Realtor® DNA

NO BUBBLE modified modified

Carla was a real estate agent in the States for more than fifteen years. “Thought I knew the business,” she says. “But, ugh, I bought at the height. Had to rent the house out when my husband got transferred.”

She lives in Dallas now. “We may move to Calgary in June…..I know strange but what can I say.  I am happy to say my husband is not in oil and gas.  Obviously looking to rent there….hopefully now we can rent something reasonable. May have to put the house in Connecticut on the market in the spring, or get a new tenant.  What are your thoughts of our situation?  Be a landlord or get rid of the house?

“I found your blog recently and I am addicted…love….love…it.  I wish I found out about you over 10 years ago, before we made some mistakes in real estate.”

As you probably know by now, real estate agents are the absolutely last people on the planet to realize when housing is about to blow up. A realtor’s idea of diversifying is to purchase another condo. They believe it’s a great time to buy when prices are rising. And when they’re falling. Or stable. They think liquidity means plumbing. It’s hopeless.

Right until the very moment when America found itself circling the drain of a massive housing crisis, the National Association of Realtors was saying everything was okay. It was a great time to buy. And then, poof. Within two years, real estate nationally had lost 32% of its value and the middle class was done like dinner. Realtors who had told people to ‘buy now or buy never’ were learning how to cook fries.

I thought of that this week as realtors in places like Edmonton, Calgary and Kelowna were telling local reporters that houses there are bullet-proof. They might actually believe it. They’re not inherently evil, just really confused.

Well, on Thursday things got a little worse. As predicted, oil cracked $60 and is now in the fifties. That’s a 44% plunge since the summer, when we were all worried about Kim Kardashian’s butt. The Canadian dollar has also descended to a 5-year low, and sits at just over 86 and a half US cents, off half a penny. Stocks improved, which was no big surprise, since the selling over the past week was more emotional than logical. Lots of people are understanding better than cheaper energy means more global growth and more US expansion.

But as I mentioned yesterday, it’s the perfect storm for Canadian houses. Cheaper gas here won’t offset a big drop in energy export revenues, crushed government royalties in Alberta or the loss of untold numbers of bloated oil patch salaries which find their way back home as far out as Newfoundland. Meanwhile accelerated recovery in the US means the Fed will advance its timetable for starting its coming round of interest rate hikes. And given the collapse in the loonie – which badly inflates the price of our imports – it’s looking like the bank of Canada will also be on the move in 2015.

Underlying it all is an immense sea of household debt. I hope you picked up on my key point yesterday – so many young people have decided to commit financial suicide, usually with the help of a realtor. Over 20% of all debt is held by people who owe 350% of what they earn. Another 40% of the debt was borrowed by people who owe 250% of their income. (The average for all of us is debt equal to 164% of earnings.) The Bank of Canada says the super-screwed tend to be the youngest borrowers, which only makes sense since they’ve bought houses with weensy down payments. But these are also the most vulnerable workers – the least experienced with lowest seniority, and the first to be booted when troubles come to town.

Sounds like a time bomb to me. But then, I don’t have a license plate that reads BUYNOW.

Well, back to Carla. Should she sell her house in New England before she moves to Cowtown? The median price of a house in Connecticut is going down again – off almost 5% in the past year, from $251,000 to $240,000. But foreclosures are reduced considerably, and overall sales volumes have increased. The question is simple: if Carla is not really making much money from being a landlord (probably a negative return factoring in her non-performing equity), and if the value of the place is shrinking, why the heck hang on?

A rational person would sell. But realtor DNA is different.

By the way, what’s the difference between a sperm and an agent? The little wriggler has a 1 in 250,000 chance of becoming human.

209 comments ↓

#1 Nomad on 12.11.14 at 6:41 pm

Oil at 59$ something.

It’ll be mighty interesting to see if oil stocks keep falling at the same rate they’ve been falling, if oil goes lower.

More interesting is any news related to real-estate that will come from Alberta over the next 6 months. Please share anything you find.

Oil fell today. The dollar fell. Stocks did not. — Garth

#2 blue steel on 12.11.14 at 6:43 pm

Bang on, Garth. Realtors only care about the commission. As such, they can’t see anything past their nose.

#3 Derek R on 12.11.14 at 6:45 pm

Real estate agents are often “true believers”. Unfortunately that makes them more dangerous, not less.

#4 Jenn on 12.11.14 at 6:47 pm

OUCH.

#5 Happy Renting on 12.11.14 at 6:48 pm

Oh, SNAP on the sperm comparison!

Hey, Carla is a realtress and loves your blog. There may be hope for the profession, after all.

#6 Juanito on 12.11.14 at 6:48 pm

@ Nomad and Swl1976 yesterday:

—————————————-

Not all capital projects should be halted. NWR partnership will be primarily a diesel production facility, and as diesel is not dropping as much as gasoline, and as the US economy is recovering leading to more consumption, and as a US construction boom is becoming more likely as mortgage rules are relaxing, diesel demand should remain robust and justify the execution of that project.

Not surprising to hear there are others that share the philosophy I adopted years ago about actively pursuing a career in maintenance. I feel I’m one of the lucky ones, now entrenched in a company that is entrenched in the industry and a recognized leader in mobilizing the skilled manpower necessary to keep facilities operational. When looked upon next to the rest of the construction industry, we’re kind of a niche market.

Big oil that wants to keep projects staff will temporarily move them into maintenance gigs in lieu of laying them off. Suncor did this during the 2009 crude-crash, will probably happen again. Syncrude re-allocated hundreds of millions of dollars from capital projects to T&M in 2010. I fully expect these to be the ensuing spending characteristics of big oil in the new year. Regular plant maintenance is lawfully enforced and hence it isn’t going away, unless the plants close. When you start adding more staff to T&M that want to remain useful and gainfully employed, they identify more problems that need fixing or have been on the back-burner for a while to avoid future unplanned outages (which really impact the bottom line) and hence an increase in scope and bloating operations spending budgets.

Another fact is that many newer players to the industry that arrived in the last few booming years will be in for a crude awakening (no pun intended) as they discover their facilities, as designed and built, will be inadequate for their service. We’re already seeing it. Uncoventional oil production requires unconventional materials and quality control. Carbon steels will upgraded to alloy and stainless steels, stainless steel will upgraded duplex, inconel, hastelloy, and proprietary steels, vessels and tanks will be fit with corrosion-resistant liners and weld overlays. More alloys, more NDE, more specialized labor required, more cost to the companies and their shareholders, more growth in the T&M industry.

Anywho, just my two cents. But remember, I’m just a young albertan in O&G with a mortgage and little saved in a TFSA, so by all accounts here, I’m still just a naive fool.

#7 Stickler on 12.11.14 at 6:51 pm

“The Bank of Canada says the super-screwed tend to be the youngest borrowers, which only makes sense since they’ve bought houses with weensy down payments. But these are also the most vulnerable workers – the least experienced with lowest seniority, and the first to be booted when troubles come to town.”

————————————————-

Well, the younger ones are also cheaper…so layoffs could be aimed at more SR staff.

#8 Realitybytes on 12.11.14 at 6:52 pm

RE agents don’t actually sell houses.
They sell you on their ability to generate market exposure and traffic. Then sit back and wait for someone to lay down.

Oh, they also sell you on reducing your listing price after blowing smoke up your skirt about how valuable your property is, in order to get the listing.

On the buyer side, I guess they just sell their chauffeuring ability.

#9 Stickler on 12.11.14 at 6:53 pm

Check out the charts on the following…could be great buying opportunities:
FCG
ECA
ABEV

#10 T5_INCOME on 12.11.14 at 6:57 pm

Garth and Blog dogs; how is this even legal ?

https://www.youtube.com/watch?v=owswcmoBHM8&feature=trueview-instream

Try to imagine the legal repercussions if you replaced condo, with “TD Stock”

Unbelievable. Truly.

#11 Liquid on 12.11.14 at 6:57 pm

Q: How many Realtor does it take to screw in a light bulb?

A: None. They only screw home buyers who are irrationally horny for real estate. :P

#12 waiting on the westcoast on 12.11.14 at 6:58 pm

It’s sad to see what they are going through. Note – she drank her own kool-aid so don’t ride her too hard for the promotion of real estate… She was a believer. This is why it is important to do your own due diligence.

Mass hysteria is not limited to Realtors… Look at the people who have been buying in Canada at these elevated amounts recently…

The funny thing is that it is not whether you should hold stocks, currencies or real estate. It is whether any of those asset classes are a buy when you are seeking to acquire them. If not, move on to a class that is and of course spread it around to reduce the overall risk. Just make sure you are buying it because it is a good value and not just to diversify.

#13 r1200c on 12.11.14 at 6:58 pm

With Harper government now trying to go after price disparity between Canada and US… can someone tell me why the difference between regular unleaded and premium is 10 cents a litre in Canada, while it’s 10 cents a gallon in the US… that’s like a 4 times gouge ratio!!!

#14 Mike S on 12.11.14 at 7:03 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.”

Longer term there will be (technological) singularity…

But to the point. To compare the debt to real GDP, you need to take into account the expected debt expansion, which usually follow housing correction. Add CMHC loses (which government insures), higher unemployment (in RE/construction sector), maybe stimulus spending by the government

Mark seem to argue that we will see debt to GDP expansion in Canada (maybe on massive scale) yet CAD will do well relatively to other currencies.
Which basically means that the world will be willing to lend us money on 0%-negative rates to save us from self inflicted mess. It might happen if you are the USA (or even Japan to a point) but Canada? we sure better than many countries, but not that good

I think the CAD value is dictated by our growth rate (which seems to go down) + resource/energy sector (which seems to go down as well)

Sure, in the longer term the resource/energy sector might rebound, and if not we hopefully should be able to ramp up manufacturing, but not just yet

#15 Mark on 12.11.14 at 7:04 pm

“Well, the younger ones are also cheaper…so layoffs could be aimed at more SR staff.”

If the O&G sector works anything like the tech sector’s collapse did, they’ll just push the compensation of the seniors down, and dump the recent hires.

When you look at Alberta oil and gas salaries, and base hourly salaries, they’re really not that high compared to what’s seen in Ontario. The real differentiator is overtime and bonuses. Which are entirely discretionary and can (and will) be cut on a whim by O&G firm management seeking to ensure their solvency and cost competitiveness in the oil price environment.

For many O&G (and supporting sector) workers, this can be a 50% cut in actual pay, without even going through a layoff. For management types, stock purchase plans and stock options are largely under-water at this point.

And let’s face it, since the work in the sector tends to be so specialized, its not like the workers, the jackscrews, the engineers, etc., can just get up and find other jobs that have comparable pay.

#16 mitzerboy on 12.11.14 at 7:08 pm

I haven’t seen any trucknutz in the queen city for over a year now…..

#17 David on 12.11.14 at 7:09 pm

I recently met someone who agreed with me that we’re in a bubble. They then proceeded to say that people better get in now before the crash happens.

What?

#18 Drill Baby Drill on 12.11.14 at 7:11 pm

#6 Juanito
You have made some very good observations with regard to oil field operations and maintenance. Yes Suncor and Syncrude, Husky, CNRL, Devon etc. will shift personnel around to keep costs down and reduce layoffs but this will only help some staff. Many will be let go once break-up comes in mid March then the sh__ will hit the fan. Once spring break-up hits the drillers, construction, suppliers, truckers and some operations will be set home permanently.

#19 Drill Baby Drill on 12.11.14 at 7:16 pm

#15 Mark
You are an idiot without a doubt. Oil field base rates are the highest in Canada. No other jurisdiction even comes close. I pay junior engineers straight out of school $34/hr, my seniors get $100 – $125/hr. Prorate these hourly rates to the skilled field construction guys and they about 75% of the engineers rates. Once again you do not know what you are talking about. Quit wasting our time.

#20 Mark on 12.11.14 at 7:18 pm

“Mark seem to argue that we will see debt to GDP expansion in Canada (maybe on massive scale) yet CAD will do well relatively to other currencies.”

I think I was argued that we’ll see debt contraction at a rate faster than GDP contraction. On account of consumer debt ratios being so extended compared to the historic norms, or that of most other economies.

This is the opposite of what has occurred in the past decade, and that is, consumer debt expansion at a rate faster than GDP expansion, stretching those ratios to levels exceeding that of most other economies.

The former should push up the value of currency, as absolute debt contraction and de-leveraging, is effectively a form of ‘short covering’ of the currency. While the latter, ie: the past decade has been characterized by heavy borrowing which effectively is a ‘short’ of the currency.

Of course, transient periods for currency pairs can prove to be fairly violent, as we’re seeing lately. But the long term outcome of aggressive development of a robust export capability such as Canada has developed is an improved standard of living and a reduced domestic cost of capital (ie: ability of central banks to run low rate policy without inflationary consequences). Occasionally chronic net importers (ie: the USA) will temporarily gain the upper hand during economic turbulence, but a good rule of thumb is that exporters are always the long-term winners in the currency game, eventually forcing the chronic importers into lower currency valuations and a reduced standard of living.

#21 Smoking Man on 12.11.14 at 7:21 pm

Judging by the kinetic molecular theory, the passive aggressive electron structure of the female mind, and her happy, tail wagging, bone fetching hubby of the hipsters here in Toronto.

I’m calling for a spectacular spring market.

The fear and loathing being pushed from MSM and the state tells me, market is a lot stronger that the charts from TREB indicate.

#22 not 1st on 12.11.14 at 7:25 pm

#6 Juanito on 12.11.14 at 6:48 pm

So young, so delusional, so screwed.

In the last 3 oil crashes, the companies did not shift into super maintenance mode while waiting for prices to recover. This area was cut to the bone and maintenance deferred or cancelled all together because it has little effect on the bottom line.

#23 david on 12.11.14 at 7:27 pm

Hi Garth,

Why wouldn’t BoC just let the dollar float down?

Inflation is very low will go up with lower dollar but can be done gradually. It will make exports & esp dollar priced oil more competitive. They won’t have to raise interest rates as quickly – which, as you point out, will be catastrophic to the housing market.

Also, given the fed’s propensity to raise rates in ’15, why do you think the mortgage rates and the U.S. are almost at record lows again. I think 30 year mortgage can be had for 3.75%.

#24 not 1st on 12.11.14 at 7:27 pm

I don’t under standing the debt rations. So does 350% mean I have a house worth $350k but make $100k? Thats clearly serviceable.

Sigh. — Garth

#25 jackson on 12.11.14 at 7:28 pm

The question is simple: if Carla is not really making much money from being a landlord (probably a negative return factoring in her non-performing equity), and if the value of the place is shrinking, why the heck hang on?~~Garth~~

so its not a good time to buy? last year you said it was a good time to buy in the usa

And you didn’t? — Garth

#26 TEMPORARY® Foreign Prime Minister on 12.11.14 at 7:31 pm

“…..They’re not inherently evil, just really confused…….”
=========================

In reality, given personal experience, I believe the former is correct.

Realtor® ? in no CAPS ? The horror, the horror….

P.S. Your last line almost blew the Dom Perignon White Gold Jeroboam out my nose. Not nice. (Truth be told, no one should drink anything that costs more per litre than 20W50).

#27 Godth on 12.11.14 at 7:41 pm

Realtors are as immune to delusion as economists – remember 2007-8?

I’m really looking forward to this much hyped interest rate hike by the Fed. Let the great unraveling begin.

#28 TEMPORARY® Foreign Prime Minister on 12.11.14 at 7:42 pm

Juanito on 12.11.14 at 6:48 pm
“…many newer players to the industry that arrived in the last few booming years will be in for a crude awakening (no pun intended)…….”
========================

crude awakening. priceless.

Do you have a © on that? or can we share it.

#29 Realties.ca » Realtor® DNA on 12.11.14 at 7:44 pm

[…] Source: http://www.greaterfool.ca/2014/12/11/realtor-dna/ […]

#30 Arfmooocat on 12.11.14 at 7:45 pm

I was going to bring this up the other day..

The Fed raising interest rates to defend the falling loonie

I remember the fed raising interest rates to defend the falling dollar (before loonie) in the past.

#31 For those about to flop... on 12.11.14 at 7:48 pm

Hi Garth your last two lines reminded me of an old joke back in Oz.
What is the difference between a dead koala on the road and a dead realtor on the road?
There are brake marks in front of the dead koala!

#32 Godth on 12.11.14 at 8:00 pm

#14 Mike S

Longer term there will be (technological) singularity
———————————————————-

What happened to space colonies and undersea cities? Oh yeah, technological Jesus didn’t show up.

#33 JSS on 12.11.14 at 8:04 pm

#19 Drill Baby Drill on 12.11.14 at 7:16 pm
#15 Mark
You are an idiot without a doubt.
—–
#19 You sound like more of the idiot. This Mark guy seems to know a lot more than you.

#34 Sideshow Rob on 12.11.14 at 8:05 pm

#9 Stickler
“Check out the charts on the following…could be great buying opportunities:
FCG
ECA
ABEV ”

No thanks. I’ll let someone else catch those chain saws.

#35 Momo on 12.11.14 at 8:08 pm

“… when we were all worried about Kim Kardashian’s butt. ”

Don’t you worry about Kim’s butt, I’m pretty sure it is in good hands, so to speak :-)

#36 Joe on 12.11.14 at 8:08 pm

“Over 20% of all debt is held by people who owe 350% of what they earn.”

Not quite understanding this. 350% of what they earn in a year?

#37 Grammar Check on 12.11.14 at 8:14 pm

#28 TEMPORARY® Foreign Prime Minister on 12.11.14 at 7:42 pm

Juanito on 12.11.14 at 6:48 pm
“…many newer players to the industry that arrived in the last few booming years will be in for a crude awakening (no pun intended)…….”
========================

crude awakening. priceless.

Do you have a © on that? or can we share it.
===============

Why not just put the ® after Minister – really makes more sense.

#38 Mark on 12.11.14 at 8:17 pm

“I pay junior engineers straight out of school $34/hr, my seniors get $100 – $125/hr.”

That’s similar to what’s seen in Ontario when you convert to annual salaries (ie: multiply by 2000), adjust for bonuses and stock, the cyclicality/stability of the position, etc. Your point? But my comments were mostly with respect to trades. Engineers are only a small fraction of the overall O&G labour force compared to the hoardes of other workers.

So my point stands, the key differentiator in Alberta is the amount of highly compensated overtime (for hourly workers) on offer, and bonuses/stock participation for management professionals such as engineers. Not base salaries. Which is why cuts can be made very rapidly to “senior” level salaries without mass layoffs occurring.

In the last 3 oil crashes, the companies did not shift into super maintenance mode while waiting for prices to recover.

Yeah there’s only so much maintenance to be done, and if “super maintenance” is done for the next maintenance cycle, less maintenance is required for the subsequent cycle. Even if a highly capitalized O&G operator does not lay people off, the mere availability of a large number of qualified applicants who have been laid off from other firms will definitely suppress compensation.

#39 Obvious Truth on 12.11.14 at 8:19 pm

It’s all over but the excuses. Realtors will officially become very long term investors.

Garth is poking fun at you and any retort at this point will be hard swallowing in the months and years to come.

#40 jess on 12.11.14 at 8:20 pm

routers
a sticker on a shared mailbox 1.6.dollars of loan assets staffing cost 0. watch the video
the receptionist never heard of arteva

http://www.theguardian.com/business/2014/dec/09/-sp-luxembourg-tax-files-how-junckers-duchy-accommodated-skype-and-the-koch-empire

#41 the Jaguar on 12.11.14 at 8:21 pm

Drill Baby Drill & other O&G types on this blog::
Question for you: Won’t people still be employed who are drilling for gas versus oil? Would the rigs and personnel on gas rigs keep some parts of the industry afloat?
BTW Garth, suppose you saw the article (yet another) in the G&M about consumer debt blowup worry on auto loans, with long amortizations and over financing the value of the asset a continuing concern. This can’t end well.

#42 Mark on 12.11.14 at 8:26 pm

“I remember the fed raising interest rates to defend the falling dollar (before loonie) in the past.”

And central bank currency intervention almost always fails to have the intended consequences, at least in the short term.

There is ample historical precedent for quite extended periods of low rates after a significant domestic industrial expansion and debt expansion associated therein.

http://www.bankofcanada.ca/wp-content/uploads/2010/09/selected_historical_page1_2_3.pdf

The period of February 1944 to July 1955 comes to mind — ~11 years of <2% rates, trailing significant wartime inflation and substantial creation of new industrial supply.

#43 Ronaldo on 12.11.14 at 8:35 pm

With those kinds of odds its seems that it’s a complete fluke that anyone of us have made it which gets me to thinking of why we get so up tight about anything. We should just thank our lucky stars that we’ve been given this chance to begin with. And I can’t even swim.

#44 Victor V on 12.11.14 at 8:35 pm

Terence Corcoran: Bank of Canada provides ‘forward confusion’ about state of housing market

http://business.financialpost.com/2014/12/11/terence-corcoran-bank-of-canada-provides-forward-confusion-in-state-of-housing-market/

#45 RealistvsExtremist on 12.11.14 at 8:42 pm

Still getting gouged in ZombieHamcouver at 110 per litre. I guess this means when oil is back over 100 bucks gas will be 160. I guess with all the “tax free” money here from overseas bank accounts they don’t care.

#46 len on 12.11.14 at 8:43 pm

Stocks did not fall?

materials and energy sectors were both down, -1.08% and -0.31%, respectively. No bargain hunters in those sectors, no bounce back, no buying the dip.

I had a question regarding hedging of oil prices. Many energy companies have recently commented that portion of their production is hedged at a decent $97. Who are the counter parties in this hedge? Wall Street, shadow banking? I have seen numbers as high as 3.9 trillion of derivatives issued that are suddenly exposed to an enormous risk with oil price at these levels. What will be the implications for the financial sectors? Another issue that may rock the financials and investors who snapped up high junk bonds is default risk- ETF asset managers are thought to be huge buyers.

None of this is priced in by a long shot – the belief that all these bets will be bailed out is very much entrenched. If not, all hell will break loose again. Forget rising rates if this detonates.

BTW, 2/3 of all full time U.S. jobs have been related to the energy sector in the US. Texas has been on a tear.

I am not including links to support my assertions – you never do so I am sure that won’t be a problem for this post to make it through. :)

#47 Ret on 12.11.14 at 8:44 pm

#13 CDN vs US price for premium
Suck it up. You are a Canadian and used to getting screwed by the government and big oil companies.

I wasn’t going to mention CDN/US freight differentials on new cars and trucks, but now that you have gotten me riled up…

#48 takla on 12.11.14 at 8:44 pm

‘No fear’ of a housing correction..Wishfull thinking on cmhc’s behalf.
Will Canada’s big banks be forced to cover cmhc in the event of a realized housing crash,how well capitalize is cmhc??
Not a good time to be in the Canadian banking industry
Add Straped consumers in the eye of declineing job storm coupled with a housing crash is the perfect storm.. @ least we’re saveing $20 buck a week on fuel!

#49 Leo Tolstoy on 12.11.14 at 8:48 pm

Hey Mark, please stop making stuff up. It’s embarassing.

Are you a high school drop out? Seriously.

#50 Mark on 12.11.14 at 8:52 pm

“Will Canada’s big banks be forced to cover cmhc in the event of a realized housing crash,how well capitalize is cmhc??”

CMHC has approximately $20B of equity capital to cover ~$900B of subprime mortgage loan guarantees and 90% re-insurance of third party guarantors.

If you figure that only 5X leverage is prudent for such loan guarantees, it logically follows that CMHC is deficient approximately $160B in capital. Which is a good first-order estimate of the sort of bailout CMHC will require.

#51 Godth on 12.11.14 at 8:52 pm

#44 Ronaldo

Just happy to be here…even if it is planet of the apes. Beats the alternative. No one knows. I don’t dream of retirement in this clusterfuck…the only guarantee is death, same as it’s ever been. Sweet relief, in the meantime the sun still appears to rise as the earth continues to spin.

#52 Sheane Wallace on 12.11.14 at 8:53 pm

Is Harper going to explain the difference in the housing prices between Canada and US?

#53 jackson on 12.11.14 at 8:53 pm

Oil fell today. The dollar fell. Stocks did not. — Garth

Well of course they didn’t and they never will ever .ever until there is a new reserve currency after it all comes down but buy then u can kiss the value of the dow 100 000 and S&P500 50000 oh ya baby its gonna get there for sure just like the Venezuela stock market is up like 1000% since 2012 but they are about to default lol

#54 coastal on 12.11.14 at 8:55 pm

The voice of reason at the Bank of Canada speaks the truth yet the sleazeball Remax talking heads can’t help but continue the rape and pillage program. Looking at condo prices in Victoria selling 20- 30% less then what they sold for in 2007, and the Bear Mountain fizzle where nary a sale anywhere near a million is heard in the valley below is quite the spectacle. Every crash starts in the outskirts and works there way in. V-town is goin down bigtime.

#55 Linda on 12.11.14 at 8:58 pm

Well, the lower energy costs should hopefully translate into lower utility bills, along with lower vehicle fuel costs. Certainly some companies are anticipating their delivery costs will be reduced by a considerable amount. As for the Canadian dollar, as long as you spend it in Canada or another country whose currency is either at par with or lower than ours no problem. Even with the disparity in currency valuations buying in the USA might still be worth one’s while, simply because the price disparity is so large. Though once you cross the border the duties & taxes on your purchases might eat up any ‘savings’ you might have had…..

#56 Roman on 12.11.14 at 9:00 pm

So here is the plan for you, folks.

The houses are falling 10-15 percent for the next half a year. Some going to dump it with moderate 10-20% loss and invest in diversified portfolio – just in time for the Fed to start hiking.

After Fed pops the bubble, the yield curve will dramatically flatten, so both stocks and bonds implode. Along with juicy corporate and junk bonds of course, which are already blowing out, but no rush – years and years ahead to deflate that bubble.

Of course everybody will panic and liquidate when oil is 40, SPX 1600, bonds lost 20% (good luck holding them for 2% return when inflation runs at 4-5). News press in Canada for housing sections start with “Dramatic situation on RE markets in Toronto”.

This time is NOT different.

#57 Paul on 12.11.14 at 9:05 pm

A buddy of mine said now that he and the other half are “saving” about $150 a week on gas she wants to take out a HELOC and re-do the kitchen. Got to love it?

#58 Juanito on 12.11.14 at 9:05 pm

@not first #22:

————————————

I may be a little overconfident and young, but I was there when oil crashed to $30/bbl. Our billings doubled the following year as oil recovered and it was attributed to an increased work load that year.

Cancelled maintenance for budgetary reasons?! Please for our well-being, share with all of us what specific companies are willing to take on that risk to the public? Besides, what’s the rush to get their plant back on line sooner only to get crap returns for each barrel refined and sold? If the Saudi’s want to let their oil go for cheap, more power to them…

#59 Victoria Real Estate Update on 12.11.14 at 9:07 pm

. . . . . . . . . . .Victoria House Prices. . . . . . . . . . . . . . .
. . . . . . . . (Compared To October 2007). . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+13%. . . . . . . . . . . .x . . . . . . . . . . . . . . . . . . . . . . .
+12%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+11%. . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . .
+10%. . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . . . . .
+ 9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 8%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 7%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 6%. . . . . . . . . . *. . . . . . . . . . . . . . . . . . . . . . . . .
+ 5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 4%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 3%. . . . . . *. . . . . . . . . . . . . . . . .*. . . . *. . . . . . .
+ 2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..0%. . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . .
———————————————————————————————
. . . . .Oct. . Oct. . Oct. . Oct. . Oct. . Oct. . Oct. . Oct. .
. . . . . 07. . .08. . . 09. . . 10. . .11. . . 12. . . 13. . .14. .

x = peak (June 2010)

(source: Brookfield’s index)

This chart shows that October prices in Victoria were lower than they were in 2007. (link)

Some Victorians assume that buying real estate in Victoria is always a safe bet. That assumption has certainly been proven wrong (see chart).

A significant number of Victoria buyers (from 2007-14) now owe more than their properties are worth. Clearly it would have been better for them to rent in Victoria over the last number of years. Here’s why:

As an example, let’s use a Victoria house that was valued at $650 K in 2010. House prices have declined approximately 13% since then, so that house would have lost about $85 K in value since the peak.

However, with compounding interest on a typical mortgage, you end up paying approximately 2.75 times the original sale price by the time the mortgage is paid off.

Therefore, the total amount saved by buying the house after prices declined 13% would have been more than $85 K, it would have been ($85 K x 2.75) = $234 K. That’s almost a quart of a million dollars! And all you had to do was let prices fall for 4 years.

The savings of $234 K doesn’t include maintenance costs (a new roof could easily cost $25 K) or a special assessment on a condo ($80 K, for example) or any of the other expenses that are associated with owning a property. Here are some examples of special assessment horror stories.

Many of Victoria’s near-peak buyers now understand that buying a house always comes with significant risk (prices might fall) and that an underwater mortgage always brings major financial problems to those families who are stuck in this extremely stressful situation. This is a story shared by millions of our American friends.

The latest Case-Shiller house price index data shows that prices in the US are still lower than they were in December 2004, one decade ago. These numbers prove that it certainly wasn’t a good idea to buy in the US near the peak of the 2006 US housing bubble, even with the (unusually strong) price rebound that was fueled by slashing interest rates from near-normal levels to emergency levels as prices fell in the US.

When prices across Canada are in decline, it will be impossible to slash interest rates in Canada from near-normal levels to emergency levels to slow the price decline and fuel a price rebound since rates in Canada are already at emergency levels. Therefore, there will be no US-style price rebound in Canada.

Girls and guys, Victoria’s housing bubble has deflated a little, but not nearly enough for it to be a good idea to buy a property at this time. Think of all the money that renters have saved (by not buying) since 2010.

Wait for lower prices. Renting for now is definitely the way to go. You will thank yourself in the future.

Until next time – Cheers!

#60 Sheik Yerbouti on 12.11.14 at 9:15 pm

Another excellent post Garth, although my main focus right now is on how to see the market’s “bottom” rather than focusing on Kim Kardashian’s overpriced and inflationary ass-et.

Btw your last 2 lines prompted me to tweak an old joke about lawyers, but maybe a bit more relevant to the current situation…..

Q: What’s the difference between a carp and a real estate agent?
A: One’s a scum-sucking, bottom-feeding scavenger. The other is a fish.

#61 Mark on 12.11.14 at 9:16 pm

“Of course everybody will panic and liquidate when oil is 40, SPX 1600, bonds lost 20% (good luck holding them for 2% return when inflation runs at 4-5). “

I mostly agreed with everything you said, but how do you get inflation at 4-5% with oil at $40? And wouldn’t inflation at 4-5% absolutely blow the crap out of the long end of the curve?

#62 NoName on 12.11.14 at 9:25 pm

#7 Stickler

Well, the younger ones are also cheaper…so layoffs could be aimed at more SR staff.

it is correct that younger work force is in general cheaper vs oldtimers, but when it come to firings or cuts it is a way more expensive to get rid of the older work force vs younger one. just think in terms of price of severance packages. Usually older one are bought out or forced to retire thru job demotions with pay cuts, but that could lead to unjust constructive dismissal, or something like that.
tons of young one, now days are contract workers now days, so only thing that ties them to the company is 2 weeks notice and 4% vacpay.
if place is unionized lower seniority goes out first, so younger workforce is on chopping block fist.

#63 VanDammeCouver on 12.11.14 at 9:26 pm

“That’s a 44% plunge since the summer, when we were all worried about Kim Kardashian’s butt.”

LOL

#64 VanDammeCouver on 12.11.14 at 9:26 pm

It’s go time….. Go Daddy

#65 Arfmooocat on 12.11.14 at 9:27 pm

#42 Mark

I don’t know what your rambling on about regarding my post, but here is a paragraph more relevant to my post.

Manipulating Interest Rates

Another important factor is the level of interest rates in Canada. Interest rates constitute the amount lenders charge individuals and businesses to borrow money. Suppose the interest rate in Canada is higher than in the United States (particularly after each country’s rate of inflation is taken into account). This means that lenders can get a higher rate of return for lending in Canada than in the United States. In order to take advantage of this higher rate of return, international investors will shift their portfolios (for example, government bonds) from the United States to Canada.

These sorts of shifts cause an increase in demand for Canadian dollars. In order to buy Canadian government bonds, investors first have to purchase Canadian dollars; the result is an increase in the demand for Canadian currency. Meanwhile, the demand for the US currency would fall as investors divest themselves of US government bonds in order to reinvest that money in Canada, where they can gain a higher rate of return. The overall result: a rise in the value of the Canadian currency relative to its US counterpart.

As such, the Bank of Canada can attempt to influence Canadian dollar exchange rates by manipulating the interest rates. If the Bank wishes to stop or slow a drop in the value of the Canadian dollar, it may raise interest rates to levels higher than in other nations; this, in turn can spur investment in Canada relative to other nations and demand for the dollar. Conversely, if the Bank wishes to stop or slow a rise in the value of the dollar, it can do so by lowering interest rates below other countries, thus causing lower relative investment and demand for the dollar.

It is, however, important to note that manipulation of interest rates for monetary policy is a very complex task. For example, while higher interest rates may spur higher demand for the Canadian dollar amongst lenders, it can also reduce demand amongst other economic actors. As explained earlier, the value of the dollar depends in large part on the level of business activity and foreign investment. High domestic interest rates often have the result of slowing down general economic activity and investment, as businesses and consumers cannot cheaply borrow the money they need to continue or expand their operations or make consumer purchases. This economic slowdown can, in turn, reduce domestic and international demand for Canadian dollars.

#66 Ray Skunk on 12.11.14 at 9:43 pm

Not sure why so many are getting butthurt about Mark.

At least what he contributes is relevant, on-topic and promotes discussion on the subjects we’re here to discuss.

If you don’t like what he has to say, his posts are typically identifiable by a bold quote to kick things off – simply scroll past it. Not too hard, surely?

#67 Drill Baby Drill on 12.11.14 at 9:44 pm

#22 Not 1st
Juanito is in fact correct, producers will not defer maintenance on a production facility because it is there cash flow generator. If these plants go down on an unplanned shutdown it affects their bottom line greatly. Besides all of these O&G facilities have partners who would sue their pants off if they caused loss of production due to maintenance cut backs. You need to join up with Mark given your vast knowledge of the oil industry.

#68 NoName on 12.11.14 at 9:50 pm

#59 Juanito

you obviously work at a process plant, where dynamics are bit different vs classic production plant, so i understand that it makes you feel bit more safe vs same position in manufacturing.
but be careful when handy dandy LSS specialist comes, first thing he will say i will come at no cost to the company, i will minimum save my wage or more just by reducing legacy costs. (Ongoing costs to a company that come from funding activities that, by definition, do not increase revenue.) so for bean counters maintenance, materials, logistic and warehousing, is some form of legacy cost that has to be reduced and outsourced.
not that i am giving you employer any ideas, but where i worked company was cutting my OT and they were paying 3x my hourly wage to outside contractor to do a jobs that i could do better and maybe faster.
why beats me, but its true. there was a talk at some point to outsource all maintenance to outside company. so dont get to cozy. i use to baby sit process for living, now iam just unemployed bum…

#69 Drill Baby Drill on 12.11.14 at 9:51 pm

#38 Mark
Once again you show your lack of experience with labour costs. These guys working in the field besides making by far the highest hourly rates they also get overtime plus some get bonuses as well as free room and board and airline travel almost all are non-union unless they work in a major facility. Alberta is chock full of Ontario welders, electricians, engineers etc. etc. For now anyway.

#70 Arfmooocat on 12.11.14 at 10:03 pm

The Saudi’s want cheap oil

They don’t want the West to become self sufficient or have alternative energy technology to ruin their gold mine.

#71 TEMPORARY® Foreign Prime Minister on 12.11.14 at 10:03 pm

#37 Grammar Check on 12.11.14 at 8:14 pm
=============================

I’m only here TEMPORARY®ily until the Man-Who-Hides-In-Omnibus-Closets gets punted in 2015.

..and now, back to our regular programming.

#72 Bubbles on 12.11.14 at 10:04 pm

Interesting how there’s no mention on the Government Shutdown by midnight again, if the 1.1 Trillion dollar budget isn’t passed.

North America is Great!

#73 Lumberjack arch on 12.11.14 at 10:04 pm

Drill baby drill is right I’m a boilermaker and this spring shutdown season is going to be one of the busiest despite the fall in oil, all you guys can take your rambling BS about layoffs and shove it , you have no idea what your talking about , do you think billion dollar outfits are going to turn out the lights because of a temporary price drop which isn’t even in the real loss zone? All projects, and expansions currently underway will be finished including scheduled maintenance programs, stop talking like ur a sync rude CEO ur just a geek on a blog like the rest of us

#74 TurnerNation on 12.11.14 at 10:06 pm

Short sellers today call it Rue Rue Remon (LULU.US)

#75 Mark on 12.11.14 at 10:12 pm

“Suppose the interest rate in Canada is higher than in the United States (particularly after each country’s rate of inflation is taken into account). This means that lenders can get a higher rate of return for lending in Canada than in the United States. ”

The problem with that paragraph in particular is that it simply is not true. The ‘return’ on lending is:

Return = Interest Rate + Currency Appreciation

Lenders have been perfectly willing to, for instance, lend in Japanese Yen at 0% policy rates and minimal spread, because the Japanese economy traditionally has been very productive and expectations have been deflationary.

A similar set of circumstances exist in Canada. Deflationary forces are extremely entrenched in the pipeline, implying currency appreciation. Therefore, the perception is, and increasingly will be that Canadian borrowers do not need to pay an explicitly greater than minimal rate of interest as currency appreciation will provide the foreign investor a return.

Contrast this with a nation which has a currency with a higher rate. The only reason why the currency has a higher interest rate implied, is that investors believe that currency depreciation will occur. Hence, providing for a total return that is within an acceptable range for the cash investment in question.

As Garth constantly reminds us, and I tend to agree, the path of raising rates in the US is close upon us, which also implies that currency depreciation and inflation forcing such rate increases is also relatively near.

#76 pastbeyond60 on 12.11.14 at 10:13 pm

If she is an American living in Canada she must be aware of the need to pay taxes in both countries and face costly international accounting fees. Also none of the tax deferred vehicles in Canada are available to her except RRSPs. She cannot invest in anything but US mutual funds or ETFs. Anything not US based are taxed under the punitive PFIC rules. Currently most US investment firms are not allowing clients to have accounts if living outside the US.

Hopefully neither she nor her husband have any fiduciary responsibilities in a business as that entity will then have to report to the IRS. Good luck, it is confusing!

#77 SWL1976 on 12.11.14 at 10:14 pm

#6 Juanito – Sure sounds like you know the business. The skilled will definitely survive and even thrive in this market. I’m sure you will do just fine.

Garth – Nice jab on the realtor’s. However, I agree that most are not bad people, just misinformed and believing too much of their own hype. Perhaps the vanity plate will have to read BY NOW

#78 Mark on 12.11.14 at 10:18 pm

“These guys working in the field besides making by far the highest hourly rates they also get overtime plus some get bonuses as well as free room and board and airline travel almost all are non-union unless they work in a major facility”

But the actual hourly rates aren’t meaningfully higher than in Ontario. The difference is all those discretionary benefits and overtime, which has the effect of doubling the overall compensation package for hourly worker. And for engineering and other management professionals, stock options and bonuses have much the same sort of effect.

The point was, over and above the base package, compensation is mostly at the employer’s discretion, especially for the senior staff. And such compensation can fall very quickly in the current environment, without even handing out pink slips. Most O&G workers have few other options to make the same sort of money and will gladly take a 50% all-in pay cut, rather than sit on welfare in the Maritimes.

#79 Sean on 12.11.14 at 10:18 pm

Your analysis is usually quite good Mark, though I’m not sure why you bother. Your currency analysis I’m not so sure about… Surprisingly, you made the point yourself tonight, saying “it logically follows that CMHC is deficient approximately $160B in capital. Which is a good first-order estimate of the sort of bailout CMHC will require”.

These deflationary pressures you mention will result in the central bank printing money.. but we are not the world’s reserve currency, and there is not infinite global demand for our freshly printed dollars. This sort of dynamic will not be bullish for our dollar.

#80 Smoking Man on 12.11.14 at 10:21 pm

Markets.

Percent of ufo believers.

http://m.huffpost.com/us/entry/3900669

Percent of religious believers.

http://www.washingtontimes.com/blog/watercooler/2012/dec/23/84-percent-world-population-has-faith-third-are-ch/

#81 Ben on 12.11.14 at 10:24 pm

Canada is getting a bit more attention internationally now.

Here is an article from the Financial Times blog FTAlphaville:

http://ftalphaville.ft.com/2014/12/10/2067681/the-bank-of-canada-on-the-risks-of-high-household-debt-and-overpriced-housing/

“We don’t want you to get too gloomy. The following footnote suggests that the Bank of Canada thinks that even under a really unpleasant scenario, the impact wouldn’t be nearly as bad as it was south of the border…Then again, the Fed was pretty sanguine about the US housing market before that bubble burst, too.

#82 Drill Baby Drill on 12.11.14 at 10:26 pm

#78 Mark
The point is the hourly rates are much much higher than anywhere else in Canada. Get over it already.

#83 Leo Tolstoy on 12.11.14 at 10:26 pm

Drill baby drill is right I’m a boilermaker and this spring shutdown season is going to be one of the busiest despite the fall in oil, all you guys can take your rambling BS about layoffs and shove it…

Don’t be too hard on Mark. His problem is his belief that because he knows a little bit about a few things it means that he knows a lot about everything.

This is generally not a problem as his BS often falls upon the ignorant. However, occasionally there is a poster who actually happens to have expertise in the topic and Mark gets exposed.

Confirmation bias is a bitch.

#84 Leo Tolstoy on 12.11.14 at 10:30 pm

Is Harper going to explain the difference in the housing prices between Canada and US?

No because nobody can do it without looking like an armchair hack. Or they don’t care about their credibility.

#85 Mark on 12.11.14 at 10:30 pm

“Not sure why so many are getting butthurt about Mark.”

I don’t mind, unless it gets too disrespectful. The deflationary viewpoint is really hard for a lot of people to wrap their heads around, because it hasn’t happened in a major, coordinated way worldwide since the 1930s, and to a lesser extent in Japan and the United States more recently. The idea of prices going up, and consumer demand always growing is firmly entrenched from the past 30-40 years of growth in North America.

Mike Shedlock (“Mish”) had views that are fairly similar to mine prior to the culmination of the 2008 RE crash. The gold-bugs and hyperinflationists skewered him almost every chance they got, even though, in hindsight, his argument, that housing-led asset deflation would precipitate a reduction in consumer spending, and ultimately a collapse in aggregate demand, proved to be correct. I find no reason to believe that the same isn’t going to happen to Canada, although key differences in the structure and nature of mortgage finance and inversely correlated industry in Canada may somewhat attenuate the downturn and create a surprising upside.

#86 Inglorious Investor on 12.11.14 at 10:36 pm

Ultimately Carla’s choice should depend on the risk, which depends largely on her personal financial situation and local market conditions. A careful assessment is needed.

Connecticut is not Camden. US real estate may have dropped 32% nationally, but price changes varied greatly from market to market.

That said, if one believes the US economy truly is in recovery, then one would think Connecticut, being a more affluent area, would benefit from a recovery. Therefore, the drop in price could be a temporary blip, and may indeed perhaps be a bottom given the historical trend.

However, I’m reading that 2015/16 might see a big economic downturn. Hope for the best. Plan for the worst.

#87 O&G Field Geologist on 12.11.14 at 10:38 pm

#41 the Jaguar on 12.11.14 at 8:21 pm
Drill Baby Drill & other O&G types on this blog::
Question for you: Won’t people still be employed who are drilling for gas versus oil? Would the rigs and personnel on gas rigs keep some parts of the industry afloat?
++++++++++++++++++++++++++++++++++

Drilling for oil can stop immediately. Gas drilling actually stopped in 2008. I haven’t been on a well that targeted gas since then. The wells that are “drilling for gas” now are targeting a liquids rich gas stream (think butane or propane) which is massively more valuable than plain vanilla natural gas. None of the my colleagues nor I have drilled a conventional gas well in years.

Ft. Nelson (gas shales) is supposedly a ghost town now with, as I hear it, only one drilling rig left. Gas shales in the U.S. destroyed the Canadian nat gas industry many, many years ago. Gas prices back in 2007 were $12/GJ. It has been stuck at $4 since then, which is the energy equivalent of $24/bbl oil. How much oil drilling would go on in Canada at $24 oil?

In the years since the GFC, oil drilling saved the oil patch. Now with oil in trouble there is no Act III.

Right now in Alberta rig utilization is running at around 50%. We should be in high season now closer to 75-80%. Not good. I have two projects that I’m waiting on in the New Year that the client has suddenly gone quiet. Not looking good.

So, for me, it is time to go sailing. But that’s only because I sold my Calgary house years ago, bought a sailboat and live on it when I’m not working in Alberta or overseas. If I was a rookie with big house and truck payments I’d be crapping now.

#88 Mark on 12.11.14 at 10:39 pm

“These deflationary pressures you mention will result in the central bank printing money.. but we are not the world’s reserve currency, and there is not infinite global demand for our freshly printed dollars. This sort of dynamic will not be bullish for our dollar.”

A CMHC bailout is merely a matter of transferring debt from bank balance sheets, to the GoC’s balance sheet. A non-event in terms of external funding requirements. Since the CMHC is no secret to the world and sophisticated investors, presumably GoC T-Bond buyers already understand that the GoC is going to be at least partially responsible for taking bad debt off of the hands of the banks for which they’ve provided guarantees.

Its the collapse in domestic aggregate demand from a severe reduction in consumer spending, and domestic demand for CAD$ debt repayment that will drive the CAD$ much higher.

Think of the CAD$ like a stock. Over the past decade, everyone has been shorting the CAD$ by borrowing, and spending on houses, foreign vacations, foreign cars, remittances to the in-laws back in Pakistan, etc. Debt has reached its probable apex. When everyone stops shorting the CAD$ (ie: stops borrowing), and starts repaying the debt (ie: buying CAD$), its pretty easy to see what happens — the currency experiences a short squeeze and shoots higher. The same logic applies to any stock with reasonably solid fundamentals and positive net earnings.

#89 young & foolish on 12.11.14 at 10:56 pm

“probably a negative return factoring in her non-performing equity”

So, RE that is rented out for positive cash flow is non performing? How does that differ from a share in a company? Somebody please help this fool understand.

#90 moloko on 12.11.14 at 10:57 pm

If I had a 2 million dollar home in Van right now I’d be selling it and investing in Suncor, CNQ and Husky.

$80,000 a year in dividends, enough to pay rent on an equally nice house as you sold PLUS cash in your pocket.

In 5 years from now you’d probably be able to buy back your old house for $1.5 mil AND still have your original 2 mil that you invested today.

No brainer!

#91 Mark on 12.11.14 at 10:58 pm

“The point is the hourly rates are much much higher than anywhere else in Canada. Get over it already. “

Except they’re not. The difference is in availability of work, and the overall benefits package. Which can be rolled back in an instant, without a single pink slip issued. Anyways, this whole line of discussion is silly — I think it is self evident that employers in an obviously overheated sector can easily slash their compensation costs significantly as the sector slows down, regardless of the specific methods employed.

#92 Inglorious Investor on 12.11.14 at 11:02 pm

People argue about high inflation and deflation, but we should realize that the average person gets hurt in either extreme. I am attempting to position myself for both. Stocks, bonds, income real estate, gold.

The challenge, as I see it, is that we could get alternating bouts of very high inflation and deflation. Volatility. Caused largely by a reboot of the international monetary order.

The wealth of the average person can get eroded severely as we swing from one extreme to the other: periods where savings decline in value, and other periods of outright job loss and lack of income altogether. Or everything at the same time. We might even see outright confiscations of wealth. So by the time it may all shake out and we are truly on a path to global economic stability, a great deal of wealth may have been lost.

In truth, the wealth that will be lost is payment for all the future income we spent on yesterday’s consumption. We might just get a bona fide economic boom where the declining value of savings will be off-set by much higher incomes. But somehow the bill has to be paid because the money was already spent. Of this, I am sure.

#93 Kevin Unfortunately in Winnipeg on 12.11.14 at 11:05 pm

“CHOICE GALORE FOR HOUSE SHOPPING IN DECEMBER”

http://www.winnipegrealtors.ca/Resources/ShowDocument/263

More inventory in Winnipeg since 1980… when the average lending rate was 17%. This is going to turn out bad for everyone.

#94 wallflower on 12.11.14 at 11:08 pm

#87 O&G Field Geologist on 12.11.14 at 10:38 pm

do you need crew?

#95 Mark on 12.11.14 at 11:10 pm

, all you guys can take your rambling BS about layoffs and shove it , you have no idea what your talking about , do you think billion dollar outfits are going to turn out the lights because of a temporary price drop which isn’t even in the real loss zone? All projects, and expansions currently underway will be finished including scheduled maintenance programs,

You’re absolutely correct about projects, maintenance, etc. But that doesn’t stop the employers from slashing overtime to zero. Which, in most cases, would decrease compensation by around half for O&G construction tradespeople without a single pink slip issued.

#96 SWL1976 on 12.11.14 at 11:12 pm

#38 Mark – I am in the trades and have worked in Ontario, BC, Alberta, and the Arctic. Hands down Alberta is the best pay even excluding the OT. I just got a healthy bump in pay in August so all smiles here.

#22 not 1st – Judging by your math skills in your following post you are in no position to make maintenance calls in O&G. The plant I am at they could not even consider shutting down in winter without causing major damage and restart costs. With smaller budgets they will be fixing what they have with skilled people pulling wrenches, less new parts requires highly skilled people to make repairs

#97 VICTORIA TEA PARTY on 12.11.14 at 11:23 pm

HISTORY NOT STUDIED? BE CAREFUL WHAT YOU THINK MAY TRANSPIRE

It is fascinating to read these posts from youngsters employed in the oil patch.

It is also instructional to read posts from others poo-pooing convictions that maintenance projects will hold them steady until oil prices turn around.

Standby for a lot of job bloodletting. Oil prices pay no attention to anyone, ever.

A LITTLE HISTORY…

I lived in Calgary in the early 1980s after PM Trudeau’s disastrous NEP was forced down Alberta’s throat.

I was on my way to Lethbridge, one winter day down Highway 2, and was passed by a steady stream of portable oil rigs all heading to the USA. Those were jobs and opportunities going in the wrong direction for us. It was awful to watch.

So, is that where Alberta jobs COULD soon be heading now should oil prices keep plunging BUT US fracking keeps on? Only if the Yanks are repaying their junk bond debt interest rates will they be able to hire idle Canadian rigs, if they so decide, BUT at a severe discount, of course!

SO…

…the pain of joblessness will be all too real and young workers, who’ve been living pretty well for years, will feel the wounds of economic reality and be forever changed.

EFFECTS COULD ALSO BE FELT HERE IN VICTORIA?

Here, I marvel at the huge secondary industry of custom home building and renovations. Much of the work has been financed in recent years by rich Albertans who’ve moved to the coast. It is amazing how many contractors, known by their large gaudy pickup trucks, toil at some work sites for years in some cases.

It’s de rigeur for these “transplants” to buy old dumps, have them demolished and replaced by some magnificent piles of plywood, stucco, stone, the poshest of interior bric and brac and so on. Enormous costs would have been funded in part by oil patch stock dividends, cheap home equity loans or profits from selling Alberta holdings.

In Oak Bay, for example, a lot of construction has been going on for years but things seem to be slowing a little. In other words are there more fancy pickup trucks than available work?

We may know shortly, depending where oil prices go. If prices continue to slide how will that affect the transplants? If they’re in hock they won’t be spending so much here after that. Who’ll buy their palaces? Not good for our economy.

CONSEQUENCES…

Alberta’s fall from economic grace will have so many impacts and unintended effects right across Canada and will be hard to track.

IF YOU’RE INTERESTED…

Check out this, a site showing Western Canada Select, the price Canada gets for selling heavy Alberta-produced oil to customers. The prices have been gutted as of late. Disturbing indeed.

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

#98 Mike S on 12.11.14 at 11:24 pm

“Of course, transient periods for currency pairs can prove to be fairly violent, as we’re seeing lately. But the long term outcome of aggressive development of a robust export capability such as Canada has developed is an improved standard of living and a reduced domestic cost of capital”

In the long term Canada will be great, but as long as CAD continues its down trend, Poloz will not risk cutting rates and might be forced to increase them, especially when/if the US will move

#99 Suede on 12.11.14 at 11:25 pm

Mark, are you getting paid to post?

“You. You’re good you.”
-Joe Pesci (i think)

#100 Millennial_Falcon_thefirst on 12.11.14 at 11:29 pm

A message to Mark:

As a fellow Millennial in his early 30’s, please continue posting and ignore the nay sayers.

Your posts are very informative and contribute a lot to the discussion always.

Here is a thank you,

MF

#101 Millennial Maestro on 12.11.14 at 11:30 pm

“The Canadian dollar has also descended to a 5-year low, and sits at just over 86 and a half US cents, off half a penny. Stocks improved, which was no big surprise, since the selling over the past week was more emotional than logical.”
—————————————————————-

Garth,

Look at the VIX today, on a neutral day! It will tell you exactly how emotional and illogical the selling over the past week has been. It will also tell you exactly where we’re heading.

Not a chance. The VIX is no leading indicator. — Garth

#102 pravchaw on 12.11.14 at 11:34 pm

At $60 for oil – not outside the middle east no one can make money and the middle east cannot supply all the oil needed. Oil prices will be back to $80 in 6 months. This is a good time to get long on Oil stocks. Short term pain for long term gain.

#103 Mark on 12.11.14 at 11:37 pm

“In the long term Canada will be great, but as long as CAD continues its down trend, Poloz will not risk cutting rates and might be forced to increase them, especially when/if the US will move”

From everything I’m seeing right now, things look closer to going off a cliff, than actually heating up in such a way that would require rate hikes. Two of the country’s most significant economic drivers are deflating (RE and O&G). Governments will soon follow in full austerity mode.

Additionally, the XBB.TO ETF, an ETF of long-term Canadian bonds (corporates + gov) is sitting within a stone’s throw of all-time highs despite the recent currency losses. If the belief that currency losses were going to be a longer-term sort of thing, this would have sold off, not be pushed back into all-time record territory.

Just what sector or part of the Canadian economy is going to actually heat up enough to replace the demand lost from the RE and O&G sector slowdown, never mind heat it up enough to necessitate interest rate hikes?

#104 CalgaryRocks on 12.11.14 at 11:38 pm

So, for me, it is time to go sailing. But that’s only because I sold my Calgary house years ago, bought a sailboat and live on it when I’m not working in Alberta or overseas. If I was a rookie with big house and truck payments I’d be crapping now.

Is the boat moored somewhere where it is cost effective? It’s an interesting concept. I imagine that your primary residence is where your boat is and thus pay taxes there. Hopefully this is a low tax jurisdiction?

#105 TEMPORARY® Foreign Prime Minister on 12.11.14 at 11:39 pm

#87 O&G Field Geologist on 12.11.14 at 10:38 pm
=========================

Thanks for concrete facts instead of hyperbole.

#106 Doug in London on 12.11.14 at 11:57 pm

@moloko, post #90 and pravchaw, post #102:
Well, I see you both understand the idea of buy low and sell high, a highly abstract concept most people (including many commenters here) don’t appear to understand.

#107 Mike S on 12.11.14 at 11:59 pm

“What happened to space colonies and undersea cities? Oh yeah, technological Jesus didn’t show up.”

Wait. What?

Man, sorry if I ofended your religion in any way !?

#108 Marco on 12.12.14 at 12:11 am

@81 Ben

Thanks for the article.
What really stuck out to me was the debt to income chart. Only 15.8% of Canadians are between 1-100%. So basically if this chart is accurate 84.2% of Canadians pay out more then they bring in.
And as Garth already stated 40.2 % are highly indebted. Not pretty in any kind of downturn.

#109 Smoking Man on 12.12.14 at 12:21 am

Jesus I’m doomed, a new law, cops can take your phone and snop.

I pray to God, it’s a few dudes that arrest me for what evet. If a hard core feminist cop, or a cop that sports pink socks gets their hands on my phone, water boarding, a choke hold. A kick in the softies.

I’m not going to sleep tonight..

#110 Entrepreneur on 12.12.14 at 12:22 am

Depends how much money you put towards the house so far? If a headache I would sell but if feel comfortable with the arrangements & plans to return keep it. Wrong time to buy in Canada.

Where is Victoria Real Estate Update?

#111 Mike S on 12.12.14 at 12:24 am

“Additionally, the XBB.TO ETF, an ETF of long-term Canadian bonds (corporates + gov) is sitting within a stone’s throw of all-time highs despite the recent currency losses. If the belief that currency losses were going to be a longer-term sort of thing, this would have sold off, not be pushed back into all-time record territory.”

True. Maybe Garth can explain that.
My opinion is that this related in large part to very low rates in Europe/Japan (and US – although slightly higher). In small part this happens because of caution/expectation of some equity Market correction.

“Just what sector or part of the Canadian economy is going to actually heat up enough to replace the demand lost from the RE and O&G sector slowdown, never mind heat it up enough to necessitate interest rate hikes?”

Nothing comes to mind besides manufacturing sector. But consumer prices of imported goods might go up because of the CAD decline. This might create inflation expectations which in turn pressure the CAD lower.

Housing decline should be significant to create a big deflationary effect. This might only happen after the rates rises. So far the common knowledge is the real estate goes “up up up” (3 words is the correct way to say that)

#112 Waterloo Resident on 12.12.14 at 12:25 am

#38 Mark said (( “I pay junior engineers straight out of school $34/hr … That’s similar to what’s seen in Ontario .” ))

Ah, you might want to check out the salaries of recent engineering grads, its more like $14 per hour, not $34 per hour.

#113 45north on 12.12.14 at 12:25 am

Leo Kelivakis : from your link: There seems to be a failure to connect the dots here. The main driver of the higher housing prices is the low financing rates created by the Bank of Canada’s low interest rate policy.

it’s so obvious, rising interest rates would sink the Canadian housing market.

Garth: the Fed will advance its timetable for starting its coming round of interest rate hikes. And given the collapse in the loonie, it’s looking like the bank of Canada will also be on the move in 2015.

which sounds like one big smack down of the Canadian housing market

#114 mortgagebrokeron on 12.12.14 at 12:51 am

I think we are going to see a Japanese type real estate market. Long steady decline in asset prices… Look at all the commodity prices. Oil. Gold. Corn. Beans etc.

We are talking significant declines over the past two years.

Farmland and housing will soon follow.

#115 Freedom First on 12.12.14 at 12:57 am

I feel pretty good about how things are going in Canada. And yes, house salespeople do not make good financial advisers at any time. For myself however, the few times I have used them, either buying or selling, they have been the ones bent over. Thank you Mr. Market. Now, that should go for anything a person buys through a smiling sales agent who is trying to service you. I always look after myself as I know nothing is as important as putting my freedom first. I have been very Blessed in my life, but then I keep everything simple, I have too, as there is many many many agents out there, who are also looking out for #1. I can say today though, for myself, I adhere to ethics, as I have to, or I could not live with myself. I see Garth as the same, ethical, and it is why his haters hate his truth revealing Blog, and attack him steady, but never for his character, but for his honesty. Evil can’t stand the truth.

#116 Juanito on 12.12.14 at 1:09 am

#68 NoName:

————————–

Nice guess, but I’m actually not an operator, nor even a direct hire for any plant. However, I am actually in with contracting, so thanks for that tidbit about outsourcing, it made my evening!

Speaking seriously though, I do regret that you we’re put out of a job. With sincerity: Good luck, I hope you land something soon.

——————————–

#97 Victoria tea party

——————————–

Cool story bro. I remember by old man tell me about the NEP, and the oil rigs that lined up at Coutts. Those were different times, hopefully we’re a better nation now. But where is the instruction I am to take by those poo pooing T&M as a safe haven during this crude crunch? Do you know which plants will be boxed up and moved down the highway?

To clarify, I’m poo pooing Alberta-bashers that ridicule us for circumstanes out of our control. As other blog dogs have pointed out, all of Canada benefits from the export of our resources and the employment offered here. I’m grateful to live in a region that has been able to provide for the rest of the nation for so long. I’ve also met some great people from all across Canada here and I truly feel for them and their families if they become victims of the looming downturn.

Why mock locomotive Alberta as it derails if you’re also a passenger on train Canada?

#117 VB on 12.12.14 at 1:15 am

Hmmmm….I have to say more doomsey than reality.

The world didn’t end in the 90’s real estate bust and it won’t end this time. House prices will decline because they are over valued yes…oil will recover because the big players won’t play chicken for long. Buy good companies on the dip and buy that cheap(er) house in two years.

#118 J man on 12.12.14 at 1:19 am

Mark as an O&G guy I generally agree with what you say about the O&G industry but I can’t say I agree on the dollar. Most issues are going to lead to Canadian weakness relative to the US and the dollar will suffer. CAD$ went up when the US was sucking and we were commodity income rich. With the reverse will come a lower CAD$. On the plus side it’ll only help Canadian O&G that sell in US dollars. Any drop in the exchange rate helps offset the oil drop. Interesting that none of our eastern commenter-rocket scientist predictors have pointed that out.

I definitely agree with your assessment that many companies have quite a bit of room to drop wages without out any layoffs. OT and “variable” pay components are a large part of many companies compensation model. My company could drop 20% of G&A wages with a simple freeze on variable pay alone.

That said there will be layoffs. New capital projects are already being cut and that will continue. I would not want to be a conventional/unconventional drill with a big debt load right now.

There will be hurt but it won’t be as catastrophic as some are gleefully hoping it will be and the prices won’t stay down forever. O&G is still the most in demand essential commodity in the world and the oversupply is not THAT big. And demand will rise with lower prices. Anybody that analyzes todays “unconventional” reservoir performance knows that production declines will dominate as soon as they stop injecting BIG capital into many of our latest and greatest unconventional reservoirs.

I won’t get into how the US isn’t even close to energy independence and that their much of their best unconventional reserves are already drilled up. The fact that they tend to extrapolate their best performance curves to the moon without any grounding in reality…like there is a limit to the good ground…its much like realtors! Unconventional reserves are the preverbial scraping the bottom of the barrel. Word to the wise. It wasn’t some amazing technology that opened unconventional reserves. It was economics. We always knew the stuff was there it just wasn’t considered it was so bad and not worth the effort. It wasn’t until shortages and BIG price increases did the money and effort go into getting that stuff out of the ground.

I would liken the current glut in oil production vs peak oil argument this way. Consider you have 20 jars of peanut butter and that has to sustain you for two years. That peanut butter is controlled by a manager/producer. That manager/producer throws 10 of those 20 jars of peanut butter at you in the first month. Do you have no worries about peanut butter supplies? That is todays reality.

#119 omg on 12.12.14 at 1:24 am

#9 Stickler
Check the charts for
…..
Abev
———-

Do not know about the charts, but ABEV has really been slammed by the market’s view of Brazil.

The 2nd last thing Brazilians quit doing in tough times is drinking, and as well ABEV has considerable revenue flow external of Brazil.

#120 TheLaughing(e)CONomist on 12.12.14 at 1:28 am

Re: Drill Baby Drill posts
===================================
Employment in Alberta in “Mining, quarrying, and oil and gas extraction ” – data from Stats Canada table 282-0007

Nov.2008 – 157,000
Nov.2009 – 131,300
Nov.2010 – 144,600
Nov.2011 – 161,800
Nov.2012 – 166,400
Nov.2013 – 187,700
Nov.2014 – 169,000

#121 omg on 12.12.14 at 1:29 am

DON’T THINK THIS IS THE BIG ONE

We have had many false starts over the past few years, whether this one is for real, time will tell.

Myself, I do not think we will see a real correction in housing due to a slowdown in the oil sector – there will be some pain in Alberta and Sask, but it will not be a contagion that will spread across the country.

For that we need a real macro catalyst, which I still contend will only be a meaningful rise in interest rates.

That is still a ways off regardless of what some US FEDsters may be saying.

#122 omg on 12.12.14 at 1:34 am

#9 Stickler

Mind you, if oil recovers over the next year or so pretty much any Canadian oil stock looks like a winner.

Hard not to like CNQ at $30 (and paying 2.5%) – why not have Boy Wonder Murray manage your money?

#123 Mr. White on 12.12.14 at 1:40 am

I spoke with one of my friends who runs a nice size oilfield service company. He is raising his rates by 10% on the drilling and frac water side of his business because he is too busy and cannot keep up with demand.

No one knows what the price of oil is going to be. But nobody up and down the corporate ladder in any of the big companies that I know think that these prices will last out the first quarter.

I like oil stocks because we are going to be using lots of petroleum for at least the next 30 years. The industry always finds a way to make money and pay dividends.

I always buy, up and down the market, average out roll over the dividends and in a few years you will be looking at more juicy gains than ever. Betting against oil and gas is always a dumb move.

Garth does not seem to see that no one other than a few pundits and headline grabbing CEO’s think that oil is hitting the ditch. The reality is that the difference in production between 50 or 60 buck oil and 100 buck oil is always less than 2 million barrels a day.

Syncrude made money on 11 buck oil in 1989 and on 90 buck oil in 2012.

#124 Juanito on 12.12.14 at 1:59 am

#49 jaguar:

——————————–

Don’t know a whole lot about NG drilling but cheap natural gas is beneficial for bitumen upgraders or fertilizer producers as it’s used as feedstock for their reformer furnaces. There are a few ammonia/nitrogen plants in Alberta that are undergoing expansions and upgrades with the help of cheap gas. Gas plants are still being built or debottlenecked to increase feedstock to them. So there must be some gas drilling activity going on, but nowhere near the same volumes as there was 6-7 years ago.

#125 IM in C on 12.12.14 at 2:05 am

By the way, what’s the difference between a sperm and an agent? The little wriggler has a 1 in 250,000 chance of becoming human.
===============================

Naughty naughty Mr. Turner !

#126 Original Dave on 12.12.14 at 2:27 am

“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.

—————

Mark, I’m even more confused now. From what I’ve understood, when an economy is heated (in normal circumstances. Not during times after the financial crisis we had), countries look to raise rates. The U.S obviously couldn’t do that until they sorted their sh*t out (now). The same applies to Canada. Lots of debt, high cost of living etc, plus the U.S is moving in that direction.

How wise would it be for Canada to have a big disconnect with the U.S? Isn’t it ideal to try and stay on the same page as the world’s largest economic powerhouse? You mean to tell me that the U.S will raise rates while Canada will drop rates? What would that do to our dollar if in the process the USD is strengthening?

Lots of questions from me because I just don’t see things the way you do. What you’re saying doesn’t make sense

#127 Russ L on 12.12.14 at 2:45 am

GT said, “By the way, what’s the difference between a sperm and an agent? The little wriggler has a 1 in 250,000 chance of becoming human.”

I had to laugh.
Just remember, every Realturd was their Daddy’s best swimmer!

#128 Russ L on 12.12.14 at 2:57 am

And to carry on the post boomer generations’ unifying cry…
“Blame your parents!”

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

#129 jane24 on 12.12.14 at 3:17 am

Most pundits are calling for the Cdn $ to hit 80 cents next year. This would mean that international investors who value their world in US $ will have lost 20% of their Cdn RE investment. Will be interesting to see how this plays out in the 2015 RE market. Will they head for the exit?

I am not claiming to be perfect but can my fellow bloggers please look up the words:

their
there
they’re.

They do actually mean three different things and mixing them up on blog comments does annoy.

#130 Habs76-79 on 12.12.14 at 5:54 am

#102 pravchaw

At $60 for oil – not outside the middle east no one can make money and the middle east cannot supply all the oil needed. Oil prices will be back to $80 in 6 months. This is a good time to get long on Oil stocks. Short term pain for long term gain.

———————————

Actually I recently read cost numbers on oil production. Russian oil drilled on shore (not off shore or arctic) costs only about $20.00 US per barrel. Only Mid East oil costs less and they in the M.E. can make money on any costs above $12-$15 US per barrel.

This drop in oil costs is really hurting the producers of more costly oil such as Tar Sands in Canada and shale/fracking in the USA. The Saudi’s are really doing this to keep the US on the hook buying their cheaper oil and not trying to drill more of the costly US oil, this as well as other off shore oil drilling globally. Sure in the long term the current group of greed hand Saudi Sheik’s and Prince’s lose but they will all be dead by then and probably could not give much a rats arse about who takes over then in the M.E.

Though these greed hands and such in the M.E. and the Russians would prefer oil to be between to $75.00- $100.00 per barrel. They are still making good money at $65-$60-$55-$50 per barrel.

It’s all mostly politics, jingoism, and rank oil based diplomacy and as typical all of it is mostly short sighted crapolla.

I doubt oil will stay as below $60.00 for too long. But I bet it does not cross $100.00 per barrel for a much longer time frame. My gut tells me oil will be between $60-$80 US per barrel for a number of years to come, short of some greater or all out major war. But with ALL the nut bars running the insane asylum of modern nation states that war could happen.

#131 workingarchitect on 12.12.14 at 6:36 am

Funny….this article (Garth) and this article (Calgary Herald). At the time of posting this link, the only 2 comments are from Realtors. Hmmm.

http://calgaryherald.com/business/real-estate/calgary-new-home-prices-see-biggest-hike-in-canada

#132 @RealistvsExtrrmist on 12.12.14 at 7:08 am

Many people living in Canada are earning 10% interest in their savings accounts in India. Free from taxation in Canada. Most Canadians of Indian origin have these accounts.

#133 saskatoon on 12.12.14 at 7:57 am

pigg damage control:

http://www.thestar.com/business/real_estate/2014/12/11/stuck_on_the_sidelines.html

“Now the couple find themselves facing another grim reality. They may have inadvertently joined the ranks of renters-for-life.”

#134 OttawaMike on 12.12.14 at 8:18 am

#109 Smoking Man on 12.12.14 at 12:21 am

Vaping Man,
Border services has been doing this for years. ask me how I know. They took my phone and downloaded everything I had on it for future snooping.

I should have swiped it clean as I was sitting in their waiting room. The difference with the cops is they cannot ask for your password without a warrant.

How about some equity market prognostications? You’ve been quiet on that front lately.

#135 Sheane Wallace on 12.12.14 at 8:28 am

I don’t think there was ever more clueless man in charge of BOC.

https://ca.finance.yahoo.com/news/bank-canada-says-housing-market-crash-not-cards-162008494–sector.html

Is the guy a heavy drinker? Look at the red spots on his face.

#136 the Jaguar on 12.12.14 at 8:41 am

#125 Juanito. Thanks for your reply. Reading your comments and also O&G Field Geologist say a lot about the completely different reality that people live in Alberta. Most people in other provinces just see O&G as a commodity or savings at the pump. It’s a complex world, and you are quite right about the misguided ‘schadenfreude” of some on the blog. Hurt Alberta and you hurt the country.

#137 ALBERTASTROPHE on 12.12.14 at 8:44 am

Well at least all the finance ministers are having an urgent meeting (on the weekend no less) to deal with the oil price drop and the economic results of that.

That’s a relief.

http://www.nationalnewswatch.com/2014/12/11/oils-slide-expected-to-surface-at-provincial-federal-finance-ministers-meeting/#.VIrg7M50x9A

Except the Alberta finance minister won’t be there.

Yep, this won’t end well.

#138 SWL1976 on 12.12.14 at 8:48 am

#24 not 1st – Sorry about the jab on the math skills. Judging by mine I have no business in the finacial world. One thing I love about math is, the numbers never lie

Wise people have said many times think before you speak. I am removing my foot from my mouth now

#139 @Jane24 on 12.12.14 at 9:12 am

I am not claiming to be perfect but can my fellow bloggers please look up the words:

their
there
they’re.

—> Far from perfect. Numbers and Math matter in today’s world! English Grammar is a relic…

#140 old gringo on 12.12.14 at 9:27 am

Could this be true?
Even the bullet-proof Canadian banks are at risk.

http://www.marketwatch.com/story/falling-oil-threatens-canadas-bulletproof-banking-system-2014-12-12?link=MW_Nav_MA

No, the banks are not at risk. — Garth

#141 ALBERTASTROPHE on 12.12.14 at 9:30 am

“Panic”

http://www.theglobeandmail.com/report-on-business/top-business-stories/as-oil-prices-skid-again-panic-is-beginning-to-set-in/article22060567/

#142 ALBERTASTROPHE on 12.12.14 at 9:35 am

PS

And the Iranian oil minister sees oil going to $40. He ought to know.

http://www.theglobeandmail.com/report-on-business/top-business-stories/as-oil-prices-skid-again-panic-is-beginning-to-set-in/article22060567/

#143 fancy_pants on 12.12.14 at 9:37 am

now I’m curious to see how the gov’t gets out of this one. how about 0-40 mortgages again? they were praised for averting the financial crisis of ’09.. all they did was postpone and augment it. chickens coming home to roost?

#144 425 Days on 12.12.14 at 9:42 am

This extra $600 CMHC cost per mortgage is likely just the beginning.

It will be just another force that sucks out the air and ends the 2015 spring market early.

The 2016 spring market will be stillborn.

http://business.financialpost.com/2014/12/12/cmhc-to-hike-issuer-fees-and-mortgage-rates-could-follow/

#145 Harbour on 12.12.14 at 9:47 am

The neighbors kid is a garbage man, he makes $31 an hour throwing garbage in Edmonton.

#146 Holy Crap wheres The Tylenol on 12.12.14 at 10:18 am

#21 Smoking Man on 12.11.14 at 7:21 pm
Judging by the kinetic molecular theory, the passive aggressive electron structure of the female mind, and her happy, tail wagging, bone fetching hubby of the hipsters here in Toronto.
I’m calling for a spectacular spring market.
The fear and loathing being pushed from MSM and the state tells me, market is a lot stronger that the charts from TREB indicate.
_________________________________________
Smoking Man are you sure you not talking about your anal gaseous expulsions in the office.
Here is some more Kinetic info for your perusal. This was the boring stuff we had to do in University, but it does come in handy once in a while.
Bogoliubov-Born-Green-Kirkwood-Yvon hierarchy of equations
Boltzmann equation
Collision theory
Critical temperature
Gas laws
Heat
Maxwell–Boltzmann distribution
Mixmaster dynamics
Thermodynamics
Vlasov equation

#147 Holy Crap wheres The Tylenol on 12.12.14 at 10:25 am

#140 @Jane24 on 12.12.14 at 9:12 am
I am not claiming to be perfect but can my fellow bloggers please look up the words:
their
there
they’re.
—> Far from perfect. Numbers and Math matter in today’s world! English Grammar is a relic…
_____________________________________________

Ha, ha, ha Jane, you had better skip past Smoking Mans diatribes then. Ask him for a a debate to evaluate his linguistic vernacular. You may be surprised? You could learn a new language!

#148 Holy Crap wheres The Tylenol on 12.12.14 at 10:32 am

#131 Habs76-79 on 12.12.14 at 5:54 am

You are correct sir. A war is all it takes to jump start oil back to $100+. The oil Barron’s who want to maximize their profit margins will navigate us into a war. Just wait I can hear the cocking of rifles! Oh yes and happy holidays!

#149 Kris on 12.12.14 at 10:39 am

#142-143 From the globeandmail.com link:
The loonie, as Canada’s dollar coin is known, is “caught in a massive oil slick,” said chief technical analyst George Davis of RBC Dominion Securities.

Strange.. A Canadian newspaper needs to spell out what a “loonie” is?? Makes you wonder, who’s their target audience – International investors, perhaps? Then again, any investor worth their weight in peanuts shouldn’t have to be told what a loonie is.. Or is our dollar THAT worthless & forgettable now? :)

#150 realtors and mortgage brokers pooping on garths blog on 12.12.14 at 10:57 am

Look at the realtors and mortgage brokers kicking and scream with the facts mark is pointing out. Oil is falling yet again and this impact is going to hit not only Alberta but all of Canada when it comes to the housing bubble with Toronto feeling just as bad as Alberta. You can see the sheer panic from realtors and mortgage brokers who post on this blog. They are shysters and know the housing crash is already hitting Cananda

#151 Canadian Oil to crash and take the housing bubble with it on 12.12.14 at 10:59 am

Look out below Alberta oil is going to crash to $40 and take the housing bubble with it realtors. Love watching the realtor scum go crazy on this blog.

#152 robert james on 12.12.14 at 11:08 am

There is at least one honest realtor in the Okanagan.. Well done, Mark !!! http://www.castanet.net/news/Kelowna/128706/Real-Estate-market-predictions

#153 Snowboid on 12.12.14 at 11:15 am

Just to prove the esteemed professors’ observations about realtors, the delusional ones in Kelowna released this article today:

http://www.castanet.net/news/Kelowna/128706/Real-Estate-market-predictions

I love the part about “…steady job growth, and a strong prairie resource market…”

At least another agent counterpoints the ReMax balderdash by stating “…we are still in somewhat of a depressed housing market…”.

Even that is a bit of an understatement, but at least far better than the fodder coming from the ‘greater fool’ training camp at ReMax.

#154 Jeff in Moose Jaw on 12.12.14 at 11:18 am

The 45% crash in oil prices since the summer is alarming.

Is it really because OPEC has their foot to the floor with production?

Could it be something else?

#155 $40-50 is coming on 12.12.14 at 11:22 am

$40-50 oil while it means less profits for some will mean economic ruin for countries like Canada. Money is running out of Canada as oil stocks crash and the Canadian dollar falls like a rock. This will hit the FIRE sector so hard. This means we can expect a ton of layoffs and drop in spending and a crash in the housing market.

#156 Renter's Revenge! on 12.12.14 at 11:22 am

#133 @RealistvsExtrrmist

“Many people living in Canada are earning 10% interest in their savings accounts in India. Free from taxation in Canada. Most Canadians of Indian origin have these accounts.”

Yeah, because the Rupee is a paragon of stability, right?

#157 Rational Optimist on 12.12.14 at 11:25 am

87 O&G Field Geologist on 12.11.14 at 10:38 pm

Thank you very much for that; that was educational.

#158 Rational Optimist on 12.12.14 at 11:25 am

117 Juanito on 12.12.14 at 1:09 am

“I’m grateful to live in a region that has been able to provide for the rest of the nation for so long.”

Ah, damn. Your posts were pretty interesting until you belied that you believe in this particular narrative. That’s nothing more than a story, “bro.”

#159 Daisy Mae on 12.12.14 at 11:26 am

#100 Millinniel: Re Mark “Your posts are very informative and contribute a lot to the discussion always….”

*********************

Right! Mark and Garth don’t always agree, but by and large, I appreciate Marks’ posts very much.

#160 waiting on 12.12.14 at 11:28 am

uh-oh, didn’t see that coming …

http://business.financialpost.com/2014/12/12/cmhc-to-hike-issuer-fees-and-mortgage-rates-could-follow/

#161 Smoking Man on 12.12.14 at 11:44 am

#135 OttawaMike on 12.12.14 at 8:18 am
#109 Smoking Man on 12.12.14 at 12:21 am

Vaping Man,
Border services has been doing this for years. ask me how I know. They took my phone and downloaded everything I had on it for future snooping.

I should have swiped it clean as I was sitting in their waiting room. The difference with the cops is they cannot ask for your password without a warrant.

How about some equity market prognostications? You’ve been quiet on that front lately.
……….

Mike, I’m not following it that much, apart from a Facebook short and a few others, my equities portion of my portfolio is in cash right now.

I’m busy, for the last few years I’ve been telling you guys I was writing a book.

That was complete bull shit. I needed cover. I suspected some at the tax farm knew I was SM. So I came up with an elaborate plan, Authors, especially Fiction authors can get away with being loons. I even changed my linked in to reflect that.

Have you read the crazy shit I’ve posted here. The cover worked.

Well guess what… I’m actually writing it now. One thumb press at a time..

It’s really coming together nicely.

#162 HD on 12.12.14 at 11:46 am

#139 SWL1976 on 12.12.14 at 8:48 am

#24 not 1st – Sorry about the jab on the math skills. Judging by mine I have no business in the finacial world. One thing I love about math is, the numbers never lie

Wise people have said many times think before you speak. I am removing my foot from my mouth now

Impressive.

It is not something one witnesses very often on this blog. I commend you for that.

Best,

HD

#163 Funny that on 12.12.14 at 12:02 pm

#110 Entrepreneur on 12.12.14 at 12:22 am

Where is Victoria Real Estate Update?
+++++++++++++++++++++++++++
She caved and bought a place.

#164 TheLaughing(e)CONomist on 12.12.14 at 12:10 pm

Ouch – CMHC is cutting 10%+ of its present head count but hiring more people in the “foreclosure department”

http://www.theglobeandmail.com/report-on-business/economy/cmhc-to-cut-more-than-10-of-staff-in-reorganization/article22061044/

#165 Mark on 12.12.14 at 12:20 pm

“Housing decline should be significant to create a big deflationary effect. This might only happen after the rates rises. So far the common knowledge is the real estate goes “up up up” (3 words is the correct way to say that)”

Housing is already in decline if you look at the real situation instead of increasingly narrow, often-revised, not adjusted for a constant sales mix numbers offered up by the Realtors. And has been, across Canada, for the past year and a half. No interest rate ‘hikes” were needed to make the market roll over. In some cities, Winnipeg, Regina, Saskatoon, etc. the over-building is blatantly obvious, and they’re still planning additional supply at only minorly reduced prices for next year.

I’ve agreed with Garth all along, in saying that the cost of mortgage finance is going up over the next few years (despite disagreeing with him about BoC policy rates). But its my belief that it will be the lenders themselves who will do the rate hiking, as an increase to spreads and risk premia. Credit-worthiness will increasingly be *the* issue, which is to be expected since borrowers at the margin are extremely over-indebted and the employment cycle is no longer working in their favour.

#166 Market Man on 12.12.14 at 12:40 pm

I posted a few days ago that Chmc would
Change their rules
And here you go
http://business.financialpost.com/2014/12/12/cmhc-to-hike-issuer-fees-and-mortgage-rates-could-follow/

You don’t need higher rates to make
Homes unaffordable or a crash having No job
Will also have the same result.

#167 not 1st on 12.12.14 at 12:50 pm

#139 SWL1976 on 12.12.14 at 8:48 am

#24 not 1st – Sorry about the jab on the math skills. Judging by mine I have no business in the finacial world. One thing I love about math is, the numbers never lie.

—–

Well no harm done. I understand Garth has to be snarky sometimes to keep the blog drama level up.

I still do not understand the stat. What is the income to debt ratio being compared? is it monthly payments or long term financing? Its never clearly explained.

Because if that stat says that 40% of the canadian population is super over extended then we are in for a world of hurt no matter what oil or housing does.

And it begs the question, how did they get there? If banks allowed people to get in that far just on a house then its truly criminal, but if this number is a combination of mortgage, credit cards, cars loans etc, then we have the stupidest population on the planet.

#168 Smoking Man on 12.12.14 at 1:00 pm

Mike, if you want a clue as to what my other big short is..

From the archives..

#37 Smoking Man on 09.29.14 at 7:34 pm
Fort McMurray, Sudi Arabia just got a new massive rival.

Russia just found in the artic, an oil field the size of golf of Mexico…

Should translate to Lower oil prices.. Will it be reflected at pumps? … That is the question..

#169 robert on 12.12.14 at 1:01 pm

Lets see some 3 billion in cuts announced in the last few days and any reasonable amount of common sense tells one that there will be massive layoffs in January. We have not seen ugly yet! More and more dividends will be slashed or eliminated altogether. The brokerage community have been pushing the chase yield story for sometime now and this market is going to deliver a double wammy to those that felt safely parked. The income element is disappearing and now the capital losses are nearing 50%. This event will trap retail investment funds and corral them into the dead money barn. I can hear the words now “Honey we have to stop spending”. The automotive industry will feel the pain first! Real Estate will come to a standstill in places like Fort Mac and Grande Prairie. Common sense must tell you that the train has left the station and standing in front of a moving train has absolutely no merit to ones health. This is not at all funny nor is it anything but disasterous news for Alberta. Just my humble opinion of course!!!

#170 saskatoon on 12.12.14 at 1:09 pm

#136 Sheane Wallace

it is naive (and most likely dangerous) to think that men like this are incompetent.

sophisticated sociopathic propaganda.

#171 Tony on 12.12.14 at 1:12 pm

Canada’s home prices fall for first time in a year

http://www.theglobeandmail.com/report-on-business/economy/canadas-home-prices-fall-for-first-time-in-a-year/article22061271/

#172 chapter 9 on 12.12.14 at 1:14 pm

The OPEC countries have used their oil dollars to finance social programs,build infractructure and subsidize basic foodstuffs. Cut back on social programs and they run the risk of civil unrest. So it is a disincentive to cut back on production. As long as the price of oil exceeds cash production costs which it does they will keep pumping out oil. It’s just which OPEC country blinks first.

#173 TorontoBull on 12.12.14 at 1:15 pm

@121
O&G is a high value added sector meaning thre are spillovers galore to other sectors. In addition, higher oil prices=higher gvmt revenue=more gvmt spending while keeping taxes low=more discretionary income=higher GDP

#174 dosouth on 12.12.14 at 1:16 pm

I am betting this Kelowna Realtor is not getting any Christmas presents from his local sales team but he is a voice of reason….which never does go well in the Okanagan…

Tread lightly….

#175 TurnerNation on 12.12.14 at 1:23 pm

Wheee. VIX 22 is target then buy indicies, oil.

#176 bdy sktrn on 12.12.14 at 1:42 pm

58 bucks for a barrel of rude crude.

somebody must be starting to buy into this soon.

is talk of the 40’s just that, talk?

feels like a spring is being stretched

if the economy remains marginally non comatose it will need fuel.

or is it best that one heed the knife/catch/falling thing.

#177 Ogopogo on 12.12.14 at 1:42 pm

When Garth updates the blog tonight, I will post a link to an article (by a realtor, no less) that exposes the catastrophic state of Kelowna real estate and the corrupt stats of the local cartel.

Even DA should be afraid. Stay tuned.

#178 Mike T. on 12.12.14 at 1:43 pm

#154 Snowboid

This was posted a bit lower on the page

http://www.castanet.net/edition/news-story-128671-906-.htm#128671

Prices obviously not about to skyrocket

#179 SWL1976 on 12.12.14 at 1:48 pm

Mark – I have said it before and will say it again. I don’t know where you find the time, and I don’t always agree, but I do find your posts imformative

#180 everythingisterrible on 12.12.14 at 2:06 pm

#175 dosouth
Nice Article for BC interior folk.
A real-tor with a conscience. Who would of thought?

#181 bdy sktrn on 12.12.14 at 2:18 pm

The automotive industry will feel the pain first!
——————————–
for every one oil patch guy who loses his job there are 999 drivers getting cheap gas for their …wait for it….. cars.

maybe ford is a buy

#182 Holy Crap Wheres The Tylenol on 12.12.14 at 2:26 pm

#168 not 1st on 12.12.14 at 12:50 pm

#139 SWL1976 on 12.12.14 at 8:48 am

#24 not 1st – Sorry about the jab on the math skills. Judging by mine I have no business in the financial world. One thing I love about math is, the numbers never lie.
___________________________________________

Unless your an shady accountant! It’s not a question of what do the numbers say but, what would you like them to say!

#183 bill on 12.12.14 at 2:39 pm

#147 Holy Crap wheres The Tylenol on 12.12.14 at 10:18 am
and the Fletcher-Munson curves….

#184 bdy sktrn on 12.12.14 at 2:40 pm

#181 everythingisterrible #175 dosouth
Nice Article for BC interior folk.
A real-tor with a conscience. Who would of thougt
——————————
yes a truly frank asessment.

i think the whole RE boils down to this;

1. RE growth is weak/dead/negative everywhere in Canada.

2. Except urban 416 and 604 where it remains red hot.

#185 More proof the market is toast on 12.12.14 at 2:43 pm

http://www.theglobeandmail.com/report-on-business/top-business-stories/some-homebuyers-are-borrowing-for-their-down-payments-too/article22065421/

#186 Debtfree on 12.12.14 at 2:46 pm

Remaxamous article in castanet today . Housing will rise seven percent this coming year in kelowna ! No wonder we are not hearing from DA . He’s so busy selling houses and condos that he has no time for us .

#187 Porsche on 12.12.14 at 2:49 pm

All this talk about low oil prices being the end of the world is crap.

The world loves low oil prices… ya it’s bad for Venezuela, Canada and Russia… but it’s fantastic for the rest of the world and there’s some big populated countries like India and China ejaculating over low oil.

#188 Debtfree on 12.12.14 at 3:03 pm

Also not to be missed .

Calgary’s $2,000 Homeownership Hack
At thetyee .

#189 Ronaldo on 12.12.14 at 3:11 pm

#179 Mike T. – Skyrocketing prices in Kelowna????

Besides the crash in prices at La Casa (originally developed in early 70’s and bankrupt several times) a few minutes further down the road you will arrive at Secret Point, a 20 unit condo development built in 2006 and originally marketed at around $840,000. Drove by back in 09 and still several not sold and price had dropped down to less than $500,000. See following listing. There are many other similar stories like this in the Okanagan over the years.

http://www.remax.ca/bc/kelowna-real-estate/na-4215-westside-road–9-na-wp_id99226745-lst/

#190 Mike S on 12.12.14 at 3:29 pm

“This extra $600 CMHC cost per mortgage is likely just the beginning.

It will be just another force that sucks out the air and ends the 2015 spring market early.

The 2016 spring market will be stillborn.”

Notice that the change itself is is starting on April 1st.

If you are a government that tries to be re-elected and think strategically, you might figure out that slowing the Spring market would be damaging (if the elections will follow in Summer/Autumn)

So if I were them, I would do some relatively bigger step, say:
– CMHC only insures 10 yr mortgages after 500K
– CMHC limits 5% down only till 400K; 10% and more above 400K
– …

But schedule it for some later date, say August 1st

This should create a run for housing in the spring market (to beat the change) temporally suppressing any downturn (remember what happened last winter when there was a talk about possible rate rise), and in the long term (after the elections) it will limit the government exposure to subprime

#191 Blacksheep on 12.12.14 at 3:44 pm

I think some Dogs are getting ahead of them selves with all the recent ‘housing is done talk’ here.

I find this headline pretty funny:

“Why the Bank of Canada’s next move on interest rates may be a cut”

http://www.montrealgazette.com/Bank+Canada+next+move+interest+rates/10463365/story.html

Oils rapid decent along with Poloz talking the CAN $ down, is going to have the desired effect.

They want an 80 cent dollar to become an equalizing factor and deflate any concerns about a RE market correction, while attempting to hitch a ride on Garth’s now booming, US economic recovery train.

As far as rates go, I agree with Smoking man, no upward wage pressure, low official inflation and only so, so job #’s, means zero motivation to move rates up. Buy spring the Cattle will be enjoying reduced fuel costs, be feeling better and ready to mortgage up : )

Add in 10/30 yr US bonds are still dropping and it looks like deflation is still the real concern.

Oh ya…when is the next Canadian federal election ?

#192 Market Man on 12.12.14 at 3:44 pm

Same old story – when times are good – let the credit flow and when times start to get tough (credit restricts) Chmc will triple its fees April 1st – they should have done this during the peak not during the a downturn.

CHMC is scared.. I’m sure there is more to come.

#193 };-) aka Devil's Advocate on 12.12.14 at 3:55 pm

Couldn’t possibly expect me not to chime in on this one despite my humble immense debt of gratitude };-)

REALTORS® are no different than anyone else. All it takes is a few bad apples…

People buy houses. I defy any REALTOR® the ability to “sell” someone a home they don’t want. A good REALTOR® can be an invaluable source of information. Unlike the HGTV reality shows; most prospective purchasers view not just three but rather tens of homes before making a decision, and so they should.

You might miss that perfect home because you were too cautious and another beat you to it but rest assured houses are like busses and women – there’s another just around the corner. (yes Chris it’s me) };-)

The old adage “location, LOCATION, LOCATION should be paramount in the mind of anyone who is considering a purchase. Lifestyle….

Please don’t tar and feather ALL REALTORS® for the unconscionable acts of a few. Any REALTOR® worth their salt is more concerned about earning long term sustainable business/personal relationships than making a quick commission.

As far as the market goes and oil for that matter; this too shall pass be it good times or bad times it is, invariably, merely a bump in the road one way or the other. SHIFT happens. Learn to ride the tide.

Our economy tends to follow, as unpredictable as they are, 7 to 10 year cycles. 2008 was more than 6 years ago now and since then things have been steadily improving in the minds of most. As the “improving” trend continues more and more hop on board. Soon the market takes a huge jump forward (or back depending on your point of view) as a swack of people enter thinking “if we don’t now we’ll never be able to afford to”. It’s that emotional thing mixed with a good helping of greed that pushes the market to and past it’s breaking point.

The MSM is today leading with news of price increases, HGTV is pimping house porn like never before, EVERYBODY is talking real estate, Mom and Dad are out on Sunday checking out Open Houses, it’s all a whirlwind carnival wild ride focused around house horniness. And REALTORS® are there to fulfill the demand of the people, they don’t create it. Unfortunately some do take advantage of it in the sense that they want to “make hay while the sun is shining” and don’t provide the duty of care they should in helping their clients gather more of the information with which to make a fully informed decision. And that’s what a good REALTOR® does; help their client make informed decisions and avoid costly mistakes. Those mistakes can be very costly – many, many times more than the cost of hiring a good REALTOR®

Eventually the market overshoots its equilibrium and can’t sustain that momentum any longer. Having overshot so much the market inevitably claws back those unwarranted gains. The more we overshoot the bigger the claw back is. Keep in mind that the claw back too can overshoot which will inevitably lead to a correction in the other direction. Monetary and fiscal policy, not managed appropriately, only serve to exasperate the matter.

Things are pretty good in the minds of many right now and the perception is that we are in the clear. But how long will it last. It can’t last forever.

Personally I think we might be closer to another failing than most of my counterparts believe, just as I thought so in 2007. But I don’t think it’s next year and maybe not even the year after that. Next year, Spring more specifically, I expect might be that year of exponential price increases in many parts of the country. Unfortunately this will be such time as I earlier alluded to when would be buyers think “I gotta get in now or I’ll be priced out forever!” which only serves to push us closer to the breaking point. “Forever” is a long, long time in which many buses, women and opportunities will have come and gone.

When you hear more and more REALTORS® talking of, not a pending crash or soft landing but rather, concern about too much unwarranted gain is when you know we are nearing the peak.

There is ALWAYS a safe zone in which to buy or sell. If you have the right information you can confidently do either with little peril to your financial welfare. There is no crystal ball and “speculation” is nothing more than good luck. Real estate, like any “investment” is a long term hold. If you don’t plan on holding it as such don’t buy it.

SHIFT happens, learn to ride the tide.

};-)

#194 Mark on 12.12.14 at 4:05 pm

“http://www.theglobeandmail.com/report-on-business/top-business-stories/some-homebuyers-are-borrowing-for-their-down-payments-too/article22065421/”

The housing bulls are always so eager to point out that, in order to obtain a CMHC insured subprime mortgage, the downpayment funds, as meagre as they are, have to be proven as “cash” savings or investment by showing bank statements, etc.

Which is absolutely true.

But what’s the difference between spending one’s 5% downpayment on a car prior to buying a house on CMHC subprime mortgage insurance? Or buying the house (with the provable cash savings), and subsequently going to the car dealer and buying the car on credit?

Nothing. Absolutely nothing. Which makes the whole claim that CMHC subprime insured borrowers are well qualified a whole farce.

On top of all of this, it is well known that the CMHC was using the “Emili” system for evaluating the value of proposed collateral behind subprime mortgage guarantees they were writing. A mere computer program has no way of knowing if a house harboured a financially catastrophic fault, maybe a high propensity to flood, maybe a furnace on its last legs, etc., that would severely damage the finances of a subprime borrower. If I was personally lending to a subprime borrower on such a thin margin of error, the last thing I would do is trust a computer program to do the groundwork of appraising the collateral.

CMHC is basically a textbook case of how *not* to run a subprime mortgage insurance company.

#195 Nemesis on 12.12.14 at 4:12 pm

#LongShots&LittleWrigglers… #TheOdds…

http://youtu.be/dh4LikiGBrQ

#196 Mike S on 12.12.14 at 4:13 pm

“Housing is already in decline if you look at the real situation instead of increasingly narrow, often-revised, not adjusted for a constant sales mix numbers offered up by the Realtors. And has been, across Canada, for the past year and a half. No interest rate ‘hikes” were needed to make the market roll over. In some cities, Winnipeg, Regina, Saskatoon, etc. the over-building is blatantly obvious, and they’re still planning additional supply at only minorly reduced prices for next year.”

I agree that you don’t need rates to rise for a housing correction. I’m just saying that currently (at least in the GTA) there is still some “spend spend spend” mentality going on along with (houses only go up etc)

So we still need to wait some time, for the deflation to be a big problem (or for mentality to change)

What I’m saying is that BoC might need to step in and protect the CAD, before the big housing correction happens

“Think of the CAD$ like a stock. Over the past decade, everyone has been shorting the CAD$ by borrowing, and spending on houses, foreign vacations, foreign cars, remittances to the in-laws back in Pakistan, etc. Debt has reached its probable apex. When everyone stops shorting the CAD$ (ie: stops borrowing), and starts repaying the debt (ie: buying CAD$), its pretty easy to see what happens”

I do understand now where are you coming from with the higher CAD predictions. And while I can agree to some points Mish Shedlock is making for the general economy US dollar and such, still Canada is not the USA, and it is not a very significant player in the grand scheme of things

So for “everyone has been shorting the CAD” statement, it is not exact

For instance I wasn’t, my debt is about 0.1% of my total net worth (Of course I do hold foreign currency and assets, as anyone balanced/almost balanced should).

There are lots of boomers which have lot’s of liquid assets in GICs, as Garth showed lot’s of debt is concentrated in some groups (young, recent newcomers)

But the main point is that while the US/Europe/Japan ARE the economy, Canada is only a small part and the money outside Canada is free to short/long the currency at any time, as they see fit. You can see now that the big money is exercising that right as the oil slides. If this evolves into a short-Canada mentality, there would be nothing BoC can do about that

For a small demonstration of such, look at Russia right now where all the recent rate hikes don’t seem to help the falling ruble. We are not Rusia (thanks god) but the dynamics might be the same (although at far smaller scale)

#197 espressobob on 12.12.14 at 4:19 pm

Markets are down, oil below $58, Excellent!

Keep going.

#198 Funny that on 12.12.14 at 4:36 pm

Hey Mark have you ever been diagnosed with aspergers?
Garth I ask this in all seriousness and with due respect.
It would help explain to me why Mark answers the questions the way he does.

#199 VICTORIA TEA PARTY on 12.12.14 at 4:44 pm

SELF-PRESERVATION IN THE OIL PATCH

#117 Juanito

Who knows which outfits will be boxed up and shipped?

That is not the point here.

What is the point is what personal financial actions you may have taken (or perhaps should consider taking) to protect you and those for whom you are responsible.

The damnable issue here, for all oil company execs in charge of hiring and firing, is to try and suss out where oil prices go from here.

Do they layoff skilled tradespeople and office dwellers?
If so when and for how long?

Or do they eat the profits to keep the staff at the same levels? Shareholders will be some ticked, won’t they?

So, this is the great corporate nightmare.

We all think we know how long oil and natty gases will decline. Not actually.

For instance:

–today WTI closed at $57.62 US down $2.33;

–Western Canada Select, our heavy oil price, closed at $49.25 up 81 cents CAD. Yes, up. Why? Probably some computer programming play, but it doesn’t really matter at all.

—Meanwhile Brent North Sea closed at $61.66 down $2.02 US. That is the “official” world oil price result. Always watch that.

EXPLAINING THE POOPOOERS

The poo-pooers are making their points, perhaps a little crudely, but the oil exploitation game is fraught with nightsweats, white knuckles and occasional long periods of joblessness.

Because of its ongoing necessity, and until some so-called alternative heaves into view, oil’s volatility must be programmed into the minds of all those workers who toil in that pit. That is not FAIR but it is the TRUTH.

REMEMBER: THERE IS NO JOB SECURITY IN THE OIL PATCH…EVER!

For example where is Dome Petroleum now? Remember that all encompassing Calgary giant? You don’t? You see what I mean? Stuff happens in the “patch.”

I must get back to my point which is that you and your cohorts must always be setting aside rainy day money, stay out of debt and live like monks, as compared to your nosey, noisy, materialistic so-called neighbours and friends.

It’s your time and your money, no one else’s.

Good luck to you and yours this Christmas.

Next year will bring “interesting opportunities” whatever the heck that means!

#200 Raincouver on 12.12.14 at 4:53 pm

http://www.vancouversun.com/business/Multiple+bids+price+jumps+Metro+Vancouver+housing+market/10458195/story.html#ixzz3LbWsTsXW

It’s up, up and away!!

#201 NoName on 12.12.14 at 5:19 pm

#167 Market Man
Put yourself together man, smoky sad that year and a half ago…

i keep going back to this comment
http://www.greaterfool.ca/2013/05/21/too-good-to-be-true/#comment-242972
couldnt figure it out how low dollar will devaluate re, but now blacksheep explained in a way that me can understand.
#192 Blacksheep on 12.12.14 at 3:44 pm
They want an 80 cent dollar to become an equalizing factor and deflate any concerns about a RE market correction, while attempting to hitch a ride on Garth’s now booming, US economic recovery train.

#202 Marco on 12.12.14 at 5:22 pm

@187

Remaxamous, LOL! 7% increase in Kelowna. Remaxaurelius are covering all their bases, in light of the BoC announcement. Considering there are a lot of workers from Fort Mcmurray that own there. Where’s the demand coming from? Retirees?

#203 Godth on 12.12.14 at 5:22 pm

We need more QE!

#204 devore on 12.12.14 at 5:22 pm

#73 Lumberjack arch

You sound very angry, perhaps due to fear?

When profitability declines, and a boom turns cold, fewer people will be employed, and those who still are, will be making less money. What is so hard to understand about that.

So many critics of various very straightforward observations are arguing by extreme. There’s not a recovery in the US, because there are still unemployed people and part-timers. There’s not a housing bust, because people are still buying. There’s not an oil bust, because wells are still pumping and yahoos are still driving trucks. So what? Life goes on, and any time you find an actual extreme, better stock up the bunker.

#205 stevep on 12.12.14 at 5:54 pm

garth man

sold cdn tbills month ago bot 30 year us t bonds
im up 30% in one month

#206 Victor V on 12.12.14 at 6:11 pm

CMHC to hike issuer fees and mortgage rates could follow

http://business.financialpost.com/2014/12/12/cmhc-to-hike-issuer-fees-and-mortgage-rates-could-follow/

Canada Mortgage and Housing Corp. is tripling the fee it charges some financial institutions to guarantee loans in the mortgage-backed securities market, a move that could end up costing consumers more, the Financial Post has learned.

The move appears to be aimed at the government’s stated goal of reducing its role in the mortgage insurance market but it just might have the added benefit of applying a bit more in the way of brakes to the housing market, which the Bank of Canada said this week might be as much 30% overvalued.

Rob McLister, the founder of http://www.ratespy.com, said there’s little doubt in his mind that the changes will end up costing new home buyers and estimates it will mean about $600 on a typical first-time buyers’ mortgage of $250,000.

#207 Setting the Record Straight on 12.13.14 at 9:27 pm

@118
Why mock locomotive Alberta as it derails if you’re also a passenger on train Canada?

*****
Canajun eh! Liberals who can’t take their own side in an argument. Environmentalists with a death wish. Torontonians who think the world drops off at the Humber. The list goes on.

#208 Matt on 12.14.14 at 12:35 pm

Um…you guys do realize that even with falling oil prices, the Alberta economy is still expected to increase around 2% next year, plus the unemployment rate will still be lower than in Ontario. Trust me, housing prices will not go down. So much fear mongering on this site.

So much wishful thinking in Calgary. — Garth

#209 Market Man on 12.14.14 at 4:28 pm

#Black Sheep #no name

They want a lower dollar but NOT $60 oil.