Could be worse

DOGFACE modified

More oil news. ConocoPhillips is cutting its capital budget by 20%. Precision Drilling says it will idle its rig-building business once current projects are done. EOG Resources is closing its Calgary office and laying off 150. Morgan Stanley says oil could be $43 a barrel in a few months, which is 30% lower than the five-year bottom it hit Monday. “Without OPEC intervention,” explains the company, “markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015.”

Don’t need to tell you what oil in the $40-range for a year or so would mean to Alberta. Fort Mac or the Calgary and Edmonton housing markets.

The dollar dropped to just above 87 cents on Monday as the TSX shed 329 points (it was closer to 500 in the early afternoon). Slumping energy issues took the Dow down a hundred. A barrel of crude finished the day at $63, off a withering 4.3%.

This was a graphic representation of what this pathetic blog dished up on Sunday. The move is on from hard stuff to liquid assets, suggesting a long up-cycle in commodity prices is coming off the tracks, or at least seriously wobbling. The effect is magnified in a resource-rich country like Canada where the natives have levered the poop out of things buying houses they actually can’t afford, based on how awesome tomorrow will be.

The ratings agency Fitch had more to say about that a few hours ago. It issued a report warning consumer debt in Canada is at “unsustainable levels” and, “This, combined with signs of overvaluation in the Canadian housing market, particularly in areas such as Vancouver and the Greater Toronto Area, begets a cautious view of consumer credit and thus the negative sector outlook.” The sector it refers to is that of banking. If real estate soft-lands, says Fitch, the banks will merely earn less. If houses hard-land, it gets worse.

If the oil mess continues for a while, Albertan real estate could be a disaster, given the fact people in that province have led the country in personal borrowing, as well as testosterone. In Toronto and Vancouver, the effect will be more muted, but the lower the dollar falls the more likely we are to see the Bank of Canada move to stabilize in order to temper import-fueled inflation. That could hasten a bank rate increase.

Now, let’s keep this in perspective. The TSX is up 6.5% on the year and 9% since this time last December – even after the oil-fired losses of the last few sessions. That’s a bigger increase than houses in either 416 or 604. Plus, there’s a good argument for believing at these levels the TSX is oversold. Sure, there could be more losing days ahead, but the world still runs on oil while investors run on emotion. It’s hard to see how scooping up an ETF owning the biggest companies – including the energy titans and the Big Six banks – would be a bad long-term move.

Also recall what was said here about the US versus Canada. For the past two years I’ve been forecasting the American economy would outperform ours, with greater market opportunities. So, why not own more of it? The weightings given for the equity portion of a 60/40 balanced portfolio were 16% Canada, 18% US, 17% international and 9% alternative. And of the Canadian component, only 8% is large cap companies (TSX), with the remainder being smaller enterprises and REITs.

This is called diversification within a balanced portfolio. It’s about not having too many eggs in one basket, and deliberately limiting your exposure to volatility, while ensuring you have assets that pay you regular income (preferreds, REITs, bonds) regardless of what the dingdongs are doing on the stock market.

So, oil is interesting in that it makes one segment of a portfolio cheaper, and (besides) intellectually we realize the plop will be temporary. This is way different from seeing the value of your $1.3 million particle board palace in Cowtown drop to $1.1 million because the guys in OPEC are playing hardball. With real estate, when markets decline, buyers evaporate. Houses become not only worth less, but they get illiquid. And (worst of all) the level of debt doesn’t fall along with the equity. Finally, if you sell for less than you paid, after factoring in all of the carrying costs, acquisition costs, taxes and commissions, none of it is tax-deductible.

A crazy long time ago this blog called Alberta real estate dangerous. This is why. Imagine if not only your house and mortgage were held hostage by crude, but also your job and income. Consider if you had to sell into a declining market where bidders quickly vanished. There would be no good choices.

It’s all part of the shift in how we see risk. For the past six years in Canada the masses have viewed real estate as a safe, predictable way to build wealth, even with it involved extreme leverage and a lifetime of debt. As a result we’ve borrowed epically, depleted cash reserves and pushed prices to the extreme. At least half of today’s buyers were in Huggies the last time mortgages were 8%, and have never known prices to erode. How can you blame them for being idiots?

But, this will change. It only takes a shock or two. Here’s one.

188 comments ↓

#1 johnny d on 12.08.14 at 7:10 pm

Good thing I bought HOD etf back in June.

Double ETFs based on one sector are gambling, not investing. — Garth

#2 Role on 12.08.14 at 7:12 pm

Oil , up oil down. Never cannot figure out why most of the best in people can’t no find best jobs. Only time jobs be good when crashing, or big,, big up draft in jobs! I would for sure be scared if losting my job only cause of one many things! Hold tight people!

#3 Curious on 12.08.14 at 7:12 pm

Several houses in our Edmonton neighborhood have been up for sale for a while….drop in oil prices is going to drop the hammer on home sales.

#4 Foist! on 12.08.14 at 7:12 pm

Hope everyone in Alberta remembers how to farm…

#5 Mark on 12.08.14 at 7:23 pm

The big question is what sector will rise out of the ashes and be the leader for the next phase of growth?

Seems to me that there’s a lot of parallels between today, and the early 1930s — when the gold miners started to do incredibly well not because the price of gold went up, but rather, the cost of inputs to the mining industry collapsed. Labour/men. Oil/energy. Materials. A lot of people think gold/gold mining only performs well in a hyperinflation, but the 1930s was a time of profound deflation, and the 1930s is a quintessential example of gold mining equity outperformance.

#6 JR on 12.08.14 at 7:26 pm

Garth, An article in today’s Star, at the link below, highlights one of your themes. Basically the nabes featured that have experienced serious declines in income have also experienced huge increases in home ownership rates. Go figure.

http://m.thestar.com/#/article/news/gta/2014/12/08/a_tale_of_income_inequality_in_five_toronto_neighbourhoods.html

#7 I'm stupid on 12.08.14 at 7:29 pm

I simple don’t have words to describe the foolishness of the masses. Who in their right mind would think it’s a good idea to spend 800k on a home? How do you justify that purchase with a net worth of nothing? It’s no wonder the average joe blow can’t come up with 2k or miss a pay cheque. All this stress is going to have an impact that will be seen in the future health care cost.

#8 Fed-up on 12.08.14 at 7:33 pm

Annnnnnd gas prices stay the same tonight.

Go Canada!

#9 Happy Renting on 12.08.14 at 7:34 pm

Imagine if not only your house and mortgage were held hostage by crude, but also your job and income. Consider if you had to sell into a declining market where bidders quickly vanished. There would be no good choices.

A while back the Globe and Mail had a provocative headline, something like “why Calgary could be the next Detroit”. Unthinkable, at the time (especially to the young who have only seen the boom years), but the point was that if the single engine powering your economy goes kaput, it could be a very fast, very steep ride down. And it goes without saying that if all your income and all your assets count on one industry, your indebted butt is totally screwed. I wonder if people are realizing this, yet?

#10 Paul on 12.08.14 at 7:35 pm

#4 Foist! on 12.08.14 at 7:12 pm

Hope everyone in Alberta remembers how to farm…

No worries…it will be weed farming this time and they are making a killing already in BC.

#11 Porsche on 12.08.14 at 7:35 pm

THE TAXMAN WILL GET YOU IN EDMONTON

So the brother inlaw’s brother owned a 6 or 8 plex walkup apartment. He made good capital gains on it, but never claimed them.

He went through an ugly divorce, she leaves him after he put her through 7 years of university, she got the house and he got the child support payments.

He buys another house with profits from the apartment for himself.

It’s been seized by the government, he has to be out by Feb. 1st

Back in mom and dads basement at age 52

#12 Jimmy on 12.08.14 at 7:38 pm

Jimmy says 5th!!

#13 james on 12.08.14 at 7:38 pm

The funny thing is that countless numbers of people have argued that Canadian housing wouldn’t deflate absent a major ‘catalyzing’ event. They said interest rates were unlikely to rise, and consumers were unlikely to default.

Lo and behold, an unanticipated shock in the form of crashing oil prices. The sort of thing that we were told wouldn’t happen.

This should be very very interesting.

PS: I think the long term issue facing Alberta is water, not oil. Research has shown that the 19th and 20th centuries were exceedingly wet by historical standards, and that a reversion to the mean is likely. Importing millions of people to an area with questionable water resources is not wise.

#14 AlberTA IS GOING TO FEEL FINANCIAL PAIN on 12.08.14 at 7:38 pm

The financial pain hasn’t even started yet and it will hit hard and stay that way for a long time. Many will lose their jobs and homes and be forced to go bankrupt.

#15 Tony from Calgary on 12.08.14 at 7:42 pm

“Double ETFs based on one sector are gambling, not investing. — Garth”

Absolutely no difference.

They’re both ‘gambles’ on the future based on ones perception of value vs risk. The only difference is people who tell themselves they’re “investing” do so to avoid having to recognize they are gamblers themselves, and/or to reaffirm their belief they have a better understanding of what the future holds than the average Joe.

Everything in life has risks involved. Everything in life is a gamble.

TFC

#16 Alberta's Selective Memory on 12.08.14 at 7:43 pm

” oil in the $40-range ”

That’s Brent. What Alberta sells is WCS, which always goes for a significant discount. If Brent is 40 bucks WCS is 20, maybe even less. That’s not even close to covering extraction costs, nevermind maintenance or anything else. Even if they staff themselves with 100% min-wage TFWs they can’t break even at prices like that.

However, I’m sure Alberta has a sizeable sovereign fund like Norway. After all, they’ve had since the 70s to prepare for this. Right? They did save money, right? Oh, I forgot, government action for the collective good is dirty dirty socialism. Grrr. Every man for himself! Oh well. Easy come, easy go.

At least this is how the housing story ends. I always wondered what things would look like at the peak. Whether there would be a catalyst or not. Or what the moment would finally look like when the jig was up. Guess this is it. Oil prices. Alberta rediscovering ancient history. Cowboy “economists” maybe not smirking as much. Million dollar McMurray particleboard palaces offered for less than the cost of materials and still not changing hands, like in Florida (but without the nice weather).

It’s the free market, baby. Eat or be eaten. Time to bootstrap it, cowboys. Yee-haww.

#17 Realties.ca » Could be worse on 12.08.14 at 7:45 pm

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#18 Oh Boy! on 12.08.14 at 7:46 pm

Garth,

Have been reading your blog for quite sometime. Now I can shake off my high cash stash hiding in fear tiny return bank account, and commence an investment strategy. I have learnt such things are not luck based if, as you keep stating, are diversified.

Here in Australia, we’re in the midst political crisis and economic hammering to come. We’re in need of a competent Prime Minister and Treasurer. Now Garth, I’ve read your history/bio, you’ve seen it, you’ve been there, you’ve done it, you know how the system here works. We could do with some-one like you here.

You only need to work on your accent, then Bob’s your Aunty.

#19 David McDonald on 12.08.14 at 7:46 pm

The market was scary today even though I am heavily US weighted and don’t own too much oil related stock. Nevertheless I cling to Garth’s conviction echoed by US based blog dogs that the US is recovering. I don’t expect great things but I don’t expect a repeat of 2008 either.

Condo prices have been stagnant for a couple years and projects have been stalled in Ottawa. We won’t see a crash but prices certainly won’t go up. That’s ok because we own a condo for emotional not financial reasons.

I feel sorry for what may happen in Alberta. I had a friend who just walked away from his home in Edmonton back in the eighties. I also remember investor groups buying up homes there because nobody else wanted them. It was a disaster.

#20 Pascii on 12.08.14 at 7:47 pm

My Garth-esque portfolio hardly blinked today…the worst day for the TSX in over 3 years according to FP.
Could be worse. I could own a house in Calgary, or anywhere in Canada for that matter.

#21 José on 12.08.14 at 7:49 pm

This article says that the era of ETF’s is greatly slowing down. The big increase was due to the quantitative easing programs. Now they say that active managers or mutual funds will be the increasing trend for years to come.

Could you comment please Garth?

http://www.cnbc.com/id/102249335

#22 Drill Baby Drill on 12.08.14 at 7:51 pm

Dear Pathetic Bloggers : Oil rises in value and falls in value. Oil is currently falling at a rapid rate, will overshoot and bounce back up but not as high as we have become used to. The Loonie is falling and the differential between CAN & USA $ will cushion the blow somewhat. Oil producers will adjust and so will households (Yikes!!). Those with oil and non oil related jobs in Alberta will all be hurting and those with job loss or overtime cuts will lose homes and or truck nuts on 4 wheels. This is the new reality UNLESS there is an oil supply shock in the middle east then all bets are off.

#23 Roman on 12.08.14 at 7:53 pm

Buy the dip!
There will be no other chance to get into real estate with todays market… sorry, I mean into diversified portfolio.

Start climbing stock ladder already because they are going up fast. Might be the last chance to get on the bandwagon :)

#24 Timmy on 12.08.14 at 7:58 pm

Hope it falls to 40 a barrel. Then maybe we wouldn’t be destroying the North and putting in all the pipelines, wrecking our evvironment to satisfy China’s demand for oil.

#25 Sign of the Times on 12.08.14 at 8:00 pm

Was at a “professional services” firm Holiday Party over the weekend in The Best Place on Earth and learned:

1) Vancouver is a world class city like no other.
2) Prices always go up.
3) Assessments are on the rise and, when assessments go up, that means people have to pay more for properties.
4) No other world class cities in the world have experienced a property bust, why would we expect Vancouver to?
5) My spouse and I are going to end up poor and homeless unless we buy now or be priced out forever!

I was tempted to share my $3000/month dividend portfolio with them but figured I could bite my tongue for six more months (they have a summer party most years as well) now that a reversion to the mean is beginning to play out. My expectation was that a rise in rates would be required to get the ball rolling more quickly but it looks like Saudi Arabia and OPEC decided enough was enough…glad I have my popcorn ready and powder dry.

#26 Timmy on 12.08.14 at 8:04 pm

Re #16. No, the dumbass Conservatives privatized Petrocan and RalphClown and the boobs in Alberta raided the Heritage trust fund. That province should be paved with gold with all of the oil being sucked out of the ground but this is what happens in a petro state run by short sighted neo con idiots. I feel sorry for the people of Alberta. How many times have reports suggested the province diversify away from oil and gas?

#27 Cdn Flier on 12.08.14 at 8:04 pm

Cato the Elder, you make some good points about our government and its monetary policy. What should we do about it? How can we fix it? I’m not asking what the Gov’t should do. But rather, what can us blog dogs actively do?

Please do not feed him. — Garth

#28 Smoking Man on 12.08.14 at 8:05 pm

Oil free fall..

It’s called , take that Putin.. First we take Kiev, then we take Syria. Pump it up from Qutar..

Don’t be surprised if you see 20 dollar oil.

Bricks got to be stopped dead in there tracks. Who do they think they are abandoning the petro dollar..

By the way, the kid from Ottawa..the ISIS guy, 100% CSIS.

Now that Harpo and the Neocons are vault up in this global proxy war against Russia..

They will lose the economic card, but one wee false flag..chest pounding Nationalism. Boom

Another 4 years for Harpo…no pun intended.

Just hope they do it like sandy hook, no one gets hurt.

I’m cool with it, I hate the tree hugging liberals…

#29 Opportunity on 12.08.14 at 8:07 pm

Would this be a good opportunity to start getting some oil/bank stocks while the prices are on the cheap? Perhaps short term may go down a bit more but L/T will be a good investment? Also does having a portion of your asset allocation in cash make sense for situations like this where you can pick up some bargains?

#30 not 1st on 12.08.14 at 8:12 pm

Lord just give me one more oil boom and I promise not to piss it away.

#31 ( . ) ( . ) on 12.08.14 at 8:14 pm

Pretty tough to pull the trigger on US ETFs when you lose 15% exchange right off the hop.

So buy in C$. — Garth

#32 Vancouver Troy on 12.08.14 at 8:14 pm

How will mortgages be effected by the falling dollar?
Since I pay my mortgage in Canadian dollars and their value is dropping, am I actually giving the lender something of lesser value every month?

Only if you are paid in US$. — Garth

#33 groovin123 on 12.08.14 at 8:17 pm

The smart money went from hard assets to financial assets three years ago. What we are witnessing now is the dumb money bailing from hard assets…. guess who’s buying? Same as it ever was.

It’s easier said than done, but… buy LOW sell HIGH.

Sigh.

#34 Obvious Truth on 12.08.14 at 8:26 pm

When you go not huge debt on any asset it seems you always get clobbered on all sides.

Perfect storm for housing. Who would have thought all could go wrong at the same time.

This is all serious stuff. Probably more serious than the tone in the blog would suggest.

#35 Shackman on 12.08.14 at 8:34 pm

I’ve been in Calgary since 1976 when I moved here wtih my family. Seen it all before. Honestly, I don’t think $35 oil will be a bad thing.

I view this as nothing more than a much needed realignment of priorities. We’ll survive and come out stronger on the other side.

#36 Nope, it's the carry trade on 12.08.14 at 8:41 pm

This isn’t about a ‘fundamental’ move from “stuff to liquid assets”.

This is not about strengthening economies; it’s about massive central bank money-creation and ZIRP (zero interest rate policy) which has caused excessive financial speculation.

This is about the US $9 trillion ‘carry trade’, the financialization of the capital markets, and possibly some geopolitics for good measure. Don’t read too much more into this than that.

As far as “stuff” is concerned, just wait until the carry trade unwinds. Then you better own stuff.

http://www.forbes.com/sites/investor/2014/09/04/carry-trade-the-multi-trillion-dollar-hidden-market/

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11278264/Dollar-surge-endangers-global-debt-edifice-warns-BIS.html

#37 robert on 12.08.14 at 8:43 pm

Few understand that things in Alberta have already turned the corner. We have not seen huge headlines of camp closures and pink slips on one days notice but the mere threat of oil prices at $50 or lower will change the spending habits of many overnight. Automobiles and Real Estate will be the first to notice the fear in the heart of consumers. How could anyone even think about buying a house when job security is an issue or even that new truck with a $800 monthly price tag? Credit will also tighten as the financial institutions weigh the risk of job loss into every application. Its not just Albertans either. Look at the planes full of workers who fly into Fort Mac each week from Kelowna and Kamloops. This is not going to be pretty and unfortunately if we do get $50 oil or lower there will be no place to hide.

#38 North Burnaby on 12.08.14 at 8:52 pm

December’s sales data will be horrendous for the Alberta RE market

#39 JSS on 12.08.14 at 8:55 pm

Big six Canadian banks on sale!

So are…CN Rail, Enbridge, TransCanada Pipelines, Suncor, and CNRL.

What are ya waitin for?

#40 Steve on 12.08.14 at 9:04 pm

Heavy

#41 robert james on 12.08.14 at 9:04 pm

#37 Robert…. According to this article there 5,000 people alone living in the Okangan that work at Fort Mac… Lay offs will be felt beyond the borders of Alberta……………..http://www.calgaryherald.com/business/Oilsands+growth+sees+Fort+McMurray+flight+demand+soar/10063606/story.html

#42 totalinvestor.com on 12.08.14 at 9:05 pm

“The TSX is up 6.5% on the year and 9% since this time last December – even after the oil-fired losses of the last few sessions. That’s a bigger increase than houses in either 416 or 604. ”

Yes, but 3 more trading days like today and…….

http://tinypic.com/r/2nbezr4/8

Exaggerate much? — Garth

#43 takla on 12.08.14 at 9:05 pm

may be a bit of a stretch but those old enough to remember what happened to the residents of Tumbler Ridge B.c after they let the air out of the coal bubble in the eighties will attest to just how serious declineing oil prices and revenues will be to the economy of Alberta.
I remember houses being offered for 5-10 G’s when the mines shut down.Population declined over 50% the first couple yrs.It was a one trick poney town based on continued Japanese purchase and investment in coal.
Theres gonna be a lot of hurting cowboys/cowgirls with oil @ $40

#44 Darryl on 12.08.14 at 9:09 pm

Pass the tinfoil please . SM and the gang are in full flight tonight .

#45 RealistvsExtremist on 12.08.14 at 9:10 pm

And still no 0.99 gas in BC. Oh….I forgot. You have the incompetent Govt of BC involved. It’s amazing how stupid they are when they try to tell us “Buy in BC”. When 50% of us are 20 mins from the border where it’s 80 cents Cdn.

Yet if the price was closer to WA’s price….more people would stay and they would get MORE revenue from taxes not less. BC Ferries is learning this lesson the hard way right now. With ever increasing ferry prices…less and less and less people are using them. It now takes almost as long for the walk ons to walk off as it does to load the ferries with cars. Such is a self fulfilling prophecy.

#46 devore on 12.08.14 at 9:20 pm

The dollar dropped to just above 87 cents on Monday as the TSX shed 329 points (it was closer to 500 in the early afternoon). Slumping energy issues took the Dow down a hundred. A barrel of crude finished the day at $63, off a withering 4.3%.

So what’s the bottom line, chief? A “generic” portfolio diversified globally and over asset classes, what’s the damage since peak? YTD? Is it a yawner?

#47 Banjopete on 12.08.14 at 9:31 pm

It seems that the concept that only Alberta will be hurt by this is held by many here. I’m sure it will hurt here in oil country but the repercussions will be more widespread than our little pancake of a province.

As mentioned, there are thousands and thousands of your neighbours from all across the country that fly in fly out of our province enjoying the spoils of the labour.

The need for oil isn’t changing, and short term lows will only help those ready for it. Try to be on the right side of the widening gap.

#48 omg the original on 12.08.14 at 9:33 pm

#41 robert james
According to this article there 5,000 people alone living in the Okangan that work at Fort Mac… Lay offs will be felt beyond the borders of Alberta…
—————-

You bet – much of the real estate and renovation $$ in Kelowna are coming from Albertan that have 2nd homes in BC.

Same for Victoria – seems about 1/2 the condos I do work in are owned by Albertan’s (or Sask farmers that have cashed out).

Its not going to tip the cart in these markets but its just one more factor that will weaken demand.

Add a made in Canada recession, higher world interest rates forcing Canadian rates up…….and you’ll have a perfect storm.

#49 pitfield on 12.08.14 at 9:34 pm

I think its all very short sighted. Oil can’t stay down for long. Its a war of attrition started by someone and it will backfire in the longer term.
So I will buy with all hands when I start hearing $40 oil on tv on a consistent basis and if they say $20 I will mortgage the house to buy.
I’m a gambler at heart.

#50 Smoking Man on 12.08.14 at 9:38 pm

#44 Darryl on 12.08.14 at 9:09 pm
Pass the tinfoil please . SM and the gang are in full flight tonight .
………

I’m actually thinking of new business venture..

Smoking Mans Tinfoil Fadora’s. I think its a Huge market..and becoming bigger.

The reason most don’t wear them in public , they have no design. No style

With the proffits we can expand into tinfoil yamaka’s, tinfoil turbins, tinfoil ball caps..

Don’t be surprised in the not to distant future a large percentage of the population will prouldly be wearing them.

Potential is limitless.

#51 devore on 12.08.14 at 9:45 pm

#15 Tony from Calgary

Everything in life has risks involved. Everything in life is a gamble.

Just because there is risk, does not make it gamble. Do you gamble crossing the street? Eating pretzels? You can justify your gambling however makes you sleep better, but things are never black and white, just shades of grey.

#52 Smoking Man on 12.08.14 at 9:59 pm

Just wondering if the regulators will force us to put out warnings with the tinfoil hat sales.

“Side effects include the possibly of third degree burns if warn in the sun. Extream possibility of electrocution if worn in a lightning storm. Be careful not to wear your Smoking Man tinfoil Fadora in countries that don’t respect freedom of speach. Countries that spy on its own citizens, and who’s police forces can kill with impunity.”

#53 bigtown on 12.08.14 at 10:00 pm

Somewhere in suburban Canada a high school kid is trying to figure out how to extract the oil from the tar pits in a green enviromentally safe way for much less money. We should fund school trips for kids from the GTA to the Fort Mac area and give them a head’s up on their future.

We have to believe in our kids to solve the stuff we are not able to get. In Canada we forget what is important. Never mind fighting ISIS instead spend the money on our kids. Give them a chance. Tell them we are putting our bets on them.

#54 Wayne2yerGarth on 12.08.14 at 10:00 pm

Garth:

given the relentless shitstorm on the horizon, that most
of us have seen coming for half a decade,

do you think that the BOC may abandon some of the
longheld tenets of macro-economic management the rest of the world adheres to,
and try something ‘new and exciting’ to attempt to smooth it all out?

We’ve already heard of Poloz musing about re-setting the inflation target policy etc…

I mean, after all, this is Canada, we’ve got some historically funny ideas about economy to begin with…we’re the biggest fake country in the entire world ?! right?

Might some ‘political leadership’ (long thought extirpated from our range) come into play?

It’s hard to see how: “so many people, in so many places , got it all wrong” -A. Greenspan

#55 everythingisterrible on 12.08.14 at 10:01 pm

Smoking Man on 12.08.14 at 9:38 pm
#44 Darryl on 12.08.14 at 9:09 pm
Pass the tinfoil please . SM and the gang are in full flight tonight .
………

I’m actually thinking of new business venture..

Smoking Mans Tinfoil Fadora’s. I think its a Huge market..and becoming bigger.

The reason most don’t wear them in public , they have no design. No style

With the proffits we can expand into tinfoil yamaka’s, tinfoil turbins, tinfoil ball caps..

Don’t be surprised in the not to distant future a large percentage of the population will prouldly be wearing them.

Potential is limitless.
————————–
Will they be manufactured in Canada? There might be some people in Alberta in need of a job.

#56 Mortgage Man on 12.08.14 at 10:04 pm

Chmc will now be more cautious (I wouldn’t be surprised if we get a another rule change) Chmc only losses money when value decreases AND people can’t pay. In the last three years if you lost your home it didn’t matter employment was growing people would have bought at a higher price so no losses for Chmc.
I don’t think they predicted this it changes the risk involved.

Banks and Oil Co will make less start to layoff
Oil prices will need to low for longer than a month.

#57 Dienekes on 12.08.14 at 10:10 pm

Only question I have is why are refineries taking it on the chin? Working through higher priced oil inventories?
Refineries (PSX, VLO) look like the buy of the century to me.

#58 Freedom First on 12.08.14 at 10:15 pm

Right on Garth. You’ve been warning people of the extreme danger of being all in on 1 a$$et. I know through history, even the recent history of the housing crashes world wide, just how much financial carnage can occur with this erratic behavior. Market bubbles, and the majority lose.

The terms: balance, re-balancing, liquidity, and diversification are about to take on a whole new meaning for many many Canadians who have been unaware of the cliff they were running toward. Watching other countries masses being financially ruined is never fun, but seeing your own citizens have their financial jewels removed is particularly heart wrenching. I have seen it before, and though never the victim, it is still sad.

#59 Big Jack on 12.08.14 at 10:19 pm

Let’s see oil’s at $63.83 USD/bbl (1bbl = 159 liters)

US average gasoline price $2.82 USD/USG ($0.75 USD/liter)
So, 1 bbl of GASOLINE is $118.48 USD

Looks like the geniuses should have been building refineries.

#60 Smoking Man on 12.08.14 at 10:24 pm

#55 everythingisterrible on 12.08.14 at 10:01 pm.

Will they be manufactured in Canada? There might be some people in Alberta in need of a job.
………..

We will make them in Alberta. Ontario is out of the question..regulations, high price of electricity. Plus I’m not sure their is a market in Toronto, unless we come up with a pink dye of some kind, then we can get an endorsement from the Toronto Star. But then it can’t be a dude style Fedora, Downtowners will find it offensive..

Wait we can stamp some floral imprints ….this just might work so long as the dudes wearing can be trained to speak in a higher octive voice..we will train them at Starbucks…they get it..

#61 not 1st on 12.08.14 at 10:32 pm

#39 JSS on 12.08.14 at 8:55 pm

What are ya waitin for?

As Garth mentions, this is not just a couple odd days on the TSX. The change in the oil market is structural. Its like remember back in 1990 everything you bought was made here in canada or the US, then all of a sudden it wasn’t and it was all coming in from China. Its that kind of change to oil market.

Canada’s share of world production will be decreasing no matter what we do. On BNN the analysts are shorting all the juniors cause they are loaded with debt coming due in a few years. Some are going to zero. You are reaching for a falling knife.

#62 Arfmooocat on 12.08.14 at 10:38 pm

Sell Canadian banks, there over priced and have lots of headwinds coming.

Buy U.S. banks, there under priced compared to Canadian banks and the U.S. economy is growing.

#63 VICTORIA TEA PARTY on 12.08.14 at 10:40 pm

MR. MARKET MUST BE SMILING…

I’ll bet he’s pleased with the preliminary outcomes of what could be “his” first full-scale shakeout of Canada’s economy since the GFC.

His view is that there’s still some unfinished business from last time, particularly debt deleveraging that’s been ignored for too long by too many.

Why is he making his move now? Because it’s easy, and he can!

He has friends in a number of high places, including the bozos who run our so-called real estate market and dysfunctional OPEC which can’t find its rear-end in broad daylight with both hands right now.

To recap:

–the real estate industry hasn’t looked this bad since the double-digit mortgage rates of the early 1980s in the West at least. And we’ve seen nothing yet.

–the sickly oil patch, plagued by collapsing energy prices; and now omnipresent, having insinuated itself into just about everywhere in our economy, Canada’s economic future looks very bad.

And there is more.

Mr. Market, knowing tough medicine is needed, is thinking about the need for higher interest rates, opines St. Garth of “We’re Already Living In Interesting Times; Enough Already!”

Higher rates soon is a very good idea.

It’ll stiffen a few Millennial spines for future hardships, showing them what it’ll be like to go without being able to visit sidewalk cafes, as just one frivolous example. There’ll be other more serious deprivations to come but come they will and must.

Mr. Market has other friends in high places, namely the geopolitical crowd.

You see Canada’s perilous economic situation is due largely to the ongoing currency wars that the Yanks, and their reserve currency status, are winning hands down.

Unfortunately there are other victims: all emerging markets and their countries, Europe, Japan, China, Russia, Brazil. Just about everybody. And us!

The Yanks aren’t making any friends here. But that’s another story for later.

The American leaders and elites are also not making a lot of friends amongst their local economic serf population on the home front.

Conditions there continue to leave too many Americans poor. Read the following by Rick Ackerman…

http://www.rickackerman.com/2014/12/wall-street-orgy-ignores-middle-class-death-spiral/#more-66600

SO, WE’RE SEEING HISTORY BEING MADE…

because this is geopolitics at its worst and the fall-out is horrific and tragic.

Meanwhile I’m not surprised at the intelligence displayed by so many of your faithful blogger dogs and cats. THEY GET IT!

Mr. Market will sleep soundly tonight.

Tomorrow he’ll be having another busy day, and so too will a lot of our indebted fellow citizens as they begin a renewed scramble to “keep it all together.”

Good luck to them.

Mr. Market doesn’t need our blessing.

He makes his own!

#64 Terry on 12.08.14 at 10:42 pm

Penngrowth Energy Corporation, an Oil and Gas producer out of Alberta, was selling at an all time high some time ago at over $27 a share. You can now pick up this company for $2.83 a share. It pays a whopping 15%+ annual dividend yield, monthly. It’s on my TFSA investment account buy list for January…….ka-ching!

http://web.tmxmoney.com/quote.php?qm_symbol=PGF:TSX

#65 Sheik Yerbouti on 12.08.14 at 10:47 pm

Garth,

How does the rebalancing work in the face of this impending financial sandstorm….

http://finance.yahoo.com/news/longtime-stock-bull-raises-big-143653091.html

The rebalancing thing must work in both up/down market directions, dunnit?

I do not see any reason for a US equity market correction larger than normal in 2015. — Garth

#66 Cato the Elder on 12.08.14 at 10:47 pm

Re: #27 Cdn

Most of Garth’s advice is good. Really the only place I differ is the degree to which I would trust our government officials.

I think when the next big crisis comes, they won’t hesitate to confiscate assets. That’s how desperate things could get if China pulls the rug out from underneath the west. They’ve already passed ‘bail-in’ legislation legalizing this kind of action at the banks.

So, prepare yourself accordingly. Have some ‘real’ wealth in physical form, and don’t let anyone know about it. No receipts. Pay cash. I mean gold and silver. You don’t need much, but gold and silver are essentially a ‘hedge’ against government stupidity – and we all know their capacity for stupidity.

In terms of investments, I would buy dividend paying companies. Ones that have been around a long time and aren’t going extinct anytime soon (just think of brands that you buy, and buy their shares). Tim Horton’s was a good one I owned. The EASIEST investing philosophy is to ‘buy what others are buying’ so just pay attention to the world around you and see what’s popular (this would have alerted you to the Ipod craze among others. You could have retired on Apple shares alone). That being said, buying individual stocks shouldn’t make up the majority of your holdings. It’s still risky, and anything can happen. ETFs are a good play. Mutual funds are bad and most asset managers can’t beat the market and charge exorbitant fees, putting you even further behind than a simple ETF.

Overall my advice would be to shelter your assets from government. We’ve been relatively lucky in our history to avoid a ‘lawless’ government environment, but that doesn’t mean our future won’t be like that. Normalcy bias can be a killer if you get too complacent. Don’t let anyone convince you being prepared is ‘silly’.

I’m not saying definitively that anything is going to happen, but it doesn’t hurt to be prepared. I don’t think we necessarily have evil people in government who want to do us harm. But I fear politicians that want to cater to a democratic mob, especially when that mob is as overindebted and self-entitled and desperate as most Canadians are about to become. And remember, they’ve believed their whole lives that these many Canadian entitlement programs will be there, and they are going to be pretty angry if there’s shortfalls. As they say, the road to hell is paved with good intentions, and any actions our politicians take could end up being detrimental to the many responsible folk who peruse this blog.

#67 Silent the People on 12.08.14 at 10:49 pm

Reading your blogs lately, I am seeing a sharp side! Remember, you’re right but it never goes according to plan…

#68 Leo Tolstoy on 12.08.14 at 10:53 pm

I also remember investor groups buying up homes there because nobody else wanted them. It was a disaster.

It wasn’t a disaster for the investor groups.

#69 Bob on 12.08.14 at 10:54 pm

Raunchy McDonald had the worst burger sales in a decade.

It’s not Saudi pimping oil, it’s a global recession accelerating

#70 Grantmi on 12.08.14 at 10:54 pm

#1 johnny d on 12.08.14 at 7:10 pm

Good thing I bought HOD etf back in June.

Sell, sell, sell!!!

#71 Grantmi on 12.08.14 at 10:56 pm

#12 Jimmy on 12.08.14 at 7:38 pm

Jimmy says 5th!!

Grantmi say you’re an IDIOT!!!

#72 Nomad on 12.08.14 at 10:57 pm

The speed at which banks sold-off today is…interesting.
Banks have business in the oil sector, and because of it they’ve been selling-off. Not that much, yet, but quickly. I read that only 5% of banks loan portfolio is connected to the oil industry (I may have read I read a lie).

Imagine how fast $ZEB, a popular canadian bank ETF, would sell-off if housing had a mini-crash. It would be non-enjoyable.

#73 Arfmooocat on 12.08.14 at 10:58 pm

#64 Terry

PGF was $27 ten years ago

An American one….

EXXI was $25 in July and it yours today for $2.80

#74 Sheik Yerbouti on 12.08.14 at 11:02 pm

#66 Cato the Elder on 12.08.14 at 10:47 pm

Cato, I think you might fit into a new market demographic….the Baby Doomers…..

#75 Leo Tolstoy on 12.08.14 at 11:04 pm

I do not see any reason for a US equity market correction larger than normal in 2015. — Garth

If individuals could see future corrections they would be billionaires.

It’s merely prudent to plan for corrections. — Garth

#76 joblo on 12.08.14 at 11:11 pm

Now sprinkle in a little rate hike or 2.
Oh the opportunities then, come on Bozo Poloz let’s get this party started!

#77 Neta on 12.08.14 at 11:12 pm

Just one week ago we were still gloating about what falling oil prices are doing to Russia.
Ooops!
And have you mentioned a couple O days ago the former chief of one of our largest banks has suggested that Canada should stop trying to compete with Michigan for a low paying jobs and instead start competing with Massachusetts. Hmmm, good idea, but as I see it, America is not even allowing Alberta Oil sands to compete with Dakota and Texas shale oil formations, and it has nothing to do with environment. It is pure protectionism. So why he thinks they will allow us to compete witch Massachusetts? All America will allow us is to compete with Mexico. Americans will make sure we pay price for thumping their nose during the crisis, screaming how prudent we are and how much better our regulations were…
By allowing the huge rise in real estate prices and cost if living, our Government foolishly facilitated decline in manufacturing from 15% of our economy in 2000, to less then 10% now. As a result, Canada slowly turned into the nat resources appendix, where we compete with Mingolia, Kazakhstan and the same Russia.

#78 not 1st on 12.08.14 at 11:13 pm

#64 Terry on 12.08.14 at 10:42 pm

Sounds like a nortel or bre-x or yellow media story,

Seriously dude when a stock loses 90% of its value, thats not a sale. Its a sign of big problems. Anything trading closer to zero than its recent high is likely to go out of business.

#79 Smoking Man on 12.08.14 at 11:21 pm

I love the pick, dogs always end up looking like there mommy and daddy.

Look at my new one. Shave its head we are clones. He’s got my crazy eyes.

I love this little guy…Wyatt S Thompson.

http://lh5.ggpht.com/-OWnZQiG12ho/VISYH1iB8tI/AAAAAAAACWI/5peE-cbRziY/s1600/20141207_130814.jpg

#80 daivey on 12.08.14 at 11:30 pm

oil will be back up to $100 in 6 months.

Kuwait says $65 for next six months. You know more? — Garth

#81 jamie on 12.08.14 at 11:31 pm

went to an open house in late September for a house at 481 Hiddentrail Toronto. Asking 858,000. I thought it was overvalued. It just sold after being on the market for more than 60 days. Dont know what the sale price was but i assume well below asking. how can i know how much it was sold for?

#82 Ronaldo on 12.08.14 at 11:34 pm

#43 Takla – and lets not forget the town of Kitsault north of Terrace, BC which was built for 1200 people complete with Shopping Mall, etc. and which was shutdown after just 18 months when the molybdenum
prices crashed in 1982. Still a ghost town. Now being proposed as an LNG Terminal.

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

#83 Neta on 12.08.14 at 11:41 pm

It is amazing how fiscally conservative and prudent Canadian Liberals were under Chrétien and Matrin, and how foolish and irresponsible our Conservatives have been under Harper. And there is nothing they can do now. In order to ensure the soft landing in real estate, Canada must maintain about 400K real estate transactions a year. That means, even if prices stop rising, in 5 years the debt load of 30% of Canadian population will be absolutely catastrophic and unsustainable. There will be no soft landing. It’s too late. The soft landing will lead to slow economic decline and eventual hard landing. From another hand, the hard landing will bring brutal adjustment and severe economic contraction , but in 3-5 years the cleansed Canadian economy will have a chance to develop some green shoots and slowly but surely move forward. The alternative is the slow death by thousands of small cuts.

#84 45north on 12.08.14 at 11:43 pm

smoking man : talking about his dog: Look at my new one. Shave its head we are clones. He’s got my crazy eyes.

pretty sure that DNA would show you’re not related

#85 Smoking Man on 12.08.14 at 11:57 pm

#84 45north on 12.08.14 at 11:43 pm
smoking man : talking about his dog: Look at my new one. Shave its head we are clones. He’s got my crazy eyes.

pretty sure that DNA would show you’re not related
………

Obviously you’re not a dog owner. Beause every dog owner here knows exactly what I’m taking about, with referances to mommy and daddy.

#86 Sheane Wallace on 12.08.14 at 11:58 pm

#83 Neta

On the contrary: There would be soft landing in nominal terms, simply the CA dollar will lose most of it’s value.

Every other outcome is unacceptable to our economic an banking system. I say dollar losses 60-70 % of it’s value and alles in ordnung.

#87 Retired Boomer - WI on 12.08.14 at 11:58 pm

#66 Cato The Elder

Wow, your post was factual, concise, and even I could agree with the content!!

Either I am getting senile, or that was wickedly ‘mellow’ tonight.

Good job

#88 Kenchie on 12.09.14 at 12:02 am

Worth a read…

“Australia is Adrift”

http://www.bloombergview.com/articles/2014-12-09/australia-is-adrift

#89 Keith on 12.09.14 at 12:05 am

Won’t lower oil prices be better for the economy of Southern Ontario. Surely the reason Ontario has been struggling has been the onset of Dutch disease which the government wasn’t willing to admit. But now, that’s about to reverse. This bodes well for Ontario.

#90 Keith on 12.09.14 at 12:07 am

And why not more of your money in the USA? 95% of my portfolio is in the USA. Started that shift a while back. Saw where Canada was headed. Decided the foreign currency risk was worthwhile. Now, I’m hoping to see a lower Canadian dollar for more returns.

#91 Terrier on 12.09.14 at 12:15 am

As this blog have warned many about upcoming storm, I doubt torpedoing will stop anytime soon … this is just a beginning of a long downhill ride.

I have been and still am a firm believer that economic implosion will bring the RE down rather than interest rate hike. No matter how much you jack up the interest rates, you’ll find fools applying for those massive mortgages. Poor bastards will stop buying ONLY when their paychecks dry up.

Low oil prices will decimate AB’s economy but let’s not forget, Ontario’s financial sector will be the next in line. We’ll fold with a real estate bloodbath and inevitable construction industry crash … 2015 will be a very interesting year.

#92 Nemesis on 12.09.14 at 12:26 am

#RidingTheDoggie… #WolfStyle!

“At least half of today’s buyers were in Huggies the last time mortgages were 8%…” – HOn.GT

Funny you should say that, AuldPol…

http://youtu.be/hashPaU7Dpk

#93 Waterloo Resident on 12.09.14 at 12:29 am

I don’t give a RATS ASS about Alberta or their houses or jobs lost, All I want is to see gasoline selling for under $1 / liter again.

When I see signs of gas at $0.99 / Liter I’m celebrating big time ! (and so will everyone else in Ontario too.)

#94 nonplused on 12.09.14 at 12:42 am

Where Calgary goes, TO follows. Calgary has been the center of the economy for a while, actually it might be Edmonton. But it doesn’t matter, point is if Alberta oil doesn’t have a market, Canada doesn’t have anything to sell.

#95 daivey on 12.09.14 at 12:47 am

Kuwait says $65 for next six months. You know more? — Garth
———————————————————

Yeah, right Garth. Because every time someone talks, the market does exactly what they say it will.

Funny, 4 months ago oil supply couldn’t keep up with demand.

We are such a far sighted species.

#96 Christopher Lackey on 12.09.14 at 12:48 am

I was expecting stern admonishment today as oil got slammed
hard yet again from this blog. Instead garth made the observation
a rational and reasonable person would make that the world still
runs on oil. Thank you garth.

The most popular article on the globe today was by the guy who called
$200 oil in 2008 when it was $147 a barrel and now says hes bailing
on the tsx because we are never seeing $100 oil again in this lifetime.

I know all the cool kids in the investing playground are into this
s&p500, cloud computing, return chasing meme, but the hyperbole
and emotion that come with market crashes are really interesting in the
rear view mirror. I like how the financial press encourages investors
to bail on their energy stocks that are down 30-80% because clearly
folks, humanity just does not need commodities anymore.
.

#97 Cato the Elder on 12.09.14 at 12:51 am

Re: #83 Neta

And people wonder why I’m concerned at the socio-political lanscape that has been forming for years…

Just like in 1984 – war is peace, slavery is freedom, conservatives are big spenders, liberals are thrifty, etc.

Now our enemies are now our allies who are now our enemies (Syria fighting ISIS is our enemy, but ISIS is our enemy, except ISIS is fighting Syria so we must arm them, but then they use those arms against us, etc.).

It’s quite scary how far down the rabbit hole we’ve gone just to cater to the bankers.

#98 TheLaughingCon on 12.09.14 at 12:55 am

Add another sign for the booming USA economy:
1. people do not shop that much on BF/CM because they are flush with money and can buy the stuff at anytime.
2. people flush with money from so many new jobs stop eating at McD and go to more upscale places.

3. Fannie, Freddie detail 3%-down payment mortgage program
http://www.marketwatch.com/story/fannie-freddie-detail-3-down-payment-mortgage-program-2014-12-08?siteid=yhoof2%C2%A0
To go with 3.5% 30 years mortgage rates.

Booming indeed!

#99 Millennial Maestro on 12.09.14 at 12:55 am

Good thing I bought HOD etf back in June.

Double ETFs based on one sector are gambling, not investing. — Garth
—————————————————————–

Garth, the man shorted crude at a time when the bull looked exhausted, was consistently failing in making new highs, and the curve was in contango. If you look at the charts, I think he was looking to sell his HOD position when the CL Jan 15 contract touched the $75 mark. It broke below violently, and now this is all bonus gravy for him. Good for him, I wish I had the balls to do it!

If oil prices are behaving like this due to OPEC, price war vis a vis shale, Russia, or whatever else has been written out there so far, riddle me this: March 2009, OPEC held a meeting over the weekend regarding an oil glut in the market. They decide to not cut production, and crude tanks another 5%. FOMC then announces an expansion of junk MBSs and Treasury purchases to the amount of over $1 trillion. Everything and their mother gets bid, including crude.

Anyone who thinks that the price movement in crude, along with the US 10 year bond yield swinging like a penny stock is just business as usual in the market, is sorely mistaken. The writing is on the wall.

#100 davikk on 12.09.14 at 1:08 am

Anyone That Believes That Collapsing Oil Prices Are Good For The Economy Is Crazy

http://investmentwatchblog.com/anyone-that-believes-that-collapsing-oil-prices-are-good-for-the-economy-is-crazy/

#101 Xisled on 12.09.14 at 1:09 am

Lots to think about these days, boys and girls- that’s for sure! Agendas to the left of me, ideologies to the right, here I am, stuck in the middle with Garth.
Why limit yourself to fedoras SM… You would be perfect to bust out a new line of tinfoil Manziers as well. Give Kosmo a call.

#102 still learning on 12.09.14 at 2:10 am

Thank you for this blog. I actually finally understood your suggested asset allocation – yea for me! I’m not as financially literate as some of your readers but working towards facing my financial ignorance.

One of your commenters pointed me to two books which have been so helpful. One is Stop Over Thinking your Money and the other – Millionaire Teacher. I feel like there is some hope. :)

#103 VB on 12.09.14 at 2:45 am

Too much drama, not a balanced view in my opinion

low dollar is good for exports.
low oil is good for average working folk…the indebted.
stronger U.S economy is good for them and us ..tourism, hotels and all the folks that work in service indusrtries.

remember high tides float all boats so you can’t just say the U.S is smoking it and Canada is a wreck because thats not reality…we will benefit in some ways and others well not so much. Yes, housing is overbought, but if you think interest rates are going to rocket upwards your dreaming.

cheers

#104 David on 12.09.14 at 3:11 am

Alberta’s economy would probably look like road kill if WTI hit the $40 level. A housing bubble, an oil bubble and cheap money fueling it all looks like a near perfect storm.

http://davidstockmanscontracorner.com/this-time-its-the-same-like-the-housing-mania-the-subprime-shale-bubble-is-in-plain-sight/#comment-5741

#105 jane24 on 12.09.14 at 4:39 am

Now you have to admit the upside to this oily black swan.

Gone from this blog are the:

1. Peak oil advocates
2. The gold and silver bullion lickers
3. The RE agents pretending to be real people.
4. The end of the financial world nutters
5. American bashers.
6. Folk claiming there will never be a black swan/drop in oil/ drop in real estate values – ever.
7. Those claiming that interest rates will never go up.
8. Those claiming the Cdn $ will never go down…..

Isn’t it nice. We normal, sane folk have this wonderful blog all to ourselves.

There will be no Spring RE market, it is finished. Too late now to get out at the top. As an experienced Cdn RE agent from 20 years ago in the last RE rout, your best bet now is to be the cheapest house locally. Drop big and sell now. Drop in tiny bits at the same rate as the competition and it won’t sell.

I agree with Garth in the the Cdn $ is dropping too quickly and the govt will have to raise Cdn interest rates to steady the fall. Folk were warned. I have been reading articles from pundits for the last 6 months that said to short the Cdn $ as it was in la la land. I responded my selling left-over Cdn assets and I live in England.

#106 Zorik on 12.09.14 at 5:06 am

We had a meeting with manager as he mentioned
So last few month Major Oil and Gas engineering
Companies cut their staff in Alberta Calgary
Like CH2ML. 80% of his employees Worley Parson 65%
SNC Lavalin 55% Jacobs 45% and our company 30%. He said we are still doing better then other but there is still some people laid off. All investors pulled out money from oil sands and cancelled LNG projects in BC too.
There is still worse to come next year.
I wonder why Canadian news propaganda machine is so quite about what is going on job cuts and laid off.

#107 Millenial on 12.09.14 at 7:10 am

Can’t imagine who’d be buying houses/condos in Alberta this month.

I hope Brad Lamb will be okay. ;)

#108 Im stupid on 12.09.14 at 8:09 am

We now live in a world where adults are treated as babies.

http://ww2.nationalpost.com/m/wp/blog.html?b=news.nationalpost.com/2014/12/08/liberals-introduce-bill-to-create-mandatory-ontario-pension-plan-because-workers-not-saving-enough

#109 Cato the Elder on 12.09.14 at 8:44 am

Re: #104 VB

A low dollar is not good for exports – that is a commonly held fallacy.

The logical fallacy arises due to the limited argument that is presented: that a cheaper dollar means more countries can afford our exports.

While that makes sense for current inventory (not future exports), what happens when producers go to replenished depleted inventory? Their costs have gone up due to a weak dollar. They can no longer afford to buy the same amount of capital equipment or raw materials that allowed them to generate their production in the first place. They must then raise their prices to accommodate this change in dollar value. The price rise will negate any reduction in the dollar’s value for export.

In fact, it’s much more detrimental than that. A fluctuating dollar hampers a businesses ability to properly plan ahead of time and make big investments. It prevents them from pursuing productivity increases, because it is much easier to just quickly ‘flip’ their product onto market for a quick sale.

A weak dollar is incredibly destructive for a society. It makes everything more expensive for the citizenry that are using the money. The only reason we have a weak dollar is because all the central banks are collaborating and synergistically inflating at the same time. They are all destroying our countries simultaneously because if they didn’t, it would be incredibly obvious if 1 country was doing really well. People would start to question it, and things might change. No, they want us all sinking to the bottom tied together.

Garth calls me tedious. Maybe I am. But I know how fundamentally important it is for us as a society to understand what ails us. This ‘export’ and weak dollar advocacy permeates Canadian discourse, but it’s wrong. And it’s hurting us. I want as many Canadians to be aware of this nonsense as possible so maybe we can change it.

#110 ALBERTASTROPHE on 12.09.14 at 8:46 am

Prices plummeting.

Plans being cancelled.

Jobs being cut.

Delusions being extinguished.

Hope being mugged.

ALBERTASTROPHE is here.

It’s too late to sneak out quietly.

#111 Cato the Elder on 12.09.14 at 8:55 am

Re: #106

Gold is still up significantly since I started buying in 2004. Gold is not a play on economic expansion, it is a play on the stupidity of governments. As far as I can tell, the fundamentals for the ‘stupidity of governments’ play is still sound, and going exponential.

Peak oil never existed. It is a misunderstanding of basic economics. You can’t run out of something that is in demand. The price mechanism will incentivize alternatives long before oil runs out. But I don’t think we will run out, there’s more oil on earth than these big companies are willing to let on.

America has not gotten in better shape. I don’t even know how anyone who examines the numbers can think that. 50 million on food stamps (50% higher population than Canada, ALL dependent on government to survive). Over 100 trillion in obligations. 500 billion trade deficit (only maintained because of their military). This will not end well regardless of your political affiliations.

You misunderstand black swans. Black swans are not predictable events. Both oil dropping and real estate dropping were obvious. I predicted oil dropping prior to the elections – it happens every time. It’s a sneaky little way presidents try to convince the population that their economic situation is doing better than they think.

The financial world IS ending. It is being replaced by something else. The East is rising. The US dollar won’t be the reserve currency anymore, and for a country like ours with such a huge integration with them, the consequences are severe. We need to free up capital controls so our businesses can adjust when the time comes.

#112 fancy_pants on 12.09.14 at 9:26 am

Avast, me proud beauty! Wanna know why my Roger is so Jolly?

No Cap’n Feathersword, just reporting that the economy is tanking.

Well blow me down. Arrrr! They don’t call me Long John because my head is so big. Nothing to fear ye lubbers, we simply pull this lever called “lower interest rates”.

Sir, that ramming speed lever has already been pulled.

C’mon, lad, jerk it again.

Cap’n, we’ve bilged on her anchor. Ship is going down.

Shiver me timbers! Abandon ship or it’s Davy Jones’ Locker for ya’ll!

#113 takla on 12.09.14 at 9:46 am

re #114 ..I think fancypants pirate is onto something….just heading out the door for work,I needed that laugh!!

#114 fancy_pants on 12.09.14 at 9:51 am

#54 Wayne2yerGarth on 12.08.14 at 10:00 pm

I was fully on board and then you lost me when you quoted Greenspan and “political leadership” in the same post. yes, of course financial firms can regulate themselves, eh Alan? tongue-in-cheek. whoops.

federal reserve is on the same playing field as Mexican cartels, just deal in a different medium. Both destroy lives, just in a different fashion.

#115 Holy Crap Wheres The Tylenol on 12.09.14 at 10:02 am

#210 Retired Boomer – WI on 12.08.14 at 6:16 pm
#203 Holy Crap Where’s The Tylenol?
Have no clue what you are referring?
Check your meds.
_____________________________________________

Yep was replying to #163 chapter 9 on 12.08.14 at 1:29 pm
#97 Retired Boomer
No media coverage about Dec. 7-odd! Here is something else that one never hears about.
_______________________________________
Your post was included.
Definitely checking Meds, Oh good Meds are all here,

Prozac, Benperidol Neuraxph., Glianimon Anatensol, Dapotum D, Deconoat, Fludecate, Modecate, Prolixin Decanoate Dapotum Injektion, Flunanthate, Moditen Enanthate Injection, Sinqualone Enantat Dapotum, Permitil, Prolixin, Lyogen, Moditen, Omca, Sediten, Selecten, Sevinol, Siqualone, Trancin Fluspi, Fluspirilen Beta, Imap Haldol, Serenase Clozaril, Fazaclo, Leponex

#116 fancy_pants on 12.09.14 at 10:06 am

#110 Im stupid on 12.09.14 at 8:09 am

just another tax for a fiberal gov’t that can’t keep it’s own coffers in check. and unless she is buying votes, her world doesn’t lie beyond Toronto’s borders

#117 Jeff in Moose Jaw on 12.09.14 at 10:12 am

Good morning – was going to say team, blog dogs (same thing).

Got my new internet bill, was $60.50 per month for basic service, the new price is now $64.90 per month for the same service.

I would say 8 out of 12 months I spend more on internet than on electricity. Not a fan of this trend. Anyhow good luck with the fight out there, most wont make it. some will.

#118 Holy Crap Wheres The Tylenol on 12.09.14 at 10:16 am

#79 Smoking Man on 12.08.14 at 11:21 pm
I love the pick, dogs always end up looking like there mommy and daddy.
Look at my new one. Shave its head we are clones. He’s got my crazy eyes.
I love this little guy…Wyatt S Thompson.
http://lh5.ggpht.com/-OWnZQiG12ho/VISYH1iB8tI/AAAAAAAACWI/5peE-cbRziY/s1600/20141207_130814.jpg
_____________________________________________

Can understand your affection for the little guy Smoking Man. Dogs are absolute friends for life, they don’t judge, they don’t tell you your right or wrong they just stay by your side through it all. Ive had several German Sheppard’s and my last do was a Belgian Malinois. Miss them greatly.

#119 Nwo on 12.09.14 at 10:35 am

Freddie and Fannie need only 3% down.

#120 TurnerNation on 12.09.14 at 11:07 am

Gentlemen, about those exits?

#121 Kitkat on 12.09.14 at 11:14 am

Cato the Elder seems to have a good, realistic understanding of the situation. Kudos.

Re-read his posts and invest completely opposite. Judging by past market performance, this should work.

Best Holiday wishes to all of you and your families.

#122 silvester on 12.09.14 at 11:43 am

some action in precious metals and stock markets today.

Any comments?

#123 Mark on 12.09.14 at 11:47 am

“And you will understand the real threat is deflation, not inflation, which is why the Bank of Canada won’t raise rates anytime soon regardless of the decline in the loonie which will continue.”

The loonie decline isn’t likely to continue, especially in a deflationary environment. The declining loonie in the short term is just a knee-jerk reaction by currency traders who don’t understand the amount of deflation and debt contraction that is in Canada’s future. If the gold sector lights up in a big way in the coming years, and US rates go up — it wouldn’t surprise me to see the CAD$ surge to well over parity, and eventually into the $1.5 USD$ range.

Deflation, by definition, is a strengthening of the currency. Currency can buy more tomorrow, than it could buy today. I agree with you, however, that the BoC is way, way behind the curve in lowering policy rates to reflect the deflationary reality. It is as though Poloz is blind to the coming deflationary reality, meanwhile, the damage being done to the Canadian economy by BoC inaction is piling up.

#124 not 1st on 12.09.14 at 11:52 am

Cato, just a little tip for you. Might help you sleep better.

We take the world as it is. Pining over the way the world should be is a waste of time. And the little guy has no power to effect change no matter how you vote. Your vote is basically worthless. I know its sh*tty but thats the way it is.

So now what do you do about it? You work within the game to protect yourself, your family and your interests and there are still lots of tools available to do that.

I personally think this is how Garth feels. He has seen it all up close and even tried to work in the system and was tossed.

#125 Derek R on 12.09.14 at 12:02 pm

#93 Waterloo Resident on 12.09.14 at 12:29 am
I don’t give a RATS ASS about Alberta or their houses or jobs lost, All I want is to see gasoline selling for under $1 / liter again.

When I see signs of gas at $0.99 / Liter I’m celebrating big time ! (and so will everyone else in Ontario too.

You’re living in the wrong part of Canada. It’s already down to $0.95 per litre in Alberta.

#126 Mike S on 12.09.14 at 12:04 pm

“and 9% alternative”

What’s alternative?

Depends on your circumstance. Could be a sector fund, a completion ETF etc. — Garth

#127 casual reader on 12.09.14 at 12:17 pm

People are on here drawing comparisons between Alberta and places like Tumbler Ridge, BC and Kitsault, BC. Those are not fair comparison. Tumbler Ridge and Kitsault are both examples of what are called ‘company towns’. A company opens up a coal mine (Tumbler Ridge) or molybdenum mine (Kitsault) in the middle of nowhere. The companies needs workers, it needs places for workers to live, places for workers to shop, schools, etc. The entire town is built out of the wilderness by the company. That is lack of economic diversification to the extreme. The raison d’etre, the very creation of those towns was to service a single industry, or even a single company within an industry.

Yes, Alberta lacks economic diversification. Yes, Alberta is foolish to put all it’s eggs in one basket. Yes, Canada suffers from Dutch Disease as a result. Yes, it will crash, and crash hard. I agree with all that.

But Alberta is not the same thing as a company town like Tumbler Ridge. The very creation of Alberta was not to service the oil industry. Alberta had an economy before oil. The Alberta economy was originally based on the fur trade, and when that subsided, the economy found something else. Alberta does have some measure of economic diversity, however minimal it might be. There are still farms in Alberta. There are still cattle ranches in Alberta. There are still logging firms in Alberta with forests to be logged. There is a service sector. It’s complete exaggeration and fear-mongering to compare Alberta (which is a province with a history and a variety of economic activities) to company towns like Tumbler Ridge and Kitsault that were created to service a single company. Even Fort McMurray isn’t a company town–it was there long before the oil industry was big in Alberta.

#128 Mister Obvious on 12.09.14 at 12:27 pm

#81 jamie

“Dont know what the sale price was but i assume well below asking. how can i know how much it was sold for?”
————————————-

In this country it’s not considered to be any of your business. However, any real estate agent could give you that information if he/she wanted to.

But why would they? Unless you’re doing business with them it’s not really in their interest.

#129 GS on 12.09.14 at 12:37 pm

RE: #109

It’s crazy, but sold signs are still popping up. I’ve said this before, I think young immigrant families will be hit very hard. They’ve come here to live the Canadian dream, and they have bought at peak.

They have never been through a Calgary bust… it could be scary.

#130 Polozified on 12.09.14 at 12:45 pm

http://www.theglobeandmail.com/life/home-and-garden/real-estate/ugly-duckling-rooming-house-draws-over-asking-bid/article21956521/

Don’t worry guys, there’s still hideous crackhouses in Cabbagetown you can get for under a million.

$60 grand under a million, but regardless.

#131 Smoking Man on 12.09.14 at 12:55 pm

Conspiracy Theorist Defined!!

Often called Nutters, Truthers, Tinfoil Hats.

Conspiracy Theorist = Someone that disagrees with the narrative presented by the five major news organizations, and or their State.

Once an individual cross the line and disagrees with the official narrative he is branded a Conspiracy Theorist , the opposing viewpoint no longer is required to defend its position on an issue. The science is settled, the debate is over.

The Conspiracy Theorist is crazy, therefore no need to engage in debate. The only opinions that matters are from state sanctioned individuals.

An individual with smoking gun evidence contrary to the official narrative is marginalized, shamed , and humiliated in front of his peer’s. Others watching who also have smoking gun evidence will remember the fat kid in class sent to the principal’s office for discipline.

Smoking Man is a proud member of the guild of international conspiracy theorists. I question everything, including my own beliefs from time to time. I miss being sent to the principal’s office.

#132 Doug in London on 12.09.14 at 12:56 pm

@pitfield, post #49:
Consistent with my thoughts. I have no idea how much lower oil will go, but I’ve lately been hearing and reading predictions of exactly what you said, namely oil in the $40 range. Add to that one commenter who suggested it’s a good time to short oil, there’s obviously a lot of bearish sentiment out there. I’ve been averaging into oil investments, bit by bit, and now have some real lowball offers in. There may be even better buying opportunities in the near future, but if you buy in now you could be disappointed in the short term but pleased with the results in the longer term. Oil is no place for short term traders right now, but a good place for patient investors with a longer term view.

@jane24, post #106 who said:
Gone from this blog are the: 1. Peak oil advocates
————————————————————–
Guess what, we’re still here. In the shorter term oil is low, could go lower, and stay low for a year or possibly longer. If you take the longer term view, the trend will be up as the easy to produce oil gets used up, more costly to produce oil is extracted, and demand increases. Are there any investors out there with a longer term view?

#133 bdy sktrn on 12.09.14 at 1:00 pm

new BC assesments (warnings?)

a friend with a slanty shack in east van just got a strange letter from BC assessment notifying that his number will go up this year

last year 800k
this year 1.0m (estimaated value)

25% gain in one year. holy hardwood batman!

no improvements to property in ’14
property did not move to a better hood.

150k or 3/4 of gain was land value.
he will be disputing the 50k bump in improvements since none were done.

beats the dow, s&p and the tsx gains combined. tax free. nice for him.

#134 Dub on 12.09.14 at 1:04 pm

Market goes down…Time to buy…

#135 calgaryPhantom on 12.09.14 at 1:05 pm

Everyone’s attention towards oil stocks. WTH is going on with Prefs? Does it point to an interest rate hike? Or a recent dismal ( less billions in profit) performance of the banks?

Corporate profitability does not move preferreds. They are interest-rate sensitive. Despite the capital value, the dividends continue to roll in. — Garth

#136 calgarytimers on 12.09.14 at 1:23 pm

Calgary house prices going up, low inventory, high demand, rent prices high, rent vacancy low. Nothing’s changed. Where are the lower house prices? I’m still waiting.

#137 Mark on 12.09.14 at 1:25 pm

“a friend with a slanty shack in east van just got a strange letter from BC assessment notifying that his number will go up this year ”

Assessments aren’t a true reflection of market values of properties. For starters, they don’t actually take into account the condition of the property. They don’t tend to value things like ‘views’, or feng shui, like real buyers do. Assessments are based on a certain reference date. I wouldn’t take a government ‘assessment’ of a property too seriously.

“Corporate profitability does not move preferreds. They are interest-rate sensitive. Despite the capital value, the dividends continue to roll in”

Sort of true Garth. If profitability is bad, preferreds can move in a negative fashion, but certainly with less volatility than the common. Nortel preferreds, for instance, chronically traded at a higher yield than other firms in the market, and for good reason.

So if bank preferreds are trading down a bit, perhaps some investors are thinking that there might be some sort of event that causes meaningful impairment to the equity of the firm? I don’t think there’s any reason to be concerned personally, but an increase to the cost of capital to the banks may very well create a self-fulfilling prophecy of higher risk premia in the housing market. Accelerating the slow-motion avalanche of lower prices that we’ve been seeing over the past year and a half since the Canadian housing peaked in 2Q 2013.

#138 Mark on 12.09.14 at 1:27 pm

“Calgary house prices going up, low inventory, high demand, rent prices high, rent vacancy low. Nothing’s changed. Where are the lower house prices? I’m still waiting.”

Do you even live in Calgary???

#139 SWL1976 on 12.09.14 at 1:29 pm

#111 Cato the Elder

Garth calls me tedious. Maybe I am. But I know how fundamentally important it is for us as a society to understand what ails us. This ‘export’ and weak dollar advocacy permeates Canadian discourse, but it’s wrong. And it’s hurting us. I want as many Canadians to be aware of this nonsense as possible so maybe we can change it.

———————————————

Good for you Cato. It would be a shame for this blogs comment section turn into this…

#106 jane24

Isn’t it nice. We normal, sane folk have this wonderful blog all to ourselves

——————————————–

All while living in fantasy land of a homogenous perfection

Thanks Garth for putting up with all us crazies for every day we seem much more rational than the sane folk living in bliss

And this is only the beginning of the big decline I would suspect as things unravel the speed and momentum of events will only increase

I would suggest no matter what your thoughts on where we are as a civilization… Expecting less and being more self sufficient will be far less heart breaking for you in the long run

#140 Panhead on 12.09.14 at 1:38 pm

#45 RealistvsExtremist on 12.08.14 at 9:10 pm

BC Ferries is learning this lesson the hard way right now. With ever increasing ferry prices…less and less and less people are using them. It now takes almost as long for the walk ons to walk off as it does to load the ferries with cars.
————————————————————-

And the safety limit on the ferries is the amount of people allowed on. Not cars. Once this limit is reached the doors are closed. No more cars … no more cash.

#141 Spaccone on 12.09.14 at 1:38 pm

>#136 Dub on 12.09.14 at 1:04 pm
>Market goes down…Time to buy…

Not yet, feels like a slow controlled implosion to pennypinch from as many knifecatchers as possible. My guess is around another 3.5% down in something like XIU…if “they” really push it, maybe 5.5%. Though if I was actually so presceint I would’ve been able to avoid this downmove.

#142 edmontonian on 12.09.14 at 1:38 pm

Great to see rents going down in Calgary! The market is getting sketchy here in Edmonton & Calgary. Look at all the MLS listings most are empty or looked staged. Thousands of units in production right now too…. A merket correction is taking place, even if oil stayed higher.

#143 DM in C on 12.09.14 at 1:39 pm

“When I see signs of gas at $0.99 / Liter I’m celebrating big time ! (and so will everyone else in Ontario too.)”

In AB it’s 88 cents at Costco. :-)

#144 SWL1976 on 12.09.14 at 1:44 pm

#133 Smoking Man

Smoking Man is a proud member of the guild of international conspiracy theorists

———————————————–

As am I SM

The term “Conspiracy Thoery” was developed by the CIA in the sixties after JFK was removed from office. People started questioning the establishment so the CIA dealt with it, and since it has caught on too well. Especially amoungst the ones with the highest levels of obedience, the ones who lack critical thinking skills, but are excellent with ostracizing and name calling

“Removed from office?” — Garth

#145 calgarytimers on 12.09.14 at 1:45 pm

#140 Mark. Yes I do. I’m currently looking at moving. Buying or renting, either way I need a place to live. Prices are at all time highs. Nothing has come down unless you’re referring to million dollar plus properties. But anything in the normal range that people can afford or places with normal rent rates not ultra high luxury rentals are still just as high as ever and vacancy is still just as low as ever. Sure, less people are buying $5,000,000 homes. But put up a place for $400k and its gone in 15 minutes. Put up an inner city rental for $1500 and it’s instantly gone.

#146 liquidincalgary on 12.09.14 at 1:58 pm

“Removed from office?” — Garth

==========================================

just one of the beliefs of ‘the guild’

#147 saskatoon on 12.09.14 at 2:01 pm

saskatoon bucking the trend:

http://www.saskatoonrealtors.ca/Mediarelease/DetailedArticle.aspx?Article=216|1

“For the first time in Saskatoon, sales have topped the $2 Billion mark.”

#148 JimH on 12.09.14 at 2:10 pm

#133 Smoking Man
“Conspiracy Theorist = Someone that disagrees with the narrative presented by the five major news organizations, and or their State.”
===================================
No! Your definition is much, much too vague and way, way overly simplistic! Your definition pretty well applies or has applied to all of us at certain times and under various circumstances!

A “conspiracy theorist” is not simply defined as one who refuses to accept a certain narrative or dogma. A “conspiracy theorist” goes far beyond simply rejecting an established or “official” narrative! A “conspiracy theorist” also goes far beyond simply proposing an alternative narrative, theory or speculation. That would simply make them “alternative theorists”.

For example, I happen to reject the bulk of the dogma and systematic theology surrounding the beliefs, traditions, rituals and supporting documentation for Zeus and the menagerie of the gods of ancient Greece. These I have replaced by a firm faith in the validity of the dogma of The Church of the Flying Spaghetti Monster.

This alone doesn’t make me a “conspiracy theorist”. I make no claim of any conspiracy.

According to knowyourmeme.com,
“A conspiracy theory is an explanatory proposition that accuses two or more people, a group, or an organization of having caused or covered up, through deliberate collusion, an event or phenomenon of great social, political, or economic impact. Despite existing for decades, the conspiracy theories have exploded in popularity since the invention of the internet, where said people could share their thoughts on different things.
Originally a neutral term, since the mid-1960s it has acquired a somewhat derogatory meaning, implying a paranoid tendency to see the influence of some malign covert agency in events. The term is often used to automatically dismiss claims that the critic deems ridiculous, misconceived, paranoid, unfounded, outlandish, or irrational.”

Like some here, I do not agree with much that our current political leadership is doing. I also do not not agree with much of the repetitive ramblings of Cato the Long-Winded.

But I definitely do not offer up as a serious explanation for their antics the firm belief as fact that they are Reptilian Shape-Shifters in league with the Subterranean Troglodytes who have taken over the bodies of all Central Bankers.

In all fairness, while all nuts are in some respects conspiracy theorists, it doesn’t follow that all conspiracy theorists are nuts.

#149 Mark on 12.09.14 at 2:24 pm

“Prices are at all time highs. Nothing has come down unless you’re referring to million dollar plus properties.”

That’s not what I’ve seen out there. Yes, there was a bit of a spike in rental demand after the floods a few years ago, but that was temporary and has come out of the market. Of course inner city is going to be expensive, but on the periphery, prices are definitely falling in Calgary and have been for the past year or two after the run-up in 2010-2011 coming out of the 2008/2009 fall.

The Realtor propaganda machine definitely runs very thick in Calgary because a hidden secret of Calgary is that the economy is far more dependant on its local RE bubble, than it is on oil and gas. Although the O&G industry’s slowdown will probably take the blame for a continuation of falling prices, the RE bubble pricking will make things many times worse.

#150 RealistvsExtremist on 12.09.14 at 2:36 pm

#115 takla on 12.09.14 at 9:46 am
re #114 ..I think fancypants pirate is onto something….just heading out the door for work,I needed that laugh!!
++++++++++++++++++++++++++++++

Fancy Pants……hahahaha…..

#151 dontcallmeshirley on 12.09.14 at 2:51 pm

How many of you missed the opportunity when banks bottomed in 2008? Don’t miss it again. Summon the will and courage for your childrens’ sakes.

Fool me twice, shame on me.

#152 Inglorious Investor on 12.09.14 at 3:02 pm

Regarding histories and conspiracies…

When interpreting history, one should not seek to validate a specific view or interpretation, for whatever reason––political, personal, religious, cultural, etc.

One should simply seek the truth. However, keep in mind that there are as many “truths” as there are individuals.

History is not a recounting of past events. It is one interpretation of the past that becomes the widely accepted interpretation. It is never complete.

There should be no such label as “revisionist” history because history is revisionist by definition. Our interpretation of past events evolves as we learn more. One of the ironies of history is that the further we move into the future, the more we often learn about the past as new discoveries are made (texts, artifacts).

The real study of history requires critical thinking, objectivity, honesty and the courage to face whatever that truth is, and what it may mean for you and for those around you (family, community, country, etc). It also requires the conviction and self-confidence to sustain the ridicule of others, especially if you are in the minority.

Much like investing.

#153 Cato the Elder on 12.09.14 at 3:06 pm

Re: #146

“Removed from office?” — Garth

**********

From Jack Ruby’s own words: LBJ responsible. Most likely working in conjunction with various elements within the military industrial complex. 1 minute clip so you don’t waste your time.

https://www.youtube.com/watch?v=0qb-3Rv8K-k

You just completed discredited yourself. — Garth

#154 Roadrunner12 on 12.09.14 at 3:08 pm

Re #113

Peak oil never existed. It is a misunderstanding of basic economics. You can’t run out of something that is in demand. The price mechanism will incentivize alternatives long before oil runs out. But I don’t think we will run out, there’s more oil on earth than these big companies are willing to let on.
——————————————————-

Peak oil is real. There is a finite amount of oil on the planet. Technology and economics play a factor but you can and we WILL run out of something that is in demand. How the future plays out is anybodys guess but the trend for oil prices is definitely up and when peak oil hits will only be known in retrospect whether that be 2 years, 20 years or 50 years from now.

Meanwhile 1 billion cars are being refilled weekly and our economies are dependent upon oil. How rising prices and peak oil play out in the future will be interesting to say the least. The price mechanism will indeed spur alternatives, will that be the horse and buggy, increased use of electric cars, etc

Meanwhile agree with most of your comments otherwise.

#155 Mike S on 12.09.14 at 3:17 pm

“Depends on your circumstance. Could be a sector fund, a completion ETF etc. — Garth”

Completion ETF is XMD? Doesn’t it basically mean more percentage in Canada?

What is a sector fund? Oil or Resources etc?

#156 Mike S on 12.09.14 at 3:22 pm

“he will be disputing the 50k bump in improvements since none were done.

beats the dow, s&p and the tsx gains combined. tax free. nice for him.”

Doesn’t that mean more tax?

#157 not 1st on 12.09.14 at 3:22 pm

#149 saskatoon on 12.09.14 at 2:01 pm

—-

You go saskatoon, cause there is nothing more desirable than a 3rd tier city on the frozen tundra….

#158 RealistvsExtremist on 12.09.14 at 3:23 pm

#106 jane24 on 12.09.14 at 4:39 am
Now you have to admit the upside to this oily black swan.

Gone from this blog are the:

1. Peak oil advocates
2. The gold and silver bullion lickers
3. The RE agents pretending to be real people.
4. The end of the financial world nutters
5. American bashers.
6. Folk claiming there will never be a black swan/drop in oil/ drop in real estate values – ever.
7. Those claiming that interest rates will never go up.
8. Those claiming the Cdn $ will never go down…..
++++++++++++++++++++++++++++++++

People just refuse to study history. Seems to me the largest conspiracy of all is the lack of history taught in school. Here are a few highlights of history where history changed or was laughed at by society at the time. And nothing has changed.

Cars will never work
No one will buy online
Gold and Silver will always be money
We will never fly
The world is flat
There are WMDs in Iraq
RE will go up forever.
Interest rates will never go to zero (.25% close enough)
Star Trek communicators are fantasy (Iphone?)
Direct Current (later AC invented by Tesla)
Then Tesla was laughed at
Saturday was a result of Saturn being visible thousands of years ago along with many other astronomical facts which are purposely “withheld” so as to not “disturb” phoney religions of some dude in a robe or some other dude flying on a magic horse all night……

Now what are they laughing at now?

Interest Rates will stay low (been told for three years now they are going up “next year”.

Bitcoin – because corrupt Central Bank money is the only money that works

We didn’t torture anyone in the ME (just disproved and Canada approved of the torture – in the news TODAY).

The US Economy is the largest economy – China just became the largest.

Syria is the enemy. No wait. ISIS is. No wait. They both are. No wait……what about Al Queda. No wait. There are terrorists hiding behind every rock so “No freedom or liberties for you”. No wait. Its all an exaggeration. No wait…….its being proved everyday the phoney war on TERROR is to keep you all in control and keep the war machine going (yes laugh – just like cars and electricity and central banks and on and on and on. Keep laughing and please whatever you do….DO NOT study history.

HAM is not hurting Vancouver – scores of articles about our ZOMBIE city now. Empty houses and condos everywhere from Chinese millionaires who took all our jobs (thanks Govt who we elect to protect us !!)

Global Warming – yes yes yes…..they call it climate change now. The climate has been changing for 4 billion years. Everyone knows its getting colder and its just a scam to save money but charge the SAME AMOUNT on your Hydro bill and charge carbon taxes. Anyone listen to the very scientific “PEER RESEARCHED” Coast to Coast am show last week on Global Cooling?

Guess you will watch all of this and go “HUH”….in 10 years from now on a documentary…….and hopefully you will be a bit ashamed you laughed at people…..ten years ago.

#159 Mike S on 12.09.14 at 3:25 pm

“Corporate profitability does not move preferreds. They are interest-rate sensitive. Despite the capital value, the dividends continue to roll in. — Garth”

VAB etf (bonds) do go up

#160 TheLaughingeCONomist on 12.09.14 at 4:30 pm

DELETED

#161 JSS on 12.09.14 at 4:36 pm

Perhaps it’s time to be contrarian?

Companies which recently increased their dividends: BMO, National Bank, CIBC, Enbridge.

If you have a long-term horizon, why not buy an ETF/shares of solid companies with historical dividend increases

#162 JSS on 12.09.14 at 4:38 pm

What worries me are how cheap Canadian REITS/ETF’s (XRE) are getting these days.

Look at D.UN -> Office tower REIT king of Canada: 8.9% annual yield. Wow.
Wondering if a potential distribution cut is coming.

#163 Rifles on 12.09.14 at 4:39 pm

meanwhile over in Shanghai the market craters. How leveraged are Chinese investors as their property market sags? How many of these leveraged investors are leveraged again via their Canadian holdings (I know we don’t believe in HAM here but others have pointed out the statistical correlation). If you can’t sell your Chinese assets then you sell what you can – Canada. The only problem there is that the same buyers strike in China is being led by the people you would normally sell to here – your fellow HAMmers. No bid. Market folds.

#164 gloomeranddoomer on 12.09.14 at 4:48 pm

I think its hilarious that people on this blog think that low oil prices only affect Alberta, considering the transfer payments are going to stop who is going to pay the easts unemployment benefits or anything else. as usual I don’t think most Canadians understand that the oil industry benefits us all! not to mention a lot of what is going on in the industry is posturing right now. If the price dropped that fast could it not technically rise that fast?

#165 blobby on 12.09.14 at 5:14 pm

With oil being low, and it’s quite inevitable that it will get back up to at least double its current level sooner or later.

I wonder – can i actually buy into oil, without actually owning a barrel of it in my back yard?

#166 Drill Baby Drill on 12.09.14 at 5:21 pm

#151 Mark
Now listen closely. Oil is King period. Without high oil prices there is no housing bubble in Calgary regardless of low interest rates. Demand for housing in Calgary is due to high employment due to high oil prices. Without high demand you do not get high home/rent prices.

#167 Holy Crap Wheres The Tylenol on 12.09.14 at 5:25 pm

#150 JimH on 12.09.14 at 2:10 pm
The Church of the Flying Spaghetti Monster.

Smoking Man, your up now! Please proceed!

#168 TRT on 12.09.14 at 5:29 pm

Oil is down due to geopolitical reasons ; to take down Russia.

And in the process keep the American economy hummin after the end of QE.

The sheep will believe the whole drivel about overproduction blah blah blah

#169 Alex N Calgary on 12.09.14 at 5:29 pm

Was in the managerial meeting this morning where we were all discussing the outlook for 2015 and oil and gas. (oil and gas monitoring tools company) One of our guys said Cenovus has 4 budgets for next year based on the potential price of oil. So as far as we know so far, projects that were already planned are going ahead as scheduled, of course that could change if it gets real low.

Its the services companies that will hurt first, expensive third party engineers, completion services, tooling etc. The companies that will last longest will be someone like Suncor who owns their own refinery and is getting refined prices for product. There is a Q about which country will break first and cut production to combat the Saudi price crusher. Or maybe this is just the new reality of USA shale oil production, no more crazy fuel costs in a world full of oil.

We are owned by a huge corporation with diversified interests in other energy sectors, so we’re all hoping that if we batten down the hatches and run lean through 2015 we’ll be able to keep going even at 43$ bbl prices and make a reasonable profit (not insane profits like 107$ was) the other sectors can support our crappy profits until energy goes up a bit etc.

Anyways as long as I can keep my job it’ll be brilliant, housing is super vulnerable here as anyone knows, when the hordes of out of province workers leave, this place is ground zero for foreclosures. Thing is that AB is a non-recourse foreclosure province if you don’t have CHMC, which many of the 20 somethings don’t as they made profits on their starter house and which rolled into #2 and they could make the 20% down. Guess who’s gonna absorb that?

Wife works at the City of Calgary, city manger is predicting hard times to come, well of course they are.

A population reduction and no more insane multi 6-figure incomes for 21yr olds won’t be the worst thing, I just gotta hold onto this job! long enough to finally get a house at a reasonable price!

#170 TRT on 12.09.14 at 5:44 pm

Russia produced 11 million barrels per day so far this month.

The world is oversupplied by 2 Million bpd.

Now if Russia reduced their production by 2,000,001 barrels per day…shortage. And price goes up close to $100.

Do you really believe this? If so, …

#171 Smoking Man on 12.09.14 at 5:52 pm

#169 Holy Crap Wheres The Tylenol on 12.09.14 at 5:25 pm
#150 JimH on 12.09.14 at 2:10 pm
The Church of the Flying Spaghetti Monster.

Smoking Man, your up now! Please proceed!
………..

There is actuly a dude in BC who is taking the Govt to court In his spaghetti religion , he must wear a spaghetti strainer on his head at all times. They won’t let him get a auto license unless he removes it for the photo..

The man has a point…I hope he wins, hell I might join it..

#172 Conspiratard on 12.09.14 at 5:58 pm

#160 RealistvsExtremist

I am totally with you. I listen to Coast to Coast daily. I go to bed with George Noory and wake up with him every day. He touches me like I would allow no other man to do. I only come to this blog to see the extent to which our ever-so-schooled host spouts his version of truth in spite of what we all really know to be the case. I pity him sometimes.

By the way, do you realize that Jack Ruby died (and the real cause was SO clumsily covered up) in 1967. The last year the Leafs won the cup.

Coincidence? I think not.

I think not.

#173 Smoking Man on 12.09.14 at 6:09 pm

http://en.m.wikipedia.org/wiki/Flying_Spaghetti_Monster

You can join to:)

Holy Crap Wheres The Tylenol

#174 45north on 12.09.14 at 6:14 pm

Jane24 : There will be no Spring RE market, it is finished.

– I’m thinking that sales will be down but to say no spring RE market, that’s harsh

#175 Mark on 12.09.14 at 7:02 pm

“What worries me are how cheap Canadian REITS/ETF’s (XRE) are getting these days. “

There’s nothing cheap about REITs, especially Canadian ones. They have minimal GAAP earnings, are highly interest rate sensitive (not in a good way in a rising rate environment), and they do not retain enough in the way of earnings over the long term for long-term maintenance.

Trust me, don’t let yourself get burned with all the non-GAAP nonsense that the REITs publish in support of their valuations. RE is just another asset class.

“Now listen closely. Oil is King period. Without high oil prices there is no housing bubble in Calgary regardless of low interest rates. “

Since there aren’t really that many oil and gas workers in Calgary relative to the population, and very little O&G production within reasonable driving distance of Calgary, evidence points strongly to the housing bubble and the vibrancy of the Calgary economy having its origins in cheap credit. Just like everywhere else in Canada which does not have an O&G presence.

Oil is just a sideshow, and as of late, not a very amusing one at that.

Thing is that AB is a non-recourse foreclosure province if you don’t have CHMC, which many of the 20 somethings don’t as they made profits on their starter house and which rolled into #2 and they could make the 20% down. Guess who’s gonna absorb that?

CMHC is for houses with more than 20% down you know, right? 20% down is the absolute minimum required for a prime loan, but banks have been exceeding that standard by a considerable margin by purchasing CMHC subprime mortgage insurance on loans with much greater LTV. In any event, the Alberta provincial legislation doesn’t matter to the federal Bank Act institutions. As I’ve suggested in many posts here, the provincially regulated Credit Union sector may very well get wiped out with their cavalier risk-taking, particularly with respect to small business and construction financing.

#176 Kris on 12.09.14 at 7:41 pm

The problem with canadian real estate is that it has nothing to do with economic fundamentals and in Vancouver, has nothing to do with either fundamentals or Canadians,according to realtors.
I know Garth does not like this truth but prices are unfortunately only going higher.
Afterall, it is the official religion in this country.
Even you Garth said so.

#177 kanchan mahara on 12.09.14 at 8:43 pm

i am opening an account tomorrow in questrade finally . what do you blog dogs suggest. I want a balanced portfolio for my saved $70 thousand dollars–in tfsa, Resp and rrsp. I am looking long term.
And can put 1500 dollars every month.
any suggestion from you end will be helpful in deciding what to sign up for.

#178 Daisy Mae on 12.09.14 at 8:53 pm

Reading some of these posts I have to wonder just where do these idiots come from?

#179 Willy H on 12.09.14 at 8:56 pm

50 acre farm with barn and house $239K west of Buffalo-Aurora.

Try buying a 2 acre hobby farm anywhere in southern Ontario for double if not quadruple that price.

#180 Willy H on 12.09.14 at 8:58 pm

Correction – my post should read “just east of Buffalo-Aurora”. Actually in the rolling hills near Warsaw, NY.

#181 M on 12.10.14 at 12:59 am

At least half of today’s buyers were in Huggies the last time mortgages were 8%, and have never known prices to erode. How can you blame them for being idiots?

Well… learn history and geography. There is a reason gringos score crap in all international tests. Pisa comes to mind

#182 RE: #81 jamie on 12.10.14 at 1:46 am

Land registry is open to the public, MPAC also gives you access to a number of properties reports. It appears it sold in NOV 2014 for $835000 – was that a sale by owner….???

There are web sites u register with and send you sold prices in the areas you monitor.
=============

#81 jamie on 12.08.14 at 11:31 pm
went to an open house in late September for a house at 481 Hiddentrail Toronto. Asking 858,000. I thought it was overvalued. It just sold after being on the market for more than 60 days. Dont know what the sale price was but i assume well below asking. how can i know how much it was sold for?

#183 name on 12.10.14 at 3:14 am

what is the point of all these comment sections everywhere….any post against the grain will never get published and of the ones that do … how many people actually read that stuff, rather than their own over and over and over….

#184 name on 12.10.14 at 3:15 am

comment awaiting “moderation” … I can hardly wait.

#185 Dreamingintechnicolour on 12.10.14 at 9:53 am

Thank god for idiots every Day.

#186 Doug in London on 12.10.14 at 12:40 pm

@blobby, post #167:
Yes, you can own a handful of oil companies by buying XEG-TSX, and you can buy into crude oil with USO-NYSE. Both are dirt cheap these days, it appears to be a combination of late Black Friday and early Boxing Day sales. I’ll sign off now and go out in my petrol fueled car.

#187 CD on 12.10.14 at 4:13 pm

#93 Waterloo Resident

I wholeheartedly agree! Here Here – keep the gas prices at $1.00 litre for as long as possible. I haven’t smiled at the gas pumps for a long time until now.

#188 Harry Wilson on 12.10.14 at 9:57 pm

“Removed from office?” — Garth

Geez, try to keep up with the news. Kennedy’s in forced exile, living on an island in the Pacific, shacked up with Marilyn Monroe. Elvis rents the basement.

———————————

Once again, Mr. Turner, I thank you for making public transit a happier, quieter, friendlier place, by giving the wack-a-doodles a place where they can reach a broader audience without even paying a fare.