Kaboom

KABOOM modified

He sounded cold. “Actually it’s plus two here today,” the reporter said, “but it was minus twenty.” The poor guy was dispatched from the Globe’s cozy, warm newsroom in Toronto to go and cover the meltdown in Fort McMurray.

As this pathetic blog has suggested, Alberta could be ground zero for the Canadian housing correction which we now know is real. The Bank of Canada said so. Its routine risk report yesterday shocked those few people not addicted to this pathetic blog by suggesting the real estate market nationally is over-valued by something between 10% and 30%.

As a point of comparison, the US houseageddon shaved 32% off that market and almost tanked the world as a result. The American middle class lost $6 trillion in equity, and the country is still recovering. Besides, the BoC numbers were right up there with rogue economist David Madani’s 25% prediction, and twice that suggested by the IMF and most big US-based rations agencies.

Makes ya wonder. What the heck do they know at the central bank?

Fortunately, they told us. We’re pickled in debt and any shock to the system is likely to make the housing market roll over. Worse, the subprime mortgage market in Canada is growing rapidly, interest rates are set to rise (thanks to the gathering US recovery) and now we have the great oil shock.

Crude, by the way, continues to fade. The price of a barrel was down again on Wednesday (by 4% to just $61), which had stock markets in a dither. It sure looks like oil will test the sixty-dollar mark and could plow right through it tomorrow. While cheaper energy will be a magnificent boost to global growth, ensuring the US continues to power ahead and helping Europe get back on its feet, this is hell on wheels in Alberta. (It also pushes the loonie lower, suggesting the central bank may need higher rates to support it.)

So back to Fort Mac. The poor, banished scribe says he’s been following my regular dissing of house prospects in that city, and saw the dismal housing starts published here yesterday (showing a 65% plop). “But,” he protested, “the locals believe with all of the oil sands investment and infrastructure in place that there’s some kind of floor under the housing market, and that they will be insulated from things. They just have to wait.”

Aren’t people cute?

I explained the perfect storm. It’s bad enough in the GTA or Vancouver or Calgary that families have an average debt equal to 160% of their incomes (it was just 85% in 1990), but those cities have actual economies. They are not the creation of one major industry, the very economics of which has been shattered by market forces in just a few weeks. Worse, Fort Mac is like an ant farm. It sits in splendid isolation in the scruff and tundra, without satellite cities. In that closed world once jobs start to evaporate and the young turks aren’t Westjetting in every day, things change fast.

Besides, houses are hormonal. People buy them, accepting massive debt, when they feel strong and confident. When uncertainty and doubt slither in, it all changes. It doesn’t take much, as millions of American found, for negative equity to appear as house values slide below financing levels. Hardest hit are the last in – those who paid more, borrowed more, and have the least job security.

(Actually, this is a national problem. Almost half of all real estate buyers are now first-timers, and they’re carrying the greatest debt. The Bank of Canada points out that 12% of households have debts equal to 250% of income – and yet represent 40% of all debt. Yikes. Another 20% of all debt is shouldered by people who owe 350% of what they earn. And these super-debt monkeys tend to be the young, who are the first ones punted when a local economy tanks.)

Now depressed as well as freezing, the reporter had to listen to my reminder of the last great downturn in housing. The 20% tumble in 1990 in the GTA was not reversed for 14 years. So those who bought a place for their new baby at the 1989 peak didn’t see their house worth the same amount until they had a teenager. And Toronto, unlike northern Alberta, is a place where people actually want to live.

Well, I see that Re/Max’s latest report addresses the impact of cascading oil on Calgary. “It would have to be a sustained, long-term depression of oil prices to the point where it would have to start impacting jobs and the overall economy, and we’re not anticipating that for 2015,” says the company. Really? The Alberta economy is already looking at a $6-billion shortfall in revenue as royalties shrink. Layoffs and downsizings have materialized concurrently with the dip below seventy bucks a barrel. It is the kind of shock which will reverberate through a city where housing values were thrust higher 10% a year, by locals who have turned into Canada’s greatest borrowers.

But this is not about Alberta. Real estate’s been a disease everywhere. It’s kept people from doing what they should – saving, investing, diversifying into fat, happy little TFSAs and using once-in-a-lifetime cheap rates to trash debt. Instead we’ve borrowed our way into oblivion to buy stuff that may soon be unsaleable.

Whether your BIL believes the Bank of Canada or Re/Max could decide his fate.

I can guess.

215 comments ↓

#1 sam on 12.10.14 at 8:20 pm

Wow. It has been hard avoiding becoming a greater fool, but I have managed – thanks in great part to this blog. Thank you Garth. Just waiting for a bit more slippage before I enter the stock market (with the saved down payment). Renting very happily in a great location right next to a good school. Thanks

#2 bdy sktrn on 12.10.14 at 8:21 pm

i’ve got a bad feeling about tomorrow

#3 Steve on 12.10.14 at 8:21 pm

“Aren’t people cute?”

Sir, you made my day yet again :)

#4 Mark on 12.10.14 at 8:25 pm

A Canadian RE collapse would have occurred independent of whether the price of oil stayed at $100, or drops to $60. There’s only so much supply that can be delivered to market before everyone has their needs for housing fully satiated. And besides, the market was already in decline for the past year and a half even with the high oil price environment persisting.

The likely resolution to this mess is an extended period of very low (ie: 0%) BoC policy rates (5-8 years, perhaps even longer). Quantitative Easing, to monetize GoC debt to fund the CMHC bailouts that are going to be required due to their issuance of $900B worth of subprime mortgage insurance that is going to fail substantially. And much lower housing prices and a far higher Canadian dollar.

What remains unclear is just what sector will adopt a leadership position in the future in the Canadian economy. Because, without a meaningful demand driver, recovery or at least stabilization is very unlikely.

#5 mark on 12.10.14 at 8:25 pm

Re/Max would know!

#6 ILoveCharts on 12.10.14 at 8:26 pm

My investments are not doing so well today… but better than a house.

I’m not convinced the young’ns are the first ones to get the boot in a downturn. It’s the old folks that are more expensive.

#7 Koshy Alex on 12.10.14 at 8:28 pm

http://business.financialpost.com/2014/12/10/opec-is-finished-and-the-oil-crash-will-continue-warns-bank-of-america/?__lsa=6db7-a977

What is clear is that the world has become addicted to central bank stimulus. BoA said 56 per cent of global GDP is supported by zero interest rates, and so are 83 per cent of the free-floating equities on global bourses. Half of all government bonds in the world yield less than 1 per cent. Roughly 1.4 billion people are experiencing negative rates in one form or another.

These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still contained. Nobody knows what will happen as the Fed tries break out of the stimulus trap, including Fed officials themselves.

#8 Timmy on 12.10.14 at 8:28 pm

We’ve been hearing that housing in Canada is overvalued for years by many agencies yet it never seems to correct significantly.

#9 Zed on 12.10.14 at 8:31 pm

I am watching the stock markets fall, I don’t like it but I really like to buy more of my good companies at a lower price with the dividends that keep coming in.

I don’t worry too much since I rent a beautiful house and my financial future is not tied to a house that I might not be able to sell when I want. I like income from my assets.

Be responsable, spend less than you make and then invest the difference.

#10 Inglorious Investor on 12.10.14 at 8:32 pm

It’s become obvious that the BoC is utterly powerless to do anything about housing prices, mortgage debt, and interest rates. Thank goodness, as that’s as it should be (but that’s for another comment.)

They’ve tried and tried to talk down the housing/mortgage markets for years with warnings of overindebtedness. The nation repeatedly responded with a collective “meh.”

So, like the climate change alarmists, they feel the need to ratchet up the rhetoric. If we won’t listen when they talk politely, maybe we’ll listen if they yell “Fire!”

I’m not saying they are wrong. Obviously Canadians have gone nuts over housing and the risks of much collateral damage is extreme. I’m just saying the BoC is preaching to a deaf choir.

#11 Marco on 12.10.14 at 8:36 pm

Thanks Garth.

When did the Re/max Company become a trusted by millions economic forecaster? Are they not just salespeople?

Cheers.

#12 Inglorious Investor on 12.10.14 at 8:36 pm

What do you do when the international monetary system is changing?

We’ve all become inured to the US dollar being the go-to currency for reserves and for trade since about the end of World War 2. It was only natural that the world would use the currency of the richest, most powerful nation on Earth. At its peak the US’s share of global GDP was greater than 35%. Imagine that. One country with but a fraction of the world’s population producing over a third of the world’s output.

Just like we use standardized weights and measures to calculate the value of the things we trade, the world’s traders needed a standard unit of value to conduct business with each other, and most of all with the country everyone wanted to sell stuff to. It also makes sense that the world’s largest economy would have the world’s broadest and deepest debt and capital markets, making the US dollar the top choice for reserves (central bank savings) as well.

But what happens when the world’s largest economy (is it still?) also generates the world’s greatest debt? What happens when it evolves from the world’s largest net creditor to the world’s largest net debtor? And its share of global GDP falls to well below 20% or about half of its peak? What happens when you combine these conditions with a currency that is largely overvalued thanks to decades of coordinated manipulations by central banks?

Will the world continue to support the overvalued currency of a country in relative (if not absolute) decline, and whose economy is not growing like it once was? Whose taxes must increasingly be funneled into schemes that support millions of non-productive citizens, a waning military, massive interest payments, and a corrupt banking system? And whose governments are so saturated with debt and unfunded liabilities that the math is actually impossible?

When does the Best Man become the Bum in the eyes of the world? Are we there yet?

I don’t know, but there are signs we’re getting closer. Now this is not an event. It’s a process (I hope). And truth be told, premature rumors of the demise of what we call the US dollar have been floating around for decades. Somehow they always manage to extend the dollar’s life. Of course they could only have pulled it off with international support. And they can continue to do so as long as that support is there. It may have a massively negative affect on the world’s economy, but the alternative may be even worse.

IMO, the situation will shift once the rest of the world (or its most important actors) decide it is no longer to their benefit to support the overvalued dollar and try something else. I suspect the plans for a transition are far more advanced than we know.

So what does one do? Liquid assets? Hard assets? Both? Will debt be wiped out in some rolling hyperinflation, in which case it’s better to hold hard assets that have real value no matter what currency we use? Or are we in a deflationary spiral where money will become precious, cash is king, and liquid is the preferred state of matter?

One thing I do know: when international orders change (political, monetary, economic, social, etc), the one thing that rises for sure is volatility. Can there be any doubt the volatility is here? 2008 lows and near financial collapse? 2014 soaring stocks and low low rates?

IMO people need to be prepared for anything and everything, because that may be exactly what we get in the coming years. And perhaps more than that.

#13 Market Man on 12.10.14 at 8:37 pm

I posted a few days back that Chmc will have more rule changes but that announcement was almost equivalent
one.

Now that fear has set into BoC and Chmc credit will start to tighten credit.

I found it amusing that he indicated that there was a greater possibility of a housing correction six months ago,
when oil was at $90 and employment was flat, not now now when oil is at 60$ and employment is decreasing. LOL

gas prices down 25% at the pumps which for some Canadians is about $1000 – 1500$ per year, sorry but check your investments/rrsps – you lost that this month.

#14 Roy on 12.10.14 at 8:42 pm

Kaboom oil/TSX correlation video:

http://www.bnn.ca/News/2014/12/10/Morning-Markets-Stocks-up-on-hopes-of-China-policy-easing-Greece-stirs-concern.aspx

#15 Bill Gable on 12.10.14 at 8:43 pm

The Vancouver Province has no shame – take the Re/Max money and run garbage like this:

“Vancouver housing prices: There’s no ‘bubble,’ say realtors predicting modest increases in 2015”

Link: http://tinyurl.com/l279jby

#16 Jan on 12.10.14 at 8:43 pm

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#17 Smartalox on 12.10.14 at 8:45 pm

Clicked on the comments and was re-directed to a page that claimed greaterfool.ca was malfunctioning.

Could be that Reem-Max is preparing its latest reply?

#18 TurnerNation on 12.10.14 at 8:45 pm

How now Dow cow?

Buy buy oil very soon for bounce.

Looks like I’m going to a realty firm’s holiday party with my realtress. :-o

Tags:
#liquidity, #bikesbabesbalancedports, #rentallifestyle #tar&feather

#19 Ronaldo on 12.10.14 at 8:46 pm

”Boom and Bust in Alberta”, a bit of history.

http://www.cbc.ca/history/EPISCONTENTSE1EP17CH3PA1LE.html

#20 ALBERTASTROPHE on 12.10.14 at 8:49 pm

O.

M.

G.

This is happening so fast.

#21 Jan on 12.10.14 at 8:50 pm

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#22 Mike T. on 12.10.14 at 8:52 pm

‘i’ve got a bad feeling about tomorrow’

remember yesterday’s post?
It could be worse
The sun will be up, there’ll be food to eat and gas might get cheaper

sounds good to me

plus my cell bio and o-chem finals will be over

#23 Ex-Cowtown on 12.10.14 at 8:53 pm

Watched some putz from REMAX on BNN today attempting to spin the BOC report. It was pathetic. The upshot of what he said was that when times are good, people go out and buy houses.

And when times are bad….people seek security, so they should go out and buy houses.

What a maroon! Same kind of logic that Al Gore uses: When it’s warm out, that’s evidence of Global Warming. when it’s cold, that too, is evidence of Global Warming.

This type of logic all makes perfect sense to Trudeau, May and Mulcair.

Too bad Harper is too stupid to get it.

#24 Godth on 12.10.14 at 8:56 pm

Schadenfreude, enjoy it while you can.

Too bad it’s not just Canada.

#25 Mark on 12.10.14 at 8:59 pm

“What do you do when the international monetary system is changing?”

Diversify, diversify, diversify! Under-weighting the outsized leader, ie: the prevailing “reserve” currency, usually isn’t a bad idea, historically speaking.

Inflection points, whether strong inflation or deflation, tend to be supportive of the precious metals mining sector. And if you look at the stock market, its hard to find another sector that is gaining so much earnings power in this environment of lower energy prices and lower labour prices, while being so out of favour and un-loved.

#26 No Debt on 12.10.14 at 9:00 pm

I work for an Electrical Supplier here in the GTA and yesterday we got a wake up call as to what is likely in store with the value of oil being where it is. On track to doing a superb year, we had a customer who supplies equipment to the oil and gas industry cancel a $500,000 order. I’d been speaking to someone in the office yesterday morning and mentioned that we need to be wary of what the price of oil is doing. What a prophetic statement that turned out to be.

Real Estate in Fort Mac isn’t the only thing that’s going to take a kicking.

#27 waiting on 12.10.14 at 9:03 pm

I, like many that Garth preaches about have been to afraid to invest properly. I keep thinking I’ll get around to it one day and in the meantime have parked my cash in a (very low) interest savings account. I did listen to one thing he said about a year and a half ago when our dollar was at par. That was “don’t bet against the U.S.) so I opened a U.S. savings account. I’m glad I followed at least one good piece of advice – maybe not exactly what he intended, but thanks Garth.

#28 Uh Oh Canada on 12.10.14 at 9:03 pm

Wow. I remember Garth’s article on the Black Swan. Surprise! It revealed itself to be the drop in oil prices. Following this would be sector related unemployment and then the housing drops. I give it another year before vultching.

#29 Willy H on 12.10.14 at 9:05 pm

Oil will not be down for long. OPEC has made a cataclysmic error in judgement that fails to benefit any of the players whether extractor, refiner or consumer in the short-term. OPEC itself is divided and sooner or later this production decision will be reversed. All this price cut is going to do is keep Canadian bitumen and US shale oil in the ground temporarily. It will all be extracted at a later date when oil prices resume their relentless climb to $150-$200+ a barrel. Within 12-18 months we will look back at this OPEC decision and shake our heads in disbelief that it ever managed to happen in the first place. Oil if finite even if housing prices in Canada appear infinite!

#30 dutch4505 on 12.10.14 at 9:05 pm

While you are surfing the net check out the Edmonton sun website. Top story is the expected price increases in real estate in 2015. Ten percent increase. And I thought they only smoke the now legal weed in my new home state of Washington. The newspaper and reporter must be getting kickbacks from the real estate industry to print garbage like that.

#31 NoName on 12.10.14 at 9:07 pm

#23 Ex-Cowtown on 12.10.14 at 8:53 pm

Too bad Harper is too stupid to get it.
o, he is getting it, we are not! dynasty boy will fix it. lol

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

#32 Albertaguy on 12.10.14 at 9:08 pm

I posted this ate on yesterdays blog so most of you probably missed it.

Heres an interesting view of how we fit into the world…

In housing markets, five economies stand out as the “weakest links” among commodity exporters by virtue of the fact that house prices have been rising faster than household income over the past decade. Such multi-year declines in housing affordability have proven to be excellent markers for housing crises in the past, for example in Japan prior to 1990 and in the U.S. in the run-up to 2007. The “frothy five” are Brazil, Peru, Colombia, Norway and Canada.

http://http://seekingalpha.com/article/2730225-where-are-the-weakest-links-among-commodity-exporters

#33 Mr. Frugal on 12.10.14 at 9:09 pm

What we are seeing is panic selling. Oil stocks are getting hammered because of year-end tax loss selling and margin calls. At some point we are going to look back and see this is a golden buying opportunity. Last year, nobody wanted Apple stock. But if you jumped in, you made 35%-50% in 1 year. Sure beats a GIC.

Buy when there is blood in the streets!!! That would be now.

#34 Jan on 12.10.14 at 9:10 pm

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#35 waiting on 12.10.14 at 9:13 pm

Fort McMurray – cracks in the market.
On Oct. 30th, there was a Globe and Mail video about this luxury home in Fort McMurray with a grand tour by the remax agent. Price: 1.39 million.
http://www.theglobeandmail.com/report-on-business/video/video-tour-one-of-fort-mcmurrays-luxury-home-priced-at-139-million/article21371924/

Today 6 weeks later, the price on mls is: 1.29 million and change.
http://www.realtor.ca/propertyDetails.aspx?PropertyId=14903835
I’ll keep you posted.

#36 Conspiratard on 12.10.14 at 9:15 pm

#10 and #12 Inglorious Investor

I have no idea what you are saying but I believe with every fiber of my being that you are correct.

My favourite part was about the climate change alarmists. Those bastards.

You nailed it !

And today, in 1941, Japan invaded the Philippines.

Coincidence? I think not.

I think not.

#37 Brian Ripley on 12.10.14 at 9:16 pm

Said Garth “But this is not about Alberta. Real estate’s been a disease everywhere.”

I published a chart mashup of Private Sector Loans from 2008-2014 in Canada, US, UK and Eurozone. What stands out is that the first energy hit in 2013 spooked Canada and private sector borrowing stopped in its tracks, retested the high but looks to have failed and rolled over.

http://www.chpc.biz/history-readings/private-sector-loans

We should start seeing the “weak hands” listing their real estate very soon.

#38 Freedom First on 12.10.14 at 9:20 pm

Garth has been teaching us for years about being diversified, balanced, and liquid, plus he has shown us exactly how to do this, including the re-balancing so as to maintain this position at all times. Sound financial Principles which stand the test of time. No exception.

Garth has also shown us many many many examples here and worldwide, in not only recent history, but in the past, the financial “construction ball” crushing of individuals as well as whole Countries, whose populace were financial deviants in exercising their fetish of masochistic 1 a$$et leveraged worship.

Right on, as Garth said, aren’t people cute? SIHTF right now. You know it for sure when the BOC publicly states it. And they just did.

#39 waiting on 12.10.14 at 9:21 pm

Re: the house on Chestnut Way in Fort Mac.
oops, the neighbours down the street have their similar house (one year newer, with a legal and currently rented at $2400 suite) on the market for just over a million.
And it looks like they’re gone – house is empty.
http://www.realtor.ca/propertyDetails.aspx?PropertyId=14984752

#40 East Van on 12.10.14 at 9:24 pm

http://business.financialpost.com/2014/12/10/opec-is-finished-and-the-oil-crash-will-continue-warns-bank-of-america/?__lsa=6db7-a977

The National Post Article says we are in a 1930s style depression. Stocks are no safer than houses.

Remember, there were millions of unemployed Canadians BEFORE this oil crash, and those are the ones the government counts. Those who have given up completely or are under-employed are not counted. How many will be unemployed when the layoffs from the tar sands and related sectors begin?

Already nearly 15% in Canada are low income. http://www.thestar.com/business/2014/12/10/one_in_seven_people_lived_in_lowincome_families_in_2012_statistics_canada_reports.html
How many more will fall into the category when layoffs begin?

Maybe a diverse and green economy would have been a better idea than Harper’s “energy superpower” wet dream.

The Financial Post article says no such thing. — Garth

#41 old gringo on 12.10.14 at 9:24 pm

Always remember “nothing is as good or bad as it appears”.
This will pass and many will benefit from the lower housing,etf’s and stock prices .

Anyway, no problems in Margaritaville.
Hasta la vista

#42 NoName on 12.10.14 at 9:25 pm

#6 ILoveCharts

you are wrong and tis is why. http://youtu.be/jyJ7lRur43o?t=18m3s

#43 Not a Fool on 12.10.14 at 9:27 pm

For those that believe in a near term crash in the Canadian real estate market or believe that commodities will be depressed in the near future (1-2 years), is your portfolio still long 20-40% Canadian equities/bonds/Canadian dollars?

We’ve seen the latest oil crash take down the TSX and TSX-V, particular commodity stocks. My expectation is a crash in Canadian real estate would take the TSX down further (especially banking stocks which have taken a hit these past few days).

Unfounded speculation. The housing market will melt, not crash. Markets will not be too fussed. — Garth

#44 Chickenlittle on 12.10.14 at 9:29 pm

So we pay too much for stuff here in Canada….but not RE. Houses are apparently made of gold up here, so no price gap inquisition for RE…

http://www.cbc.ca/news/politics/canada-u-s-price-gap-complaints-could-soon-trigger-investigations-1.2865235

This is such a joke. The year before an election it suddenly strikes someone that we pay through the nose for a lot of stuff. Wow. What insight.

Its onLy going to get worse since universities are pumping out a bunch of ” yes” men and women specially trained to agree first with their professor, then with the herd.

#45 Drill Baby Drill on 12.10.14 at 9:31 pm

Dear Pathetic Blog : I will be investing within my TFSA in the oil market once I feel we are closing in on a bottom. We are nowhere near this point yet. There are many more shoes to drop such as mergers, bankruptcies, oil storage draw downs and a semblance of OPEC trying to be one again. Right now OPEC is defunct, non functioning and the lowest oil bid wins.

#46 Mark on 12.10.14 at 9:32 pm

“I published a chart mashup of Private Sector Loans from 2008-2014 in Canada, US, UK and Eurozone. What stands out is that the first energy hit in 2013 spooked Canada and private sector borrowing stopped in its tracks, retested the high but looks to have failed and rolled over. “

Yes, and this is actually a beacon of hope for the Canadian economy. Unlike in past downturns which were characterized by excessive corporate debt, the large-cap private sector is actually in very good shape. Hence, the banks can probably, over the next few years, make a fairly good business expanding credit to the sector for the purposes of paying out dividends and buying back shares. Given that the TSX is still beneath its 2008 levels, stock is cheap and debt-funded buybacks should prove to be quite accretive to earnings.

Add some leadership by way of a gold mining sector recovery (starting to see the early signs of such), and the TSX could lead us out of the mess much like was seen in the 1990s and the tech sector in the wake of the 1990s house price collapse. People looking for the TSX and the banks to suffer substantially on account of falling house prices probably haven’t fully considered the probable impact of such a scenario.

#47 JSS on 12.10.14 at 9:34 pm

Today I continued to add to a couple of long term holdings: CIBC, Enbridge, CN Rail.

Next year: Suncor, some insurance companies like Sun life, Great West Life, Manulife.

I am enjoying the hue and cry here and on the street.

I’m in it for the long haul (20+ years), so this is like early Christmas for me.

Year down the line this downturn in the stock market will be but a faint memory.

#48 economictsunami on 12.10.14 at 9:34 pm

While taking a respite from winter weather, partake in an aromatic Cuban cigar, Orange Pekoe plus a healthy shot of Amaretto and sit kick back to scan a triple play of interesting articles:

Interest Rates Have Nowhere To Go But Up?

http://streettalklive.com/index.php/daily-x-change/2526-interest-rates-have-nowhere-to-go-but-up.html

Bank of America sees $50 oil as Opec dies

http://www.telegraph.co.uk/finance/oilprices/11283875/Bank-of-America-sees-50-oil-as-Opec-dies.html

Central Banks Have Failed Because They Can’t Push Wages Higher

http://www.oftwominds.com/blogdec14/central-bank-wages12-14.html

Interest rates perhaps may see two 1/4pt raises but the game of financial market chicken will have already been lost…

#49 Andrew Woburn on 12.10.14 at 9:36 pm

This article decribes how the “blockchain” concept underlying Bitcoin can be applied in ways that may become disruptive to the major internet companies.

“Soon, the internet will be impossible to control”

http://www.telegraph.co.uk/technology/internet/11284538/Soon-the-internet-will-be-impossible-to-control.html

#50 Mark on 12.10.14 at 9:37 pm

” is your portfolio still long 20-40% Canadian equities/bonds/Canadian dollars? “

Mine is, because the Canadian dollar is one of the best values going (it will take off like a rocket ship once the impact of deflation fully hits home), and Canadian equities are dirt cheap, with a good chunk of the listed firms trading at a fraction of tangible book value. Book value which doesn’t even incorporate long-term asset appreciation in many cases.

Receiving tax-preferred dividends as a Canadian is just icing on the cake. Its not even funny how out of favour the (Canadian) stock market is these days.

#51 JSS on 12.10.14 at 9:37 pm

Laurentian bank hikes dividend.

Long live Canadian banks…and their shareholders.

http://www.thestar.com/business/2014/12/10/laurentian_bank_to_hike_dividend_restructuring_costs_take_bite_out_of_profit.html

#52 Retired Boomer - WI on 12.10.14 at 9:38 pm

Today….a yawner in total terms.

Greece caused over 600 points on the DOW in ONE DAY.
1987 caused over 20% on ONE DAY.

Still up more than the average salary for the year, who is getting nervous?

Diversified, Balanced, and Liquid.

Works every time not just on LOTTO wins.

#53 Mean Gene on 12.10.14 at 9:40 pm

It should be made known, not everyone working in the Alberta energy sector live in the province, some do “fly in fly out” paid for by the employer, so there will be a negative ripple affect in other provinces, once things start going down the swirly. :-p

#54 For those about to flop... on 12.10.14 at 9:41 pm

Went to the bank today to invest some money in the market,still have not worked out whether i,m brave or just plain stupid!

#55 Alberta housing prices to fall like oil stocks on 12.10.14 at 9:43 pm

LOL realtors from Alberta who are posting here are going to suffer MAJOR financi

#56 Bob on 12.10.14 at 9:44 pm

The job cuts are already happening in Alberta…just no press releases as private contractors shrink their rank and file.

#57 Harbour on 12.10.14 at 9:44 pm

#30 dutch4505

Comments are already closed on that Sun piece. lol

#58 Avoid ETF's in Canada on 12.10.14 at 9:46 pm

The TSX has not gone up in the last 5 years when you value it in USD.

Just thought I’d let you domestic ETF loving folks know.

Don’t even get me started on the TSX Venture…bloodbath

I don’t live in US$. Do you? — Garth

#59 Cocoabean on 12.10.14 at 9:47 pm

How exactly is cheaper oil “good for growth”? No new wealth is created; not even money is added to the pot.

The only thing that is happening is that that money which would have gone to the energy sector (maybe Alberta!) or to the revenue-desperate governments is likely to be used to pay off debt or buy consumer crap…

#60 Avoid ETF's in Canada on 12.10.14 at 9:47 pm

The only ammunition for RE the gov has is immigration. Watch the numbers spike while rates remain low.

Hardly. Immigration numbers have not moved in years. — Garth

#61 Tom from Mississauga on 12.10.14 at 9:48 pm

4 of 6 Canadian big bank stocks have crossed below the 200 day moving average. They’ll lead the TSX lower still. The ETF ZSP remains the safest place on the planet to stash your cash. Has been since inception, the ZUE before it.

#62 T5_INCOME on 12.10.14 at 9:52 pm

I live in Fort Mac, I have traded actively for 10 years and you know trouble is hitting home when people that drive trucks, work retail banking and wear protective work gear suddenly begin talking crude futures.

The gross income is high here, yet most people in town, like most Canadians elsewhere are living pay to pay. Fort Mac is the equivalent of the double leverage horizon ETFs, and the owners are about to feel the pain of rate increases and crashing oil prices.

#63 Army man on 12.10.14 at 9:53 pm

DELETED

#64 X on 12.10.14 at 9:56 pm

I don’t even believe what REMAX says about Real Estate, why would anyone believe what they say about the oil industry……

#65 StouffvilleSam on 12.10.14 at 9:56 pm

I’ve been reading this pathetic blog since 2011 and it’s my very first post.

I wanted to say thanks to Garth for his advice over the years. I’m single, 31 yrs old, renting and have been stashing away the majority of my funds in my TFSA, DCPP, and RSPs. I took a small hit on my energy ETFs the last few days but nothing like those soon to be realized by buyers entering the housing market.

It’s great to see the BoC’s statement today. Shocking to actually seeing the headlines in The Star, G&M, FinPost to vindicate (for lack of a better word) the position held by many visitors of this blog.

It won’t be much longer now.

“Patience is bitter, but its fruit is sweet”

#66 Craig on 12.10.14 at 9:57 pm

March 6, 2009 the S&P 500 bottomed out at 683 and we’ve had a friggin tripple since then. Still can’t believe the number of Financial Guru’s on BNN and CNBC recently saying that the US markets should do well again next year . True it is the most capitalized, most liquid and well diversified market in the world and it will be the year before a presidential election which bodes well but I wouldn’t be surprised if even the S&P 500 has a rough 2015. Stocks can’t go up in a straight line forever!

#67 Nemesis on 12.10.14 at 9:58 pm

#Kaboom?… #YouCallThat”Kaboom!”?… #That’sNot”Kaboom!”… #SaltyDogz… #MeetTsarBombaTheMotherOfAll”Kabooms!”:

http://youtu.be/qjnm3V0xYjI

#BonusKabooms…

“You need a dog. Or a scotch.” — Hon.Garth…

Funny you should say that, AuldPol…

#TheMoralPhilosophyOfBlendedDoggies&TheirSpirits…

#Or,WinTheRightWay:

http://youtu.be/lIs9AdtZUks

#TheMeaningOfRealFriendship:

http://youtu.be/5fC2ZfGzfwk

#ChivalrousExploits?:

http://youtu.be/70spkNuDP1k

#CraftIce:ForTheManWhoHasEverything?:

http://youtu.be/LJE4HltWCH4

#Honour…Gallantry…Freedom…&TheRightThang…TrueChivalryRevealed:

http://youtu.be/6W3JngahX7o

#BonusWongKarWai…. #CentrallyCommissioned… #Pre-Disciplinary… #WestSideInspectionTrailer:

http://youtu.be/TY60zkcBhpI

[NoteToGT: Well. You did ask. I blame it on the Valpolicella…]

#68 Smoking Man on 12.10.14 at 10:02 pm

BOC now calling for a correction.

Not two weeks ago, everything fine on the homestead.

I look at the charts in my Market Toronto.

Sales volume close to seven year high, prices, now exciding the spring market.

Days on the market at lowest everywhere.

Population in flow to GTA 100k a year.

I think they are finally getting worried and trying to talk the market down in Toronto..

Won’t work, even a modest spike in rates if they ever materialize will have no effect.

Everyone wants to be here…

#69 Market Man on 12.10.14 at 10:04 pm

Yes the BoC has been talking about a heated housing market but they never said it’s overvalued upto. 30%! they were hoping that the economy and income levels would “catch up” however it is now evident that government surplus’ are gone and employment is the real issue. Lower gas prices also mean less tax revenue

Also with the US starting to raise rates next they are also
Worried the bong yeilds will rise making the “recovery” more difficult.

#70 james on 12.10.14 at 10:04 pm

#63 T5_INCOME

Just an anecdote about trucks.

Bought a Ford F-150 from a dealer in Washington a couple of weeks back. After chatting to the guys in the office (and after learning I am originally Canadian), one of them mentioned that there are more and more pickup trucks coming across the border from Alberta. US firms are going to auctions up there and buying vehicles to re-import to the USA. Just an anecdote, but interesting.

PS: I have lost all respect for those guys who drive big fancy pickup trucks after learning that just about all of them have manual transmissions. Why get a vehicle with big tires and a big engine and then mate it to an automatic? It’s about as much fun as driving a minivan. All those ‘tough’ albertans can’t even drive a manual, is my guess.

#71 Cocoabean on 12.10.14 at 10:08 pm

Wait ’til all those housewives in umpteen coastal towns and cities here in B.C. find that the cheques from Fort MacMurray have stopped.

Sell the RV…cancel the NFLX…take back kids’ cell service…

#72 Smoking Man on 12.10.14 at 10:13 pm

I’m looking at the Boc report, I don’t actuly see it in print 10 to 30% perhaps the financial post was embellishing a bit.

On my above post to be clear I was referring to Nov 13 to Nov 14, so only one November in seven years had more sales.

Hipsters would rather eat cat food than lose the prestige, status of being a home owner in this city.

Becoming a renter would be admitting that the prized obedience certificate was for not….

#73 Millennial Maestro on 12.10.14 at 10:13 pm

“The price of a barrel was down again on Wednesday (by 4% to just $61), which had stock markets in a dither. It sure looks like oil will test the sixty-dollar mark and could plow right through it tomorrow.”
——————————————————————-

You ain’t seen nothin’ yet. Spoos have a loooooooong way to catch up to CL on the downside. Also the $60 mark is just a nice round number- nothing significant about it. Crude will break through it very easily, as there is no significant support till just above $52. If that doesn’t hold, see ya at early 2009 levels. Do you think CL @50 and spoos @2000 simultaneously make sense? Something’s got to give. To put it in Stalingrad&Poorski’s twitter feed’s words: “Time for the Fed to begin crude oil purchases…” Hope you catch the drift ;-)

#74 BOC says housing OVERVALUED by 30% on 12.10.14 at 10:15 pm

Eat it realtors you are going to starve. Housing is going to crash like oil stocks. The game of lies is over. HAM money is leaving Canada and greaterfools are all but gone. Canadian dollar down as money is leaving Canada. The game of lies is over. You shysters have ruined Canada with you lies

#75 Ronaldo on 12.10.14 at 10:17 pm

#70 James – ”All those ‘tough’ albertans can’t even drive a manual, is my guess.”

Pretty hard to ‘text’ and shift gears.

#76 Nemesis on 12.10.14 at 10:27 pm

#[email protected]#22….

“You’re THE MAN!”… Congrats!… That said and, strictly between the two of us, just remember this – not all ScienceProjects complete in quite the way you might like them too… or, the last thing you ever want to hear is, “There’s no time for lubricant!”…

Trust me on this Mr.T…

http://youtu.be/-nkxnc1C6rc

#77 A Nightmare On Bay Street on 12.10.14 at 10:28 pm

Hi Garth, everyone.

I was browsing and found this old 2011 Fort McMurray forum :

http://fortmc.ca/real-estate/can-prices-much-higher-for-housing-t228.html

A short exerpt :

“can prices go much higher in Fort McMurray ?”

First answer :

3 Things will drive house prices in FMM

1 – the price of oil….drives growth.
2 . Interest rates….determines if those with $800k mortgage can afford to re-new their 2% varaible at say 6% and pay 3x the mortgage! Will drive an exodus if it happens.
3 . Enviro Politics….self explanatory

We will not be seriously impacted by a national swing either way….we can be in a total national collapse but if oil is $150 prices here will still climb.

… Plus 89 other answers of pure human comedy. Enjoy.

#78 Makes sense? on 12.10.14 at 10:35 pm

PS: I have lost all respect for those guys who drive big fancy pickup trucks after learning that just about all of them have manual transmissions. Why get a vehicle with big tires and a big engine and then mate it to an automatic? It’s about as much fun as driving a minivan. All those ‘tough’ albertans can’t even drive a manual, is my guess.
—————
Wut?

#79 JSS on 12.10.14 at 10:39 pm

Can any of you imagine how many divorces will be coming around? There will be soooooo many divorced Fort Mac male employees in the next year or two.

Hot demand career: Divorce lawyer

#80 Jen on 12.10.14 at 10:41 pm

I’ve now putting my housing search on hold. A friend turned me to this blog a few weeks ago and I am so greatful. The BoC just made my decision of not buying an a house in the GTA that much easier. Many realtors on here will hate to hear that but it seems buyers are saying screw you greedy home owers who IMO will become desperate to sale and screw you realtors who offer no value.

#81 sotiri on 12.10.14 at 10:45 pm

Garth the title today is – Kaboom
At the same time you say “The housing market will melt, not crash. ”
Do you think Kaboom is the soundtrack of Melt or Crash ???

I was referring to Re/Max agents. — Garth

#82 Mike S on 12.10.14 at 10:46 pm

“The likely resolution to this mess is an extended period of very low (ie: 0%) BoC policy rates (5-8 years, perhaps even longer). Quantitative Easing, to monetize GoC debt to fund the CMHC bailouts that are going to be required due to their issuance of $900B worth of subprime mortgage insurance that is going to fail substantially. And much lower housing prices and a far higher Canadian dollar.”

Low rates + QE means lower CAD.

Do you think US/Europe wanted QE to strenghten their currency?

#83 SWL1976 on 12.10.14 at 10:48 pm

People want to live in Toronto?

Wow those numbers for the amount people owe are ridiculous, sure glad I am not that stat right now and wondering if I have a job in 2015. I know lots of people here are sweating bullets right now wondering where they fit in. I am one of those stats who fly to work in Ft Mac, camp jobs are by far the best deal here for out of towners

When I talk to the construction guys around here who are typically shut down for 6 weeks at Christmas, I am always surprised at their reaction to their time off. I typically enjoy more time off and say that must be nice to have 6 weeks off. Most say that they don’t want the time off and that they need the money, despite working crazy hours all year and knowing they get 6 weeks off, its not a surprise. I guess some know how to budget and some look at an overtime cheque and see a new truck with truck with nutz.

I have a feeling their 6 weeks off a Christmas this year might be 8, 10, or 12

Guess we’ll soon find out. Kijiji in Alberta will a interesting read in the spring

#84 VICTORIA TEA PARTY on 12.10.14 at 10:49 pm

A PRICE FOR EVERYTHING…EVERYTHING HAS A PRICE

All this happy chatter about the good that cheap gas pump prices will bring to Mr. and Mrs. Canada (their Yankee friends) and all the ships at sea, is utterly bogus.

There can be no good at all from any of this insanity.

For example, first let’s check out what’s happening in the US economy, not counting the cratering stock markets of late.

Even with all the “low priced” fracking going on, the economy can never revive its pre-2008 economic lustre, because things are now DIFFERENT.

HOW?

While the US government’s operational deficit is apparently under control its debt keeps spiralling upward with no end in sight, thanks in part to low interest rates and little or no government, consumer or corporate fiscal discipline.

As well, average American workers, at their inflation-ravaged pay levels, MAY be happier with cheaper gas, but as for the rest of their costs of living, what the Hell!

In Canada it’s not the same, but worse.

Lower oil prices, mean less capital spending (the “blood supply”of the corporate world), more layoffs (also in the US), corporate dividend cuts, fewer taxes collected, higher government deficits and debts, less personal money spent.

And lower pump prices will cover the difference? Huhh??

From 2008 until last June Canada’s energy complex kept the rest of us sitting economically pretty.

With central bank-induced low interest rates, coupled with good energy sector jobs, unleashed a torrent of spending unseen in decades, by millions of Canadians who shoulda known better but didn’t and who are now beginning to realize to their utter horror, they’ve made an error.

Now, St. Garth of “We’re So Screwed” says the Bank of Canada agrees with every other legitimate financial forecaster that our housing costs are outrageously over-priced as personal consumer debt is at best speeding toward the realm of the UNREPAYABLE.

As world oil prices continue to collapse the heart of Canada’s economy, the energy sector, is having its heart ripped out. And we’re celebrating the charm of low gas prices? Nuts!

How can you fill your tank when you’ve lost your job at Fort Mac, or some fast foodery? Or, what good’s gonna come from senior oil executives punted from their Calgary office tower jobs?

The difference between the situation with 2009’s low oil price world and today’s shrinking prices is central bank stimulus.

Back then it was just getting underway.

Now it has peaked and its gradual withdrawal is about to happen in the US; not-gonna-be-happening in the EU; ending in China; completely screwing up Japan.

That means that low interest rates and low oil prices are killing the global economy (the golden geese and all the eggs).

BTW, please check out #7 above…

As I mentioned up top, EVERYTHING HAS A PRICE.

So the price for uncalled-for hubris, greed, and general economic stupidity is severe and personal economic rectitude, coming soon to you, unless it has just arrived.

With cheaper gas prices we’re not going to see more of that good old Happy Motoring nonsense of the 1950s.

How far can you get out of town on a quarter tank of gas because that’s all you can damn well afford?

Bottom line, the price for everything ALSO means that you have to be willing to spend a buck in order to make a few. This is called INVESTING in your future. OK?

Which is why higher oil prices are good for you. It’s worked well for you for years up until, when, last summer?

What’ll it be like by the end of January when your credit cards come due? Happy Motoring or the UIC office?

Never listen, never learn, never mind.

#85 Sheane Wallace on 12.10.14 at 10:56 pm

#12 Inglorious Investor

Default on debt is not possible. it would have profound impact on the future of the US economy, as a minimum foreign governments can confiscate assets of american companies abroad, not to mention the total loss of confidence and absolute lack of buyers for US debt. Interest rates would sky rocket.

The chosen path I believe is controlled inflation if such thing is possible this days.
This is the only possible path with these levels of debt.

#86 Sheane Wallace on 12.10.14 at 10:57 pm

these days

#87 economictsunami on 12.10.14 at 11:02 pm

The mirror view from the rabbit hole, down under…

Australia Is Adrift:

” Yet in an interim report in July, David Murray, the former head of Commonwealth Bank of Australia, called the surge in housing debt since 1997 and banks’ exposure to mortgages a significant risk. Since that time, Murray’s panel said, “household leverage has almost doubled,” and “higher household indebtedness and the greater proportion of mortgages on bank balance sheets mean that an extreme event in the housing market would have significant implications for financial stability and economic growth.”

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

#88 West Vanner on 12.10.14 at 11:09 pm

Thank god I don’t own anything that doesn’t float, even on oil.

#89 Bdy sktrn on 12.10.14 at 11:16 pm

DELETED

#90 saskatoon on 12.10.14 at 11:18 pm

#61 Avoid ETF’s in Canada

The only ammunition for RE the gov has is immigration. Watch the numbers spike while rates remain low.

Hardly. Immigration numbers have not moved in years. — Garth

Do “immigration numbers” include the following (increasing?) programs?:

Federal Skilled Worker Class
New Economic Action Plan
Temporary Foreign Worker Program
Immigrant Investor Program
VIP Business Immigration Program

#91 Jimocalypse on 12.10.14 at 11:24 pm

@Mark #4 – yours is a benign view indeed. Everything you described happened in the UK, viz trash the currency, ZIRP, etc – and it was all designed to bolster house prices. Perhaps more likely is that Ottawa has to assume (say) $40bn of bad debts, goes to the bond markets and the Canuck 5 and 10 year yields take a hit, in which case interest rates rise faster and… you know the rest. I think the difference between canada and the UK is the former has something, longer term, to sell (commodities) and a much lower starting debt position. It does sound as though the starting gun has been fired, though.. will the Devil take the hindmost??

#92 Smoking Man on 12.10.14 at 11:27 pm

#80 Jen on 12.10.14 at 10:41 pm
I’ve now putting my housing search on hold. A friend turned me to this blog a few weeks ago and I am so greatful. The BoC just made my decision of not buying an a house in the GTA that much easier. Many realtors on here will hate to hear that but it seems buyers are saying screw you greedy home owers who IMO will become desperate to sale and screw you realtors who offer no value.
…..
Jen, your post set off by bull shit meter.
You had no intention of buying. You’re one of those who belive that a post like that will gain traction, influence the masses. Become a self fulfilling prophecy.

Miss calculation on your part.. It sucks that you kids don’t make squat, real estate prices are insane..

Your mind, it’s paradine trapped in a fixed income mind set.. Frighten to piss off the teacher and demand a raise, or even that dreaded, oh my God I’m self employed, what do I do, I’ve had no lessons in this road to riches.. I’m scared..

Jen buy the house, then drink, stop thinking to much, and let the force guide you to riches..

Worked for me.

#93 gut check on 12.10.14 at 11:30 pm

apologies if this has already been posted.
also,
just …
apologies for what you are about to witness:

https://ca.screen.yahoo.com/global-news/stephen-harper-sings-quot-sweet-124101595.html

#94 Sheane Wallace on 12.10.14 at 11:33 pm

So BOC acknowledges that house prices are overvalued by 30 %, which probably means 40 % for Toronto and 50 % for Vancouver.

Does that mean that they were lying 3 months ago when they said that house prices are OK? Or they are just incompetents. Are we looking here at firing them for incompetence or for investigating them for fraud?

#95 young & foolish on 12.10.14 at 11:37 pm

“buyers are saying screw you greedy home owers ”

Good for you, after all, who needs to be an ‘owner’?

#96 Mike S on 12.10.14 at 11:38 pm

“The only ammunition for RE the gov has is immigration. Watch the numbers spike while rates remain low.

Hardly. Immigration numbers have not moved in years. — Garth”

Actually I believe the target for 2015 slightly increased from 250K to 280K

That said, our government apparently loves to shoot itself in the leg and they came with two “great” ideas:

– Express entry (tailored for the needs of western provinces – in the time of boom)
– Strenghtenning Canadian Citizenship Act

These two + increasing US H1/L1 Quotas will sure do good for immigration to Canada

#97 425 Days on 12.10.14 at 11:40 pm

CBC news lead story tonight is the BoC “sounding the alarm” on housing. That will get some attention.

By comparison, even Detroit is starting to come back from the 2008-2009 crash.

Detroit emerges officially from bankruptcy at 12:01 Thursday, just over one hour from now.

http://www.pbs.org/newshour/bb/news-wrap-detroit-emerges-bankruptcy/

By comparison, the hard part of our journey is only beginning. We have years of difficulty ahead of us.

2015 will be a time of hot spots like Fort Mac cratering, while the whole balloon slowly deflates most noticeably by 2016.

#98 Sheane Wallace on 12.10.14 at 11:40 pm

Ca dollar is a sitting duck.

#99 Mark on 12.10.14 at 11:40 pm

“Low rates + QE means lower CAD.”

No it doesn’t. It didn’t mean that in the USA, and it won’t mean that in Canada. Low rates tend to help, not hinder currencies, especially if executed in a deflationary environment.

#100 Boomer21 on 12.10.14 at 11:42 pm

Yikes! I am trying not to cave and sell everything. I actually bought some stuff on Monday and still have some cash to do more buying but holy shite it’s unnerving. Trying to stay calm and think it through. I am one of the balanced, diversified and liquid dogs but I am also retired and skittish right now. SM, maybe I should just have a JD and give it up. Tomorrow is another day right Garth.

#101 nonplused on 12.10.14 at 11:44 pm

Good post today Garth except…. nobody wants to live in Toronto. Almost everywhere in NA except Detroit offers better living conditions and affordability. Well except Vancouver but it’s still better living. So move south a bit to Seattle or Portland and have both better living and affordability.

For those watching the oil market, this correction will probably last long enough to flush out a bunch of leveraged shale players and cause great pain to the heavy oil folks. But I give it 1 to 2 years max. the marginal cost of the last barrel is over $60 so supply is going into decline.

#102 young & foolish on 12.10.14 at 11:50 pm

So, the free markets at work on the price of energy, or is secret geopolitical back room manoeuvring behind the sudden drop?
Who cares, we’ll never really know what’s going on anyway (tin foil hat guys exempted).

#103 Leo Tolstoy on 12.10.14 at 11:53 pm

I explained the perfect storm. It’s bad enough in the GTA or Vancouver or Calgary that families have an average debt equal to 160% of their incomes (it was just 85% in 1990)

The Toronto real estate market was in shambles for the first half of the 90s. The aforementioned statement implies that the correlation between household debt and real estate prices is weak or non-existent.

Different times, different shock. Then it was double-digit rates. — Garth

#104 Marco on 12.10.14 at 11:53 pm

@93 gut check

Haha, I couldn’t watch the whole thing. Saw a GnR cover band in the UK last year just for fun and they were very good. Harper not so much. Besides he should have been singing : “Sweet crude of mine, Oh oh, sweet crude of mine.”

Cheers.

#105 everythingisterrible on 12.10.14 at 11:54 pm

#80 Jen on 12.10.14 at 10:41 pm
I’ve now putting my housing search on hold. A friend turned me to this blog a few weeks ago and I am so greatful. The BoC just made my decision of not buying an a house in the GTA that much easier. Many realtors on here will hate to hear that but it seems buyers are saying screw you greedy home owers who IMO will become desperate to sale and screw you realtors who offer no value.
…..
Jen, your post set off by bull shit meter.
You had no intention of buying. You’re one of those who belive that a post like that will gain traction, influence the masses. Become a self fulfilling prophecy.

Miss calculation on your part.. It sucks that you kids don’t make squat, real estate prices are insane..

Your mind, it’s paradine trapped in a fixed income mind set.. Frighten to piss off the teacher and demand a raise, or even that dreaded, oh my God I’m self employed, what do I do, I’ve had no lessons in this road to riches.. I’m scared..

Jen buy the house, then drink, stop thinking to much, and let the force guide you to riches..

Worked for me.
———————————–
“Worked for me” <- this set off my bullshit meter.

#106 Franco on 12.10.14 at 11:56 pm

Some people just love doom and gloom.

#107 brad on 12.11.14 at 12:00 am

Poloz had to lie to us whilst knowing full well housing was in a bubble created by low rates. His soft landing is out of reach now so he had to come clean to avoid embarrassment. Just doing his job. Don’t trust those in power but instead learn the rules of their game.

#108 Larry1 on 12.11.14 at 12:12 am

#60 Cocoabean on 12.10.14 at 9:47 pm

How exactly is cheaper oil “good for growth”? No new wealth is created; not even money is added to the pot.

The only thing that is happening is that that money which would have gone to the energy sector (maybe Alberta!) or to the revenue-desperate governments is likely to be used to pay off debt or buy consumer crap…

The consumer rules the US economy more than oil workers and oil tycoons. The Saudi’s, as a side effect of their price war, are transferring wealth from their oil reserves to gas consumers who will raise overall aggregate demand. Unless you work in or own oil, who cares? I own oil cos and don’t really care. The price will come back some day before I retire.

#109 espressobob on 12.11.14 at 12:13 am

The TSX pull-back (oil) is pretty much a snorefest for now along with a few of the other indices. I just hope it gets worse!

Sharpening these talons, even if a few are ingrown.

#110 MarcFromOttawa on 12.11.14 at 12:18 am

#90

‘VIP Business Immigration Program’

Did you just make that one up?

Garth is right. Immigration to Canada has been holding steady at about 250,000 new Permanent Residents (landed immigrants) for the last ~7 years.

We live in the greatest country on Earth boys. Stop complaining, man up, and get your hands dirty (no offense to the women on this blog)

#111 Smoking Man on 12.11.14 at 12:19 am

#94 Sheane Wallace on 12.10.14 at 11:33 pm
So BOC acknowledges that house prices are overvalued by 30 %, which probably means 40 % for Toronto and 50 % for Vancouver.Does that mean that they were lying 3 months ago when they said that house prices are OK? Or they are just incompetents. Are we looking here at firing them for incompetence or for investigating them for fraud?

…….

Your post insights logic… But not politics.

Not a chance for Toronto. I can’t comment with accuracy of other markets cause I can’t smell the arm pitts, or farts of fellow commuters. But in toronto.. Real estate is golden, I may be pretending to be sleeping on the train, but my ears wide open…

And in the summer when the sun is out, and I can wear my shades without looking like a freek, I’m observing, but it’s not real estate…

:)

#112 Ret on 12.11.14 at 12:36 am

Poloz is an embarrassment. He needs to start looking for a prestigious posting in an American university.

#113 NotAGreaterFol on 12.11.14 at 12:41 am

Poloz’s comments today are far more pointed than those of Oliver (Finance) or Siddall (CMCH. Why would he do that? Could it be he is most honest and looking to steer other to fix the real estate market risks?

PS: Ross Kay says a national contraction has started.

http://www.rosskay.com/national-contraction.html

#114 NoName on 12.11.14 at 12:46 am

#72 Smoking Man
#69 Market Man

press play
http://youtu.be/FDA9lraVk6U?t=5m01s

#115 Sebee on 12.11.14 at 12:50 am

I need something to restore my faith after yesterday’s razor sponsored blog.

#116 Strathcona on 12.11.14 at 12:52 am

While I agree with the general line of Garth’s article, I don’t agree with all of it.

Here in Edmonton, many people are worried about current oil prices. It was like a slow freight train coming, a blind man could have seen it.

I expect within the next six months to a year, we’ll see continued layoffs in exploration, projects and development of the oil sector; this is most of the growth we’ve had in Alberta. We are not diversified here. We only have oil and gas, mining, forestry and farming. We don’t even have a coastline here!

That said, Alberta may be the cause of RE problems in Canada, but damage to Canada’s largest, most frothy cities RE, may be the effect. Our homes in Alberta are expensive, but nowhere near the atmospheric prices in Van and Toronto.

Garth’s article paints an illusion of some great metrosexual diversified economy in Ontario. Where everyone is selling services to each other, and everyone is fine. Ontario is not South Korea. Ontario has failed to leave behind its branch-plant industrial past and move into a more successful phase of innovation. Blackberry is dead, and Samsung was seen holding the knife.

Our leased office is owned by the Ontario teachers union. I know another office down the street, owned by the Ontario municipal workers. When Alberta sneezes, it will be this old world money that catches a cold. Ontario produces, what, minivans and condos?. They need to move on to a more effective means of production. Export some novel ideas the world will pay for. Less Michigan, more Massachusetts…

#117 DON on 12.11.14 at 12:56 am

BIL out in Alberta for 4 years. Just heard the president made an Assessment visit. Most believe the layoffs to come at spring breakup.

My BIL and sister listened to me when I gave the no buy a house in Red Deer advice. He got some good training, paid down debt, didn’t buy a 60K truck, snow mobiles, 2nd house, trips, full time nanny with stay at home wife who shops and has her own vehicle.

I am glad to have him in the family…a corner of sanity is this greedy world. He is transitioning to a new job before the herd realizes.

#118 espressobob on 12.11.14 at 1:06 am

#100 Boomer

Putting cash into the markets as a DIY investor is difficult since you have no control? It’s easier if you think long term and dismiss short term moves. Diversification Globally mitigates risk!

Then again, you can hire an adviser.

#119 Mike S on 12.11.14 at 1:07 am

“No it doesn’t. It didn’t mean that in the USA, and it won’t mean that in Canada. Low rates tend to help, not hinder currencies, especially if executed in a deflationary environment.”

What is the point of doing QE + low rates?

#120 Mike S on 12.11.14 at 1:11 am

“But in toronto.. Real estate is golden”

Yep, gold didn’t do well recently …

#121 Mark on 12.11.14 at 1:14 am

“Ca dollar is a sitting duck.”

Yeah a sitting duck all right, headed much, much higher as panic starts to set in. Extraordinary BoC policy will be required to actually get the CAD$ to go down in the future.

The same scenario was played out in the USA, circa 2006-2008. Housing started to weaken in 2006 (as it did starting in 2013 in Canada). The USD$ weakened, and, at least for a while, it appeared that USD$ weakening might provide for some external demand to ‘save’ US housing from collapse.

Then came 2008, when the defaults started being recognized. Panic set in, risk premia soared, and people raced to repay USD$ denominated debt lest they be immolated by deflating asset prices. The rest, including the strong USD$ is history.

We’re at the leading edge of the same in Canada, with short-term CAD$ weakening, but a significant period of extreme strengthening due to a structural weakening of the Canadian consumer. Canadians that are indebted up to their eyeballs, quite frankly, have little money left in their pockets to spend on foreign imported goods, vacations, etc. Plus layoffs in the housing (and O&G sector) will increase the value of the CAD$ relative to labour, another sign of a strengthening CAD$. Toss in higher US interest rates and currency weakening/capital losses in the long-term US bond market and equities associated with such, and you have a recipe for a lot of CAD$ strength.

#122 Sharon on 12.11.14 at 1:17 am

This is a interesting article about how a severe drop in oil prices will change many things across the globe. The risks are high especially in Canada with high household debt. It concludes that a debt related collapse will be a result of low oil prices.

Did the Canadian Government actually implement a
“bail -in regime” back in the August – where it wanted the bank shareholders to back the banks in case there was a “problem” with defaults? The government seems to be quietly preparing for the worst while putting on a happy face until the eleventh hour. I could not find if the economic action plan (144 & 145) was put in place with the banks.

May not be a good time to own bank shares in the future.

There is a lot of information to absorb to try to understand what is really going on with oil prices.
Hope some of you find this article as interesting as I did.

http://ourfiniteworld.com/2014/12/07/ten-reasons-why-a-severe-drop-in-oil-prices-is-a-problem/

#123 Mark on 12.11.14 at 1:21 am

“Poloz had to lie to us whilst knowing full well housing was in a bubble created by low rates. “

Low rates were entirely justified by the amount of inflation existing in the Canadian economy (almost none), and the high levels of unemployment and underemployment.

The real problem was created by the politicians who have run the CMHC over the years. Allowing people with no skin in the game to own extreme amounts of housing. Providing leverage at the margin, which pushed up housing prices for almost everyone in Canada. If you want proof of that, almost to the month that the CMHC subprime rules were changed in 2013, the market started its descent.

Raising rates at this point would probably crash the economy, especially with significant components of CPI such as energy collapsing and employment weakening dramatically. Monetary stimulus from the BoC that was intended to go into the broader economy over much of the past decade, instead was directed into one sector, housing, which now represents a significant level of malinvestment. After all, the CMHC subprime mortgage insurance program has the effect of alchemizing very risky subprime mortgages into the equivalent of risk-free GoC bonds with additional spread and embedded call options.

#124 Mark on 12.11.14 at 1:25 am

“Garth is right. Immigration to Canada has been holding steady at about 250,000 new Permanent Residents (landed immigrants) for the last ~7 years. “

Nearly all of whom arrive with little more than funds to buy a used Honda, and an apartment rental security deposit. CMHC subprime credit has been the great enabler to a relatively comfortable recent immigrant lifestyle in Canada, and as housing continues its turn-down, Canada is certainly likely to be a far less attractive place for immigrants to come.

HAM has been proven many times to be a myth, usually with a xenophobic element attached to it, by individuals who haven’t quite accepted that being a “Canadian” is a nationality, not a race. Of course, Canadians who have over-leveraged, particularly in the most bubbly cities, will face the most severe of consequences possible

#125 juno on 12.11.14 at 1:58 am

When ft mcmurray falls, it should take down the rest of CMHC’s funding. This should put them into the red and start to draw on the taxpayers to fund the sea of blood Ft Mac will spill.

Now: what will the government do. Damn, the loonie is in the dumpster and when the US raises rates, say goodbye to selling bonds at below 1% interest.

Now way buddy, instead the looming Re-bubble will get foriegn money to stay the heck out… This is a Greece in the making.

So say goodbye to more CMHC funding, its over and as for the banks. Forget about getting lending from them because they will be tight with their buck. So no more buyers, and you want to sell too bad so sad

One place “Gold River” half a million dollar properties sold for less than 50 k’s

#126 The original dave on 12.11.14 at 2:03 am

“Low rates + QE means lower CAD.”

No it doesn’t. It didn’t mean that in the USA, and it won’t mean that in Canada. Low rates tend to help, not hinder currencies, especially if executed in a deflationary environment.
—————————-

The above goes against everything I’ve ever learned. Low rates encourages spending and increases the velocity of money thus diminishing it’s value while pushing asset prices up. Higher rates would do the opposite.

I think you contradict yourself. We did see a weaker greenback for years vs the cdn dollar. It also didnt help that every other country followed the U.S in lowering their rates as well

#127 Vanreal on 12.11.14 at 2:27 am

the BoC has no ability to raise rates so they are trying to use the weapon of fear. It won’t work especially when people watch the stock market plunge.

Why would that happen? — Garth

#128 Happy Renting on 12.11.14 at 2:29 am

So the Globe reporter gave you the scoop on the attitude of Fort Mac’s naive and hopeful locals, and you gave him the real deal on what this shock’s actual effect could be on RE and the economy. Hardly seems a fair trade, but if he had to haul his butt all the way out there I guess it would have been unkind to expect more legwork from him. Will keep an eye out for his story.

I suppose I haven’t been an observer long enough, the past few weeks have been surreal in how quick and deep oil prices have dropped (along with general optimism and feelings of RE’s indestructibleness as a can’t-lose investment.) The investor panic feels like a rerun. Have done a little buying but really hoping to increase my U.S. exposure with cash I got only after the last big ETF sale (bought a bit then, too.)

#129 Dennis Rusinak on 12.11.14 at 3:17 am

http://www.theguardian.com/commentisfree/video/2014/dec/10/owen-jones-property-developers-bankers-global-menace-comment-is-free-video

#130 priceofoil on 12.11.14 at 3:44 am

I see it now… The cruel fate of climate change, environmental destruction, and species extinction; the more people see the need to reduce consumption, the cheaper the companies make the product, attempting to increase consumption.

Cocaine out of your price range? Well we just invented crack! Now you can continue to consume at the same rate! Don’t wait to thank us, because you’ll be dead.

#131 Juanito on 12.11.14 at 3:47 am

I’m an Edmontonian, I’m young, I work predominately in O&G and I have a mortgage that’s less than 5 years old oh, and I currently have little saved in my TFSA as I am still paying off student loans while starting a family. Apparently from what I read on this blog I would be stereotyped a poster child of failure.

Am I worried? Nope. When I started in this industry years ago I aimed to be on the right payroll during times like these.

Capital spending will be curtailed, however maintenance, turnaround and debottlenecking spending won’t. In fact, mark my words, as oil companies revise their budgets in the coming months, available capital spending will be re-directed to the upkeep of their existing facilities which have been run too hard for too long. So for all you investors looking to make some profit from big oil as their stocks tank, I will be looking forward to more work in our sector, courtesy of you. It happened in 2009/2010 and it will happen again. 2015-16 were already the biggest years for planned outages and turnaround work in Alberta, and as oil prices will suck anyways, might as well add even more scope. Looking forward to the overtime…

Take heed fellow Albertans in this industry: get yourself on the operations payroll and steer clear of capital projects.

#132 Edmontonguy on 12.11.14 at 3:52 am

Never mind the real estate crash here in Calgary & Edmonton!

There is a rental crash starting.

Thousands of empty units, many still brand new condos bought by investors, and hard to find renters. My landlord has agreed to LOWER my rent $100 a month to keep me. He can’t find renters for his other 2 places yet since the old renters went back out east in November.

#133 Lillooet, BC on 12.11.14 at 4:19 am

I estimate that house prices in Toronto, Vancouver, and Calgary are overpriced by 70%. A million dollar house in those cities is probably really only worth about $300k.

Meanwhile, in many small towns across this great country, house prices are UNDERVALUED by about 20%. A house that sells for $140k is worth $175k.

#134 juno on 12.11.14 at 5:14 am

108 brad on 12.11.14 at 12:00 am

Poloz had to lie to us whilst knowing full well housing was in a bubble created by low rates. His soft landing is out of reach now so he had to come clean to avoid embarrassment. Just doing his job. Don’t trust those in power but instead learn the rules of their game.
================

http://www.bnn.ca/Video/player.aspx?vid=511375

Listen to the TD real estate ecomonist. She basically doesn’t understand economics.

Seem like she struggling to tell her lies. But if there are outside factors it can cause a crash. My god what do you thing 60 dollar oil is. I think its pretty major.

BTW Obama, see cheap cheap oil as a godsend. Its sparking up an already heating up ecomony into an election year. I wouldn’t be surprised if he tells his buddies to open more taps and drive the price of oil to 30/40 dollars

Therefore he can increase the interest rates a few percentages to get them back to normal.

Don’t blame Poloz, he’s been giving warnings, it CMHC and CREA which keeps on putting up these revamped frosty number. Also the media for advertising the beauty of (safe ) real estate investments.

#135 Avoid ETF's in Canada on 12.11.14 at 5:15 am

I don’t live in US$. Do you? — Garth

I do. So does Oil. As well as Gold, Copper, Wheat, etc…..

#136 Nomad on 12.11.14 at 8:00 am

What the OPEC master said that moved markets:

“Why should I cut production? You know what a market does for any commodity. It goes up and down and up and down,” – Al-Naimi

http://www.businessinsider.com/opec-now-believes-in-letting-the-market-take-care-of-oil-prices-2014-12

If your friend is thinking of buying a place in Calgary, stop him. Tell him to wait 6 months at least. See if prices stabilize. And by that time he’ll know if his company will lay off people.

#137 Jackie O on 12.11.14 at 8:27 am

I wouldn’t be so sure the ‘Globe & Mail’ ( I refer to the syndrome suffered by gleeful leftist rags dancing in the graveyard over oils imminent demise) version of why oil prices have collapsed is correct.

The idea that OPEC has decided to ‘let market forces prevail’ is laughable balderdash. I’m reminded of the chicken little story….and the actions of befuddled retail investors swept up in a panic sell off. Since when has OPEC ever been logical, honest, believable or forthright in any way with the world?

Why do the papers want us to believe what is being reported now? Why would you suddenly throw your portfolio out the window because of some blabber you hear on TV?

The idea that Canada’s oil patch is ‘going down for the count’ is naive and newspaper dependent.

Insiders suggest …and I include those dummies at the WSJ…that this is an Obama strategy to secure a foreign policy win over either Iran or Russia before he leaves office in order to secure one foreign policy initiative to patch together a very shaky ‘legacy’. Wasn’t he just bashing Isreal…last week…they blew him off and he turned elsewhere.

Obama has been the most feckless and least intelligent or focused president in US history….why back him or his daily dreamed up strategies..at all? The bottom line is that he’s paying the Saudi’s in security chits to bash oil prices…OK..we get it. But…90 plus countries feed their millions of people with oil revenue…so these countries will begin to stave within days…not weeks or months.

We hear the back lash from the WH. That the Saudi have bog forign reserves and can withstand the sell off. Great…but what of the hundreds of millions who will revolt when they can’t find food….the food that their governments supply with oil revenue. Ask yourself how many people in Nigeria will side with Obama when the children are starving and Boko Haram is streaming across the border…because they’re hungry too. Venezuela ..ditto. Sudan…headed for another civil war…you bet.

Oil stocks may not be at the bottom yet…but we are within weeks of a bottom…and the natural increase in Calgary real estate to follow.

The Calgary real estate market will be just fine because this oil trough is very temporary. Unless Obama can justify starving a billion people in 90 plus countries…for the sake of his ‘legacy.

#138 earthboundmisfit on 12.11.14 at 8:28 am

“Lord, grant me one more boom and I promise not to piss it away.” I’ve forgotten if this is the chorus or the refrain.

#139 I'm stupid on 12.11.14 at 8:40 am

#118 Don

The first one out the gate usually finishes first. So many employees wait until they get laid off to find work. The ones who succeed are those that have options and aren’t afraid to change careers or leave their current company for something better.

#140 SWL1976 on 12.11.14 at 9:24 am

#132 Juanito – I hear you there. Myself, well not being in O&G too long I did bring a lot to the table when I signed up 3 years ago. I started in maintenance and have never looked back. I know lots of guys who switched over to construction chasing more hours and bigger cheques, but I knew better.

Who knows in the end, but they will have to cut really deep to get me. We are actually getting busier as well, less new equipment, fix and make do with what we have and repairs we can’t handle will all be done locally in Edmonton

Either way I am a firm believer in staying diversified in all aspects of life, if things feel apart here tomorrow I would also be content to go back to the coast and scratch out a living there closer to home

#141 jess on 12.11.14 at 9:27 am

ETMFs ?
– development of non-transparent actively-managed ETF structures.

http://www.sec.gov/rules/ic/2014/ic-31301.pdf

#142 Nomad on 12.11.14 at 9:45 am

#132 “get yourself on the operations payroll and steer clear of capital projects.”

This was one of the rare comments on this blog that’s interesting to read. Please share more as the oil story develops.

I hope more people with your profile share facts, negative and positive.

#143 TheLaughing(e)CONomist on 12.11.14 at 10:01 am

It pays to be a contrarian and to understand that “the world is not the way they tell you it is” (Adam Smith)

From Bloomberg – “‘Severe Downturn’ Threatening Norway, Central Bank Governor Says”
http://www.bloomberg.com/news/2014-12-11/-severe-downturn-threatening-norway-central-bank-governor-says.html

From the article above – “While the oil price drop is threatening growth in Norway, policy makers aren’t facing the disinflationary spiral that’s hit Sweden and other parts of Europe. Sweden’s central bank has cut its rate to zero to bring back inflation, abandoning efforts to contain household debt growth that had kept interests rates up. ”

Harper recently announced initiative for “price parity” with USA means one thing – they will be snap election coming much earlier than expected – and before the things deteriorate further.

And now the big gun Poloz declaring that the housing is overvalued by 30% – this is a desperate attempt to talk out the sheep of buying and to attempt to engineer the “unseen” soft landing – and this is because the next BOC move will be to CUT the interest rate and not raise it (check again the Bloomberg article above and put 2+2 together)

#144 Stoopid Idiot on 12.11.14 at 10:15 am

Big Banks Will Take Depositors Money In Next Crash -Ellen Brown & Greg Hunter Video
Tuesday, December 9, 2014 23:19
By Greg Hunter’s USAWatchdog.com
The G-20 met recently in Australia to make new banking rules for the next financial calamity. Financial reform advocate Ellen Brown says these new rules will allow banks to take money from depositors and pensioners globally. Brown explains, “It became rules we agreed to actually implement. There was no treaty, and Congress didn’t agree to all this. They use words so that it’s not obvious to tell what they have done, but what they did was say, basically, that we, the governments, are no longer going to be responsible for bailing out the big banks. These are about 30 international banks. So, you are going to have to save yourselves, and the way you are going to have to do it is by bailing in the money of your creditors. The largest class of creditors of any bank is the depositors.”

https://www.youtube.com/watch?v=Ey20x-VlDYQ

#145 Grantmi on 12.11.14 at 10:35 am

RE companies circling the wagons over the BOC report.

Lap Dog Elton Ash (?) from RE/MAX just got off the Jon McCombe CKNW show tooting that Vancouver is DIFFERENT!!

and yes … he says BECAUSE OF ALL THE OFFSHORE $$$$ from MAINLAND CHINA will continue to prop up the Hongcouver market.

Wait Wait…. i thought the offshore investment money had nothing to do with the RE prices running amuck here… Hmmmm.

Which is it Elton???

#146 Inglorious Investor on 12.11.14 at 11:08 am

What did Poloz and the BoC actually say?…

From Poloz’s FSR opening statement:

“[…] the difficulty that highly indebted households would have servicing their debt […} raises the risk that a shock to the economy could trigger a correction in house prices. The probability of this risk materializing is low, but if it did occur, the effect on the economy would be severe.”

This risk would be greater if house prices were judged to be overvalued relative to fundamentals. [And…] there is some risk that the housing market is overvalued, and our estimates fall in the 10 to 30 per cent range.”

“We experienced housing corrections in the early 1980s and the early 1990s, […]. But both of those episodes were preceded by a much faster run-up in prices amid rising inflation expectations. In both cases, interest rates rose as monetary policy leaned against inflation, and a recession ensued.”

[Note: circa 1980 the Fed jacked up interest rates to prevent a dollar collapse. They new it would cause a severe recession. It’s interesting how back then the Fed actually induced a recession to correct imbalances, where today it seems they are doing everything to avoid one, causing massive distortions and prolonged pain. Different circumstances. Different times.]

Back to Poloz…

“None of those conditions is present today. The rise in house prices has been much more gradual and, in the context of a broadening recovery, the unwinding of household imbalances should be gradual as well. That is why we continue to expect a soft landing in the housing market, but it is conditional on continued strengthening in the economy.”

[Note: Of course everything is conditional, but here Poloz does not sound alarmist to me, but the opposite in fact.]

————-

Chart 6 in the FSR says “The debt burden of Canadian households has been relatively stable”

They must be comparing it to debt since the last FSR in June. Because clearly Canadian household debt has gone almost ballistic. It rose from approx. 120% to 165% of disposable household income over the last ten years. However, the mortgage debt service ratio (mortgage payments to income ratio) has actually been fairly steady since 2008 at just over 6%. Lower and lower rates?

————-

A working paper titled”International House Price Cycles…” also from the BoC, estimates Canadian housing to be overvalued by about 20% (Figure 3). There’s Poloz’s “10 to 30 per cent range.”

By their methodology, house prices were undervalued between around 1990 and 2003.

And here’s what I find really interesting: The chart shows housing over/under valuation going back to the late seventies. The valuation range seem to fall comfortably within the +/- 20% band. Could we indeed be near a peak? If overvaluation went far beyond 20% today it would be an historical anomaly.

But anyway, in short: The BoC actually says that houses in Canada are overvalued by 20%.

#147 chopper on 12.11.14 at 11:16 am

Another great article Garth, so true all you said. This stuff you will not find from the MSM. So glad I found this blog I am richer and wiser as a result.

Sold my house 3 years ago and bought a house in Florida and downsized
To a smaller home here. Going back soon to buy another house in Florida. I refuse to invest in RE here in Canada at these bloated prices.

#148 Embassy of the People's Republic on 12.11.14 at 11:22 am

And you dumb Canadian punsters think WE are a totalitarian state?

http://www.thestar.com/news/canada/2014/12/11/supreme_court_allows_police_to_search_cellphones_upon_arrest.html

We laugh at you and your delusions!

https://www.youtube.com/watch?v=r4bzHHxhfdk

#149 Rational Optimist on 12.11.14 at 11:59 am

Bloomberg had an article this morning that included the tidbit that contracts insuring Venezuelan debt are implying a probability of default of 94 percent. All of the world’s bad guys (Venezuela, Nigeria, Iran, nutcase upstart Islamic “states,” and maybe most importantly the Russians) are about to get some comeuppance; we’re a bit of collateral damage.

Will Russia default? It hasn’t even been twenty years since the last time.

#150 Ft Mac House Guy (made famous by Garth) on 12.11.14 at 12:03 pm

So remember me? I’m the lucky SOB that sold his house about 2 months ago to some greater fool couple in Fort Mac. Having lived there for 3.5yrs, I’ll chime in on my thoughts.

First of all, the house 2 doors down that is very similar to mine, a little nicer, but with a much smaller yard is still for sale at the original listing price of $25k higher than what mine sold for. Suckers. So is the house in the $900k range that counter offered with a condition that their house sold by now. THANK Goodness I didn’t even entertain that offer!

Second, I was up there in 2008 when things tanked, and oil hit $30/bb. (I actually bought just as things were starting to drop – I was a such a fool). My $600k+ house eventually dropped probably $100k, and took 2-3yrs to recover back in price. I would suspect something similar will happen to prices this time around. Of all places in Canada, I think Fort Mac will be able to recover the easiest.

Will oil eventually rebound? Of course. And when it does, those $100-$200k jobs will be back in full force again, (somewhat) justifying the $600k+ houses up there. There was/is/will be again HUGE demand for labour up there, and people make literally unbelieveable STUPID amounts of money. Like commented earlier, most live paycheck to paycheck b/c *most* are financial idiots. Will they care that house prices are cratering, or about to? No… I didn’t. I wasn’t even aware of it. It hadn’t happened since 1990.

That doesn’t justify crazy prices in the rest of Canada, like the one guy mentioned about Moose Jaw. LOL! For the most part we have all the space in the world. Sooner or later if/when the rest of Canada craters too in regards to house prices, places like little old Moose Jaw are going to be really hurt when people finally realize “WHY DID I OR WHY WOULD I PAY THAT MUCH FOR A HOUSE IN MOOSE JAW?!?”

#151 Kenchie on 12.11.14 at 12:07 pm

Impressive charts…

“America has shaken of its oil addiction”

http://www.bloomberg.com/graphics/2014-america-shakes-off-oil-addiction/

#152 harden on 12.11.14 at 12:07 pm

Vancouver Sun reports home buyers are “camping out” – and multiple offshore bids with “no inspections” (could they be tearing them down? go figure!!).

http://www.vancouversun.com/business/Multiple+bids+price+jumps+Metro+Vancouver+housing+market/10458195/story.html

#153 Doug in London on 12.11.14 at 12:13 pm

Well, let’s look on the bright side. For what seem like eons employers in places like Fort Mac have been bellyaching about labour shortages and wanting the government to do something about it. Now, it looks like the problem’s solved and it didn’t even need any costly government intervention!

Speaking of the government, the fall in oil prices is sure to translate to less tax revenues in the future. So much for that projected budget surplus the Federal Government has been anticipating.

#154 Nomad on 12.11.14 at 12:13 pm

Genworth Canada said they are tightening underwriting standards in Alberta.

Less profits for them, but more important, harder for buyers to get a mortgage.

Source: CMT on Twitter

#155 Rational Optimist on 12.11.14 at 12:20 pm

133 Edmontonguy on 12.11.14 at 3:52 am

That got my attention. Is it true that newcomers are already heading back home?

By the way, what neighbourhood are you in?

#156 Snowboid on 12.11.14 at 12:23 pm

#134 Lillooet, BC on 12.11.14 at 4:19 am…

I’m not sure those bigger cities are overpriced by 70%, I’m pretty sure that homes in smaller towns aren’t undervalued by 20%.

Are you really saying this is worth $ 175K?

http://www.realtor.ca/propertyDetails.aspx?PropertyId=14571911

#157 Doug in London on 12.11.14 at 12:23 pm

@earthboundmisfit, post #139:
Your post reminds me of the saying: The one thing we learn from history is that most people learn nothing from history. No doubt during the boom years many people, especially older people who remember bust periods in the past, managed their money wisely. Others who squandered money during the boom will regret doing so.

#158 Derek R on 12.11.14 at 12:29 pm

All those who were saying “Bring on deflation” are now getting their wish. For Canada, falling oil prices mean deflation in spades.

#159 Mark on 12.11.14 at 12:43 pm

“The above goes against everything I’ve ever learned. Low rates encourages spending and increases the velocity of money thus diminishing it’s value while pushing asset prices up. Higher rates would do the opposite. “

Well there’s a theory out there that states that all currencies, adjusted for interest rates, will have converging returns, ie: through arbitrage. Effectively a statement of the efficient market hypothesis, but for currencies more specifically.

So if we have the USD$ paying, say, 5% “interest”, and a currency (say the CAD$) paying 0% “interest”, for the total returns to converge, the CAD$ with the low interest rate must appreciate relative to the higher interest rate currency. In other words, the interest not paid by higher rates is made up for by currency appreciation.

The bond market will force higher interest rates on currencies which suffer inflation, and will force lower interest rates on currencies suffering deflation. Canada, with the RE crash and associated consumer austerity and de-leveraging, is heading towards significant deflation. The USA, by comparison, is about 6-7 years ahead of us in terms of house price declines and the deflationary impact associated with such. Hence, the reason why rates are likely to rise in the USA relatively soon, and currency weakening associated with such.

#160 Mark on 12.11.14 at 12:49 pm

“Will Russia default? It hasn’t even been twenty years since the last time.”

Of course Russia won’t default. Their debt to GDP ratio is far too low for such to even be possible, even if their oil industry does collapse.

“and this is because the next BOC move will be to CUT the interest rate and not raise it (check again the Bloomberg article above and put 2+2 together)”

I read that Bloomberg article too, and have been one of the most vocal commenters on this blog, and elsewhere, about the BoC facing a deflationary abyss, and probably being behind the curve in lowering policy rates and providing stimulus to the ex-oil/ex-FIRE economy. Sounds like the Norweigan central bankers “get it” finally. How long till Poloz wakes up is a matter of increasing uncertainty, but if he doesn’t start to act, a liquidity crisis may be precipitated in the Canadian economy with unnecessary consequences.

#161 TnT on 12.11.14 at 12:49 pm

Cato the Elder has left the building?

Seems to be silent since I outed him as an agent of the Chinese Social Media brigade on a mission to undermine the freedoms we enjoy.

Mission Impossible?

#162 Marcus on 12.11.14 at 12:55 pm

Stress is showing

Does it ever end?

This morning’s retail sales report was a disaster.

Yes, the headline number was up 0.46%. Last year, same month comparison, it was up 1.91%, both unadjusted.

Down the line it’s the same story. Last year autos were down 3.76% this month. This year they were down 6.18%!

Last year furniture was up 10.3% on the month. This year it was up 7.7%.

Last year electronics were up 28.98%. This year 32.32%, heh, a brighter light. Guess what – that’s because there were basically no deals to be had on so-called “Black Friday.”

Last year building materials were down 8.878%. This year it was down 9.44%.

Last year food and beverage stores (for home consumption) were up 1.67%. This year? 0.32%. Are people are out of money for entertaining at home?

Last year health and personal care (usually a bad category in November) was down 3.82%. This year? Negative 5.1%.

Last year gasoline was down 9.29%. This year it was down 9.4%. No, gentlemen, the collapse in gas prices over the last month did not translate.

Last year clothing stores were up 13.3%. This year? 14.23%. Ok, make it two (somewhat) brighter lights.

Last year sporting goods (always a common gift) were up 25.67%. This year? 21.62%.

Last year general merchandise stores (e.g. department stores) were up 14.12%. This year? 13.17%.

Last year miscellaneous store retailers were down 8.46%. This year sales collapsed by 12.31%.

Last year, the Internet will save us sellers (non-store retailers) were up 11.81%. This year? 9.71%, a big miss over last year as well.

Finally, people generally don’t drink as much in bars and restaurants in November, probably because they’re too schnocked to get out of the house over Thanksgiving. Ok, last year that category was down 1.59% on the month.

This year it was down 4.2%.

Where’s the “strong” in that report, eh?

-Karl Denninger

#163 TurnerNation on 12.11.14 at 1:04 pm

Dollarama stock in hockey stick mode. Getting ready to buy longer term kaputs.

#164 Lumberjack arch on 12.11.14 at 1:18 pm

#125 mark

Haha that was funny mark, used honda? What city do you live in?

#165 miketheengineer on 12.11.14 at 1:31 pm

Garth et al:

My guess on layoff’s out west is this: “wait and see”, if it is a sustained drop in oil prices, say greater than 3 months….major “stop” will happen out west. I am sure that oil and gas companies have a “slush” fund that they can draw on, since they have made record profits, and should be able to sustain themselves for the short term.

The companies in the worst shape would likely announce layoff’s first week of Jan. The ones in better financial shape, later in the year, as things play out.

It is difficult to get “skilled” trained people, so these guys should fair better than the average “joe” who is doing low skill work. I was at a “better run” ontario company for a short while. While there, the VP announced (their major customer was shut down due to a bitter strike) that they would not layoff any engineers, maintenance and office staff, during the time of the “union issues with their customer”. Their reason, was that they had learned from past mistakes, and did not want to have to hire and re-train the 20-30% of the skilled people that would go and find alternate work, and simple just not come back after the recall. For 3 or 4 months it was really really slow, with almost nothing to do. Cost/benefit analysis is what worked, plus the management was “better” organized, and rational, and intelligent. The had some awesome “leaders” there.

Still, if it was me out in Alberta, I would be watching how much I spent on my credit cards at Xmas, and have a wait and see attitude towards any purchases.

#166 Gtrz4peace on 12.11.14 at 1:41 pm

@33 – Mike T — and all of the climate change deniers on the blog, how do you guys do it? How are you unable to grasp the basic tenets of science? Climate change is real, sorry about that but that’s the truth. And it involves EXTREMES OF HOT AND COLD.

If you all are unable to grasp basic science that is embraced nearly unanimously by scientists around the globe, please rent or torrent the move “The Day After Tomorrow” because in it, the science of WHY extreme cold is part of client change is explained for the masses to hopefully understand.

However, IT IS JUST A MOVIE. In reality those changes will not happen in the space of a 2 hour movie. They are starting to happen now to the planet, but they will not happen in 2 hours, 2 days, or 2 weeks.

This does not mean, however, that the changes are not happening and the scientific community worldwide seems to be agreed on the causes. And there is mounting consensus on the need to deal with this extinction-level issue.

In fact, at the present time, species are going extinct at unprecedented rates in the lifetime of humanity — much of this directly attributed to climate change environmental disruption.

Maybe invest in renewables instead of ramping up the same polluting fossil fuel industry and engaging in climate change denier nonsense? You might find there are actually still plenty of wondrous places to spend your hard-earned investment dollars in in about 20 years.

#167 Retired Boomer - WI on 12.11.14 at 1:42 pm

If the demographic shift means less commuting via private auto, and lower per capita gas use that is a great thing!

We are but one country in the world, the rest of the world looks like it will be using more gas. That will be their problem to pay for the privilege.

In the meantime I will use even less this year than last, and when replacing vehicles fuel use will be my #1 criteria.
Why waste more? I’ll pay whatever the current freight is.

#168 TnT on 12.11.14 at 1:50 pm

#125 Mark

Only a fool would insist that money generated from foreign lands did not have an impact on Real Estate values here in Vancouver or Toronto.

There’s no data to compute any analysis, just common sense and being a visitor to any public school in the Toronto or Vancouver.

Garth and all the other bean counters have been wrong for far too many years on Real Estate prices simply because they do not have the proper foreign monies data as part of their calculations.

To save some time of going back and forth on who is right, here’s my list of facts… (as I see them…)

1) The average Canadian salary cannot afford the average Canadian home (Vancouver / GTA)
2) Canadians making money in Canada cannot afford the prices for the Single Family Detach homes which makes more buyers for the lower tier homes.
3) Canadians do not have the birth rate to sustain the number of buyers Canada has seen over the last 10 years.
4) Every neighborhood in GTA and Vancouver has seen an influx in the number of new Canadians.
5) There is no official or reputable records of any data points from anyone that can be used as facts for the impact of foreign monies on Real Estate.
6) It is all too “Canadian” to not talk about immigrants migrating to Canada.

Feel free to move the goal posts on your replies if it makes you feel better…

#169 SWL1976 on 12.11.14 at 1:52 pm

#162 TnT on 12.11.14 at 12:49 pm Cato the Elder has left the building?

Seems to be silent since I outed him as an agent of the Chinese Social Media brigade on a mission to undermine the freedoms we enjoy.

Mission Impossible?

———————————————

The freedoms we enjoy for now… For those who can’t see this now never will until it’s unavoidable. Well I don’t agree with everything Cato says, he does bring many good ideas to the table. Healthy debt is about sharing ideas and understanding all sides to the story. Unfortunately here name calling and simply saying that one hates America for pointing out some cracks in the system is the norm and shows ones level of obedience as SM would say.

The problems we now all face in the world today has been and is being played out by the banksters and the 0.0001% Most of the people inhabiting this earth only want to live in peace, raise a family and get on with their lives. People born into war know nothing more than what they have been born into and people born into cruel dictatorship also know nothing else, but their basic human instinct is not to fight, it’s to survive. These people given the choice I’m sure would just rather be left alone to live in peace, but circumstance has left them at a great disadvantage in the world. All most people really want is food, clean water, shelter, and family

I wrote the other day that my stance on global domination was that I am against it, and after thinking more about it I am utterly against it. Is that a fairy tale these days? Probably yes, but that doesn’t change how I feel about it. It’s not about taking sides, it’s about being fair. I do realize things are messy right now and one cannot unscramble eggs, but that doesn’t mean it’s making the world a better place is not worth a try.

We here in the west have won the birth lottery by being born here in a free country, but that doesn’t give us the right to sit back and while many parts of the world suffer, and say oh well not in my back yard. We do have the freedom and power to effect change in a positive way. Many in the world do not. This is no time for name calling without considering the whole story even if the story hurts. Be brave and challenge yourself, your thoughts and your beliefs, for anyone who does will find a very sinister story to who really calls the shots in America. The take down is from within, and that is sad. I love how America was founded and everything it once stood for.

I have never ever claimed to know any of the answers, but that doesn’t mean I will ever stop looking. I will not turn my head and join the herd and pretend everything is OK. Things are happening at an alarming rate and if we waste our freedom now before we know it, it will be gone in the blink of an eye, and that my friends will be one sad day for all

Ignorance is bliss, but it’s still ignorant

#170 -=jwk=- on 12.11.14 at 2:11 pm

@ #169 TNT

Can you explain why the ‘foreign money’ allowed the price of housing in the USA to collapse? Or do you think Canada is somehow special with respect to foreign money, and that foreigners would rather put their money here than in the USA?

Your basic theory is that no other country in the world has this foreign money issue, and that is what makes us special. Right. Forget about moving the goal posts, you aren’t even in the right stadium!

#171 Mark on 12.11.14 at 2:21 pm

“Only a fool would insist that money generated from foreign lands did not have an impact on Real Estate values here in Vancouver or Toronto.”

High prices in Canada can be entirely explained through extremities in leverage. Leverage/debt taken on by domestic actors.

“1) The average Canadian salary cannot afford the average Canadian home (Vancouver / GTA)”

CMHC insured subprime credit has been ubiquitously available to purchase the ‘average Canadian home” with minimal down-payments. Additionally, boomers have been able to pyramid their existing equity to get into more expensive housing and drive up prices as lenders have been unusually lax about amortization periods (ie: writing loans with 25-year amortization periods to 55-year-old boomers, for instance, who probably don’t have 25-years left in the paid workforce!).

“2) Canadians making money in Canada cannot afford the prices for the Single Family Detach homes which makes more buyers for the lower tier homes.”

Credit has been widely available to fill in the gap. And the evidence points entirely to extreme use of credit by Canadians to bid up house prices.

“3) Canadians do not have the birth rate to sustain the number of buyers Canada has seen over the last 10 years.”

Immigration, ie: new Canadians, using mortgages to buy, has filled in the gap. The theory of “HAM” is that money is actually being brought to Canada from overseas in significant quantities which clearly isn’t the case (such would be reducing, not increasing leverage in the market, as cash is the opposite of leverage!).

“4) Every neighborhood in GTA and Vancouver has seen an influx in the number of new Canadians.”

Sure, but new Canadians != HAM. Hot Asian Credit, perhaps. Hot Asian Mortgagors, perhaps. But not “money”.

“5) There is no official or reputable records of any data points from anyone that can be used as facts for the impact of foreign monies on Real Estate.”

If Canadian RE pricing can be explained entirely through the extreme expansion of leverage and issuance of CMHC subprime credit, then its really not necessary to have statistics on foreign inflows as it can be inferred that no meaningful quantities exist. Besides, wealthy foreigners probably didn’t get to be wealthy by purchasing assets at extremities of their valuations.

People who claim that HAM exist, usually are quite ignorant of the RE debt bubble that exists in Canada’s economy. If you compare CMHC’s $900B to Fannie/Freddie’s $5-6T, and use a traditional 1:10 ratio, it can be seen easily that Canada’s RE debt bubble significantly eclipses that experienced in the USA.

“6) It is all too “Canadian” to not talk about immigrants migrating to Canada.”

I never denied immigration is occurring. The demographic and racial make-up of Canada is definitely changing, and only a blind person would argue otherwise.

The argument, however, is that “HAM” doesn’t exist in the form postulated, ie: foreigners (particularly Asians) bringing significant quantities of money to Canada to purchase. The immigrants who do arrive to Canada, mostly arrive with little more than enough to purchase a modest used car and rent an apartment. Credit, and hard work, is used to fill in the rest. Recent immigrants are most likely some of the most vulnerable groups financially to a RE collapse in Canada due to their concentration in high-price centres, significant activity (if not the majority) in the housing sector over the past decade of price expansion, and extreme use of leverage in their housing purchases.

#172 Mike T. on 12.11.14 at 2:26 pm

#77 Nemesis

dude you lost me – however, the next time you are in the Okanagan I will be more than happy to explain faster than light anti-gravity travel to you. The wave/particle duality of matter and gravity shielding make it so.

Lillooet

the house that sold for 140K is worth 140K not 175K

also

#167 Gtrz4peace

I am not sure how I got lumped into this but climate change is happening because of the sun. The sun is the 2nd mechanism involved in evolution. See in my cell bio class and evolution and ecology class we learned about this stuff. Evolution happens because of ‘random genetic mutations’ that produce a benefit that is passed on to progeny.

The problem is there is nothing random about the process. The mutations all happen at roughly the same time, in evolution terms IE not spread out over millions of years. So there must be a 2nd mechanism involved and I believe it to be the sun.

#173 Mike T. on 12.11.14 at 2:30 pm

Oh

we are in a period of evolution right now, thus all the chaos

something or someone is keeping all this a secret and giving you/us bogus info to explain it

I’m like 99% sure

#174 Godth on 12.11.14 at 3:06 pm

#167 Gtrz4peace

Maybe you should think through the implications of what you’re saying a little further. Fossil fuels > industrial civilization > science > population growth > complexity > exponential economic growth > physics and geology > finite planet, etc.

The implications are far more stark than you’re green tech. investing can address.

#175 john on 12.11.14 at 3:11 pm

TnT #169 you sound like a typical uneducated high school drop out realtor. Where do you fools come up with such nonsense. Remove CHMC and see how fast and hard prices come down.

#176 Rational Optimist on 12.11.14 at 3:12 pm

161 Mark on 12.11.14 at 12:49 pm

“Of course Russia won’t default. Their debt to GDP ratio is far too low for such to even be possible, even if their oil industry does collapse.”

Their public debt to GDP ratio is very low (given that they defaulted not even two decades ago), but their corporate debt to GDP ratio is fairly high, and very little of their debt is denominated in their own currency. Their currency is in free fall and they are in recession. A huge number of their biggest “private enterprises” are state-owned or –controlled. What happens when Gazprom or Rosneft can’t pay their creditors?

#177 Mark on 12.11.14 at 3:19 pm

“Haha that was funny mark, used honda? What city do you live in?”

The most significant impediment to coming to Canada, as a foreigner, is being able to come up with the minimum required funds. Here’s a table from CIC of the minimum requirements:

http://www.cic.gc.ca/english/immigrate/skilled/funds.asp

You’ll find those numbers to be fairly consistent with my comments.

Of course, like any other Canadian, domestic or foreign born, once they arrive, find a job, and start making some money, the taps of credit are typically wide open to them, and an overwhelming majority get into home ownership as soon as possible. CMHC subprime mortgage insurance has lowered the downpayment requirements almost to nothing, so of course these Canadians are bidding up property. The recent immigrant crowd often has the benefit of their loans being de facto non-recourse, as they can simply leave Canada if the housing market crashes and housing fails to provide an augmentation to their lifestyle. Canadian born and raised do not have this option, hence, tend to be more cautious. Add in a cultural affinity towards RE and against financial assets / business investment seen in certain ethnic groups, and its no surprise that recent immigrants are widely seen as one of the most important demand drivers in the Canadian residential RE marketplace.

#178 bdy sktrn on 12.11.14 at 3:30 pm

#167 Gtrz4peace on 12.11.14 at 1:41 pm
@33 – Mike T — and all of the climate change deniers on the blog, how do you guys do it? How are you unable to grasp the basic tenets of science?
————————————————-
the ones who see through the lies have advanced scientific training. engineers,physists,chemists etc.

it’s like you are being bulshitted in italian, but you can’t speak a word of it.
well, we ‘disbelievers’ can speak science fluently (thats why we make your airplanes, computers, satellites, cars and utility grids etc) and we can see they are bullshitting in the extreme.

most ‘climate scientists’ couldn’t survive for a second in a real medical/engineering/network/financial field where imagining up bogeyman wasn’t the name of the game

#179 JimH on 12.11.14 at 3:30 pm

#162 TnT

“Cato the Elder has left the building?”
==============================
Shhhhh! Don’t disturb him! He’s in the middle of his initiation ceremony here…
http://www.funnyordie.com/videos/6a75827042/paranoids-anonymous-from-larry-graves

#180 Inglorious Investor on 12.11.14 at 3:37 pm

#169 TnT on 12.11.14 at 1:50 pm

For what it’s worth, I’ve been in the market for a number of years and I’ve talked to several realtors about this (commercial and residential). They’ve all said that ‘foreign’ money has been a major factor.

Exactly what realtors wish you to believe. Did you buy it? — Garth

#181 John on 12.11.14 at 3:40 pm

Hi Garth

Realtors in Edmonton are saying not to worry. Not as dependant on oil as we once were.

http://www.cbc.ca/news/canada/edmonton/edmonton-housing-boom-to-continue-into-2015-despite-oil-skid-1.2870032

That’s a shock. Realtors pumping real estate. — Garth

#182 bdy sktrn on 12.11.14 at 3:44 pm

oil at 59.87 here we go again.

#183 Ole Doberman on 12.11.14 at 3:46 pm

Looks like Western Canada Select Oil just hit $48/barrel.

Welcome to the next Great Depression – Gartho was right again.

OD –

#184 Alex on 12.11.14 at 3:51 pm

Hi Garth and blog dogs,

simple question to you, what is the average oil production (extraction) cost in Alberta compared to USA/Russia/Saudi Arabia and rest of the world? Is $60 per barrel killing our oil industry or it should go lower?

Thanks

#185 Drill Baby Drill on 12.11.14 at 4:00 pm

#169 TnT
I agree with your comments on international monies coming to certain RE markets in Canada. Whether it is wealthy immigrants or hard case mercy immigrants the need for more housing will be staggering in the future few years. Just last weekend the United Nations called on Canada to accept immediately 30,000 Syrians. To date we have only accepted 457 since the war began over there. Were are we going to put 30K of new Canadians ?

It is highly unlikely immigration levels will be raised from where they have sat for almost a decade. — Garth

#186 old gringo on 12.11.14 at 4:14 pm

Not everyone has been slammed by the drop in oil prices.
This country has hedged oil for all 2015.
Keep your eye on the ball.

http://www.cnbc.com/id/102260792

#187 Inglorious Investor on 12.11.14 at 4:20 pm

#167 Gtrz4peace on 12.11.14 at 1:41 pm

First, don’t panic.

Climate change is not the issue. At issue is the cause of climate change, and our response to that change.

As to the cause, the debate is whether or not climate change is anthropogenic. One can produce loads of scientific ‘evidence’ for either side of that debate. While I do think human actions can play a part, basic science and an understanding of the forces of nature tells me that Mother Nature and the Sun God are FAR more powerful influences on climate than we humans. And if they so wished, they could wipe us out in an instant.

My main concern with those who scream for a call to action to, what, stop climate change? If you think about that for just a moment, you’d realize how silly an idea that is. Any actions we might take to actively stop climate change would be like trying to piss on a house fire. The forces allayed against us are just too strong. And we would waste vast amounts of resources doing so. However, we can do things, such as geoengineering that might have real, detrimental effects on the environment and our health, like the nutso idea of seeding the atmosphere with sulfur.

If you get your science from a Hollywood movie, I sincerely hope you are not a member of the IPCC.

As for the timeline for changes, I’ve read that the data shows that climate patterns can change significantly within a time span of as little as ten years. And that’s before humans had any chance of affecting the global environment in any way.

IMO, the only actions we should take specifically regarding climate change are defensive actions. Instead of fighting Mother Nature and the Sun God, we should work with them and adjust our living patterns accordingly.

As for species extinction and other environmental concerns, we should focus on reducing man-made pollution in all its forms. There is no debate on pollution, either its causes or its effects. Reducing pollution and waste on global scale would be the best thing we can do. That’s where the real problem is.

Caveat, with regards to species extinction. Mass extinctions have occurred before. They are the result of natural changes and events. However, if we are a major cause of this latest mass extinction, then my money is on pollution and other habitat-destroying actions of human kind as being the cause.

As for investment, the money will flow to where the profits are to be made. Not to where the real solutions lie, necessarily. Renewables may be part of the solution, but don’t think they are a panacea. I’m sure we will discover some very detrimental effects from various renewables in time.

In the ’50s it was predicted that nuclear energy would make electricity too cheap to meter. How’s that turned out? Some very smart scientists were touting that back then too.

#188 Mark on 12.11.14 at 4:22 pm

Realtors in Edmonton are saying not to worry. Not as dependant on oil as we once were.

Just like Calgary, perhaps not as dependant on oil, but highly dependant on RE. There’s more people employed in Calgary’s RE industry, than there is in Calgary’s O&G industry, and as RE slows down, on account of oversupply, so goes the rest of the City’s economy.

O&G is what, around 5% of Canada’s GDP if I remember correctly. FIRE is in excess of 20%. Oil prices declining will be ‘blamed’ for the Alberta RE trainwreck now in progress, but in reality, bubble RE valuations are the chief culprit.

#189 robert on 12.11.14 at 4:22 pm

The pullback has started already! Just take a look at the cutbacks already announced by Canadian Producers. Add to that the dividend cuts and Alberta is already talking billions of dollars withdrawn from the economy. With this alone one can only imagine how many 100k a year jobs are going by the wayside. Can you imagine the writedowns coming in early February? With many living paycheck to paycheck those pinkslips will equate to missed truck payments missed mortgage payments and missed toy payments. The liquidation will begin the day the pink slips are handed out. Watch for the hotel like camps to be shuttered on a moments notice. It will not be pretty or at all funny!!

#190 r1200c on 12.11.14 at 4:26 pm

Bahahahaha!!!!

Edmonton housing boom to continue into 2015 despite oil skid – Housing market no longer tied to oil and gas industry, realtors say…

http://www.cbc.ca/news/canada/edmonton/edmonton-housing-boom-to-continue-into-2015-despite-oil-skid-1.2870032?cmp=rss

#191 Roy on 12.11.14 at 4:31 pm

Canadian dollar getting crushed
http://www.cbc.ca/news/business/canadian-dollar-plunges-to-5-year-low-as-oil-dips-below-60-1.2869946

Western Canadian Select at $42.51

CTV said oil producers lose money for every barrel they produce under $50.

#192 Godth on 12.11.14 at 4:34 pm

#170 SWL1976

Surviving Progress
https://www.youtube.com/watch?v=IpOCn1zJdHg

The New World Order
https://www.youtube.com/watch?v=W4nSjPdT788

#193 Mark on 12.11.14 at 4:35 pm

“With many living paycheck to paycheck those pinkslips will equate to missed truck payments missed mortgage payments and missed toy payments.”

Not only missed payments, but the banks will (and are) acting to raise interest rates as applicable to adjustable rate loans for a wide swath of Canadians.

So even for those who are lucky enough to keep their jobs in the industry, they’re probably going to be stuck with higher finance costs.

And, unlike the 2008/2009 crash, there’s very little the BoC/GoC/CMHC can do to arrest the deflation. The BoC can lower policy rates to zero (and they will). But they don’t have anywhere near the sort of reflationary toolkit as they had 5-6 years ago available to them. Especially since consumer credit-worthiness is such a giant issue.

#194 Obvious Truth on 12.11.14 at 4:43 pm

I can’t believe the nonsense about RE holding up. The same arguments. Just sales pitch stuff. I bet as a proportion of the population immigration has been way higher in the past. Although I have not checked this.

Ask the italian who loves RE. How many Italians and other Europeans came over in the 60’s and 70’s. News flash. They all bought houses. And rental property. And cottages. If fact there are whole cities of Italians.

Anyone listening to jim doak. He knows more about assets than your local RE agent. And bank economists. They are scrabbling for a new tag line.

This is the perfect storm folks. Nobody thought this could all come to pass at the same time. Oil will be pointed to as the catalyst. Media needs a catalyst. The money flow and stats can reports have been telling for a while.

Canadian financials up less than the TSX right now. RY looks anemic.

#195 Inglorious Investor on 12.11.14 at 4:44 pm

“Exactly what realtors wish you to believe. Did you buy it? — Garth”

Aha! Good point.

#196 bdy sktrn on 12.11.14 at 4:47 pm

we should focus on reducing man-made pollution in all its forms. There is no debate on pollution, either its causes or its effects. Reducing pollution and waste on global scale would be the best thing we can do. That’s where the real problem is.
——————————
billions are being diverted from this real need to chase the ghost of carbon.

#197 Dub on 12.11.14 at 4:52 pm

I am not sure why people even care about Greece. They are mostly a tourism based country that export feta cheese and olives. Who cares if their market goes down. Worry if Germany goes down… People just like to fly with whatever news they hear…

#198 calgaryPhantom on 12.11.14 at 4:55 pm

#184 Ole Doberman on 12.11.14 at 3:46 pm
Looks like Western Canada Select Oil just hit $48/barrel.
————————————————————————-
Have real time price information for WTI and Brent. But even after googling, i can’t seem to find same info for WCS oil.
Can any one point me to a link?

Thanks

#199 Drill Baby Drill on 12.11.14 at 4:55 pm

#189 Mark

Oil alone is 7% of Canada’s economy. That does not include the pipe, steel, instruments, equipment of all stripes and electricity just to name a very few. Oil is one of the most highly valued commodities on the planet. Do not think for one second that RE is driving Edmonton or Calgary it is OIL period. You need a serious education on Alberta. Next time you are in Edmonton have a drive around Nisku then tell me all about how RE is driving Edmonton’s economy.

Mark is burdened by knowing everything. Forgive him. — Garth

#200 Ole Doberman on 12.11.14 at 5:13 pm

#199 calgaryPhantom on 12.11.14 at 4:55 pm

#184 Ole Doberman on 12.11.14 at 3:46 pm
Looks like Western Canada Select Oil just hit $48/barrel.
————————————————————————-
Have real time price information for WTI and Brent. But even after googling, i can’t seem to find same info for WCS oil.
Can any one point me to a link?
———————————————————-

http://www.psac.ca/business/firstenergy/

#201 SWL1976 on 12.11.14 at 5:19 pm

#169 TnT

There’s no data to compute any analysis, just common sense and being a visitor to any public school in the Toronto or Vancouver

————————————

Sounds like a conspiracy theory to me

#202 Mark on 12.11.14 at 5:28 pm

“Do not think for one second that RE is driving Edmonton or Calgary it is OIL period. You need a serious education on Alberta.”

Okay, so I went to StatsCan and got one:

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labr67j-eng.htm

170k jobs in the “Forestry, fishing, mining, quarrying, oil and gas” sector. Or around 7.5% of Alberta’s jobs. Pretty big, but pales in comparison to many other sectors. Construction, which is RE, has far more jobs.

I know, its easy to get carried away with believing that oil has been the driving force behind Alberta’s economy, but in reality, its similar to everywhere else in Canada — an excess of debt, and a giant housing bubble that’s now in the process of popping.

#203 Mike S on 12.11.14 at 5:33 pm

“Mark is burdened by knowing everything. Forgive him. — Garth”

He does have some good points, but the CAD/USD opinion is very uncommon. The markets seem to disagree with him on that one

#204 For those about to flop... on 12.11.14 at 5:41 pm

Mark has taught me one valuable lesson…..
No man knows everything .

#205 Funny that on 12.11.14 at 6:01 pm

Mark is burdened by knowing everything. Forgive him. — Garth
+++++++++++++++++++++++++++++
Perhaps you can spare him the burden of posting 20 times a day and just vapourize him. ZAP!!! Just like that.
Like pulling off a bandaid. ZAAAAAPPPPPPPP!
No more Mark=many happy people.

#206 Tony on 12.11.14 at 6:24 pm

Re: #204 Mike S on 12.11.14 at 5:33 pm

Longer term he’s right the Canadian dollar call. Simple debt to GDP ratios in both countries and I’d really like to see debt to real GDP in America not fabricated GDP.

#207 chapter 9 on 12.11.14 at 6:26 pm

#189 Mark
Take a look back to the mid 80’s when the 10th and 11th largest banks in Canada by assets, Canadian Commercial and Northlands-went broke.Oil prices exploded in the 70’s till 1981 when oil price dropped like a rock.See a parallel here? Alberta’s economy dependent on energy prices went into recession– REAL ESTATE COLLAPSED!!
And as #200 Baby Drill commented “Take a drive around Nisku” cause when times are good it is hopping but when the shit hit the fan the only busy place was Ritchie Bros. auction for the receivership sales.

#208 Drill Baby Drill on 12.11.14 at 6:27 pm

#203 Mark
Mark please understand without the massive income to our country from oil and it’s derivatives to the overall economy the other industries would contract to a fraction of their current value. This is basic OIL economics. For someone who professes to understand economics I should not have to explain this ECON 101 fact to you.

#209 Leo Tolstoy on 12.11.14 at 6:29 pm

Mark doesn’t even know what he doesn’t know. LOL. The funniest part is when he stumbles into a topic where it’s clear that he’s just making stuff up. That’s comedy gold Jerry!

Every blog needs a clown. Just to spice things up.

#210 Marcus on 12.11.14 at 6:30 pm

the main driver of weather on planet earth is that big fiery ball at the center of our solar system. If you really want to try to understand climate change and cycles on earth then study the sun. Here is a great place to start. https://www.youtube.com/watch?v=LBfuTP8_3NU&list=UUTiL1q9YbrVam5nP2xzFTWQ

#211 Leo Tolstoy on 12.11.14 at 6:31 pm

Perhaps you can spare him the burden of posting 20 times a day and just vapourize him. ZAP!!! Just like that.
Like pulling off a bandaid. ZAAAAAPPPPPPPP!
No more Mark=many happy people.

Don’t worry. Mark is following the same path that got him banned from the Red Flag Deals forum. There was only so much make-believe that the moderators there could handle.

#212 Mark on 12.11.14 at 6:32 pm

“No more Mark=many happy people.”

Really? My track record of being right in my comments is pretty good. Everyone and their dog a couple years ago thought that the BoC would have a clear trajectory to raise rates in an ongoing program far higher than 1%. These days, I don’t think anyone really believes in anything but a cut or, at the very least, a very prolonged period of 1%. I clearly identified hitting the $600B limit of the CMHC’s subprime guarantee authority as being a major inflection point in the Canadian RE market — in hindsight, that proved correct as well as prices have been on the decline since 2Q, 2013 with the Realtor claimed increases only being on account of a dramatically altered sales mix. But, by all means, the purpose of a discussion forum is to discuss, so if there’s anything you disagree with that I write, you certainly have the option of responding.

Additionally, I suggested quite a while ago in my comments that credit-worthiness would become a serious problem for Canadian residential borrowers in light of severely over-extended debt ratios. And low and behold, even in the absence of policy rate changes, a large number of Canadian borrowers in adjustable rate products are now receiving letters of bank-set rate hikes.

I’m happy with my record, but there’s always lots to learn!

#213 Nomad on 12.11.14 at 9:41 pm

Robin Wiebe, Senior Economist, Conference Board of Canada on BNN says “Buyers from China pushing prices up”.

http://www.bnn.ca/Video/player.aspx?vid=512258

Some say it’s not an important factor for real-estate. Some, like this economist, finds the factor important enough to list as a reason it’ll be fine in Vancouver. Who to believe. Flip a coin? If even StatsCanada isn’t reliable, why believe any other source for stats on this.

I’ll just get a slurpy and watch the story develop.

#214 Nomad on 12.11.14 at 9:53 pm

“Unfounded speculation. The housing market will melt, not crash. Markets will not be too fussed. — Garth”

If Ebola had that much effect on markets, it’s hard to believe the markets wouldn’t be too fussed by a housing meltdown. At least short-term (and likely even medium-term). Foreign investors in the TSX would just go somewhere else, like they did with oil stocks lately. Market doesn’t like uncertainty.

But I guess we’ll see!

#215 Nomad on 12.12.14 at 1:07 pm

Oil down 3.97%.
It’s almost fun to watch now. Unless your stocks were 30%+ in energy (because you wanted that extra yield).

Funner is the CMHC laying off 10%.
I just want to post it to get you fellows salivate over what the Man will post tonight. I can feel his joy from here.