Well, let’s recap.
The sheiks have decided to keep flooding the world with oil in order to maintain their market share, so a barrel of crude is on its way to sixty-five bucks, as of yesterday. This is a disaster in the making for Fort Mac, Edmonton, Calgary and poor Jim Prentice. Just a day after RBC claimed Calgary real estate is affordable (say, pardner, would you like a mortgage?), everything changed. As we near the break-even price for the gooey stuff the oil sands produces, we grow closer to the next leg in that region’s boom-and-bust cycle.
Don’t claim nobody warned you, cowboys.
On top of this, there’s the certainty of rising US interest rates in 2015, as this pathetic blog tried to drill home in the last two days. It’s coming. Like, seriously. In fact, the cheaper oil gets the more Americans will spend, and the faster their recovery powers ahead. Long-term bond yields will eventually reflect that, which means don’t count on renewing your mortgage at under 3%. Get ready now. Use this time for trashing debt or effectively investing the money you’re saving. Or, better, selling your house in the inflated burbs of Cowtown.
Third, the world continues to think we’re crazy. CMHC says Toronto and Vancouver properties are not overvalued. The OECD says pfhht. Prices are 132% of what they should be, compared to long-term averages, based on incomes. The IMF says our valuations are unsustainable. So does The Economist. Morningstar. Fitch. Standard and Poor’s. Robert Shiller.
Two days ago we laughed at the poor schmucks who paid over $1 million (plus $50,000 in land transfer tax) to buy an ugly dwarf house on Euclid in Toronto. Sadly, it was a price consistent with a hood when semis get snapped by aging hipsters for almost seven figures. Now there’s more evidence the people of Vancouver, who on average make 70% of those in Toronto, are equally insane.
Recently only six detached houses in Van were listed for less than $700,000. Yes, six. One of them, at Victoria and Hastings (yuck) was marketed at $699,000 and sold for $757,000. The unrenovated beater has but 500 square foot of space on the main floor, no closets, no finished basement and is perfectly suited for a mold farm. There were four offers, and a bidding war among people who will need to spend another $250,000.
Here it is:
The average Van property now costs $820,000. The median Van family income is $71,200. Figure that out. Foreign money plays a role of course, but it takes an entire city drinking the Kool-Aid to make an absurdity like this happen. Meanwhile prices and/or sales are heading down in six of ten other markets. Increasingly we have an unhealthy, unbalanced and unhinged situation incredibly susceptible to economic shock. This is exactly what the Bank of Canada’s been warning us all about for a dog’s age.
Well, here’s a shock for you. Oil was $106 in July. This week it’s in the sixty-dollar range. Down more than 6% on Thursday alone. Canada ships out about 2.7 million barrels of the stuff every day, accounting for 9% of the economy and almost half our total exports. With retail sales squishy, incomes stalled and our condo economy built on the ethereal horniness of moist virgins, this is relevant. Just like the certainty that we will be impacted as the Americans decide it’s time to normalize their interest rates.
By the way, the OPEC guys, whose decision on Thursday led to the crude collapse, would be happy to have Calgary hollowed out. They have enough cash reserves to see oil drop to levels which idle the tar sands, crash American fracking and completely diddle the Russians and Venezuelans. Fort Mac? Roadkill. So much for those half-million-dollar trailers.
Whether you live on Euclid, Hastings, in Tuxedo Park or on the Athabasca, you’re not immune. In the last three hot markets in Canada, real estate is overvalued and vulnerable. It probably won’t collapse, but then, it doesn’t have to. Even a modest correction will ripple through everything, and tear into the finances of those who decided a one-asset strategy, steeped in leverage, was the easy way to wealth.
228 comments ↓
Hey Garth,
how will this affect the stock markets, short term and long term? I’ve searched the answer on the ‘net but I keep getting ‘awooga apocalypse apocalypse the work is ending’ answers on the ‘net.
What happened the last time the Saudi’s got their underoos in a wad?
Gracias,
le Kid
Cheap oil has the potential to spur global growth, just as $147 oil brought recession. — Garth
Just trying to bump the baconator. Love ya garth
What’s the downside?
What if oil is actually falling not because of a flood of supply, but merely, because of collapsing US and global demand? This seems a far more likely scenario, supportable with plausible data, than the scenario of the US economy being in an acceleration mode.
The Canadian oilpatch is also in far better shape than the frack-drillers in the United States. For starters, debt levels are substantially less. Shale requires a lot of on-going investment to even sustain production on account of depletion, while the oilsands operators can walk away from most new investment for a number of years and just operate on a cashflow basis. The US shale sector will disappear far before the Canadian oilsands majors have any financial problems.
Obviously Alberta RE is going to be dead for a while, but price declines were already in the cards even before oil started dropping. Simple oversupply relative to demand. BoC’s next rate decision is likely a cut, mark my words, as the Canadian economy slides into a deepening state of deflation. Retail mortgage rates are heading upwards not because of BoC policy, but rather, on account of diminished credit-worthiness.
Mark. Take the day off. US oil demand is growing, not collapsing. Go and lie down. Please. — Garth
Don’t focus solely on the lowly <$1 million Metro Vancouver properties. The inventory is tiny in this range hence the competition for a scarce resource. Instead have a look at the burgeoning number of properties north of $3 million in Vancouver and environs that are sitting on the market with no one to love them. More and more are added everyday, especially in areas with considerable (hypothesized) foreign investment. Will someone with access to data for this kind of stratified analysis please help us out. Maybe I am just wishful thinking here.
I am paying off my line of credit, cancelling my credit card,and investing in my TFSA.
And renting is much easier on my pocket book.
I will be debt free in 3 years
Thank you Mr.Turner!
The Tar Sands is road kill to the Saudi’s
LMAO
First post? Not likely, but some comments on oil. So why are those shieks flooding the market with cheap oil? To bring the price down which will make some production on this side of the Atlantic uneconomic and result in a cut in production. Why do that? Simple, with extra production out of the picture the price will eventually climb again. In the short term the shieks lose, but in the long term they win. How do you gain from these actions? It’s a good time to start buying big blue chip oil companies, or XEG, which is made up of about 70% of those big companies. In the coming shakeout small junior fracking companies, with high production costs will be shaken out but big players like Suncor or Imperial Oil will likely survive it. As for real estate in grossly overpriced Cowtown, Edmonton, or Fort Mac, things could get ugly in the near term.
Last but not least, enjoy those low fuel prices while they last. Take that road trip, or that overseas flight and have a good time. These low oil prices are probably a temporary aberration from the longer term trend.
I have begged, cajoled, shown them this blog, and basically given the couple both barrels.
They still want to buy and ‘stop throwing away money’ on renting.
They have a beautiful property, rented, long term – in a great school district for their 4 kids. Close to everything.
I pointed out that to have an equitable property, their out of pocket could just about double. They didn’t blink an eye. “We’ll just use our line of credit”.
I asked them if knew what a demand loan was. Nope.
Did they understand that this era of free money has been an aberration, and the next mortgage will not be 2.9 pts., baby.
Nope. No sweat.
They are off to Maui for a MONTH. On plastic, is my bet.
They also have a beautiful leased Jag. He is a teacher and she is a hairdresser.
I think they are certifiably insane – and then I talk to other people who seem to be in debt beyond belief and no one seems concerned.
It’s like everyone is drinking martinis, on the aft deck of the Titanic and the band is striking up “Nearer, My God, To Thee”.
The whole thing is just incredible. One for the ages and no
doubt another book, Mr. Turner.
*Factoid* After housing values collapsed at the start of the “Fall of the Roman Empire” – it was calculated that it took 1,000 years for R/E values to become equable, in Rome.
Now, that may be apocryphal, I don’t know; but the key word now with RE is SELL and get out of the way.
Crude collapse caused by deflation. Not OPEC. Fail Garth.
Did deflation have a big meeting today? — Garth
#165 bill on 11.27.14 at 3:26 pm
#148 None on 11.27.14 at 1:25 pm
”Totally 100% wrong dude. He’s not even in the same ballpark as these other two, heck, not even in the same league.”
I would go further : keynes was in a completely different sport….
.
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Have you ever given a foot massage? lol
Best,
HD
Those shale oil junk bonds will be worthless soon.
Will cheap oil be a net benefit to Ontario’s economy?
You bet. Plus the US, Europe, China & Japan. — Garth
So that’s what The Truck that Taste Forgot looks like.
Well, I guess that there will be fewer of them in Calgary for the next few years. Maybe Car2Go should localise their Calgary Smart cars to attract former truck-driving customers.
Hey Garth,
I’ve been noticing that you’ve had a nasty case of the “Mark” lately. I think it best you see a doctor for that.
Better to be safe!!
The first domino is falling.
Soon, Keystone’s failure will be irrelevant.
Thoughts go out to friends in Alberta.
Tough times coming for you, then for the rest of us too.
Why is everything deflationary except real estate prices right now? I’m just not understanding it.
What is possessing people to pay millions of dollars for crapshacks, yet balk at paying for anything else?
Time to load up on XEG like Dean Del Pork Chop at an all you can eat smorgasbord ! Buy low.
hastings may be one of the best buys in van as the area is still dirt cheap (as evidenced by your example) compared to the rest of the city.
Seems like half of the street has recently been bulldozed and the new and shiny is coming. the area is quickly shaking it’s grungier past, much like commercial did.
The hipsters are already there, and like the vermin they are, will be run out as further ‘famlifacation’ continues;)
#9 Bill,
when you said he is a teacher that tells you all you need to know.
In the lending world teachers are the absolute worst when it comes to borrowing too much.. Not a joke, ask any lender/banker etc.
There are four categories of occupation that are the worst when it comes to borrowing too much money.
1. Teachers
2. Firefighters
3. Police Officers
4. Truckers
I have seen this multiple times and the industry knows this.
No one can talk sense into these people. Then they get into trouble and carry second mortgages on their house at 10% and above. I know because I have done it for them.
The drop in oil price will only be temporary. Saudi Arabia has past it’s peak of production and has been in downhill for a decade or more. They pump sea water into their wells to force out the remaining oil.
Meanwhile, world oil consumption continues to rise inexorably. China and India are setting record car sales. Everywhere you go in the world in every country, the roads are choked with cars, trucks, SUVs, motorbikes, transport trucks, airplanes, diesel trains, ocean cargo ships running on diesel. Large office towers heated with diesel. World population growing every day. Oil is also used to make paint, lubricants, plastics, vinyl, pesticides, herbicides, you name it.
As the oil price dropped from $106 to $80 and below, companies around the world started scaling back production, which will tighten demand in the months to come. Another cold North American winter is on it’s way and all those oil furnaces will be sucking back the crude. Now is a good time to buy oil company stocks. By next year, the price will rebound, I can guaran-damn-tee it.
Garth I disagree with you on Cheap oil has the potential to spur global growth.
US was booming in the states where lots of oil development going on. These states were the cash cow for the US, with lots of high paying jobs which means lots of tax revenue. Some of these companies have already canceled the dividends. I guess big lay offs are next. It will be some bk and huge losses soon. US banks are heavily invested into these projects by providing cheap credit(a lot). If the price will stay below break even(I think it’s around 70 $) for a long time I see very soon the credit will become very hard to get. Cheap oil doesn’t benefit that much spending as much as it damages the economy. US had lots of plans to start exporting oil and gas to Europe. I’m not sure if it’s possible now. Lot of money have been invested into these projects. Plus on top of that there are lots of companies who was benefiting from oil projects in US(equipment, utility, hotels and so on). What I agree with you is a cheap credit will be impossible to get very soon. I’m not saying it will be a crush, but I don’t see a huge grow as well.
The US oil business is about 9% of the domestic economy. A dip will not imperil the GDP. — Garth
I’ve seen the oil patch bust three times,its really not that bad.just means all the easterners move back home.its a bonus really for us albertans.
it also a very central place for access to downtown,bby/brentwood,northshore,hwy1, yvr,and wonderfully cheap oil changes.
Let oil crash harder and linger down here for years.
We Canadians are addicted to real estate and I’d love to see some empty pockets here in cowboy country.
It’s not only mid east action affecting oil but we are entering a paradigm shift.
Look at Tesla’s share price, doesn’t justify their balance sheet but the world is realizing gasoline cars are going the way of the dodo bird as slowly but surely cars are going electric.
So this is what it’s come to. Everybody has been waiting for housing prices to correct, for far far too long, and we knew that we needed a trigger. We all thought it was going to be when interest rates slowly started to creep up, but it looks like it’s going to be the collapse in crude prices.
I’m just thankful that it’s this RE craziness is almost over, when do you think it will show up in CREAs numbers?
Time to load up on XEG like Dean Del Pork Chop at an all you can eat smorgasbord ! Buy low.
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i heard that 10$ ago.
Good post. If u agree with Shiller, he also thinks US equities are in a bubble. I agree with that, valuations are getting up there
The S&P is 17 times earnings. Hardly excessive. — Garth
Funny how self-described economists gather around a central banker’s comments eight times a year like some ritual Stonehenge ceremony, religiously chanting up lofty words like stimulus, tightening, overnight rate, basis points, guidance, and other equally self-important terms, all the while completely missing the big picture.
Clearly, the global price and availability of oil has historically had a far greater and immediate effect on economic imbalance than any central banker’s announcement of a change of a few measly basis points.
If, as Garth points out, cheap oil helps spur economic growth beyond central bankers’ inflationary targets, I sure as hell wouldn’t want to be renewing a 5%-down mortgage next year, especially if I was smug enough to brag that I bought a starter-castle located on top of a pool of liquid dinosaur feces.
What could possibly go wrong with Steve the economist Harper and Joe the undertaker Oliver calling the shots!?!
Steve bet big on his friends in the Oil patch .
What a maroon – bustville in Alberta.
So much for that election baloney tax cut of shoving money out of airplanes for rich couples.
Anything to remain Master of the Universe.
Whatever happened to RALPH CRAMDOWN?
Haven’t seen him in like 6 months. He was my favourite. :(
“Will cheap oil be a net benefit to Ontario’s economy?
You bet. Plus the US, Europe, China & Japan. — Garth”
Maybe if they (in Ontario government) figure out how to balance the budget first. I think they don’t actually know how to do it …
Long term, yes I agree with you, but in the short term there is a bigger RE/debt elephant that needs to be dealt with
The Jaguar read that the Saudi’s can still float the boat with oil at 65.00 and one of the real reasons they are prepared to let it sink that low relates to the destabilization of their mortal enemy Iran. I wish there were some geopolitical types ( highly intelligent ones, I mean) that would weigh in a little on this topic. Also, Garth….the Jaguar read that due to the income gap in the US, the majority of americans are unlikely to go on a spending spree as their disposable income hasn’t changed due to low wage or part time jobs as a result of jobs being moved overseas….
Do you have any insight or counter viewpoint on this?
If the oil patch is considering cuts due to the drop in price some will likely make announcements in December so those affected don’t overspend during the holidays….
Will cheap oil be a net benefit to Ontario’s economy?
You bet. Plus the US, Europe, China & Japan. — Garth
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Not so sure, there’s quite a bit of manufacturing and services (engineering, sales, etc.) done out of Ontario that support the oilsands. I know, because the wife works directly for a Mississauga engineering firm where the majority of the work is for the big oilsands producers. Could be a wash as far as net impact.
Not worried though, like #9 Bill Gable’s example, we’re also on beautiful property in Ancaster, renting and in a great school district for our 4 kids. Big difference though, we sitting on fat stacks with no plans to buy. If the wife gets canned, we could most likely float for quite a few years, or quickly pick and leave to where the work is. In my professional capacity, I work from home, just need interwebs for company VPN.
Oil = 9% of economy. Consumer spending = 65%. — Garth
In my Nov 12th chart mashup of US Oil imports from Saudi Arabia and the USD/CAD FX plot as well as the 30 year projection of tar sands required market price, it was the Carbon Tracker Initiative quote that prompted me to put the charts together:
“Investors in Canadian oil sands are at a heightened risk of companies wasting $271 billion of capital on projects in the next decade that need high oil prices of more than $95 a barrel to give a decent return.”
Charts: http://www.chpc.biz/history-readings/diminishing-returns
But the environmental impact of the tar sands as expressed by Garth Lenz in the TEDx presentation that I added to the mashup, has not yet been priced into Alberta’s – nay – Canada’s real estate prices. The bust could be very expensive to all of us tax payers regardless of whether we rent or own our little hovels.
So in Eastern Canada are all your TV commercials Dodge RAM and GMC Sierra commercials ?
I doubt it, but just had to ask
Mark, please keep posting. You’re smart guy!
#31 Sleepless in Victoria on 11.27.14 at 7:15 pm
Whatever happened to RALPH CRAMDOWN?
Haven’t seen him in like 6 months. He was my favourite. :(
+++++++++++++++++++++++++++++++++++
We traded him for a Mark and a Cato which in retrospect was a bad trade.
“Oil = 9% of economy. Consumer spending = 65%. — Garth”
Yes. but we already know where consumer spending is heading, with nearing housing deflation. Oil may be just 9% but it may well be the catalyst to unwrap it all (It sure makes a lot of headlines)
[…] Source: http://www.greaterfool.ca/2014/11/27/the-shock-2/ […]
pretty sure the oil patch was operating in 2010 when prices were at these levels…. so everyone dont get to excited your day of vindication will have to wait …indefinetly
Commodity demand destruction coupled with peak debt and record low rates with an impending rate increase in 2015?
Break out the popcorn renters because when the boomers realize they need to liquidate their high priced homes, it will be epic.
Mr. R.
#26 Adam
To answer your question . When will this show up on crea numbers ?
Uh …..probably never. They will revise their methodology showing a “healthy market” in order to benefit their dues paying home sales minions
That’s how they roll…..
I’m totally amazed at the idiots who are planning that Keystone XL pipeline. They already have a smaller version called the ‘Keystone’ pipeline; it runs all the way to Manitoba before going Southwards to Cushing Oklahoma. Because that pipeline already passed environmental standards it would be easy to simply lay down the new pipeline just a few feet away from this existing ‘old’ pipeline. If they had to they could simply dig up the old pipeline and replace it with the much larger newer pipeline tubes, claiming that they are simply doing ‘MAINTENANCE’ on the old pipeline.
But no, instead they have to try to push the new XL through some environmentally sensitive areas in the U.S. and push it through some Indian lands. The guys who planned the route for the XL pipeline should be given a medal for being STUPID and MORONIC.
Anyways, oil is heading down to about the $62 range in the next 3 months, and that’s going to make about half of the oilsands projects unprofitable, so by summer they will be letting a lot of people go in Alberta, at least 200,000 people being given the pink slips.
I just read in the South China seas, there are some small islands near the Philippines that China is going to soon go to war over, they are reported to contain more oil that both Saudi Arabia AND Kuwait have, both combined. The name of the islands = Spratly Islands.
In about 4 years when oil starts flowing out from those wells you are going to see oil below $40 per barrel.
Did Cato the Alzheimer have a mild spastic event?
No “Tomes” for us to scroll past yet?
Three, two,one………
Hahaha, supply and demand.
From the middle of 2012 somebody really tried to push crude into the stratosphere.
But they achieved nothing, except a huge build of open interest for crude futures. When the number contract reached critical mass, the price collapsed. It was exactly like houses for a million that everybody wanted :)
Or like 10Y treasuries with rates that keep falling although the rate hike date is quickly approaching.
Oil now on the way to 40 backs, bonds on the way to 4-5% which means Canada will be quite a miserable place next 2-4 years.
http://finviz.com/futures_charts.ashx?t=CL&p=w1
#9 bill
So what part of kelowna are you in? Just kidding. There’s a whole lifestyle based on not knowing ahead. It’s like a faith. I feel bad for those that believe that way simply because it’s going to end. Then what do you believe in? My wife and I get by with two kids on 90k a year. Most of that income is me. We both work really hard to earn that money. I guess it’s a little weird but I would love to know where all this wealth comes from. I can’t figure it out either. I can’t mathematically afford a 900$ monthly truck payment. I can’t afford much of anything other than basics. We get by on 90k. So how much do you need to earn doing what to put off this image? I cut myself 100$ from every biweekly paycheque I get. That’s so I feel like I’m actually getting paid. I can eat a burger, fix my 1980 mazda truck, or even shop at value village with that! What a spree! Wooo!! Every two weeks! My friend Paul as a counterpoint, closed the bar literally every night, checked into rehab when he passed forty beers a day, had a model year car, a giant house, etc, etc… All for practically never leaving the house and making some outside sales calls. That man crapped cash. So it’s either that people are generally getting paid insanely more than I think, or they are augmenting with debt like a roid monkey on the juice. I can’t tell. Maybe if I start digging in the garbage cans I can find some papers that would… Aww never mind
“I’m totally amazed at the idiots who are planning that Keystone XL pipeline…..”
Route diversity is important for supply security, and the new KXL pipeline route is shorter ( = more energy efficient, and ostensibly safer) than the existing “Keystone” pipeline route.
Same price as 3, 500 sq ft Vancouver condo’s stacked on top of each other. 50+ year old wood frame going for over $500 per sq ft.
So what happened to peak oil?
Wait until the Russians start complaining of low oil prices and then buy heavy the tsx oil index.
Don’t just blame the Saudi’s. Look at their neighbors. Iraq and Syria both new the income to fund their wars with the militants so they’re not going to reduce that amount to prop up prices (supply and demand economics aside). Once those two countries are stable again, they’ll then look at reducing supply.
“Did deflation have a big meeting today?” — Garth
LMAO!!!
Rebuttal of the year hands down!
#48 Mark
Route diversity is important for supply security
……………………………………………………………………..
So is export diversity, things can get ugly fast when you have only one customer who happens to be the biggest oil producer in the world
Saudi Arabia is just doing as they’re told.
The US is trying to destroy Russia’s economy as it did to the Soviet Union. With 40% of it’s budget based on oil sales, this has a devastating effect there.
The US can control Saudi Arabia because it’s surrounded by military bases. The royal family does as they’re told or they will be removed from power.
The US is dangling the prospect of releasing the 28 redacted pages of the 9/11 report to the public. If it was released, there would be a torrent of fury unlike anything since Pearl Harbor. So they better play ball.
http://www.ibtimes.com/911-link-saudi-arabia-topic-28-redacted-pages-government-report-congressmen-push-release-1501202
This is, of course, all interlinked with Russia trying to get out from under the petrodollar’s hegemony. Russia has every right to try to escape that unfair system. And the US is not going to play fair.
All the more reason to mind our own business.
The International Monetary Fund pegs Canadian real estate overvaluation at 10% nationally (5% to 20% regionally):
http://www.cbc.ca/news/business/canada-s-housing-market-in-for-soft-landing-imf-1.2850982
That means all those homeowners with 0% to 10% down payments made in the last two years are likely going to have a stressful 2015, especially if variable rates rise next autumn.
Garth a few days ago you requested the Devils Advocate
To contact you he has not been back here since. Is there a funny smell coming from your basement?
“Even a modest correction will ripple through everything, and tear into the finances of those who decided a one-asset strategy, steeped in leverage, was the easy way to wealth.”
But, everybody has to live somewhere, right?
No sane person would expect those who hold real estate to see it as a losing proposition, much less openly say as much in public.
#68 Dominoes Lining Up on 11.26.14 at 10:36 pm
Then I remembered this video from 2012. I don’t watch RT at all much and you have to look past Keiser’s theatrics a bit, but give this a few minutes if you can.
http://www.youtube.com/watch?v=_acwahNKjNU
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Max Keiser and Garth’s blog are my main sources of financial news editorialization. I’ve actually recently thought about sending an email to the Keiser Report suggesting Garth be a guest on their show: maybe they’d fly him out, I dunno. They now film on a set with big glass windows overlooking the River Thames and the Tower of London; it’s quite a view. Max is a little theatrical sometimes, and goes a little crazy, especially about David Cameron, Mark Carney, and Jamie Dimon.
Garth would be a good guest, I imagine them talking about things like the Home Buyer’s Plan, irresponsible lending practices by Canadian banks (i.e. CIBC cash mortgages), of course the Canadian Mortgage Housing Corporation, and unsavoury practices of organizations such as TREB and the complicit print media in this country. Max would like this, and Garth would certainly be a legit guest as a former Canadian MP and prolific author. Recently too many of Max’s guests are people talking about digital currencies, which I’m really not that interested in. And quite frankly, Max doesn’t even really talk much about digital currencies in the first half of the show when he’s reviewing the news with his co-host and wife, Stacey.
Garth, I’m gonna email them right now about this. If you ever do go on the show don’t talk about central bankers. Max thinks that Central Bankers are the most dangerous individuals on the planet, having thrust a global government debt Ponzi scheme upon the world. And we all know you recently said they’ve “have never been more firmly in control.” :o ;)
BTW, that Nicole Foss is a little wacky I think, no offense to anybody.
“So is export diversity, things can get ugly fast when you have only one customer who happens to be the biggest oil producer in the world”
Also the biggest oil consumer in the world, still consuming close to 6-8 million more barrels than they produce, in a down economy no less. US demand for foreign oil isn’t going to disappear or dry up any time soon.
Makes me thing of the mid 1980s when oil prices went into the crapper and stayed there for over a decade, and the world economy went on a nice tear.
About the only countries low oil prices are bad for, are the ones where it makes up a very, very large part of GDP. (Canada does not fall into that category)
For everyone else its happy days.
If oil stays low longer-term the substitution effect will reduce other energy prices as well.
All in all it could be the kick-starter to a decade of world growth like low energy prices did in the 1990s.
#32 Sleepless in Victoria on 11.27.14 at 7:15 pm
I have been wondering that, too. I keep hoping he’ll show up again, guns blazing, and inject some much-needed sanity back into the comment section.
TEMPLE
Cheap Oil = Lift Kit Vasectomy
CTV video link on the house:
http://bc.ctvnews.ca/video?clipId=499607
Rental home supply dries up in Vancouver creating ‘zombie neighbourhoods’ (with video)
http://www.theprovince.com/business/Vancouver+rental+home+supply+dries+with+video/10417103/story.html
“Shelly Moffat doesn’t recognize her Kitsilano neighbourhood any more. The homes are empty. The streets are like investment portfolios. And Moffat believes that in this part of Vancouver families like hers are becoming historical artifacts.”
What housing has done for three cities:
1 in 3 kids in Toronto live in poverty
Zombie neighborhoods in Van
Cowtown about to experience a shock
Harper was right. When he’s done you won’t recognize this country. Will be fun when rates start rising and people actually start paying for what they thought they could afford.
Our landlord came over today to clean the gutters on the house. He was still there when I got home from work, so I got to go up the ladder and take a look. Looked pretty good.
Also, HAM lovers take note. My (chinese, immigrated in 2007, alas without the HAM) wife follows the shadow chinese real estate market. Two yeas ago it was all “look what they paid!” now its “rates will go up next year..this one sold for less than asking” There is fear in the hamosphere, folks. The tone of the group is definitely changing. It’s a WeChat group of realtors, financers, etc.
Re: #45 Waterloo Resident
I feel bad for anyone that relies on the US for it’s defense. Many of the countries around China like Taiwan, Philippines, and Thailand are in for a rotten surprise when China finally makes her move. If they think the US has the capability, or would endanger their relationship with their financier (China), they are sorely mistaken.
Regarding Keystone, I think anyone that opposes it is stupid. I normally don’t throw that around describing vast swathes of people I don’t know, but they are stupid. All that oil is ALREADY being transported – just by rail. And rail transport is MUCH more dangerous and MUCH more prone to environmental disaster and MUCH more expensive. It’s a lose lose lose to continue what we’re doing.
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Re: #46 crowded
Hah
Who would have predicted oil dropping like this in the summer? Once again, big unexpected plays coming from left field.
Hopefully the ontario economy has something left of a skeleton it can rebuild from. In the meantime, out here on the wet coast we will start bracing for an influx into the labor pool of disenfranchised flat-landers.
#61 Mark
Still one customer
Sorry but according to NRCAN the govt. agency that deals in energy related matters, total contribution of all oil activity to GDP is 5%.
http://www.nrcan.gc.ca/energy/publications/markets/6505
Most Canadians believe it to be much higher due to very effective PR work by the petro producers.
You including natgas? — Garth
#18 Marquis De Sale
Time to load up on XEG like Dean Del Pork Chop at an all you can eat smorgasbord ! Buy low.
—————-
#27 Bdy Skytrn
i heard that 10$ ago.
I think that’s why you “leg” in….I liken it to toeing into Lake Superior as a kid – freezing at first, but over time things warm up and the fun outweighs the initial shock.
If your investment timeline is twenty plus years, I think it’s a good bet.
Pretty easy to see why there was a bidding war on that Vancouver beauty. It had to have been the paint that Drew them in.
#48 Steve
So it’s either that people are generally getting paid insanely more than I think, or they are augmenting with debt like a roid monkey on the juice.
_____________________________________________
I was thinking the same damn thing the other day about someone in my circle of friends…and Bippity Bop my wife comes to learn that Mom and Pops cut them 50K plus to get “out of debt”
I feel like more than half the people that live on my street are in the boat of “over their heads”
But I could be so wrong. Suburus – Land Rovers Oh MY!
Garth knows what I am talking about. I sent him my report.
There are four categories of occupation that are the worst when it comes to borrowing too much money.
1. Teachers
2. Firefighters
3. Police Officers
4. Truckers
+++++++++++++++++++++++++++++
It’s called the Public Sector paycheck till I die effect.
I thought Surge Energy at 6.20 was quite delicious (yield of 9% after the drop and company pledge to keep the dividend). But then it fell to 5.01. Bought more.
Then I sold AirCanada at 11$ and bought Suncor at 36.60, and sprinkled my oily desert with some WhiteCap. Keeping Wesjet.
Money will leave energy and land somewhere. Retirees could quickly forgive $BNS for its last quarter in order to get the 3.8% dividend. What a fascinating board game.
I take the subway home with a colleague from Argentina. He tells me stocks is gambling. Somebody shoot me.
BAIL IN Garth bby:
http://www.bbc.com/news/business-30127868
..from Cyprus to Deutscheland in 5 easy steps :)
..recovery baby
Nothing to do with bail-ins. — Garth
#4 Mark – collapsing demand in US, etc.
Mark – I enjoy reading your responses although I do not agree on some of your points. This one is definitely one of them.
Let me verify that the US economy is growing fast. I own a few businesses on both the west and east coasts of the US. It is an expensive home service and we have been growing solidly since late 2012. We are averaging over 20% growth per year. The reason it is that high is because we were pummeled during the recession and had equally large numbers going down. We are a bit of a bellweather of consumer confidence and right now people are spending in the US. They only use our service after they have spent significant monies on many other necessities and wants. This growth does come from middle class and upward so these groups are feeling a bit more spritely over the past couple of years.
#67 Cato the Elder – US in SE Asean sphere of influence
While I agree that the US is slowly diminishing in power as the world moves away from a unipolar system, it is still extremely powerful and robust in preserving its interests. Wars are usually caused when these friction points start developing – not the reverse. If anything, there is increased likelihood of conflict in those zones due to the combination of economic and geopolitical pressures in those areas. The US is far more likely to bite back at some point rather than run away with its tail between its legs…
Like many of the conflicts before – it will not be a direct intervention between the parties. Much more likely that their will be conflicts developing between various sponsor countries.
Cheap oil is great for the airlines!!! Check out the recent run by WestJet and Air Canada.
Let’s take a look at what Langford condominium prices have done since 2007 (using monthly median prices averaged over 6 months).
. . . . . . . . Langford Condominium Prices. . . . . . . . . .
. . . . . . . .(Compared to December 2009). . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..0%. . . . . . . . . . . . x. . . . . . . . . . . . . . . . . . . . .
– 1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 3% . . . . . . . . . . . . . . . . . . . . . .x. . . . . . . . . . .
– 4% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 5%. . .x . . . . . . . . . . . . .x . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 7%. . . . . . . x. . . . . . . . . . . . . . . . . . . . . . . . . .
– 8% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 9% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-12% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-13% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-14%. . . . . . . . . . . . . . . . . . . . . . . . . . .x. . . . .x. .
—————————————————————————————
. . . . .Dec. . .Dec. . .Dec. . .Dec. . .Dec. . .Dec. . .Dec.
. . . . . 07. . . .08. . . .09. . . 10. . . .11. . . .12. . . .13.
From December 2009 to the end of December 2013, condo prices in Langford fell over 14% (source: Victoria‘s board). This data was no longer available after December 2013, but since that time, housing prices across Greater Victoria have fallen another 3%. It is probably safe to say condo prices in Langford are currently 15-20% lower than in December 2009.
This chart also shows that Langford condos are selling for significantly lower than in 2007 and 2008.
Obviously this means that many of those condo buyers (who bought from 2007-13) are currently stuck with underwater mortgages.
Just how much are some of them down on their “can’t-lose” real estate investments? Langford condos peaked in value in 2009 at $299 K. Since then, the average Langford condo has probably lost close to $50 K in value and not much principal is paid off over the first 4 or 5 years of a 30 year mortgage.
Now imagine that some of those stuck with underwater mortgages are offered higher paying jobs in other cities. In order to get out of their mortgages, they would have to choose between two very costly options:
a) pay the bank the difference ($50 K) plus a hefty realtor commission (as well as other expenses), less any principal that was paid off, or
b) claim bankruptcy.
Imagine how happy those first-time buyers (who bought in 07 and 08) were as their condos appreciated in value until the end of 2009. They probably thanked their R/E agents, friends, family members and co-workers who told them that it is always a good time to buy, that prices only go up in Victoria, that owning is always better than renting and that real estate is always a good investment.
Do you think they are still happy with their buying decisions. Probably not so much. Many of them probably (correctly) realize now that Victoria’s housing market was already in a bubble in 2007 and that renting would have been a much better idea than buying at that time.
How overvalued is Victoria’s real estate market? We know that the IMF considers Canadian real estate to be the most overvalued in the world based on rents (see chart). Victoria’s housing market is certainly no exception (increases in home prices have far outstripped increases in rents in Victoria since 2000).
Comparing condominium prices in Victoria to prices in Florida, for example, makes it clear that Victoria’s housing market is in a massive bubble (Canada and the US have similar household income levels). Note that Florida’s winter weather is warm (summer-like) and sunny, unlike Victoria’s.
$49 K, Riverview FL (Tampa) (3 beds, 2 baths, 1,151 sq. ft., built in 2006, gated community features a clubhouse, pool, and fitness center)
$55 K, Riverview FL (Tampa) (3 beds, 2 baths, 1,151 sq. ft., built in 2006, gated community features a pool)
$87 K, Homestead FL (3 beds, 2 baths, 1,126 sq. ft., built in 2006, community pool)
$41 K, Jacksonville, FL (3 beds, 2 baths, 1,157 sq. ft., built in 2006)
Girls and guys, if you buy a house or condo in Victoria now you will soon be stuck with an underwater mortgage. Bigger price declines are on the way for Victoria‘s sinking housing market. The US experience showed us that price declines in those US cities that began to correct first (think Victoria) didn’t pick up speed until prices were falling across the entire nation. The same will happen in Canada.
Until next time – Cheers!
#75 Nomad – buying stocks is gambling…
In Argentina, buying stocks IS gambling… just ask Repsol ;-)
You including natgas? — Garth
Yup.
Here is a quote from enercan’s page:
“In 2010, the GDP of Canada’s energy sector – i.e. industries involved in the production, transformation and transportation of energy – reached $84.3 billion (in 2002 constant dollars), accounting for 6.8 percent of Canadian GDP. The oil and gas extraction industry accounted for about half of this amount, while the electric power industry accounted for about one third.”
Interestingly, even the wholesale and retail part is included in this all encompassing figure, that would include your self service station attendant.
As a comparison, the auto sector contributes $30 billion to our GDP and that is even with its partial exodus to Mexico.
What cheap oil ?
The cheap, easily and profitable oil has been extracted long ago. We are not stuck with expensive oil that is hard to extract.
How can you generate growth with hard and expensive oil to extract .
The cheap oil has been burn into cars and transform into cheap plastic crap long ago.
No economical growth possible without cheap and easy to extract oil.
Depression that sound about right.
#80 Victoria RE Update
I love your posts – especially because I am looking to get some acreage in either Saanich or Metchosin. Looking to do so in 2 years (ideally – there will be some solid values then). Again – thanks for the ongoing updates and comparisons!
RE: #34 the Jaguar
http://journal-neo.org/2014/11/27/rus-kto-pravit-bal-v-vashingtone-po-yadernoj-programme-irana/
The link above contains a long-winded geopolitical answer you were looking for.
In short, a secondary reason the Sheiks are willing to let oil prices drop is because that’s what America wants (despite what the mainstream media portrays). These low oil prices are devastating Russia who is threatening America’s hegemony. In return for Saudi’s kindness, America did not lift the devastating sanctions on Iran in the negotiations over Iran’s nuclear program. The sheiks even threatened to raise oil prices to ensure America didn’t lift the Iranian sanctions.
#82 Justeunperdant – finding cheap oil…
Here is a link to global costs for oil… http://www.eia.gov/tools/faqs/faq.cfm?id=367&t=6
US average costs around $34 per barrel, Canada around $25 and the Middle East around $17
Still need to factor in transportation to foreign markets but lots of room to keep making money…
#67 Cato the Elder on 11.27.14 at 9:14 pm
Re: #45 Waterloo Resident
I feel bad for anyone that relies on the US for it’s defense. Many of the countries around China like Taiwan, Philippines, and Thailand are in for a rotten surprise when China finally makes her move. If they think the US has the capability, or would endanger their relationship with their financier (China), they are sorely mistaken.”
Must be nice to see the world with blinders on! Unfortunately that region of the world is just a “tad” more complicated…..Japan, India, South Korea and even Vietnam are all significant regional players, key US allies, and China counterbalances in the US strategic Asian pivot, with Japan/India having massive military budgets.
Maybe you need to supplement your reading of Mein Kamp, Keynes and Dilbert(oh yes and Garth’s blog :-) ) with some substantive geopolitical literature to add some street cred to your “analysis”. Suggest you start with Google Earth, before moving into the real meat and potatoes though….
Balls like that will break your crown housing
#20 mortgagebrokeron on 11.27.14 at 7:01 pm
#9 Bill,
when you said he is a teacher that tells you all you need to know.
In the lending world teachers are the absolute worst when it comes to borrowing too much.. Not a joke, ask any lender/banker etc.
There are four categories of occupation that are the worst when it comes to borrowing too much money.
1. Teachers
2. Firefighters
3. Police Officers
4. Truckers
I have seen this multiple times and the industry knows this.
No one can talk sense into these people. Then they get into trouble and carry second mortgages on their house at 10% and above. I know because I have done it for them.
Please add Doctors and Lawyers to the list.
And I used to work for RBC as a lender, so the additions come from experience.
Dear Pathetic Blog : awesome truck nuts. You are going to see a lot of these on repo lots throughout the western Canadian sedimentary basin by March 2015. Many fab shops and oil field construction projects are still being completed but the brakes are going to be applied before x-mas for sure.
Is it my imagination, or does the US have a “hate” on for Canada. The relationship between the US and Canada used to be congenial, with relatively free flow of goods between our borders. Now it seems the US wants to use any excuse to thumb Canada.
The US imports about 800,000 barrels of oil from Venezuela, the same thick crude that comes from the Canadian Oil Sands. This is approximate volume represented by the XL Pipeline. Venezuela is openly hostile towards the US and broadcasts it’s distain at every opportunity. President Obama, however, would rather purchase this oil, knowing it is the same crude, place it on a boat, ship it across the ocean , spend how much fuel to do this, at considerably higher environmental risk, then purchase it from Canada.
WHY?
Why is Canada on the US “S_it List”
Any Thoughts?
The rationale here seems to make sense:
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/modest-interest-rate-hikes-lead-to-major-risk/article21820222/
The shock.. I’m shocked.
This is America… It’s closed today. I have an empty two story suite, a Butler that will be tipless tonight. Near the penthouse I will BE AWOL in Vegas. THE room will be vacant tonight.
I’m stuck in old folks hell. It’s called Laughlin Nevada… A place reserved for old serious bastards. Not a place for a 55 year body that looks at the world through the eye balls as a 19 year old spirt.
I can’t get a cab, or a rental car. Because to many people are exchanging bull shit stories embellishing their and their children success while fighting over who gets to carve the turkey. I figured it will be the uncle with the hot cartoon chics on his the shirt.
My books almost done, the plot, the mistsry, the protagonist.. All done.
I’m here to turn a black and white photo into Technicolour.
My night at cheetahs planned for today won’t happen.. It’s in chapter five.
Damn America, though it never closed.
I’m not amused.
>> … worst when it comes to borrowing too much money:
>> 2. Firefighters
>> 3. Police Officers
> It’s called the Public Sector paycheck till I die effect.
who’s in for crowdfunding Uber911 services??!! Great opportunities for entrepreneurial service providers too!! just think of the surge pricing opportunities!!!
So, not only are a lot of commenters on this blog anti-American, but so is the Canadian economy itself.
When the US economy and centrally-planned fiscal and monetary manipulations tanked rates, the Canadian economy hummed along just strong enough keep the housing mania going far longer than most expected. Fueled largely by dirt cheap rates and large pools of cash held by elders, money launderers and absconding Asians.
Now, if US rates rise due to a stronger US economy, and less meddling by Old Yellen, that could tank Canada’s very vulnerable housing market and take a huge chunk of the economy with it. Add low oil prices to the mix, and we have another net benefit to the US and a huge hit to Canadian exports.
Remember when what was good for GM was good for Canada?
85 Sam on 11.27.14 at 10:03 pm
RE: #34 the Jaguar
http://journal-neo.org/2014/11/27/rus-kto-pravit-bal-v-vashingtone-po-yadernoj-programme-irana/
The link above contains a long-winded geopolitical answer you were looking for.
In short, a secondary reason the Sheiks are willing to let oil prices drop is because that’s what America wants (despite what the mainstream media portrays). These low oil prices are devastating Russia who is threatening America’s hegemony. In return for Saudi’s kindness, America did not lift the devastating sanctions on Iran in the negotiations over Iran’s nuclear program. The sheiks even threatened to raise oil prices to ensure America didn’t lift the Iranian sanctions.
.
*********************
YUP!
Or it may all be for naught if Armstrong is right. Wars. Corruption. And a major economic downturn beginning around Stardate 2015.75.
Interesting article.
I’m in Australia and the equivalent here is the collapsing iron ore price. The hope was that an emergent LNG boom would solve that problem but (a) Australian producers are too expensive by world standards and (b) the collapsing oil price is killing that dream.
Regional mining prices have already collapsed, and Perth, a town built on mining money, looks to be headed south as well.
In Australia we have a number of taxation measures that favour idiotic property investment, so that’s doing really well in the big eastern cities like Sydney and Melbourne. If you’re right about interest rates, they’re all toast: a ridiculous number of loans written at the moment (~50%) are interest only.
Following the Canadian story with interest as your RE market is in many ways similar.
What will impact be on Calgary housing, retail, and general morale by next spring? Any predictions?
Was talking with an inedependant financial advisor lately as he told me that a lot of people are over leveraged in Victoria BC. The more you earn the greater the amount. He told me not to buy, better of renting and he owns. The tides are turning and when the herd feels the pain they will be looking to share the pain with the politicians at the ballot box. After all, they can’t blame themselves.
Like Bill Gable stated, it is unbelievable how people think in the internet age, with info at your fingertips. Problem is…they are using the internet and new devices to do basically what i call time wasting sh$t. I used to think i was somewhat average (good sense of humility) Now I can’t but think I am in the top 5% in terms of ability to reason and not follow the emotional side.
Even highly educated people are financially stupid.
If you want to spook the herd… causually leave bubble literature around the workplace and see the change in the overall mood. I know…nasty but hey, payback’s bitch.
re: #59 But, everybody has to live somewhere, right?
i have heard this so many times before, plllllease
but what if they lose their job, then they lose their house and the next guy and the next guy and so on and so on
#11 HD on 11.27.14 at 6:39 pm
huh?
Mark. Take the day off. US oil demand is growing, not collapsing. Go and lie down. Please. — Garth
certainly.
http://www.eia.gov/countries/country-data.cfm?fips=US#inline_get_petcon_total
———————-
Oil = 9% of economy. Consumer spending = 65%. — Garth
certainly, spending on staff manufactured abroad.
——————————–
if oil prices stay down the nominal GDP will take big dive, both in US and Canada.
There goes the recovery.
world economy must be in really bad shape.
Bullish for the stock market,
stuff darn it.
Heard that environmental company Golder laid off 250 yesterday (across Canada). Environmental is regulatory driven and somewhat bullet proof, but they were pretty heavy into oil & gas work. The writing is on the wall.
Goldman sack disagree.
Goldman warns another large leg lower in Brent oil prices to near $60/bbl would not be sustainable beyond a few months (absent significant demand weakness) as it would accelerate the rebalancing of the oil market with Canadian oil sands and US shale oil projects reaching their production variable costs
http://www.zerohedge.com/news/2014-11-27/sellside-chimes-crude-crush-will-reverberate-years
Down here in Downtown vancouver tonight. Has not changed that much in 25 yrs. Did not want to live here then, definetly not now. Skytrain is nice.
Oil dropping to $65.00 or lower, let the market dictate price. Many service operations will fold, or hold if they can.
Might be able to get myself some more drilling tools @ $0.15 on the dollar.
Worked in Saudi. They have many wells with multiple 4+ pay zones. Not so in N. A. They can take this down low. Maybe Saudi buy the oilsands project.
This year will become known as the death of the oilsands.
Intense discussions over the past week!
Garth, Mark, Cato all going at it! Gold this, stock market that – Keynesian economics, climate change, geoengineering, petrodollar, shadow statistics, holy moly!
How about we all celebrate by contributing to our Canadian economy? Buy something… anything (other than RE) you want this Black Friday and contribute to our consumer driven economy!
#96 DON
don’t worry about Russia, their oil is relatively cheap, worry about shale oil and tar sands,
Cheap oil will trigger wave of deflation (the horror) so expect a little QE to offset it. Of course no interest rate increase coming in 2015 in US, I can bet on it.
You gold guys are queer. Cheap oil begets spending which begets earnings, growth, inflation and rate pressure. US rates will start rising in 2015. — Garth
Mark: #4: I think that you are absolutely correct on what is a crucial point.
Most folks who follow economic matters agree that price is set by supply of and demand for a commodity. Oil is a truly fungible product used interchangeably around the world. However world production has not risen substantially since 2005 when conventional crude production peaked and declining conventional production is barely offset by increasing unconventional production. What appears to have occurred is a dearth of demand, caused by weak economies globally. Or in other words, given that, at least in the short term, supply of oil is essentially fixed, movements in its price can be used as a good proxy measure of the state of the world economy.
If what I am saying is true, then the current state of the world economy is very bad indeed.
#34 the Jaguar on 11.27.14 at 7:22 pm
could be a regime change coming to the more odious of the oil producers…
Gwynne is a fairly prescient fellow:
http://gwynnedyer.com/2014/oil-blind-sided-by-technology/
Hi Garth,
Here’s a story posted on BNN.ca from Bloomberg. Not sure if you have seen it.
IMF says that our banks should have more skin in the RE game. This is something you’ve been saying for a while.
http://www.bnn.ca/News/2014/11/26/IMF-says-Canadian-banks-should-carry-more-risk-in-housing-market.aspx
Thank you for the great stories. Whether it’s an important financial lesson, life lesson, or something to reflect upon, you communicate it a way that is funny and sensible (and with dignity and respect for times of reflection). We appreciate your quest to educate the masses on personal finances.
VanCity D-Man
Just like on the radio today I hear Christmas songs!
Then lots of adds re Black Friday !
It’s human nature or just greed!
Any way you look at it look after yourself!
They are really just pumping you for there own benefit mostly!
If your worth 4plus mil would you buy re , would you, diversify!
Ore just smile and keep working the job you love!
Joe Oliver wants to lower taxpayer exposure to the housing market — but there’s no specific plan to do it
http://business.financialpost.com/2014/11/27/canada-housing-joe-oliver/
Jimmy has a fan: Jimmie.
Perhaps this is how it began for Smoking Man.
One admirer at a time.
First to say… LAST for tonight.
Mmm.. Bacon.
A while back, everyone was worried about the drop in potash prices. But that was just a sweet entry point. POT advanced about 18% in less than 1 year plus you made 4.5% in dividends. Oil is no different. Right now you can buy Suncor, Cenovus or Husky at bargain prices and collect a nice dividend while you wait for prices to recover. Or you could always go to the bank and get 1.5% for a GIC and if you are very lucky you might get a calendar.
I posted recently that the layoffs in the Oil industry in Alberta had begun. I also posted that they had then accelerated. Today, and as of this week, I am sorry to report that the layoffs have accelerated to a faster pace, and even the people with 15-20 years seniority are being hit. The layoffs have now hit, in total, between 25%-50% throughout the oil industry. This is not only in Fort MacMoney, but throughout the Province. This is not official, but is directly from the people I have talked to who are working, or who have been laid off all over Alberta. I have lived in 4 Provinces in Canada in my lifetime. I have seen all of the booms and busts throughout Canada in my 61 years. Garth has seen it too. It is really really fugly to see. I am very fortunate, and I know it. What Garth teaches can have you feeling very fortunate at 61. Don’t screw it up. As always, my freedom first.
#WeMayHaveTalkedLikePigs… #But,WeWereDefinitely’Slightly’AheadOfTheTimes… #&WeNeverWentInForTruckNuts… #JustForVanGrrl! #&DameCatFood,Too!(YouKnowYou’reStillReading!!!KerPow!)…
http://youtu.be/qpALvW8UD4Q
(NoteToGT: Brief though it may have been… What GloriousFun it was posing as… HM “MFWIC”… BonusZenForDames – HD, this is for you, too – OK?…: http://youtu.be/iLyP9HX33Dg )
And if all this bad news wasn’t enough, it appears HAM are turning locals in Vancouver into zombies….
http://www.theprovince.com/business/Vancouver+rental+home+supply+dries+with+video/10417103/story.html
Oil, snowmaggedon, pending rate hikes, and now zombies…..this could get real nasty folks….
Got me crazy diamonds on the Budd’s.
To the left, an old grany thinking she’s go a shot. To the right a firm young one, she’s thinking who is this creepy old bastard who’s taking to himself.
My slot machine is called the great Zeus….
Me I’m looking for Hunter S Thompsons bats.. I followed his manual.
I don’t see bats. I See a crazy prick going to area 51 tomorrow to see if the Aliens have a time machine. I’ll only go back a few months. Some one I want to save.
It’s a long shot.. But that’s how I roll.. This turkey day f_ed up my schedule.
So it’s between Cheetahs and area 51 tomorrow.
#93
55 yrs old !!! You are a youngster. I am jealous.
#107 Freedom First
Somehow I don’t really believe your story about all these layoffs. If true, the news media would have picked up on it.
Sounds like hyperbole.
#10 Saskatoon1 on 11.27.14 at 6:33 pm
Crude collapse caused by deflation. Not OPEC. Fail Garth.
Did deflation have a big meeting today? — Garth
————–
Funniest comment ever
Stan DruckenMiller, the famous investor, net worth 3.1 billions:
https://screen.yahoo.com/delivering-alpha-unfiltered-stanley-druckenmiller-100000159.html
http://www.institutionalinvestor.com/Article/3362538/Channel/199225/Stanley-Druckenmiller-Quantitative-Easing-Is-a-Major-Mistake.html#.VHfuxDHF98E
South of the 49th, cheap oil means mainly this:
For every 1 penny ($0.01) drop in the price of gasoline at the pump, American consumers have another $1.1 Billion to spend.
Retail will love Santa this year!
#123 JSS on 11.27.14 at 11:32 pm
#107 Freedom First
Somehow I don’t really believe your story about all these layoffs. If true, the news media would have picked up on it.
Sounds like hyperbole.
================
Probably happen at year end.
Hi Garth,
Here’s another one that you called. All those condos in the Toronto construction pipeline will be the slums of tomorrow.
http://www.bnn.ca/News/2014/10/14/Experts-warn-new-Toronto-condos-could-become-urban-slum.aspx
Shoddy construction practices, lots of cutting corners, not enough building inspections, and very little enforcement.
Will the 416/905 become the next 313 (Detroit)?
If you’ve bought into a new development in the past 5 years, it’s a good time to sell before the warranty expires and you are hit with (surprise) a special assessment.
We know about the Seer of Omaha. Maybe we’ll have to coin a new nickname for you. Here are a few suggestions:
1) The Seer of T.O.
2) The Seer of Hogtown
3) The Seer of the Big Smoke (my favourite)
Vancity D-Man
Ray # 91,
“The US imports about 800,000 barrels of oil from Venezuela, the same thick crude that comes from the Canadian Oil Sands. This is approximate volume represented by the XL Pipeline. Venezuela is openly hostile towards the US and broadcasts it’s distain at every opportunity. President Obama, however, would rather purchase this oil, knowing it is the same crude, place it on a boat, ship it across the ocean , spend how much fuel to do this, at considerably higher environmental risk, then purchase it from Canada.”
“WHY?
Why is Canada on the US “S_it List”
Any Thoughts?”
————————————————————-
Makes no sense, right?
Or….does it.
Why use up your own, finite resources, when you can consume those of a foe, simply by swapping for some US paper notes? I’m surprised the US is not accumulating resources (gold?) on a much larger scale. This is why Keystone XL is a certainty.
Anybody that can’t see the coming North American Union, is just not connecting the dots.
#123 JSS
That is from #118 Freedom First. What I wrote is the truth. That is why I am a Blog dawg, I come here for the truth. Not to mention the family rated humor with which it is delivered, and the nearly DELETED Smoking Man comments.
JSS, Have you not seen how Garth has shown us over the years exactly how the media does their so called “reporting” in Canada?
Wow, I feel pretty ok about my 604 condo in the mid-city “bought” (in that I still have mortgage) for 195k ten years ago… Yes, it’s a box, but it is home, and not intended to be the sum total of my retirement plan.
Garth…your response to #4 Mark probably disturbed the neighbours, and thank you for the belly laugh!
Pic today was predictable. Reminds me if an acdc tune.
Cue the budget reviews in cowtown. Spending will be slashed by producers that want to survive. Entire projects could be put n the shelf indefinitely.
Cue the tax loss selling on the TSX. Who would have thought that just a few short months ago. Wow..
TSX return YTD is 12.6%. Beats any house. — Garth
If she were a renter she could just bail. No pun intended…
http://www.cbc.ca/news/canada/british-columbia/b-c-condo-flood-leaves-owner-in-insurance-nightmare-1.2852918
The IMF wagging their finger at a member country is like Vince McMahon chastising one of his wrestlers in the ring in front of the crowd. All for the show.
You gold guys are queer. Cheap oil begets spending which begets earnings, growth, inflation and rate pressure. US rates will start rising in 2015. — Garth
……………………………
If you would like to put your reputation on it that is fine with me, Sir.
I say the US rates will stay the same or decline.
Time will tell, time will tell.
And I am not a gold guy, not queer either.
As for the statement that declining oil prices drive up the inflation, I will engrave it in my memory.
http://www.thefinancialist.com/the-effect-of-low-oil-prices-a-regional-tour/
If Credit Suisse’s energy forecasts prove correct, Brent crude will average $92 a barrel in the fourth quarter, and Americans will enjoy the equivalent of an $80 billion tax cut, the equivalent of 0.7 percent of disposable income. Credit Suisse’s U.S. economists also forecast that lower oil prices will cause annual inflation to fall from 1.7 percent in September to 0.5 percent by the spring.
This was a topic of my emails today with a good friend
US demand in 2008. 21 million BPD
US demand today. 17 million BPD
Of course. The GFC. Recovery is now on. — Garth
I think rate increases in the 80-es were due to sky-rocketing oil prices, but what do I know…
80 Victoria Real Estate Update
Just how much are some of them down on their “can’t-lose” real estate investments? Langford condos peaked in value in 2009 at $299 K. Since then, the average Langford condo has probably lost close to $50 K in value
—————————–
I deal with several people each month that bought investment condos in Victoria in the mid to late 2000s.
From day one the condos were negative cash flow – but of course they would appreciate because everyone wants to move to Victoria – sure thing.
Now after having carried them at a loss of $400 to $1000/month for the past 5 years they find out that when they go to sell they are looking at a $30K-$70K loss.
Just a quiet nightmare for these poor people who though Victoria was a sure bet.
Toronto, Victoria is your future.
the Jaguar back @ 85,96, & 112
Thanks for the interesting read (s).
I agree that the US wants to take down Putin. Too many trade agreements in currencies other than the US dollar cannot be good news for the world’s Reserve Currency. And a building a pipeline across Syria would be oh so convenient. But the chickens are coming home to roost. And all that posturing is just putting on a show. They don’t dare take on China. It will be interesting. And let us not forget Nigeria. The one country nobody is watching, but the one with the greatest promise. A great Revolution will rise out of that country and prosperity behind it. A mystery statement to many I suppose, but its source is one of intense intuition. I dream of Africa, I suppose.
I also can’t wait until Thursday for Victoria Real Estate Update. Excellent.
#91 RayofLight on the relationship of U.S. and Canada. We noticed that too. Harper looked annoyed at Obama and we think it has something to do with Obama not going through with the pipeline; he has sided with the protestors, a political move.
Also, using natural resources as a give/take is a war game. So go easy politicians on saying we are the richest people on earth, etc. You are setting us up for unwanted intruders. Hope I am wrong.
#114 Tiger on 11.27.14 at 11:14 pm
its not conspiracy its well known marketing gimmick, or something…
http://www.health24.com/Medical/Hearing-management/Noise/The-effect-of-Christmas-music-on-our-shopping-behaviour-20141125
Many marketers believe that playing Christmas music in malls will get shoppers in a good mood, making them spend more time in malls, buy more impulsively and ultimately, spend more money.
The idea that a shopping atmosphere can influence buyers’ behaviour was initially introduced by internationally-renowned Professor of International Marketing, Philip Kotler in the Journal of Retailing in 1973.
#102 bill on 11.27.14 at 10:48 pm
#11 HD on 11.27.14 at 6:39 pm
huh?
—————
Don’t worry. I haven’t got mad. Yet ;)
Your exchange was almost verbatim from the movie Pulp Fiction.
I merely added the next line from the movie. I suspected that few people would get it.
Best,
HD
Here in Edmonton, its been much quieter at our production equipment shop. Guys I know in quieter areas have been laid off, worried about becoming laid off, or have jumped ship before they saw the leak.
Alberta has always been boom and bust. It will take some time for these wild valuations for homes to settle. So much debt out there, so many guys are overextended. The plan the Saudis have put together can’t work unless they sense the likelihood of sustained low prices. It will take YEARS for the Calgary and Edmonton housing markets to decay. So many sellers need to get what they can’t have anymore.
Hi Garth,
Here’s a story that gets my blood boiling.
http://www.bnn.ca/News/2014/11/26/Home-ownership-getting-more-affordable-RBC.aspx
RBC’s report on housing affordability is a farce. Instead of showing that housing is totally unaffordable in Vancouver and Canada’s biggest housing markets, it obfuscates the real picture.
“RBC’s housing affordability measure for a detached bungalow in Canada’s largest cities in the third quarter of 2014 is as follows:”
• Vancouver: 83.6 (up 1.6 percentage points from the previous quarter)
• Toronto: 56.3 (up 0.3 percentage points)
• Montreal: 37.0 (down 0.3 percentage points)
• Ottawa: 35.7 (down 0.3 percentage points)
• Calgary: 34.2 (up 0.6 percentage points)
• Edmonton: 31.9 (up 0.2 percentage points)
Wow! This is clear. Clear as mud.
If MSM picks this up and runs with the story, all the finer details will get lost in translation by the masses. According to the report, “An affordability reading of 50 means that ownership costs at current market prices, which include mortgage costs, property taxes and utility costs, would require 50 percent of a household’s monthly gross income.”
So in fact, the higher the number, the less affordable housing becomes. (and the higher monthly household income is needed to support the mortgage, insurance, maintenance, and carrying costs).
My question to RBC is why would you call this a report on housing affordability when it is clearly not. Unless you want to sell more mortgages. Why? Because things are more affordable! Woohoo!
Vancity D-Man
#137
Interest rates were sky high due to sky high inflation. So the USA Fed Paul Volker raised interest rates up to 20+ %. I know because my first mortgage was 19% in 1983.
Fort Mac, you won’t be alone:
Bandit’s house just got foreclosed on in Florida.
https://ca.movies.yahoo.com/news/burt-reynolds-auctioning-off-personal-items-amid-financial-080032681.html
Third, the world continues to think we’re crazy. CMHC says Toronto and Vancouver properties are not overvalued. The OECD says pfhht. Prices are 132% of what they should be, compared to long-term averages, based on incomes. The IMF says our valuations are unsustainable. So does The Economist. Morningstar. Fitch. Standard and Poor’s. Robert Shiller.
Guess what typically happens when everybody agrees.
Right.
Everybody ends up wrong.
Re: #137 Sheane
The inflation during that era was caused by the money printing to fund the Vietnam war. The subsequent severing of the gold standard also played a profound role.
The effects of money printing aren’t apparent immediately. It can take years before all that money floods the market place. If the money is spent overseas especially (which is where a lot of war spending is conducted) it can take a while before the money comes home to roost.
http://www.washingtonsblog.com/2011/01/war-causes-inflation-and-inflation-allows-the-government-to-start-unnecessary-wars.html
#CrossPlatform… #iOS8.1.1Compatible… #UB40Addendum:
http://youtu.be/0AvtXbcTV6I
Well… There it is.
2015 is the year for Euro travel and Japan travel. Best Year Ever. Cheap flights and cheap currencies. I just decided to NOT bid on a place today that came available yesterday that meets all my criteria. Gonna love this obligation-free, travel lifestyle for the next 12 months instead. Let everything crash and burn around me. Will visit Tokyo pals and Austrian pals. Currently paying US$550 per month (bought the currency when the trade was 1.02 and kept it in a US dollar savings account) to rent a room in a house in mid Florida and spending the equivalent of CDN$40 to fill my 59L gas tank. Will spend the winter repositioning my investments. And, looking forward to rising interest rates to start obtaining real returns on my cash components. When it’s time to buy my next home, have about 100% of the funds required. No mortgage. Having this kind of flexibility is soooooooooooooooooooo nice. Best of all, no Ontario winter.
About Vancouver. My 18 year old son has a moving gig for a company that specializes in elderly transitions/moves. He sorted and boxed and moved the stuff of a 90 year old women recently died in a home just east of Oakridge Mall. This is an expensive neighbourhood. “Mom, it was disgusting. This old lonely lady was living in this disgusting mould.” So, amongst and amidst the mould, the rats, and coyotes, sit these multi-million dollar properties. It’s really just the most perplexing thing… I walked adjacent to a coyote west of there where the houses list for $5M. Because of the exceptionally high rat population, the coyotes are doing just fine — stunning fur coats. No mange there. And the term zombie is apt. So many of these multi million $ properties were vacant. Equal amounts falling apart and newly renovated. I walked many kilometres every day for the month of October. Saw this throughout the west side area. These are not resident-owned units.
About Calgary. We have seen this whole play book before. What was it? ~1982 or thereabouts. Ugly. I drove through enormous new (like yesterday-built) soulless neighbourhoods in September………. it’s going to be worse than the 80s.
About Toronto. I am third generation Toronto. I just don’t get Toronto (and don’t even get me started on Markham). It’s gotta be the ugliest metro city, with the worst weather, the most dysfunctional transit routeways, and the least appeal topographically. The stupid valuations in TO will deliver apocalyptic blowback.
There are 58 companies in XEG. All or nearly all headquartered in Calgary. I backed up the truck on about 8 of them two days too early.
Then you have your energy services big and small. Companies like Black Diamond, Badger, Westernone. PHX. All get whacked hard when the market moves like this.
THEN you have your more “mainstream” construction/engineering firms. WSP, Stantec, Aecon, Bird, SNC>But make no mistake/ They all have big contracts in the energy sector. They are all affected by this.
But these companies were also all around in 2008-2010 when we had oil as low as $26 a barrel and much more widespread economic mayhem than we do now. So just remember that the commodity business is volatile and this too shall pass. And obviously you want to be diversified since you see how hard it is on the nerves and the stomach when the likes of SGY,, SPE, LEG, and CNQ all get their bells rung to the tune of -10% in one day. There could be more where that came from. Cheers everybody.
#138 omg the original
I appreciate the information about Victoria’s housing market in your comments. Keep it up!
Ah Oil.
Correlation that this occurs when US sends it’s first oil to Korea?
As you said about US economy, don’t bet against ‘Murica
Re: #87 Banzai
Blinders? I don’t have any on. I don’t listen to media pundits that receive their paycheck from advertisers that are opposed to controversy.
I do independent research. I check and recheck the facts at various sources, AND I attempt to refute what I’ve read as well! See, if I try to disprove what I’m reading, I don’t look foolish.
I am right on this issue. The US will feign some sort of indignation at China’s moves, but CAN’T do anything about it.
China has nuclear weapons. None of the nations in that region have any. You think the US is going to risk that?
Even in a conventional war in the seas surrounding China, China wins. Japan is the only nation in the area that has any real wealth, and here is a comparison:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/07/china%20japan%20navies.jpg
Many Chinese are still VERY resentful at how Japan treated them in WW2. I’m sure their entire population would get behind the war effort. In Japan, not so much – Japan has a pacifist constitution, following world war 2:
https://en.wikipedia.org/wiki/Article_9_of_the_Japanese_Constitution#Text_of_the_article
Here’s China’s claim on the region, juxtaposed next to all the other small states there (note: the countries with similar claims to China will be forced to make concessions):
http://static1.businessinsider.com/image/5302aa66ecad04864ebfe96b-1200-1000/spratly.jpg?maxX=1200
Comparison of populations (for sake of general wealth that could be spent towards the military)
China: 1350 million (GDP 16.1 Trillion)
Japan: 126 million (GDP 4.8 Trillion)
Vietnam: 92 million (GDP 0.35 Trillion) <POOR
Taiwan: 23 million (GDP 0.97 Trillion)
Philippines: 100 million (GDP 0.493 Trillion) <POOR
The US is feigning support. When China chooses to make a move, it will just do it, like it did here:
https://en.wikipedia.org/wiki/Haiyang_Shiyou_981_standoff#China
China is smart. They are slowly taking over the world economically. Once that is no longer producing viable returns, they will engage in a more aggressive foreign policy. They are already beginning to make moves to 'test the waters' so to speak. It's only a matter of time.
US hegemony is over. Socialism destroyed that country over the past few decades. Their economy is carved out, and the military industrial complex has gorged itself of everything.
#67 Cato The Elder
When I was in high school (1999-2000ish), there were some Russian immigrant kids who wore CCCP shirts with pride. It was laughable. Here they were, after their parents probably suffered through 40 years of soviet rule and risked everything to come here for a better life, here were these kids who had no grasp of reality of life under soviet rule thinking it was something to be celebrated. I wonder what their parents thought? What a joke.
I am getting tired of these conspiracy theorists spewing their anti US hatred. Must be nice typing this stuff from the safety and comfort of your Canadian home, protected by our southern neighbour that you hate so much (whether you want to admit it or not).
I think these people secretly would love to see the US fall. Then they wonder why the Americans are so defensive.
If you read the economic news these days and on this blog, the US is basically the only bright spot in the world currently. Good thing. The stronger their economy is, the better our economy is as well.
If you don’t like it, do like some of the other posters suggested and move to China…or wear a CCCP shirt.
In response to your comment. What about the cold war? We already had flash points in South East Asia with the USSR. These days, every one of those countries you mentioned is more sympathetic to the US than China. A “move” by China would be seen as an act of war. This would compromise Chinese economic ambitions too much.
The US also does not want to engage China indirectly either. Both countries are deeply connected economically. It is MAED. Mutually Assured Economic Destruction.
MF
#137 Sheane Wallace on 11.28.14 at 12:09 am
”I think rate increases in the 80-es were due to sky-rocketing oil prices, but what do I know…
not quite but close…”
there were ,according to wikipedia ,a few shocks before that ,eh?
there was the 1967 oil embargo followed by the 1973 crisis and then the 1979 energy crisis which was followed by the 1980’s oil glut [due to a recession, I remember this one well as the saw mill cut back production quite a bit….] ]
and then the 1990 oil price increase
but we had a couple of boom busts in the stock market along the way as well.
http://en.wikipedia.org/wiki/Price_of_Oil
oops the quotes for sheanes comment should be placed after the word ‘know’….
nasty bit of a cold here has rendered my brain even more obtuse and slow than ‘normal’
There is a whole generation of Albertans who were not born or who are too young to remember the oil price crash of 1985. A crashing Loonie and below cost of production oil prices did not work well in 1985 and will not likely fare any better in 2015.
DELETED
Will cheap oil be a net benefit to Ontario’s economy?
You bet. Plus the US, Europe, China & Japan. — Garth
Retail warehouses in Peel and Etobicoke less in/out freight to oil provinces, less car and home loans for T.O. banks, plus defaults. Lower CAD will goose inflation. Manufacturing is too small, electricity is half price in NY/Michigan anyway. Your clients have XEG Garth? Nope, Ontario will take some lumps here.
1. Teachers
2. Firefighters
3. Police Officers
4. Truckers
I have seen this multiple times and the industry knows this.
No one can talk sense into these people. Then they get into trouble and carry second mortgages on their house at 10% and above. I know because I have done it for them.
Please add Doctors and Lawyers to the list.
And I used to work for RBC as a lender, so the additions come from experience.
+++++++++++++++++++++++++++
So 2/3rds are Public Servants (doctors are paid with tax dollars). Can’t imagine why they are always they are going on strike all the time for more money.
Garth said: (( “Cheap oil begets spending which begets earnings, growth, inflation and rate pressure.” ))
Yup, that’s true.
Every time gasoline prices rise it’s like an additional tax on the consumer and people spend less and they drive less.
So if fuel prices come down then people are definitely going to be spending more.
I don’t know if rates will rise right away because Europe is a mess, but spending in the U.S. will definitely increase if oil prices stay low.
#66 -=jwk=-
“Hamosphere” CLASSIC! Lol. Interesting to hear your perspective. I too am observing the Ham Hot Pockets in West Side Van & Spendy South Surrey ~ White Rock areas this year especially are not-so-hot anymore. It’s still flip-flip-flip (tear-downs or perfectly decent older SFH’s) still selling at a quick pace, house goes down, hole goes in, “luxury” build goes up as fast as possible, the house (or current hole in the ground plus pretty “artist’s renderings”) gets listed ASAP aaaand….. crickets. Maybe it drifts down in price, de-lists, pops up next spring, rinse & repeat. Yet developers are still BUYING. Anyone actively flipping at this point in this rather dubious market is taking a HUGE gamble there will be a luxury buyer at the other end. I have observed at least a few of these appear to now be offered as rentals, or suddenly inhabited by the “developer” in the last year or so, as most (all?) of this new housing does NOT reflect typical local incomes.
#5 LadyInWaiting
+100
I heartily concur with your observations, seeing the same. Any Dawgs out there have access to some hard un-bastardized data on actual RE price action in the GVRD perchance?
#4 Mark
US oil demand is static or falling slightly, according to the US Energy Information Administration (Nov. 12):
http://www.eia.gov/forecasts/steo/report/us_oil.cfm
Crude collapse caused by deflation. Not OPEC. Fail Garth.
Did deflation have a big meeting today? — Garth
————–
Funniest comment ever
Indeed :)
However, did the meeting actually change anything in the output?
It’s a shame, however, as high oil prices are a main driver of investment and research in to green energy initiatives which is one of the only ways to combat global warming.
Oh well, to really save the planet, just watch what you eat: http://www.truthdig.com/report/item/saving_the_planet_one_meal_at_a_time_20141109
Good morning blog dogs,
Garth I think what you said is a critical point – which is my thoughts as well:
“Cheap oil has the potential to spur global growth, just as $147 oil brought recession. — Garth”
#121 Smoking Man on 11.27.14 at 11:30 pm
Got me crazy diamonds on the Budd’s.
To the left, an old grany thinking she’s go a shot. To the right a firm young one, she’s thinking who is this creepy old bastard who’s taking to himself.
My slot machine is called the great Zeus….
Me I’m looking for Hunter S Thompsons bats.. I followed his manual.
I don’t see bats. I See a crazy prick going to area 51 tomorrow to see if the Aliens have a time machine. I’ll only go back a few months. Some one I want to save.
It’s a long shot.. But that’s how I roll.. This turkey day f_ed up my schedule.
So it’s between Cheetahs and area 51 tomorrow.
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
What the hell did you expect on Turkey day ding dong! It’s Amerka and that’s how we roll…………..
By the way why don’t you go far enough back to purchase IBM, Bell, General Dynamics, McDonalds and Apple stocks. That how I would roll. So Smoky sit down, shut up, and have a beer, relax man!
35 NorthOf49 on 11.27.14 at 7:29 pm
I have to point out that, living in Hamilton, you are of course south of 49.
#170 Rational Optimist
I should also point out that if you live in Windsor, you live south of Detroit. not that it matters.
Oil futures down again! While anybody can see the ulterior motive of the Arabs keeping current prices low, one would think a smart government, who imports half or more of their current consumption would adjust import taxes or fuel taxes to flatten out the price of petrol. It will NOT be cheaper later. Only a blind capitalist would fail to see that right? Oh, keep forgetting we ARE run by blind capitalists, who are mostly interested in their popularity at the next election. Never mind
Time to look to add Exxon, and Chevron to the portfolio or maybe a good oil ETF. Buy low(er)… as they say.
#183 Rob on 11.27.14 at 5:17 pm
————————————-
The scenario you outline, 7% investment on the house, as you mention, subtract 1% for taxes, 1% for maintenance, and 0.5% to cover those months the house is not rented. Now you have:
0.5% yearly gain due to rental income.
4% (highly variable) yearly gain due to appreciation (note: if the market slows and your house no longer appreciates, you’re now losing money once inflation is factored in).
So, from a strictly investment perspective, you must weigh a (highly variable) gain of 5% per year, with the illiquidity of real estate, and additional work that you do as a landlord, vs. having $750,000 invested in the stock market where you can sit back, relax, and reasonably expect 5-7% gains.
With the uncertain future of real estate, I’d want my money in the stock market.
# 4 Mark
“Mark. Take the day off. US oil demand is growing, not collapsing. Go and lie down. Please. — Garth”
This should be the default first post.
#154 Cato the Elder
I do independent research.I check and recheck the facts at various sources, AND I attempt to refute what I’ve read as well! See, if I try to disprove what I’m reading, I don’t look foolish.
****
#119 Cato the Elder (yesterday’s rant on package size shrinking…)
Facts as you see them – and 2x4s now being 1.5×3.5″.
Facts as they are – 2x4s are not actually 2 inches by 4 inches. When the board is first rough sawn from the log, it is a true 2×4, but the drying process and planning of the board reduce it to the finished 1.5×3.5 size.
*********
You watched a bunch of videos online and have awaken to the realities of how the world operates. You feel the need to expose this new enlightened view of yours but you are still immature and too quick on what you post here.
It is disingenuous to slag a system to which you are benefiting and living the lavish life while positioning a corrupt communist regime as a proper role model for how we should be living.
#115: “Oliver’s predecessor, Jim Flaherty, moved four times to tighten mortgage lending rules in an effort to cool a hot real estate market.”
****************
… a ‘hot real estate market’….which the cons triggered with their stupid decisions to introduce 40-year amortizations. We went downhill from that point forward….until amortizations were moved the four times by Flaherty, back to the original 25 years. Don’t give the cons credit for anything.
“Because of the exceptionally high rat population, the coyotes are doing just fine — stunning fur coats.”
@wallflower #150
That is absolutely correct. I’ve lived in Vancouver for 40 years. I can tell you that I’ve never seen so many rats and so many coyotes as I do today. There are several factors to explain the rise in rat/coyote populations:
1. Green city policy: The City forces people to compost food scraps in their backyards. People are also allowed to keep chickens in their backyards. Both of those things create food for rats.
2. Apartments that don’t allow cats. Back in the 80s, most rentals would allow a small cat or two. Now, the vast majority of rentals do not allow any pets. Cats are a major deterent to rodents. Apartment buildings that used to have cats living in them in the 80s, don’t have them anymore. Excellent opportunity for rats to move in.
3. Tear-downs. So many homes are being torn down to make way for new homes with wok kitchens. Many anecdotal stories about structures being torn down and then neighbours start seeing more rats. All this redevelopment is stirring up the rats and we are seeing them more.
4. Coyotes are feasting on the rats. Also, the skunk population is way up too. It’s not uncommon to see coyotes prowling the streets of the west side. It really wasn’t that uncommon in the 80s either. But it does seem to be something you see more of today. I think part of it is the lack of people in some neighbourhoods because of all the vacancies. Somebody posted an article about Vancouver west side becoming a zombie neighbourhood. It’s true. There are blocks where the majority of the houses sit empty, with the owners on the other side of the world. When people move away, wildlife moves in. It’s only natural. As the west side is bought up by HAM and the people become displaced, increasingly the ones who are moving into the neighbourhood are the animals, the coyotes.
Weeeeeeee oil crashing yet again. I won’t touch oil stocks yet as the bleeding has just begone. The bottom will take a while to form. Of course there will be dead cat bounces. As for Cow town get ready for mass layoffs and many people going bankrupt.
I see that some of you like Marquis de Sale, post #18, Lillooet, BC, post #21, Mr. Frugal, post #117, and a few others actually get it. While many of you are in the traffic mayhem and crowded malls scooping up bargains, I’m scooping up bargains from the comfort of my own home! Wow, XEG is down to $14.50, what a bargain!!!!!! Just as last year REITs, preferred shares, and electric utility stocks went on sale last year, this year it’s oil stocks. I’m having flashbacks to 1998 and think I hear Bittersweet Symphony by The Verve playing in the background.
Retired Boomer- When someone in Windsor uses the moniker “north of Detroit,” I will correct him! By the way, Peelee Island is as far south as California. But not as warm.
Thanks, Bill, for the link to Dyer’s article. I was astounded to read him say that the break-even price for Saudi Arabian oil is $93, and well over $100 for Russia, Venezuela, Nigeria, and Iran. He does not mean that this is when a barrel of oil is profitable- conventional Saudi oil costs less than $20 a barrel to produce. This is the price that is required to balance their national budget, a huge portion of which in Arabia is huge social spending. I read a bit more elsewhere, and apparently this will be over $100 by next year for Saudi Arabia, too.
Dyer’s also the first place I’ve read anything meaningful about the real profitability of American shale and other production. He says that 82% of American oil is profitable at $60. So the Saudis could be sunk, along with the other unsavoury members of OPEC, and most importantly, Russia.
We’re fine. The Canadian economy is fairly diverse. What’s good for the yanks is (generally) good for us. Oil is a quarter of provincial government revenues in Alberta; a third in Newfoundland and Labrador; and half in Russia and Venezuela.
The best cure for low oil prices … is low oil prices. Right now oil companies are slashing their 2015 budget to live within their projected cashflow (which has just gone way down). Fewer wells will get drilled next year as a result. Production will start to go down (and it always goes down faster than expected). By the end of the year the shortfall will be noticed and prices will start to rebound. Companies will cautiously boost their 2016 budgets enough to steady the production drop but not enough to keep up with demand. By the end of 2016 prices will be roaring again and companies will be lining up to drill baby drill. It’s a simple and predictable cycle. Of course it’s drastically more complicated than that and the timing is not always that precise but you get the point.
In the mean time the companies that were way over leveraged will be sold off on the cheap to the fiscally prudent companies that build large cash reserves for just such occasions. Costs actually go way down in the bust market as the service comanies have to compete for your business rather than the other way around.
And it works the same for the people in the industry. Some will live below their means in the boom times, not take on too much debt, and not buy all the fancy new toys (on credit). When the bust happens, they’re well prepared. It’s only the people who have promised away too many future paychecks that feel the pinch big time.
#174 TNT –
”#119 Cato the Elder (yesterday’s rant on package size shrinking…)
Facts as you see them – and 2x4s now being 1.5×3.5″.
Facts as they are – 2x4s are not actually 2 inches by 4 inches. When the board is first rough sawn from the log, it is a true 2×4, but the drying process and planning of the board reduce it to the finished 1.5×3.5 size.”
Yep, been the same since I can remember and that goes back a long ways. So much for all this knowledge. Probably never used a 2×4.
Re: #174 TnT
What are you talking about? I am genuinely confused.
I advocate for a free market capitalist position as being the only moral, ethical, and WORKABLE economic system known to man.
Communist? What we are trending towards is that. We already fulfill various parts of the communist manifesto’s planks: socialized healthcare, state sponsored education (indoctrination), centrally managed credit (central bank), etc.
I’m not sure if you’ve actually read what I’ve been writing or if you’re just incapable of mentally digesting it.
And 2×4 aren’t smaller because they shrink. They’re smaller because of inflation. Inflation caused producers to seek out ways to pass on price increases caused by excessive money printing. Any old house you go into has REAL 2x4s in them.
“Early standards called for green rough lumber to be of full nominal dimension when dry. However, the dimensions have diminished over time…”
https://en.wikipedia.org/wiki/Lumber#North_American_softwoods
Of course, other places are using lumber at increasing rates, thus increasing demand for it. But that has NOTHING to do with US being able to afford the good stuff. We can’t afford the good stuff anymore because our money has been debased and devalued. If our dollar could purchase twice as many goods as it does now, everything would be built better, instead of all the cheap crap we buy now that has to be replaced constantly.
Re: #155 Millenial
Pointing out the reality of their present day situation DOES NOT MEAN that I in any way DESIRE to have the US collapse. This is an important difference to be distinguished and is important to notice when reading someone’s writings.
I am actually quite saddened by it. I admire the foundational principles of the US very much, and have read Jefferson, Madison, and various other founders’ writings. They established something never before seen in human history: a country based on the the sovereignty and natural rights of the individual. That precedent has had profound effects throughout the world and is responsible for all the wealth that ANY of us have.
It is a shame that decades of crony-capitalism and socialism have destroyed that country.
Now, I’m sorry if the TRUTH hurts you. But the US collapsing will happen. It is GUARANTEED. Notice I am not speculating? Why? The US has over 100 TRILLION DOLLARS in obligations to fulfill. There is only one way to do it: money printing on a scale never before seen in their history. Inflation (paying for these obligations with increasingly worthless dollars) is the only way to wipe out this debt.
Of course, when you inflate your currency, you destroy the economy in the process. Your military might becomes weakened as well.
And simple math tells us the China will be infinitely superior to anything the US has today. The US has been able to dominate the globe for 50 years with a population of only 300 million. China has 1300 MILLION. With 4 times the population, will they have 4 times the influence? I think so, or at least close to it.
And regarding the cold war, that was yet ANOTHER WORTHLESS AVOIDABLE SITUATION. Kennedy tried to pare down the situation and was making overtures to the Soviets, then he was assassinated. The military industrial complex took over the US after WW2 and has been running the show ever since. There must ALWAYS be a new enemy to justify war expenditures and continuing profits.
Knowing this, I say we mind our own business. The more friends we try to make in the world, the safer we will be. Trading and not fighting with people does NOT endorse their behavior. It simply means that we don’t have a moral right to tell others how to live or how to govern. Besides, we have PLENTY or problems here to take care of.
The stupidity of our politicians, reflective of the population that votes for them, always astounds me.
#117 Mr. Frugal on 11.27.14 at 11:18 pm
A while back, everyone was worried about the drop in potash prices. But that was just a sweet entry point. POT advanced about 18% in less than 1 year plus you made 4.5% in dividends. Oil is no different. Right now you can buy Suncor, Cenovus or Husky at bargain prices and collect a nice dividend while you wait for prices to recover.
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Can anyone please recommend a etf that I can purchase, through TD waterhouse, that tracks energy stocks. Thanks
Sometimes Mark says something that seems to make sense.
Then he continues and says something that is completely wrong.
He undermines his own credibility.
Mark. Sell your gold and gold stocks. It’s too late for your oil stocks. Take a nap.
How about we all celebrate by contributing to our Canadian economy? Buy something… anything (other than RE) you want this Black Friday and contribute to our consumer driven economy!
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so driving down to bellingham is out then?
the weaker dollar will help keep more of us home.
#67 Cato the Elder on 11.27.14 at 9:14 pm
“Regarding Keystone, I think anyone that opposes it is stupid. I normally don’t throw that around describing vast swathes of people I don’t know, but they are stupid. All that oil is ALREADY being transported – just by rail. And rail transport is MUCH more dangerous and MUCH more prone to environmental disaster and MUCH more expensive. It’s a lose lose lose to continue what we’re doing.”
This is several separate false dichotomies in one paragraph.
For the country as a whole, transport by pipeline is safer than by rail. But an individual is less safe with a pipeline going through HIS backyard than with oil-by-rail 200 miles away, so it may be perfectly sensible for him to oppose the pipeline. Nobody is being offered a choice of a rail line dedicated exclusively to oil transport or a pipeline on the same route. False dichotomy.
A smart economist such as yourself would be the first to admit that there is some marginal oil which is uneconomical to extract and ship by rail, but would be economic if a pipeline is built. So not all the oil would be shipped either way. False dichotomy.
Many of the people opposing the pipeline are not hoping that all the oil will be shipped by rail instead. They currently oppose the unbuilt pipeline because it is easier to hold up construction than to block oil by rail on a line which already exists and carries other hazardous goods. But they won’t be satisfied if the pipeline is stopped and all oil goes by rail, and I expect some of them will keep fighting. False dichotomy.
All politics is local. Some of the protesters are undoubtedly stupid; any large group has ’em. But is your failure to see rational reasons for some opponents’ discontent not wilfully blind?
Who said there won’t be any QE4?
With the help of US’s friends (Saudi), US has engineered another round of QE.
67.42 -6.27 (-8.51%) oil
breathtaking
Re: #186 bdy sktrn on 11.28.14 at 1:02 pm
I just got back from grocery shopping.
Interest rates on fixed rate bonds, Canada and U.S. are sinking all this week.
What is going on, Canada 5 year is 1.38% and 10 years at 1.86%, 30 years at 2.43%.
These are anywhere from a 0.80% to 0.88% percentage point less and on these very low rates, this is a 25% to 39% drop in rates along the yield curve.
What are 5 year fixed mortgage rates going to 2.25% or less?
Rates should be rising due to a stronger economy but what is going on?
Is lower inflation from oil, gasoline prices decreasing inflation expectations or what is it?
My 25% to 39% drop in 5, 10, 30 year Canada fixed bond rates is over the peak of 2013 which I believe was around September to October-2013.
#181 Ronaldo on 11.28.14 at 12:04 pm
you are correct.
been that way since 1962….
a sawmill cuts to what ever the customer demands.
what Eburne Sawmill sent to Germany,Italy,Japan and North America had different dimensions [and quality] as the end use/purpose was different in each case.
#176 jumbo shrimp on 11.28.14 at 11:28 am
every time a condo around here [broadway and arbutus in vancouver] puts up that blue covering we get a bunch of displaced mice seeking to come inside ….
we have found that freshening up all our poison bait containers helps.
and the cat anecdote is spot on.
actually all the points you made are true to some degree or another. uncared for fruit trees also add to the food supply.
Re: #187 Debunking
I agree with the notion that INDIVIDUAL property owners may be concerned with a pipeline in their backyard, much like individual property owners may be concerned with oil by rail in their backyard.
Property owners are the only people with a valid complaint against pipelines. Provincial and federal governments have NO say as far as I’m concerned. Let private property owners agree or disagree, and if the terms are violated, THEN government can come in and protect them.
But the VAST number of people that are opposing it are east/west coast hippies. Hippies that complain when businesses make decisions necessary to bring product to store shelves, yet ALSO complain when prices are too high or there’s no jobs. These type of people complain no matter what and their opinions shouldn’t be given so much weight. In that sense, they are stupid (at the very least incapable of correlating cause and effect) and I stick with that assessment.
The fact that a single person (Obama) can stop a pipeline going through an entire country is SCARY and ludicrous. Since when did one person’s SUBJECTIVE opinion trump the thousands of private property owners that might say ‘yes’ to such a proposal? The risk is not for Obama to bear – it’s for property owners and the pipelines to bear, it should be up to them. It’s very telling the state of a country when one person’s demented ideology can hold up the will of the vast majority of people.
Now apply that same degree of power vested in a single person to a host of other harmful issues, and we can understand why our economies are in such shambles today.
**********
And regarding native Canadians objections to the pipelines on their lands: what they need to fix their communities is private property rights. The reserves are essentially communal property, and no one gives a damn about them. I have a friend that is close to many people on the reserves and he said they rip apart doors and all kinds of things to resell whenever it’s replaced. No one cares.
Hundreds of years ago it was a SOMEWHAT effective socialism that existed. Why? The tribes existed together in close knit bonds. You can only hold together socialism when there is SOCIAL PRESSURE from your PEERS to engage in proper behaviours.
And example of this ‘pressure’ is in a typical household. You may have a sibling or child that makes a mess – you can compel them to clean it up and alter their future behaviours. But if your sibling or child didn’t care what you thought, and was completely disconnected from the mess they were making and how it affected others’ lives, it wouldn’t work. This is where socialism FAILS. And it fails on a large scale, such as in a country, for the same reason – a lack of adequate social pressure from personal relationships.
Here is an article on how private property rights could fix native communities:
http://www.nationalpost.com/opinion/columnists/story.html?id=6f9d4a97-b8c2-4c29-b3cf-35a8b682fbbe
#142 HD on 11.28.14 at 12:25 am
ahh!
I didnt see that flick. although I have seen a couple of youtube excerpts I missed that exchange.
#155 Millennial_Falcon_TheFirst on 11.28.14 at 2:08 am
#67 Cato The Elder
When I was in high school (1999-2000ish), there were some Russian immigrant kids who wore CCCP shirts with pride. It was laughable. Here they were, after their parents probably suffered through 40 years of soviet rule and risked everything to come here for a better life, here were these kids who had no grasp of reality of life under soviet rule thinking it was something to be celebrated. I wonder what their parents thought? What a joke.
I am getting tired of these conspiracy theorists spewing their anti US hatred. Must be nice typing this stuff from the safety and comfort of your Canadian home, protected by our southern neighbour that you hate so much (whether you want to admit it or not).
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I get tired of people bandying about the phrase “conspiracy theorist” because they are too effing lazy to do a bit of research.
The USSR was a “CREATION” of the USA. The Bolsheviks were trained in NY, funded by NY banks with gold and were even “caught” on their way to Russia by the British Navy who were told to let them and their gold go or the “Muricans” would not enter the war.
lazy lazy lazy people who believe everything they lernd in skoool like its gospel.
Alberta not only survived the supposedly once in a millennium 2009 crisis but also came out strong. This is nothing…. !
#197 RealistvsExtremist on 11.28.14 at 3:05 pm
your response on this matter would be more aptly applied to your self.
I fear your grasp of geopolitics is tenuous at best.
@Funny that, post #184:
Read above comments by myself and others here. Right now the Black Friday sales are on XEG (iShares Energy Fund), listed on the TSX. At last check it was trading at $14.60, not far above its 52 week low reached earlier today. Wow, what a bargain!!!!!!
I’m having another memory flashback, this time to the early 70s. On the album Who’s Next, by The Who, one song has the words: I call it a bargain, the best I ever had, the best I ever had!
#197 RealistvsExtremist on 11.28.14 at 3:05 pm
further to my last post
I would recommend reading ‘in wars dark shadow’
an excellent book on the events that led up to the revolution of 1917.
follow that up with ‘a history of the russian secret service’ by Richard Deacon.
181 Ronaldo
Try to put a nail in an old growth 2×4 from the 1940s or earlier. The old ones were still less than 2″x4″, but bigger than the modern ones. You need to shim roughly 3/16″ to 1/4″ match the thickness.
The things are almost hardwood. You need a small sledgehammer to knock a nail into one. For that matter, you can use a chunk of one as a hammer to drive nails into a modern 2×4.
The density and extra volume makes them feel like they’re 2″x4″, but they’re still a bit short of it.
I think these guys coming back from WW2 forgot that they didn’t need to make stuff bombproof. OTOH, I know some of them built bombshelters in their own homes, so… maybe they thought they were doing the residents a favour.
Today the walls are so thin they’re acoustically transparent.
A 900000 house at 3% is this the same payment as a 700000 dollar house at 5%. I know these numbers are off but you get my point. What can we expect from this scenario?
http://www.cnbc.com/id/102223871
Fed now expected to stay lower for a lot longer
Remember when the Federal Reserve was going to raise rates next spring? Yeah, well that was fun while it lasted. …….
It is prudent to plan on US rates starting to increase in 2015. But feel free to deny it. — Garth
“Mark. Sell your gold and gold stocks. It’s too late for your oil stocks. Take a nap.”
Actually this is the time that gold and silver stocks should shine, on account of falling energy prices, and an obvious need for central banks to take policy measures to re-liquefy an economy which is slowing dramatically. Similar to the situation in 1930-1932, where the price of industrial inputs dropped so much that it became very cheap to mine gold/silver.
So I am buying more actually. Not selling. As many posters earlier have indicated, evidence of US growth is scant, and most indicators point to very much the opposite.
“What are 5 year fixed mortgage rates going to 2.25% or less?”
With the economy slowing this much, and housing being in such significant overcapacity and price decline, credit-worthiness starts to become an issue in a pretty serious way.
But such low rates, especially going out longer in the curve, indicate that there is no legitimate perception of inflation in Canada, or any need for the BoC to take policy actions towards interest rate hikes. Quite the opposite, the bond market appears to be implying rate cuts, which are necessary due to the high probability of debt deflation occurring as house prices continue their year and a half-long decline in Canada.
#200 Doug in london
@Funny that, post #184:
Read above comments by myself and others here. Right now the Black Friday sales are on XEG (iShares Energy Fund), listed on the TSX. At last check it was trading at $14.60, not far above its 52 week low reached earlier today. Wow, what a bargain!!!!!!
I’m having another memory flashback, this time to the early 70s. On the album Who’s Next, by The Who, one song has the words: I call it a bargain, the best I ever had, the best I ever had!
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Well it’s not a black Friday sale, it will be a cyber monday sale.
As often, with such a dramatic decline, usually wait till three days and buy on third day.
Re: #199 bill
Bill, if there’s anything the internet is making readily apparent today, it is that we have been lied to continuously for centuries. Either come to terms with it, and realize that you’re going to have to re-learn a lot of what you’ve held to be truths, or keep living in the dark.
https://www.youtube.com/watch?v=PaFklTLNy8c
The bankers were very resentful at Tsar Nicholas II (the last emperor) rebuff of their attempts to financially enslave the state with perpetual debt. When their bolsheviks killed him, they killed his entire family, servants, and personal friends, just to wipe out all trace of him from the planet.
Believe it or not, this is what happened.
Unfortunately, as is often the case in these hair-brained schemes by powerful people, they couldn’t predict the direction the subsequent government would take. I don’t think communism was what they had in mind. But the fault lies at their feet, and the millions that died and suffered were a direct result of their intervention.
#147 Leo Tolstoy
Those named are the few contrarians. “Everybody” is busy buying houses.
#155 Millennial_Falcon_TheFirst
I am getting tired of these conspiracy theorists spewing their anti US hatred.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Careful with what you say. I wanted to chime in earlier but Cato summed it up nicely with his 183 post. You know how many times I have been labeled as a conspiracy nut by those who do not even keep an open mind to another possible story? Too many to count.
Anyway I love what America once stood for and the foresight the founding fathers had when they drafted the constitution, BUT the America they fought for and founded has been hijacked, and the constitution is being rewritten in the form of patriotism
This saddens me deeply, and where we are going is not pretty. However, it doesn’t mean that I am going to put my head in the sand and not seek answers to uncomfortable questions. The world and humanity is messed up right now, and now is not a time to be name calling and taking the easy way out.
Although your rebuttal is consistent with system wants
Re: #198 Same story
No, it’s not the same. Canada and the average Canadian are now burdened with significantly more debt. Debt that must be serviced regardless of the economy.
That means there is a lot less discretionary spending available for the average consumer. That means price shocks and job losses have a much more profound effect on the economy as a whole.
Not only that, but the ‘bailouts’ that are coming won’t work. They didn’t work the first time, but at least the US was able to trick the world into thinking it did. This time, there is going to be a loss of confidence. The results will be significant hardship for many.
What is going to happen to these bank financial holding companies?
Senator Carl Levin Conducts a Hearing Into Vast Industrial Commodity Holdings by Wall Street Mega Banks
According to the Levin Subcommittee report, the Federal Reserve was actually the facilitator of the sprawl by the banks. The report notes:
“Without the complementary orders and letters issued by the Federal Reserve, many of those physical commodity activities would not otherwise have been permissible ‘financial’ activities under federal banking law. By issuing those complementary orders, the Federal Reserve directly facilitated the expansion of financial holding companies into new physical commodity activities.”
…”The Subcommittee report details how JPMorgan amassed physical commodity holdings equal to nearly 12 percent of its Tier 1 capital, while telling regulators its holdings were far smaller; and that at one point it owned an amount equal to more than half the aluminum used in North America in a year. The report also discloses that, until recently, Morgan Stanley controlled 55 million barrels of oil storage capacity, 100 oil tankers, and 6,000 miles of pipeline, while also working to build its own compressed natural gas facility and supply major airlines with jet fuel. Details are also provided about Goldman’s ownership of a uranium trading company and two open pit coal mines in Colombia. ….”
wall street bank involvement with physical commodities
http://www.hsgac.senate.gov/…/report-wall-street-involvement-with-physical-com...
11/18/14. Permanent Subcommittee on Investigations
http://www.bullfax.com/?q=node-big-banks-take-huge-stakes-aluminum-petroleum-and-other
#202 Mike in Toronto – Mike, I know exactly what you mean about driving a nail into old growth lumber. I did a reno on a 1920’s house a few years back. Everything was built out of coastal old growth fir. Hard as rock. Took it right down to the bare walls. Did a complete re-wire and plumbing. Swore I would never do another one. Would have been less work and likely cheaper to bulldoze it down and start from scratch. Six months of hard labour.
It is prudent to plan on US rates starting to increase in 2015. But feel free to deny it. — Garth
Since the crash of 2008, Feds are using a new technique … they are using liquidity to control instead of low rates. Low rates are here to stay for at least a decade ( a raise of 1 to 2 % in 10 years is still low rates)
Rates will not stay low for 10 years. This isn’t Japan. (You have now posted this comment five times. Enough.) — Garth
#121 Smoking Man on 11.27.14 at 11:30 pm
Got me crazy diamonds on the Budd’s.
To the left, an old grany thinking she’s go a shot. To the right a firm young one, she’s thinking who is this creepy old bastard who’s taking to himself.
My slot machine is called the great Zeus….
Me I’m looking for Hunter S Thompsons bats.. I followed his manual.
I don’t see bats. I See a crazy prick going to area 51 tomorrow to see if the Aliens have a time machine. I’ll only go back a few months. Some one I want to save.
It’s a long shot.. But that’s how I roll.. This turkey day f_ed up my schedule.
So it’s between Cheetahs and area 51 tomorrow.
====================================
Leaving Las Vegas more like leaving Harrah’s Laughlin bud! Aint no way ur doin Hunter S Thompson shit.
Housing bubble in Toronto and Vancouver!
Some facts to consider:
There are officially 5 million millionaires in mainland China and many times more close to millionaires. Many of them are taking their money abroad and buying real estate in countries and cities “friendly”to foreign ownership and without discriminatory practices. Cities that that they view as world class and that are not expensive as NY, London. They are not buying in Florida, Texas or Montreal.
Real estate is most expensive in cities with a large Chinese population. Singapore, Honk Kong, Vancouver San Francisco, Toronto, Sidney.
What CMHC, the Canadian Government and the banks have done is to encourage young Canadian couples to borrow excessively to compete with the foreign investors.
I do not expect a real estate correction in Toronto or Vancouver, unless regulations are implemented
for foreign ownership.
If there is a correction, it will only hurt the overextended young Canadian couples.
(insert posted # here) Cato the Elder
You are addicted to posting / re-posting the same doom and gloom and then sucking all the attention on the replies (Garth use to have a post limit that has since disappeared…)
So… in your world 2 x 4’s are now 1.5 x 3.5’s because of inflation… since the 60’s right? Not building codes and possibly some other reasons?
US collapsing will happen. It is GUARANTEED because there’s only “one” way to wipe the $100 trillion in obligations and that’s inflation….. when you owe $100 Trillion to someone it’s not your problem it’s theirs.
China will be infinitely superior to anything the US has today because of “simple math” of population numbers… population #’s do not make a country superior.
Cold War was avoidable and Kennedy was killed because of overtures to USSR…. Really… I’ll add this one to the Conspiracy pile: Mafia, Catholic, CIA, KGB, Vietnam, Cuba etc….
And the solution to all our problems is making more friends in the world and trade fairly with them… no need to have any leverage as long as were fair…. Right?
And your best line: . It simply means that we don’t have a moral right to tell others how to live or how to govern. and China is your “go to” system for doing it right…..
I feel this is a good match for the photo.
http://www.youtube.com/watch?v=_W-fIn2QZgg
#217 TnT on 11.28.14 at 4:56 pm
Vietnam was a mistake. Been there, done that. Thanks to McNamera.
Here’s a story that deserves some attention:
http://oilprice.com/Finance/investing-and-trading-reports/Breakthrough-Technology-in-Utah-to-Make-Oil-Sands-Clean.html
Looks like they’ve invented a new technology to extract oil from the tar sands. And production cost is around $30 a barrel. Bring on the good times! I’ll take two of those trucks, Garth!! Let the Harleys roar!
#217 TnT on 11.28.14 at 4:56 pm
“Cold War was avoidable and Kennedy was killed because of overtures to USSR…. Really… I’ll add this one to the Conspiracy pile: Mafia, Catholic, CIA, KGB, Vietnam, Cuba etc….”
If JFK wasn’t assassinated he would have done exactly what LBJ did vis-a-vis Cold War, Vietnam, etc. Because you see, in that case, they would have had no reason to kill him.
JFK was the last true American president.
Having worked in oil patch for thirty years I have a few observations to share. This price drop looks to me to the third large one, in inflation adjusted dollars since the 80’s. The other two were in 1981-1985 , and 2008-2009. The others in between those two sets of dates pale in comparison. Yes, this is going to pretty darn hard on the frac derived oil business in North Dakota and Texas. In Alberta, it will definitely slow down drilling for frac derived natural gas liquids (which more or less follows oil prices). It will definitely reduce oil royalties for Alberta in a huge way. Connected in this is revenue for equalization payments. Equalization Payments to Ontario and Quebec are going to drop like a rock. Nobody gets out of this without getting damaged. As for oil sands, the more mature companies will simply shelve any projects that were about to start. Anything already underway will probably get finished off. For any newer players in the oil sands, this is going to hurt.
The bright side is natural gas. Natural gas storage is down big time in the USA. I’m betting on $5.00 to $6.00 average gas prices this winter. Also, for those in “central Canada”, suck it up and support the Pipeline East project. Your equalization payments will depend on it! Good luck everyone and enjoy cheaper gasoline at the pumps.
#221 Inglorious Investor
My take on the last true American President
Eisenhower
https://www.youtube.com/watch?v=8y06NSBBRtY
driving an efficient car in cow town is like wearing tight undies.. leads to low testo.
better to drive a healthier hiked-up fuel suckin’ ride with swingin’ room.
Oil patch approved.
Hi Garth,
For throws that might be interested in the fusion power potential.
We aren’t quit there yet but there are now a few promising looking solutions to get us there. And hopefully sooner than you might thing, if all goes well.
This article has links to several of the approaches in development.
Inside the Dynomak: A Fusion Technology Cheaper Than Coal
Modifying the most common type of experimental reactor might finally make fusion power feasible
http://spectrum.ieee.org/energy/nuclear/inside-the-dynomak-a-fusion-technology-cheaper-than-coal
#208 Cato the Elder on 11.28.14 at 3:55 pm
that you would think I would believe that ‘information’ is an insult to my intelligence.
go to a library immediately and re educate yourself.
#63 TEMPLE on 11.27.14 at 9:05 pm
I second that.
Ralphy boy give the blog a shout eh ?
Canada may take a hit from the drop in oil price, but it may not be so bad. The heavy oil differentials have drawn in and the C$ has dropped. In other words heavy oil producers were getting $70 Canadian per barrel a year ago and are getting about the same now with light oil at USD $65. NAT GAS has held up as well and may be OK I’d the weather is nice old enough and the frackera drop there liquids production.
I think the oil price drop is more about slow or negative growth in Europe, and the impact the Russian sanctions are having on the European economy. But regardless they are a fact and they will be with us for a while.
Alberta will be in a tough spot. Our gas hasn’t been worth what it costs to drill for a long time and companies were switching to liquids to the extend they could to make it work. The hop was that the Natgas/oil ratio would go back to about 10 over time but this is NOT the way it was hoped it would happen. Now the liquids aren’t worth what they cost either and it’s a matter of time before those producers who are heavily in debt cry uncle or just have their line of credit shut down.
The side effect of this is going to be decimation in the shale oil plays. Shale oil isn’t all it’s cracked up to be anyway, but now it’s as good as dead. Next time prices come up, shale will revive but probably not with the same sort of fury as last time. US a net exporter in 2020? Time to change plans.
@calgaryPhantom, post #207:
I’m eagerly awaiting even better sales and will scoop up even more XEG, and possibly also more dirt cheap HSE, if these even better deals materialize. BRING IT ON!!!!! How about a nostalgic memories of 1998 party?