly answer that one?
No. RE leverage is typically 20X. A financial investor maxes at about 3X. Most people buy financial assets with no leverage. Almost everyone buys real estate with vast leverage. — Garth
“…….The bottom 50% of the population (that’s the middle class, right?) own 6% of the stuff. The top 10% have 47% of it……”
====================
A normal human being only requires a fixed amount of assets to lead a happy, healthy and prosperous life.
If the top 10% own 47% of it, yet are still unhappy with that amount, and crave everyone else’s slice of the pie too, exactly where is the point of diminishing returns?
Sounds like the top 10% of the population have some serious Obsessive Compulsive Disorder issues.
Garth, thank you for all your advice and wisdom. I finally made some investments in ETFs this week and will complete my diversified portfolio next week. Between your blog and the book ETFs for Canadians for Dummies, I feel confident about investing now.
# 1 Cato the Elder
You my fellow blog dog have it exactly right. I call it democratic dictatorship. That is what runs Ontario. That is why rural Ontario is going down the drain with Toronto centric policies.
Middle class wealth ebbs and flows. The US had our “Pork Fest” 200-2008 with Real Estate. Actually, it took quite a bit of restraint NOT to be caught up in the Zeitgeist of those heady days. We had a plan, and we worked the plan. Thankfully, life didn’t interfere too much, or get us too far afield.
So, today those two high school grads are financially ok.
We may not be in the “Top 10%” by whatever measure they use, but let me tell ya we ARE in the “Top 10%” for peace of mind, satisfaction, and knowing no matter what
WE will have the means to be O.K. !! Job Done!!
#35 faith
You are screwed .. let us know how you do in a year
Now that the situation is clear, it’s time to put the blame on somebody. And the blame goes on to the middle class itself. The recklessness is just mind boggling.
So no decline in site for 2015?
Generals always begin fighting the last war, not the future war. French generals were given a demonstration of a machine gun. Afterwards, one of them said, “That was interesting but what would you use it for?” Our soldiers were sent over the top carrying huge amounts of equipment of supplies. They couldn’t run. They trudged to their deaths. People live by their experience. Everyone isn’t a financial guru with lots of training. My parents bought their original house for $1500.00. A couple of years ago, it sold for 160,000.00.
People see that. They then, especially when encouraged by TV programs and real estate firms, say that is what has happened for decades. They leave out the downturns, the crashes. No one, parents, public school, university, have taught them about shares and dividends, preferreds, options, etc. The [email protected] sees they have some savings and says I can get you a better rate than your savings account. They’re grateful. How are people to learn these things? How many families talk investing over the dinner table? Who would lead the conversation? There are no public figures out there, except Garth and a few others, who provide financial literacy and that’s just for those with it enough to go looking. I found Garth because someone suggested that I go to the Whispers site. You have to be computer literate, you have to know enough to know what to look for, you have to have enough education to understand what you are told. Even being well educated in a non-financial field isn’t enough. A highly successful professional just told me all the things that Garth has presented as arguments people make to buy instead of rent. She even is going to finance the downpayment for her daughter. I sent her a link to Garth’s blog. We need financial courses in the public schools. Simple bookkeeping. Interest rates. Financial contracts. Mortgages. Stocks. Bonds. Nothing fancy. Just the basics. I’ve never used my physics or chemistry but I’ve bought a number of houses, cottages, cars, trucks, invested money toward a pension.
Are vancouver houses going to be cheaper too Garth? Or just Halifax and Winnipeg?
@45PPWe need financial courses in the public schools. Simple bookkeeping. Interest rates. Financial contracts. Mortgages. Stocks. Bonds. Nothing fancy. Just the basics. I’ve never used my physics or chemistry but I’ve bought a number of houses, cottages, cars, trucks, invested money toward a pension.
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We should have had it 30 years ago.
I see we are still waiting.
#18 Mike
Completely agree. I would never move back. The difference in living cost, employment prospects and savings ability is just night and day.
It’s true that financial assets have had much higher returns than houses for the last several years.
However, houses in Canada are not the only thing that’s overpriced. Financial assets across most of the developed world are also overpriced.
There’s a bunch of interesting analysis about expected future returns for financial assets that points a not so sunny picture. The Research Affiliates expected return site is really awesome:
http://www.researchaffiliates.com/AssetAllocation/Pages/Core-Overview.aspx
(GMO has similar (low) future return estimates).
While world markets are continuing to rise for the moment, it remains to be seen what effect the trillions of dollars of money printing by central banks is going to have. Confidence can be a fragile thing.
#35 less is more
“…..how can middle class families even think about investing anyways…”
————————
That’s the whole point, the middle class has been loading up on mortgage, HELOC and credit card debt, so they can’t invest.
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“…………house is their only way to get anything meaningful as investment because you can live in it and hope for appreciation with 5x leaverage………”
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“hope” is the key word there – its worked great over the past decade but will it continue?
When you invest in a diversified manner you are playing the odds – odds that 100 years of history shows are in your favour
Had a big shindig up in the KAWARTHAS this week and chatted with people in the loop and people trying to sell their homes. Boomers are anxious in that neck of the woods and realtors are not over confident as it is a flat market and has been for a spell.
Out on Vancouver Island people are being careful and renting so it looks like the big Kahuna of investments is only to be found where most of the planes land like Toronto and Calgary and Vancouver.
Read a weird article about initiating new immigrants to Canadian weather and how it can be very enjoyable and longed for lifestyle. Of course, they never poll all those REAL CANADIANS who have spent decades in the GREAT WHITE NORTH shovelling snow and running from the Tim Horton’s to your car.
Why not tell those poor souls from India and Pakistan and Africa the truth….maybe they would feel more compelled to move out of the big cities and into smaller regional towns and villages and keep our dwindling provinces from certain decay and atrophy.
Re: #13 TheLaughingCon on 11.13.14 at 5:33 pm
Over a long enough period of time everything will average out. Gold silver the stock market and bonds. So right now a long term investor would take all their money out of stocks (which have never been more overvalued in history) before the colossal crash and put them into gold and silver. Short term, interest rates look like they’re headed a lot lower not higher.
If you’re wondering about the current decline in oil prices, check out:
http://ourfiniteworld.com/2014/11/05/oil-price-slide-no-good-way-out/
http://cassandralegacy.blogspot.co.uk/2014/11/the-crash-of-oil-prices-and-european.html
F.S. – Calgary, Alberta.
Re: #39 Faith on 11.13.14 at 7:42 pm
Stuffing your money under the mattress for the next 25 years would probably give you a better return.
#42 less is more
#35 faith (actually its #39)
You are screwed .. let us know how you do in a year
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Faith, good for you about your portfolio, you are doing the right thing. Take a long term perspective – I have been investing in one way or another since 1989 and that’s the biggest lesson I have learned.
Guy’s like “less is more” just don’t understand. Who knows exactly where markets will be 1 year from now – nobody – but 10 years from now the history of the past 100 years shows things will be higher – much, much higher.
I confess: I’ve never quite figured out exactly what ‘middle class’ is. I kind of thought the lowest 25% were ‘the poor’ or at least the economically challenged, while the next 50% were ‘middle class’ with the ranks being lower (26-49%) mid (50-60%) & upper (61-75%). Anyone over the 75% mark was more or less ‘wealthy’. But there is all this ‘top 10%’ so does that mean anyone who isn’t in the 90th percentile or higher is still considered middle class? Plus the definition of what is considered wealthy would mean pretty much anyone less than that, isn’t – at least the last time I saw a dollar figure put to the definition of wealthy. An article I read way back defined wealth (in Canada) as having at least 10 or 15 million in assets not including the official place of residence. That was some time back, so I expect the bar is even higher now.
Re: #18 Mike on 11.13.14 at 5:49 pm
Canadian car insurance is the biggest scam in the entire world. Lucky you don’t live in or near Toronto car insurance is about 500 percent higher than in British Columbia.
Garth you’ve been pitching the same story for 8 years now and prices keep going up and up.
And whatever happend to that fund shorting the housing market, it likely blew up.
As long as people are making mortgage payments it’s all good, banks love it!
#39 Faith
A few other good reads would include ‘The wealthy barber’, ‘a random walk down wall street’ or Garths ‘money road’.
Sounds like you have the right idea!
#2 Adam from Cowtown
Garth, I am afraid you have created a generation of crack addict like blogslackers who sit by their computers for hours waiting for your blog to appear…before racing to be first to comment….and inevitably finishing second……the number of these dweebs continues to increases and is approaching a critical mass of social cyberunrest….
We are back to 2006 prices in Victoria!
. . . . . . .Price Increase/Decrease. . . . . . .
. . . . . . . . Since October 2007. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+50%. . . . . . . . . . . . . . . . . . . . . . x. . .
+48%. . . . . . . . . . . . . . . . . . . . . . . . . .
+46%. . . . . . . . . . . . . . . . . . . . . . . . . .
+44%. . . . . . . . . . . . . . . . . . . . . . . . . .
+42%. . . . . . . . . . . . . . . . . . . . . . . . . .
+40%. . . . . . . . . . . . . . . . . . . . . . . . . .
+38%. . . . . . . . . . . . . . . . . . . . . . . . . .
+36%. . . . . . . . . . . . . . . . . . . . . . . . . .
+34%. . . . . . . . . . . . . . . . . . . . . . . . . .
+32%. . . . . . . . . . . . . . . . . . . . . . . . . .
+30%. . . . . . . . . . . . . . . . . . . . . . . . . .
+28%. . . . . . . . . . . . . . . . . . . . . . . . . .
+26%. . . . . . . . . . . . . . . . . . . . . . . . . .
+24%. . . . . . . . . . . . . . . . . . . . . . . . . .
+22%. . . . . . . . . . . . . . . . . . . . . . . . . .
+20%. . . . . . . . . . . . . . . . . . . . . . . . . .
+18%. . . . . . . . . x. . . . . . . . . . . . . . . .
+16%. . . . . . . . . . . . . . . . . . . . . . . . . .
+14%. . . . . . . . . *. . . . . . . . . . . . . . . .
+12%. . . . . . . . . . . . . . . . . . . . . . . . . .
+10%. . . . . . . . . . . . . . . . . . . . . . . . . .
+8%. . . . . . . . . . . . . . . . . . . . . . . . . . .
+6%. . . . . . . . . . . . . . . . . . . . . . . . . . .
+4%. . . . . . . . . . . . . . . . . . . . . . . . . . .
+2%. . . . . . . . . . . . . . . . . . . . . . . . . . .
..0%. . . .x *. . . . . . . . . . . . . . . . . .*. . .
———————————————————————–
. . . . .October . . .June. . . . . . . . October
. . . . . .2007. . . . 2010 . . . . . . . . .2014. .
x = Toronto
* = Victoria
(source: Brookfield’s index)
From October 2007 to October 2014, house prices in Toronto increased 50% while prices in Victoria decreased 1%. (link)
This data also indicates that:
* We would have to go back to 2006 to see October prices this low in Victoria.
* Prices in Victoria are down 4% year-over-year, down approximately 1% month-over-month and down approximately 3% year-to-date (since the end of 2013).
* Prices in Toronto reached an all-time high in October.
Prices have declined in Victoria since 2010 even though interest rates have fallen significantly since that time and are currently at historically-low levels. If emergency level interest rates can’t stop Victoria’s price decline, what will?
It hasn’t taken rising interest rates for prices to decline in Victoria and it won’t take rising rates for prices to continue to decline.
Victoria’s price decline (since 2010) has coincided with extremely weak single family home sales. That negative trend has continued in 2014. The strong correlation between slow sales and falling prices is well-established in residential real estate and applies to any housing market in any part of the world. Victoria’s sales and price numbers make it clear – it isn’t different in Victoria.
Prices in Victoria remain deep in bubble territory even though prices have been declining since 2010. Everyone knows that prices in Victoria are sky-high and that rents are relatively cheap. Victoria’s price-to-rent ratio has deviated from its historic average and is dramatically higher due to (debt-fueled) skyrocketing prices from 2000 to 2010. Based on the price-to-rent ratio, the International Monetary Fund (IMF) considers Canada’s housing market to be the most overvalued and least affordable in the world (see chart). Note that house prices in the US (a country with similar household income levels as Canada) are not considered to be bubbly by the IMF.
A quick look at house prices in many US states makes it clear that Victoria’s housing market is extremely overvalued and that prices will fall a lot more before reaching bottom.
Arizona:
$160 K, Coolidge, AZ (Phoenix) (5 beds, 4 baths, 3,735 sq. ft., 1 acre lot, built in 2005, attached 3 car garage, backyard pool)
$174 K, Phoenix, AZ (5 beds, 3 baths, 3,156 sq. ft., built in 2006, attached 3 car garage)
Florida:
$179 K, Jacksonville, FL (5 beds, 3 baths, 3,717 sq. ft., 0.3 acre lot, built in 2006, attached double garage)
$181 K, Palm Coast, FL (5 beds, 3 baths, 3,062 sq. ft., built in 2006, attached double garage)
Nevada:
$235 K, Las Vegas, NV (5 beds, 4 baths, 3,001 sq. ft., built in 2006, attached 3 car garage)
$244 K, Las Vegas, NV (5 beds, 5 baths, 3,105 sq. ft., built in 2007, attached double garage)
Girls and guys, prices in Victoria will continue to fall and the biggest price declines will happen after prices across the rest of Canada peak and begin to decline (the biggest price declines in the US took place while prices were falling in unison across the country).
Steer clear of major future financial problems by renting for now and buying when prices are much lower.
Until next time – Cheers!
#42 less is more
?
Some of us who read this blog and ponder events are in a position of liquidity, perhaps having liquidated or downsized our real estate holdings into something sensible, manageable, or risk free (renting). For some of us it might have been an easier task to accomplish. There is something to be said for being an “oink” or “dink” when times call for deft moves. Finding a lease arrangement can also be a little easier as well for those who travel light through life. If a family with a couple of kids and maybe some pets in a city like Calgary with so few rental units wanted to do the same if presents more challenges…especially for those who might be locked in to a mortgage with a penalty facing them in order to break free. The issues of where kids attend schools or daycares, separating them from friends, etc., these are all an extra burden. The shackles of homeownership are not so easily shaken off for some. I read recently that some animal shelters are experiencing unprecedented numbers of pets being dropped off. These lost jobs we talk about on the blog have a real heartbreaking affect on animals as well as humans. There is real value on this daily blog. It might help some who need more time to prepare to begin the process….Wealth is not measured by money alone. Freedom is in a value class of its own.
Canadians think they have problems? The *median* (detached) house price in Sydney passed the $1M mark this week. And for that amount, you can expect either an unrenovated dump, or a long commute.
The middle class. That describes being a Naval Officer’s Family, in the Fifties, Sixties and Seventies.
Now?
I have a gut feeling that the middle class is being hollowed out like a Pumpkin.
Take a look at the number of people that have been gunned in MEDIA, in just the last year. High paying jobs, even entry level jobs were slashed.
I won’t go over all that again, but I think I have an idea what we face.
I have lived in Mexico, The UK, and spent a lot of time in Asia.
I try to have a world view. Well, I was in for a reality check.
My first trip to Paris was a lesson in reality.
Big time.
The main shopping drags in Paris, are amazing. One, Rue Du Rivoli, has Mont Blanc and LaCoste and other Big time Stores. The weird thing is – the majority of customers are, wait for it, Chinese.
Paris is so popular for the rich Chinese, that the street thieves were getting fat and sassy, until the Gendarmes hired two dozen Police Officers from Beijing – to help Chinese tourists.
I talked with a student who had a young daughter, a huge student debt, and yet all he could score was three part time jobs, and was barely keeping his Family above water. I talked with entrepreneurs who were desperate. Talked to one gent, who must have been 70, and driving a Cab. “I lost my shoe store, I had for 39 years….” “No business….” His frail voice faded off.
Real Estate was flooding a market that used to be tight as a drum. 750 square feet, built in the 1800’s for 1.5 million Euro. (*DOH!!)
Cut to Denman street in Vancouver’s densely packed West End. Check the empty store fronts – and yet the dollar store is doing land office business – while the rest of the Denman Mall is asleep.
The bottom line is people are cash short (I see people putting two buck purchases on Visa, at the grocery store!!).
Many of the few jobs around want huge qualifications but are no bennies, no bucks, no future. The”Basement generation” are sitting with 30 or 40 grand in debt that they will have to pay off, even if they are declared bankrupt – (*just like Mortgages, except in Alberta, I believe).
This all augurs for an ugly ten years.
Then add the Political/World events as a background and I think we better pay very close attention to our wise host.
DEBT is going to be the beast that eats the “Middle Class”.
Adam is FIRST tonight!
My neighbour has their Christmas tree up – they don’t even have small children.
You guys worry about money way too much. Life is short, have fun.
I know this crazy Bay street bastard, today he went to work with two different pair’s of shoes on. One was black, the other brown. Same style. He claims light was out this morning. I know him. He did it on purpose.
I believe that’s a one up man ship on the wild socks Bay Streeter are wearing.
You only live once..
#39 Faith
Check out Canadian Couch Potatoe. There are a lot of good articles for DIY balanced investors.
http://canadiancouchpotato.com/
I remember playing Monopoly as a child and the game was always quite fun until one person had all the money and the rest had very little, or none. That sure took the fun out of the game in a hurry.
I completely agree with Cato on his points about gov regulation killing small business. In my mid 20’s I started a business as I seen a need for a service, I started with lots of ambition and things were good. Well maybe I was too green, or just too naive to how the system really works. Bogged down with insurance, legislation, and everyone with there hand out, there was just no meat on the bone left for me. Had local government just backed off and let things be I could easily be self employed and not displacing another persons job in my trade right now.
Nothing will get you to get your financial house in order like facing bankruptcy, I did avoid it, but I was right on the brink for over a year. It took me 10 years to get out of that mess and now that I do have some money to invest I am glad I found Garth and this site to figure it all out.
So basically my tax dollars are being used to prevent me from being self sufficient, I tried explaining this to government workers while I was struggling and they just looked at me like I had two heads
Also I am at the point of having enough invested to seek professional help so I asked my accountant for a referral and he gave me a card to a guy from the Investors Group. So disappointed. I didn’t call.
“Once rates normalize, those asset values will fall, and the jig will be up.”
The jig will be up. What is the origin of this phrase? I know what you mean Garth, but is the jig a dance? or a fishing lure? Just wondering. Does anyone know how this phrase came about?
#66 Bill Gamble
‘DEBT is going to be the best that eats the ‘middle class.”
Very True. The problem Bill, is it has always been that way. Look, for the LAST 30 years “Middle Class Wages” have done nothing but tread water, and trend down.
Middle Class earners had to either decide to live a little smaller, or shoulder more debt, or gain an edge in income generation.
looking at the stats in the US it is showing more moms went to work, more DEBT was acquired, and quite frankly, more misery was created.
Sorry guys, this dude was not going to operate that way, simple because his parents were children of the depression, who saw their parents lose farms, and everything when banks closed in the early 1930’s. I wasn’t there, but that effect on my hold man scared the shit out of me toward DEBT. Yes, I have used it, for a home wisely, for limited years.
Today when I don’t NEED DEBT the cheapest rates ever are available. go figure. I paid 7.5% down to 4.5% WAIT til they raise back up to those more ‘normal’ rates.
Do you think a Banker cares that you owe more than you can pay at higher rates? Shall I answer that, or do you prefer to look in the mirror yourself? Real Estate on the Value Plan….coming to your street….shortly! -goodbye-
#29 Funny that on 11.13.14 at 6:59 pm…
There are houses all around us in the NW valley of Phoenix that were worth about $ 350K at the peak in the spring of 2006. These same homes were worth the low $ 100Ks by 2010.
The sale prices this year are still 30% less than the peak, and to get back to the highs of 2006 could be another 10 years.
The homes around here are still half of what a similar home would cost in Kelowna, BC.
Still, if you ask any of our neighbours here if they believe in real estate, the answer will usually include a few unprintable words.
At the same time we have friends and relatives in Kelowna that still believe prices always go up.
I’m not sure what makes us as Canadians think we are so special!
#68 Mike T: That made me laugh out loud.
This is a fun site that compares cost of living between cities around the world. Now that I’m leaving Vancouver soon it is more amusing than it once was.
http://www.numbeo.com/cost-of-living/calculator.jsp
regarding the demise of cable tv
my homeowner host of my current abode constructed a copper wire antenna rig he read about in Popular Mechanics this week and receives 40 high definition digital channels over the air; he is calling the telco provider next week to cancel the cable service… seems to me all non-sports-addicted cable subscribers could do the same, for $20 in parts
And the conjecture, pontificating and general all round navel-gazing done by most here is oh so much more “substantial”? L.O.L. Am I supposed to be surprised and enlightened that you think that? Tell me is ignorance truly the bliss it’s purported to be?
#26
Last year I spoke with an advisor I know. He told me the richest client he had worked at the stelco plant his whole life. Immigrant who raised 3 kids..
Bought only three stocks his whole life. A bank, grocery store and integrated oil. Did it all himself. Using the advisor late in life as his health was failing
Blew away all his two doctor households.
Worked with a lot of italian immigrants as a kid. They always said it’s not what you make. It’s what you keep. The bricks and mortar stuff is a false stereotype. They all had very modest homes. And lots of money.
#71 SWL1976
Find a new accountant!
#18 Mike on 11.13.14 at 5:49 pm
I discuss these shocking differences everyday with my Sarasota/Florida host.
-for a similar house but MUCH smaller lot, I paid 5 TIMES property taxes he pays
-tank of gas is 50% the cost of Canada
Income taxes are WAY more in Canada and sales taxes are much higher in Canada. Things like car insurance and life insurances, much more in Canada. Both public and private sector costs huge differences but most of these are explained by taxes. We pay so much more in taxes… so my Florida host has zero health insurance HOWEVER as low income, he gets a lot for free or very little cost… so. it’s a real conundrum… can we really balance the difference with the services available? don’t think so… can we explain them away by a population times TEN or one-tenth? hhhmmm not really…. it is vexing and maybe even McKinsey & Co would be pressed to do this but I think it is getting to a point where the gap is so immense that all of Canadian provincial governments and federal government and municipal governments have some ‘splainin’ to do
#FearNotBillGable… #TheDayzWhenTheWorkingClass… #WittinglyOrOtherWiseProppedUpTheRulingClass… #AreSoOver… #OnALighterNote,Though…
“Did you read that on the men’s room wall at Re/Max headquarters?” — Hon.Garth
Strictly between the TwoOfUs, AuldPol… There’s a particularly entertaining UrbanMyth about [Redacted]™ avoiding the MensRoom in establishments a ‘Tad’ too proximal to their ‘SpecialAssessmentCrimeScenes’…
http://youtu.be/5OTSW4DRcx0?t=2m25s
NeverMindAllThat… TimeForSomeFun… TrulyTrustWorthyAgents who rejoice in ‘Letting it all HangOut’ are ReliablyRumoured to vastly prefer PrivateCompartments & SaucyRepartee to PublicLavatorys, AfricanRundowns&Parkour…
http://youtu.be/wLTKQ-uXH1o
#74 Snowboid on 11.13.14 at 10:26 pm
————————————————–
I’m not sure we should generalize that Canadians think they are superior than Americans. Sure we fended them off in the war of 1812, but they were fighting 3 wars at the time, and who really wants the north frozen tundra anyway?
I think Canadians and Americans have some different values, but there is lots to envy about the good ole US of A.
Hello Garth,
My mother has been after me to read your blog for quite some time now – I have read your thoughts and found comfort in your observations (should’ve listened to my mom sooner). I’ve been feeling like I’m in the Twilight Zone for a while now – hoping for some advice.
I am in my early 30’s and have been renting for years in Vancouver. I, along with my partner have saved approx. $200k over a number of years in the hopes of buying a home with a decent downpayment. We’d like to be in a position to buy when the time is right. Thus, our dollars remain fairly liquid so we can be well positioned to take advantage of opportunities when/if they present themselves.
I’m torn between making solid long term investments in the financial market and continuing to rent for the next 5+ years, or, staying liquid in preparation for housing prices to fall. I sit in limbo and end up losing on both fronts (no real market exposure = no real upside on my savings).
Could you provide some insight as to what you might do if you were in my shoes? If you could discuss proper allocation strategies or parameters – even better!
Best Regards,
Twriter
Will do. — Garth
Top 10% own half, bottom 10% own literally less than zero. When the housing “wealth effect” illusion evaporates, I wonder who will get the blame.
@57
#57 Linda on 11.13.14 at 8:46 pm
I confess: I’ve never quite figured out exactly what ‘middle class’ is. I kind of thought the lowest 25% were ‘the poor’ or at least the economically challenged, while the next 50% were ‘middle class’ with the ranks being lower (26-49%) mid (50-60%) & upper (61-75%). Anyone over the 75% mark was more or less ‘wealthy’. But there is all this ‘top 10%’ so does that mean anyone who isn’t in the 90th percentile or higher is still considered middle class? Plus the definition of what is considered wealthy would mean pretty much anyone less than that, isn’t – at least the last time I saw a dollar figure put to the definition of wealthy. An article I read way back defined wealth (in Canada) as having at least 10 or 15 million in assets not including the official place of residence. That was some time back, so I expect the bar is even higher now.
Middle or even upper income is not middle class, although upper income will have the opportunity to become middle class if they lack assets.
If you are dependent on the income from your job to survive you are working class. Selling the notion that everybody with an income is middle class is one of the great canards of contemporary society.
You are middle class if you can maintain a middle income lifestyle from the returns on your assets, be they business assets,financial assets, or even real estate assets that are used for commercial purposes.
20 million would seem to qualify you as wealthy. At five percent 20 million produces income of a million a year which is the current definition of a millionaire.
3.2 million barrels per day
($25) per barrel discount last 60 days
loss of national income…..$80,000,000.00 PER DAY, or 30,000,000,000.00 PER YEAR, plus knock on effects on suppliers, vendors, subcontractors, etc.
What do the income multiplier specialists forecast this will do for, say, the loan loss provisions (name your favorite subprime lender here Home Capital Group)?
Does the relative value of the US$ make up the difference?
#1 cato.
Best first post. Ever.
#66 Bill Gable
+1, very well said. I too have noticed that when shopping at the BCLQ, grocery, and drug stores for the basics of life, I have noticed in the past year or so the first, apparently default question from the cashier is almost always: “Will that be on your credit card?” Blinks and stares when I pull out the debit card or – gasp – cash. Their subtle reaction shows it’s interrupting their usual procedural thought process. THAT is how a lot of Vancouverites are paying for their basic necessities. Everyone is TAPPED OUT…. and yes, Dollaramas are sprouting like freakin’ mushrooms all over the Lower Mainland, while For Lease signs and butcher paper wallpaper swaths of once bustling retail corridors. It is a sad sight indeed, does not bode well for a healthy economy going forward at all.
#46 Vancouver right? on 11.13.14 at 8:05 pm
Are vancouver houses going to be cheaper too Garth? Or just Halifax and Winnipeg?
_______________________________
Van – they are… check out this link from BIV (http://www.biv.com/article/2014/11/prices-new-homes-down-vancouver-says-statscan/) which shows new homes are down 1.2% YoY. Resales are holding the market for now. We appear to have finally peaked over the past 18 months. Prepare for the ride down…
#88 Vanecdotal on 11.14.14 at 12:15 am
#66 Bill Gable
+1, very well said. I too have noticed that when shopping at the BCLQ, grocery, and drug stores for the basics of life, I have noticed in the past year or so the first, apparently default question from the cashier is almost always: “Will that be on your credit card?” Blinks and stares when I pull out the debit card or – gasp – cash. Their subtle reaction shows it’s interrupting their usual procedural thought process. THAT is how a lot of Vancouverites are paying for their basic necessities.
——————————
You can get Airmiles using a credit card.
I thought for years real estate was the only way to a secure future …Bought in Toronto, Reno’d it and after ten years I came across this blog ( thank you Garth !! ) ..since then everything has changed. Sold it in 2012, bought various dividend investments paying me monthly like REITS and I feel much more free. More in control. I call it retirement deficit disorder therapy lol. I’m liking the bloodbath in precious metals , looks ripe for the picking !?
here’s Garth:
The bottom 50% of the population (that’s the middle class, right?) own 6% of the stuff. The top 10% have 47% of it.
and here’s President Obama – they’re on the same page:
Even before the crisis hit, we were living through a decade where a few at the top were doing better and better, while most families were working harder and harder just to get by.
here’s Garth:
So, if you think this gap between the wealthy and the struggling is unfair, immoral, destructive and obscene, just wait. It’ll get far worse, and likely have political consequences.
and here’s President Obama talking about those consequences:
What these ideas will do is help millions of responsible, middle-class homeowners who still need relief, and working Americans who dream of owning their own home fair and square.
http://blogs.wsj.com/washwire/2013/08/06/text-of-obama-speech-on-homeownership/
Obama sounds very good. Maybe he’ll run for Parliament.
@88
who would use a debit card when you can borrow 30 days for free?
even more important why would you put your bank acct at risk?
In today’s knowledge based economy, knowledge is an asset. The best asset that someone that is middle class can acquire by far. Most of the time it’s either free to acquire or so cheap that it can be considered free.
Yes, I guess you still need to find someone that will pay you for your shinny knowledge. Which involves either a job (not preferred), a knowledge based business where you use it for the benefit of multiple customers (better) or finally, using the knowledge to build an income producing asset that will only require minimal effort after the build phase. (best)
Sometimes you can do all 3 at the same time, work your way up from #1 to #3 or any combination in between. As you see, it’s very flexible and the only limit is the amount of energy and effort that you can put into it.
Re: #71 SWL1976
I feel for any small business owner in Canada – they are treated like they have the plague.
The problem is that many in government have never worked a day in their lives – they have been employed by the state for the entirety of their careers.
They don’t understand how wealth is created. They don’t realize that you have to provide VALUE to your fellow man in the form of services/goods in order to make money. And providing value is a DIFFICULT task.
Not only that, but you don’t earn ANYTHING until all your expenses are paid. Many don’t earn anything, and many more LOSE money in their endeavors.
All while getting kicked down by the self-righteous behaviours of government employees that have never been through the struggle. The struggle that is the basis for all wealth in this country and elsewhere. The struggle that entails risk taking in pursuit of helping their fellow man.
What we have is a problem in ideology. Many feel the government is entitled to tax revenue. This could not be further from the truth. That is not their money, and they are not better allocators of capital. Business owners earn capital by enriching society with their services, employing others, and spending money.
Government officials earn money by taxing that productivity, which invariably get misallocated because they do not have the discipline instilled in them that an entrepreneur has learned through years of trial and error.
What we need are a government, at least at the federal level, dedicated to:
1. Individual civil liberties (speech etc.)
2. Protection of property rights (no more confiscatory property taxes)
3. Enforcement of contractual obligations
4. Impartial mediation in disputes
5. Engage the world diplomatically and maintain a neutral stance in world affairs. Trade and be friends with everyone. Let business owners and Canadians make the voluntary decision on which products and services they buy and from where they want to buy them.
No more prior restraint. No more passing laws out of fear that something bad might happen. When something does happen, address it on a case by case basis. Free up the entrepreneurial spirit and quit suffocating them with onerous regulations.
That is pretty much it. I imagine Quebec and Alberta could even see eye to eye on this. Quebec doesn’t want interference from other provinces, just as much as Alberta does. A decentralized federalist system is the best way to promote prosperity and peace amongst the very different cultural attitudes of the provinces.
Re: #88 Vanecdotal on 11.14.14 at 12:15 am
Sure sounds like Vancouver is in the midst of becoming a “ghost town” just like the ghost towns back in present day China.
Piccaso:
it’s Picasso – I told you this already
http://en.wikipedia.org/wiki/Pablo_Picasso
I will buy a toy pistol and rob a teller in a bank and then go sit down in the bank and wait for the police.
you dumb ass! and maybe they shoot you and even if they don’t it’s still armed robbery
Re: #86 Trigger
Bear in mind, that all the other areas of the economy that are net users of energy are seeing a BENEFIT from lower prices.
Also, bear in mind that many oil producers hedge their oil production against price swings. In effect, they sell it in advance at pre-set prices. You won’t see an impact for several months until those contracts expire – then you can worry about that industry.
All this goes without saying, that we wouldn’t have to worry about this if we had a truly capitalist free-market. If we did, capital would flow from one area that was no longer profitable into another rather smoothly. The impact on the economy would be a negligible blip.
Unfortunately, we have a crony-capitalist centrally planned economy. All the misallocated capital that has been funneled into certain industries is very difficult to reverse. We must remember, when government favours a certain industry, they have taken tax dollars OUT OF another. All the onerous regulations make it difficult as well to manoeuvre and put money into different projects (they often need ‘approval’ from government overlords, which slows things down or makes them impossibly expensive).
“Garth you’ve been pitching the same story for 8 years now and prices keep going up and up.”
Price appreciation stopped middle of last year, and now we’re seeing some significant declines across Canada. So Garth has been proven correct, although, in hindsight, it probably took a little bit longer than most of us bears had predicted.
#88 Bill Gable,
There are still those of us that pay with a credit card to avoid carrying cash. So long as the bills are paid off in full every month, I’d rather get the rewards points, than worry about coming up short.
I recall the days when I was in debt though, then it was cash only.
This country does not suffer from income inequality, or wealth inequality, it suffers from DEBT inequality. A little or a lot, those that eschew debt and who own assets do better in the long run than those who accumulate a lot of debt. Like any investment, real estate only builds wealth if you sell and pocket your gains.
It’s sad to see so many working class people are still underwater from the peak of the housing market here, in Edmonton during the 2007 housing bubble. Prices almost recovered from 2007 this year, but have started to turn down already! From the Highland’s neighbourhood to North Glenora, prices have been reduced, and hundreds have been pulled off the market, still empty and unoccupied. A turn down or collapse is coming. May God help us.
Just returned from two weeks visiting friends and family in TO. Usual residence is England. Comments as follows:
My lovely family are all middle class by which I mean professional jobs and education. No-one seems to have much disposable money but since they don’t travel much, they don’t realise it. Probably better that way actually. Canadians could be miserable if they knew.
Few For Sale boards but of those few, very few with Sold on them. I was in both 416 and 905 areas. I was there for two weekends and noted neither open house signs or much action at Mississauga and Brampton new home sites. Definite signs of the market turning down. Family starting to talk about the TO boom being past the peak too.
Walked into some new Mississauga developments and hubby noted that the construction techniques of timber frame then pressed wood sides and then felt covering was exactly the same as he had done for our garden shed kit here in England. I have made this point before but how will these homes last longer than the mortgage term, especially with killer winters. This will be the next RE scandal, the next elephant in the room.
And yes, why do we Canadians have such a superiority complex. Everywhere you see signs saying proudly Canadian, maple leafs on everything, best country on earth everywhere, flags everywhere. Surely it must really be a sign of an inferiority complex and we are just trying to convince ourselves otherwise.
Starting to become both a complex and worrying situation over there. Interesting to see if the Torys can hold it all together long enough to get through the election or if reality will start to bite this winter. If they can’t then you will get the Red Prince for sure in 2015 and it will all fall apart on his watch.
Red Prince is the term they use in the British tabloids for the sons of lefty politicians looking for a political ride through life on daddy’s coattails. Smashing term for champagne socialists.
.
‘But so have equity markets, also via leverage (margin).
Just curious: has CDN margin debt tracked CDN real estate debt?
“
As Garth has pointed out, 3.33X is the max. Additionally, RRSPs, RESP’s RPP’s, and now TFSA’s, cannot have any leverage associated with them (synthetic zero-sum leverage, by way of options, really doesn’t count!). Canadians tend to be extremely risk adverse, and anecdotally, margin debt seems to be very uncommon. The regulatory apparatus in Canada highly discourages it, and the case for leverage, ie: a positive equity risk premium, hasn’t existed over the past 30-35 years. This probably will change in the future, especially as equities and business investment goes cyclically back into favour as housing continues to move out of favour, but no coherent fact-based argument can be made that Canada’s publicly traded stock market is in any way, shape, or form, propped up by the effects of securities-backed lending.
#88 Vanecdotal on 11.14.14 at 12:15 am
You forget the minority of “deadbeats” in the ranks of credit card users, those who pay off their statements in full and on time. I bet many who frequent this blog are “deadbeats”, seeing as everybody has more liquid assets than the average person. You can’t build up that kind of nest egg without being prudent with your credit cards. So why should I pay for food (or household necessities) at Superstore when I can use my PC points and get it for free?
The rich get richer not because they own equities, but because either they inherited their wealth from a rich relative (mom, dad, uncle) and control large real estate assets and use the tax system to lower their taxes, while those of us who didn’t enherit a pile of money from rich parents have to work for a living, paying income tax without deductions, pay high rents or mortgages (you gotta live somewhere).
Case in point, a local contracter in my town told me he is renting a house from a wealthy lady who owns “a quarter mile square ranch” in BC, is in Phillipines for the winter and also owns a house in Vancouver. You can bet this lady didn’t buy all that land and real estate by working and saving or investing in equities (unless she is the CEO of a bank or large company). Yes, there are entrepreneurs who start companies and strike it rich, but you have about as much luck striking it rich starting up a new company these days as you do buying a winning lottery ticket.
The 1% CEOs and senior execs give themselves the multi-million dollar pay package with stock options, golden parachutes and iron-clad pensions, while outsourcing jobs to 3rd world countries, laying off staff, hiring temporary foreign workers, supressing wages to 1970s levels, cutting employee pensions. Wealth disparity in this country and around the world continues to grow due to tax policies, corporate practices and capitalism taken to the extreme.
#1 Cato the Elder
“I’m afraid we are going to devolve into a poorer and poorer state”.
Total liabilities which include direct debt,contingent and program obligations,debt guarantees, for the federal,all provincial and local governments in the country to-day– $4.1 trillion.
As Chinese leaders know better than anyone, the ultimate issue is American corruption. Washington is actually far more corrupt than Beijing. If you want to get something done in Washington, you do what you do in Jakarta: just slip some money to the right people. The point was made as far back as a generation ago by the prominent Japanese commentator and author Shintaro Ishihara. From an East Asian point of view, the United States is already, in its political dynamics, a Third World country.
http://www.forbes.com/sites/eamonnfingleton/2014/11/12/obama-in-china-taking-candy-from-a-baby/
A report in The Nation in 2014 suggested that while the number of 12,281 registered lobbyists was a decrease since 2002, lobbying activity was increasing and “going underground” as lobbyists use “increasingly sophisticated strategies” to obscure their activity.[3] Analyst James Thurber estimated that the actual number of working lobbyists was close to 100,000 and the industry brings in $9 billion annually. (Source wikipedia)
If you really think about it.
Robots and ever faster and more efficient automated factories are freeing up mankind. America is the test case. They are first with the most sophisticated factory automation. That is, whatever industries that are left here are well automated.
The rest of industry just took off to China.
Now what do you do with all that production and low cost import goods that now have fewer employed people to purchase them.
No wonder the top 10% is getting richer. They are the ones who own the machines that are doing the work of 10,000 men with an operating crew of 20. Since they own these machines they are benefiting and the poor are waiting around for food stamps and handouts.
Eventually all production will be done by machine. Soon even human like robots will pick soft fruit like blueberries in the fields. Cars and trucks will drive themselves.
Imagine all the truckers of North America out of work. Most of the busy work will be in offices complying with ever increasing government regulations. Accountants, Policing of all kinds, invasive regulators.
Unless you secure one of these life long government jobs you may be at the mercy of the welfare state for the rest of your life if you have no capital to start your own business.
Not many companies will be hiring in the future. Maybe not enough to sop up the unemployed.
I hope I am wrong on this, but it seem logical to me.
So when are they raising the tfsa limit to 10 or 11k was that not a election promise. Who cares about income splitting give me more tfsa room, I think the government will put a 100k ceiling on tfsa room they cant do this for ever. No 18 year old will ever be able to put 40 years at 5.5 k government would go broke lets get serious.
It is even worse here in United States
http://www.oftwominds.com/photos2012/median-net-worth5-12.png
Beware, fellow plutocrats, the pitchforks are coming
http://www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming?language=en
If oil goes below $70 a barrel and stays a while I could see Alberta real estate market slow down with minimal downside.Under $60 for an extended period I could see 10% decreases for sure.Toronto and Vancouver will always go up because of so many rich people moving to Canada.
I met a very smart young man under 30 who is from a small European country and lives in Bali 8 months a year.He said got a great deal for a small comfortable place for $1500 us a year.He says he makes more in a half days work than the average worker makes a month in Bali.He says works in Europe for 4 months a year because he sees the demise of his country.He’s been doing this for the last 5 years and loves it here,the freedom and sun.I’m in Bali and I might do the same thing.Why be a slave to your government and bank.Like my new friend says I’m not conforming to their enslavement.
#72 will on 11.13.14 at 10:11 pm
“Once rates normalize, those asset values will fall, and the jig will be up.”
The jig will be up. What is the origin of this phrase? I know what you mean Garth, but is the jig a dance? or a fishing lure? Just wondering. Does anyone know how this phrase came about?
**********************************
Go to this website. The explanation is appalling and far too long to paste here.
http://theworlds-writenow.blogspot.ca/2011/07/racist-terminology-on-msnbc.html
#71. ‘Also I am at the point of having enough invested to seek professional help so I asked my accountant for a referral and he gave me a card to a guy from the Investors Group.’
********************************************
I agree with Teulon (#79), get a new accountant. Either your accountant is getting a finders fee from IG, or he/she is completely incompetent with respect to investing and money management. Either way your best interests are not being served.
Garth, good on you for tackling the subject of wealth inequality, this is one of the most serious problems we face moving forward. Delve deeper into the issue, please.
What could possibly go wrong with Steve the Economist Harper and Joe the Undertaker Oliver pulling the levers for there rich buddies?
Folks Steve has run this government into the ground with 7 plus years of foolish wars, spending and tax cuts to buy you votes .
All of a sudden he discovers money in the kiddie to buy off middle class voters while trashing health, science, aboriginal affairs, and Statscan.
Steve is a venial guy who doesn’t care about a housing crash – he’s a phoney that has destroyed the Tim Horton and working class and the suburban middle class family.
If Steve goes he will collect his big indexed pension and tons of corporate gigs and cash for all the laws he’s trashed to help his oil buddies.
Folks its a mess – We’ll be paying through the nose for decades.
#6 AACI Home-Dog said “Hopefully that program to teach the youth about this in school is underway ? It will take a long time and some considerable suffering before this starts to even out.”
I teach in a high school in Ontario, and I certainly have seen no push or implementation of a financial curriculum. Unfortunately, if it were done, the focus would just be on budgeting or the likes, will little practical regard to investing. Principally because so few teachers (even at the ministry level) have any idea about how investing works.
Just sayin’
To my surprise, I’ve opened those links below and saw we are close to LOWS not seen since the GREAT FINANCIAL CRASH OF THE CENTURY.
so, people wasted a decade with TSX in regard to energy, materials, precious metals….GOSH – tough times ahead for Canada – why isn’t BANK OF CANADA printing $$$$$$$$$$$$$ army yet???
Because this is globalization, and it’s muscle is smaller than huge money pools owned by speculators. make the cross sign and pray, LOL the kids will inherit an evil earth. I think we should put aside divisions (about real estate) and do something about this country. like a new political party
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05MQP®ion=can&culture=en-CA
http://quote.morningstar.ca/QuickTakes/fund/f_ca.aspx?t=F0CAN05LST®ion=CAN&culture=en-CA
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05LSS®ion=can&culture=en-CA
#102 jane24
Interesting observations. I’ll be in Toronto next month when I go back to visit family and friends for Xmas. Most of the family lives in relatively new GTA developments. When I used to visit them in the past I would usually get dragged out to the new home sale centres in Oakville and Milton. They would take me under the guise of suggesting that I might be interested in buying one for investment purposes (no, thanks). Mostly it was so they could show off how much new houses cost, and therefore infer how much their homes had appreciated.
One thing though. I don’t think the construction techniques used for new homes are particularly that bad. Unlike the houses we have here in the UK, Canadian houses allow for forced air heating and cooling. Not exactly the best for sound insulation but at least the walls don’t absorb all the heat in the winter and radiate heat in the summer, like they do here. They are designed for a shorter life cycle and I think that should be reflected in the price (which it is not). But Canadians seem to be happy as long as they can “add value” by finishing the basement and building a deck.
Garth and Ole Yeller went to the same school.
“[C]iting that same survey, Ms. Yellen expressed concern about “lower-income families without assets” that “can end up, very suddenly, off the road.” She therefore advised families to “take the small steps that over time can lead to the accumulation of considerable assets.” She did not, however, explain how they were to accumulate these assets, in light of falling incomes and zero interest rates.
“https://www.businesscycle.com/ecri-reports-indexes/report-summary-details/yellen-let-them-eat-cake-retire-income
@#52 bigtown
“Read a weird article about initiating new immigrants to Canadian weather and how it can be very enjoyable and longed for lifestyle. Of course, they never poll all those REAL CANADIANS who have spent decades in the GREAT WHITE NORTH shovelling snow and running from the Tim Horton’s to your car…”
++++++++++++++++++++++++++++++++++++
I was up in Whitehorse last Christmas. -40 most days. Busload after busload of tourists for India and China everyday to take photos of the paddlewheeler on the Yukon river in downtown Whitehorse. Then they were off. I spoke with several groups. Lots of honeymooners. They loved it and were up there to “See the Northern Lights”. Didnt see one group of Canadian tourists but Timmies was packed.
Had time this summer to read and compare Marx’s Capital, Piketty’s Capitalism in the 21st Century and Richard Wolff’s Democracy at Work. I am making a very broad statement, but Capitalism does not by its nature ensure a strong middle class or in fact any real protection for labour. It is the surplus labour (the productivity gains beyond what the labourer is paid) that is what any capitalist is wanting to capture. If the middle class or the worker was totally eliminated from the production that would be just fine. It’s their role as consumers that keeps the capitalist happy. And when wages stagnate and fall, debt takes over. Gains in equity and capital trump any salary gains. Its built into our economy and any tweaks to social welfare from top down management either from corporate boards and executives or socialist politicos won’t change that.
http://m.theglobeandmail.com/report-on-business/top-business-stories/bmos-doug-porter-ten-reasons-to-cheer-canadas-economy/article21585048/?service=mobile&cmpid=rss1&click=sf_rob
This guy disagrees with you though.
I am sure Mr. Porter’s employer,the Bank of Montreal, is pleased with the article. — Garth
Harbinger of the condo future?
http://www.cbc.ca/news/canada/toronto/water-main-break-floods-condo-at-york-mills-and-yonge-1.2834962
The residents are seniors or wrinklies as Garth likes to say and most are now trapped inside.
Some of the units here at 3600-3800 Yonge are listed for over $3,000,000 !
Floods, falling glass and falling prices.
One way or another lots more people will soon be trapped inside their condos.
With all it’s good and bad points, Unions were a main player in developing the middle class. Now mostly out of favor, as a solution going forward, what organization can ensure the middle class has a foothold? We need some ideas for help/guidance in this free market! Maybe legislative?
Cheers…
#113 Millenial
I agree with Teulon (#79), get a new accountant. Either your accountant is getting a finders fee from IG, or he/she is completely incompetent with respect to investing and money management. Either way your best interests are not being served.
————————————————–
My thoughts exactly. Hence, the disappointment
A moment of silence in the Skunk household for the 50+ lady in the apartment upstairs who is moving out today.
Giving up $800/mo rent (utils included) in a beautiful leafy neighbourhood steps from High Park, having purchased an identikit filing cabinet condo overlooking the Gardiner Expressway and some railway tracks in the millionaire’s playground of Mimico. Lovely part of the world, I’m sure.
I asked her why. She couldn’t really answer the question.
Her loss, the next tenant’s gain.
“It’ll get far worse, and likely have political consequences. Since the wheels came off in 2008, the government’s encouraged people to take on big debt and buy real estate – so politicians here wouldn’t have to spend massively as the Yanks did. It worked. We bought it.”
*********************
Sure, it worked. But now it’s backfiring. Smart government!
@72, @112. My grandmother used to dance the jig.
TRUE explanation of the jig is up is simple, and here:
http://en.wiktionary.org/wiki/the_jig_is_up
#39 Faith: “ETFs for Canadians for Dummies”
**********************
Actually, those books can be very informative, speaking in laymen s language. I have ‘Golf for Dummies’ and have referred to it often over others.
Re @ Twriter
Garth – I am interested in your response to this blogger’s post. We are in the same position but with a much smaller nest egg which is just sitting in the bank doing nothing. I’ve been reading your blog for over a year and slowly getting it and trying to figure out where to begin with such a small amount $30,000.
Initially we were thinking of buying but held back because of this blog. Thankfully my fiancé listened to me (and btw for all you blog dogs it’s the reverse – in this situation it’s a guy that wants the house).
Early on when we were looking at houses in the Lower Mainland and discussing rates with the fellow at TD – he gave a big spiel on the great rates we were going to get and gave us payment figures. I asked him point blank what the amounts would be if the interest rate were to double. He wouldn’t answer the question so that was it for that guy… left a seriously bad taste in my mouth.
In the end i realized we couldn’t afford it if the rates went up by 3%. And we don’t want to buy a condo so we’re out for now.
thanks for this blog.
What middle class?
http://www.theguardian.com/business/2014/nov/13/us-wealth-inequality-top-01-worth-as-much-as-the-bottom-90?CMP=share_btn_tw
“Wealth inequality in the US is at near record levels according to a new study by academics. Over the past three decades, the share of household wealth owned by the top 0.1% has increased from 7% to 22%. For the bottom 90% of families, a combination of rising debt, the collapse of the value of their assets during the financial crisis, and stagnant real wages have led to the erosion of wealth.”
As I have argued, the US middle class fascination with real estate, which lead to an unprecedented boom and bust, was largely responsible for this situation. We appear to be on a similar path. — Garth
#82 Bottoms_Up on 11.13.14 at 11:08 pm…
What I meant to say was that most Canadians believe they are special in that a US style real estate disaster couldn’t happen to us (prices are always going up).
Our US neighbours know otherwise!
#85 Setting the Record Straight on 11.13.14 at 11:52 pm
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Someone previously said on this blog something along the lines of:
In the 1970s/80s, middle class meant basically the top 75% of earners, and at 50% one could expect to own a house, cottage, 2 cars and other play toys.
That ‘50%’ mark has now dwindled down to top 5 or 10%. The ‘middle’ is not capable of affording cottages and play toys any more.
forward thinking
Japanese tech looking for new opportunities and new ideas with old unused pcs of real-estate, Toshiba and Fujitsu are growing lettuce in old clean rooms.
http://qz.com/295936
As I mentioned in the last blog comments, these Canadian ETFs are holding a lot of industries that face disruptive risk.
1. Banks – have mortgage risk with a downturn in housing and a lack of new mortgage sign ups.
2. Gold Miners – obvious
3. Oil companies – face sub $75 oil for the near future and betting heavily on expensive oil sands crude likely to stay in the ground. Climate change, electric cars, better gas mileage, fracking, china slow down etc
4. Pipelines – Keystone, Northern gateway, Energy East, etc etc will never see the light of day.
5. Utilities – solar is making significant inroads and getting cheaper and more efficient. Its going to be on your roof very soon.
6. Life insurance – I see a lot of people living longer than ever
7. REITs – pressure from less need for office space and retail is under siege from online sales. The mall model is dying so these guys will need to pump in a lot of money to regain their glory. After the 2006 recession in the US, REITs down there imploded.
There is lots of other smaller holdings in these ETFs but the majority is in the 7 categories above.
Where am I wrong?
The TSX is ahead 11% in 2014, and economically it’s a crappy year. You’re depressed while investors are not. — Garth
I got a brochure in the mail yesterday for a place called “easy home.” Evidently, they have nearly 200 locations in Canada. They’re also the “third largest merchandise lease companies [sic] in North America.
The brochure explained to me how I could get the stuff I want when I want it (now, duh), by leasing it or “leasing-to-own” it. They had it all in there: chesterfields (actually, a “nine piece living room set”- I have no idea what the nine pieces could be, but it had a fancy name); laptop computers; big televisions; video games (they actually had a package that included two different video game systems). “Lease terms” were usually either two or three years, though stated as 104 weeks or 156 weeks. You can rent/lease/whatever that living room set for 20-something a week (sorry- I mean “only” 23 dollars!)…for 156 weeks. I have no idea what the buy-out might be after the end of the “lease term.”
I’m not sure who exactly is partaking of rent-to-own furniture, but I guess someone must be. The one closest to me is across the street from a payday loan shark, not shockingly.
It’s the end of oil….Calgary will die…..we’ll all eat granola in teepees with Obama tattooed on our bums…….get serious.
#65 Sydneysider
And the wages are double ours.
For #77 DA, most comments made on here are solely opinions based on one’s knowledge of the issues. Their intention is to not demean, nor be malicious, but strictly to offer an opinion.
You on the other hand, believe that yours is the only valid and worthwhile opinion and anyone who disagrees is a fool. You can always spot the halfwit with little of substance to offer, they resort to malicious attacks.
Like most realtors I’ve encountered, there’s not much there.
“algorithmic” trading and borrowing cash from yourself to show a loss.
G20 experts to act on corporations’ internal loans that help cut tax …
http://www.theguardian.com/business/2014/nov/07/g20-tax-experts-shakeup-corporations-internal-loans
=======
“abatements” and tax credits / megadeals?
Proposed GASB Standards for Reporting of Tax-Based Economic Development Subsidies
GASB is Proposing New Rules for State and Local Governments to Report on the Costs of Tax-Based Economic Development Subsidies. Public Comments on the Proposed Standards Are Invited Now through January 30, 2015.
see – A ray of sunlight on secretive corporate welfare
http://america.aljazeera.com/opinions/2014/11/gasb-corporate-welfare.html
http://www.goodjobsfirst.org/
A simple rule of 3x yearly income as a limit for mortgage lending would go a long way to tame home prices and personal risk…
What political party has the ability to foster this rule?
Cheers…
I like the way Obama politely trashed Keystone and Canada.
Canada wants to pipe their oil through our land where we will refine it and sell.
Well we have our own oil to refine and sell.
Americans’ ownership of assets shrinks
Candidate George W. Bush promised an ‘ownership society’ in 2000, but his policies reduced Americans’ share in ownership
November 6, 2014 2:00AM ET
by David Cay Johnston @DavidCayJ
http://america.aljazeera.com/opinions/2014/11/inequality-capitalgainsdividendsgeorgebushownershipsociety.html
#95 Cato the Elder
Lots of good points here Too bad you don’t have a seat at the big table in Ottawa
One thing I like to do these days is politely rattle government workers and get them thinking outside their normal programing. Recently I was dealing with MSP (medical services premiums) in BC. I mentioned to the lady that it’s quite expensive and always seems to be going up. She replys ‘well it would be much more expensive if the goverment didn’t pay the rest’ Well I just had to inquire as to where she thought the govenment gets its money from?
Blank stare
Nexus 6 or Note 4?
That is the question….
Sitting at home today, watching Property Brothers, and I recognize the couple as being Investors Group salespeople / financial advisors. The part that shocks me is that they don’t know the cost of houses in the area they want to live in. One of the fixer-uppers they’re shown has the walls and flooring removed, they are unimpressed; me, I’m thinking, great for the home inspection, you can see the condition of the wiring, walls, ductwork, etc., and the demo work has already been done.
I would have thought, in their line of work, they’d have a better grasp of real estate. Or is it just acting for the show?
Still waiting for one of the many govt trolls on this website to tell me why with $75 oil:
1. I’m not paying 0.99 cents at the gas pump
2. If it’s taxes, are we really paying FIFTY CENTS A LITER MORE than the Americans? They are paying taxes as well.
Cato the Elder:
many in government have never worked a day in their lives – they have been employed by the state for the entirety of their careers.
They don’t understand how wealth is created.
They don’t realize that you have to provide VALUE
Government officials earn money by taxing that productivity
I imagine Quebec and Alberta could even see eye to eye on this.
key word is imagine
4. Pipelines – Keystone, Northern gateway, Energy East, etc etc will never see the light of day.
+++++++++++++++++++++++++++++++
Keystone must have died because it has just seen the light. I hope this means 0.99 gasoline so I’m not continually ripped off by my own country. And all the CO2 I produce means more green plants (I lernd that in skoool – you know – the place ware you lern aboot global warming.) How far below zero is the temperature today?
#148 RealistvsExtremist
“And all the CO2 I produce means more green plants (I lernd that in skoool – you know – the place ware you lern aboot global warming.) How far below zero is the temperature today?”
Yep, you certainly seem to have a good grasp of the science.
#149 Rational Optimist on 11.14.14 at 2:54 pm
#148 RealistvsExtremist
“And all the CO2 I produce means more green plants (I lernd that in skoool – you know – the place ware you lern aboot global warming.) How far below zero is the temperature today?”
Yep, you certainly seem to have a good grasp of the science
++++++++++++++++++++++++++++
Are you suggesting that the “toxic gas” that our children are brainwashed to think by govt and other tax climate collecting agencies is NOT food for plants?
Here is one for the gold bugs:
http://www.theguardian.com/world/2014/nov/14/isis-gold-silver-copper-islamic-dinar-coins
I find this interesting….thought they would go the route of bitcoin…instead of coin…
“Price appreciation stopped middle of last year, and now we’re seeing some significant declines across Canada. So Garth has been proven correct, although, in hindsight, it probably took a little bit longer than most of us bears had predicted.”
I won’t argue that. In Toronto, I did see some small price drops on certain properties (From way overpriced to slightly less than way overpriced)
But I also see normally intelligent people overextend themselves in RE as we speak
The question is not if RE did peak or not but when would it become common knowledge
Have patience Calgary. Mr. Obama cannot veto Keystone approval after his reign is over. You have 26 months more to wait for that day.. like the rest of us.
#134 not 1st
First of all, you are correct that the TSX is heavily weighted towards banks, energy and mining. That’s why Garth and any other investment advisor worth his/her salt will tell you to limit your exposure to a reasonable percent of your total equities.
1) Banks – What mortgage risk? There’s CMHC. Sure a slow down will hurt their bottom line and a bear market will take them lower from their relatively lofty perch, but they aint going anywhere
2) Mining – has been down in the dumps for awhile, but only makes up 10% so won’t hurt you too badly. Plus you’re supposed to buy things when they’re low.
3) Oil Companies – $75 oil is already priced in. They’re a bargain at today’s prices. It’s likely still too early to buy, but as Garth says, you buy when things are on sale. As for all of those other things you mentioned they will have little effect on things in the next decade or two. Wake me up when there’s no more rush hour and electric cars make up a meaningful percentage of cars on the road.
4) Pipelines – the rest of your list falls under the same category of, such a small percentage you don’t need to sweat the details. One of the pipelines will go ahead I can gaurantee it. Republicans will force Keystone through eventually. The NDP actually want Energy East, etc. Not that it even matters because we’re moving more oil by rail than keystone ever would have.
5) Utilities – Solar and wind can take off all they want. It’s still going to be cheaper to mass generate electricity. There will be a SMALL market for people with extra cash who like the feeling of living “off the grid”.
6)Life insurance – If people are living longer then life insurers will cash in.
7) REITs – Rental markets are tight and I haven’t seen any office towers or malls close lately. They’re still building’em like crazy here in Calgary.
Bottom line is you can sit on the side lines FOREVER waiting for the collapse of society, or you can recognize that there is risk in investing, but there is also reward. That’s why you stay diversified. If you want to be defensive hold more fixed income. If you think Canada is due for a slide hold more US and international. Or you can just admit that you can’t predict the future and hold a balanced portfolio that you rebalance once a year like Garth suggests. Learn what TFSA and RRSPs can do for tax and then you’ll be set.
Just got word that TD’s been sending, to most of their LOC customers, increases of approximately 2% on most LOC products over and above the normal floating rate.
Should be good for TD shareholders, but is a sign that the banking sector is definitely viewing the high probability of decreased credit-worthiness as starting to being an issue.
“Starting to become both a complex and worrying situation over there. Interesting to see if the Torys can hold it all together long enough to get through the election or if reality will start to bite this winter. If they can’t then you will get the Red Prince for sure in 2015 and it will all fall apart on his watch.”
Probably they can hold it. Whatever happens this winter it can be discounted as “we always have slow market in winter” after that it is not that long till the election to create a trend.
The question is would that and/or any “free” giveaways actually help conservative to keep their majority. In absence of any critical mistakes by the liberals I think it is going to be hard for PC to replay the last elections …
#144 Smoking Man on 11.14.14 at 2:01 pm
Nexus 6 or Note 4?
That is the question….
;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;
Just got my Apple 6+ amazing machine. Dumped the Samsung Smoking Man. That’s all they can afford in Asia, over there everyone has them, dirt cheap. They don;t hold up quality wise though compared to the Apple.
“Toronto and Vancouver will always go up because of so many rich people moving to Canada.”
Very little evidence of ‘rich people moving to Canada”. If they were, then leverage would not be out of control in these cities. And Toronto/Vancouver prices stopped appreciating last year, so there goes that theory.
#141 Harbour on 11.14.14 at 1:14 pm
I like the way Obama politely trashed Keystone and Canada.
Canada wants to pipe their oil through our land where we will refine it and sell.
Well we have our own oil to refine and sell.
____________________________________________
That’s OK, when you run out of oil we will still have lots of it. Oil isn’t as important as the one resource we don’t need to refine! Water!!! And we have more of that instant resource than you could ever imagine. Oh ya………
“prince or pauper”
Fourteen Defendants Charged In White Plains Federal Court With Massive Mortgage Fraud Conspiracy
FOR IMMEDIATE RELEASE
Thursday, November 13, 2014
…”the unsealing of an Indictment (the “Indictment”) charging 15 defendants, including 14 defendants with conspiracy to commit bank fraud and wire fraud in connection with mortgages and other loans secured by properties in Brooklyn, Manhattan and Monroe in Orange County, New York. The defendants include several related members of a family, the Rubins, as well as a real estate attorney and a real estate appraiser. The Indictment sets forth a total of 21 counts charging various defendants with additional crimes, including making false statements to lenders, aggravated identity theft, and theft of public money. Thirteen of the defendants were arrested today in a coordinated takedown. They will be arraigned on the charges in the Indictment before United States Magistrate Judge Paul E. Davison in the White Plains federal courthouse.
U.S. Attorney Preet Bharara stated: “The charges unsealed today describe a sweeping and cynical fraud. As alleged, the scheme carried out by the Rubins and others ripped off banks, welfare programs, and taxpayers. It ranged from 2004 to 2014, from Brooklyn to Harlem to Orange County, and the individuals involved alternately played the parts of prince or pauper, depending on which scam was being perpetrated. Now their alleged double dealing will be stopped, and they will have to submit to the truth-seeking process of the criminal justice system.”
http://www.justice.gov/usao/nys/pressreleases/November14/RubinIrvingetalIndictment.php
“Garth – I am interested in your response to this blogger’s post. We are in the same position but with a much smaller nest egg which is just sitting in the bank doing nothing”
I am in a bit different situation, as I have both money for the down payment as well as long term investment portfolio.
I struggled with the question of what exactly to do with the down payment
There is no easy answer however, as effectively the government/BoC punish the savers (unlike investors). You get less than inflation after tax, if you go for savings account/GIC
Moreover, just keeping up with inflation won’t cut it for the down payment, as (being a bubble) the Real estate have only two ways to go: up much faster than inflation or down in a similar manner
Isn’t that your KIA in its final moments?
I can’t decide if the guy is showing regret or relief that the car will be a write-off.
Re: #147 45North
If only more of us would. Instead, people like to dismiss the idea that things could improve, and simply accept the decline our country is facing.
We are fortunate that people in the past decided to think up a better future. One where the common man would be allowed speak their minds, not be tortured, have claim to property, and pursue happiness. This is slipping away. Those silly people with their silly imaginations!
re: #70 Mr. Frugal on 11.13.14 at 9:54 pm
#39 Faith
Check out Canadian Couch Potatoe. There are a lot of good articles for DIY balanced investors.
http://canadiancouchpotato.com/
see: http://www.capitalcentury.com/1992.html
The URL was spelled correctly, since Canadians don’t normally use the British spelling.
Odds are Obama will use the veto (unfortunately, for Canada AND the US) because the environmentalists need to be worked up into a fearful, panicked frenzy, for the 2016 election.
Wouldn’t want them to stay home and thus impede Hilary’s coronation.
I think, follow the campaign money is still the best way to play this, as always.
“Just got word that TD’s been sending, to most of their LOC customers, increases of approximately 2% on most LOC products over and above the normal floating rate.”
Anything official. Links?
Q4 reports are due soon, I guess we will find some clues about expected profitability
#85 – Straight – thanks for the definition regarding class structures. Pretty much everything I’ve read previously has indicated income levels = class. And in a way they still do, IF that income is derived from income producing assets & not just a paid salary via employment. Which means the vast majority must fall under working class, because it seems to me that if people are working at jobs they complain about that they must either not have alternate income sources to cover their expenses or possibly their other assets do not as yet produce enough income to permit them to give up a salaried position they are not happy in.
Question: what about pension income? Would it count towards being considered non-working class or would it count the same as a salary would? I ask because pension income like salary income could be reduced or eliminated at any time. For anyone who believes otherwise, talk to pensioners whose plan fell under Air Canada or Nortel.
The Canadian Federal Government through the Bank of Canada will do everything it can to maintain the status-quo of near zero interest rates to “stabilize” the housing market because it would be extremely politically unpopular to cause or allow for a housing market correction. Too many “Canadians” are depending on their astronomically inflated real-estate value for their retirement incomes (witness all those Reverse Mortgage radio and TV commercials), so the government is under pressure to keep it that way. Yes the next generation is screwed but Federal politics only looks four maybe five years in advance. We have massive inflation in Canada, and the rest of the “western” world for that matter, that maintains this fantasy of a “good life” for the present generation but makes it increasingly difficult for the next generation to own a home and have a family and we are replacing the resulting decline in domestic birth-rate with immigrants from developing countries, a strategy that WILL backfire in the long run….SOS, LOL.