Cowboy hell

COWBOY modified

Could Calgary be the catalyst? Some people think so. And who would have guessed it a year or two ago?

Already, plunging oil has wiped out the federal surplus that Joe Owe was counting on. In Alberta it’s nuked the provincial budget, ripping up to $10 billion from that budget. Royalties are plunging, and costs are about to rise. You don’t cut the one export you depend on by 50% and expect the status quo. Things could get worse. More on that in a moment.

December house sales in Calgary just turned negative compared to year-ago numbers. A sales decline noted in the autumn has picked up speed in the first three weeks of December. It’s no coincidence oil has shed 20% of its value since the OPECkers announced a no-cut policy in the final days of last month.

Meanwhile the number of houses flooding the market continues to swell. While sales were down 13.31% on Monday afternoon (the number was off just 3% on Friday), active listings have spiked 37% and new listings have exploded by 55.79%. The average price, meanwhile, has just slipped under 2013 levels – a significant event after being up double-digits just months ago. Says housing consultant and ex-realtor Ross Kay, “Calgary has slid into a buyer’s market versus last December when it was a seller’s market. This is irrefutable, and means Calgary will enter 2015 with the buyers in control.”

This is cowboy hell.

Kay figures more than two thousand people have been lefft with their belts on their ankles as this oil-induced housing shock hits. “There are at least 2,500 home sellers in Calgary who have already purchased another home without their own being sold (classic over-sold euphoria),” he says, “and there are simply not enough buyers in the queue to absorb those deals. This means prices will be negatively impacted.”

Of the 3,845 active listings now on the market, about 10% have reduced asking prices. “The swing in confidence in the housing market is now a big concern heading into 2015,” says Kay. Of course, area realtors disagree, saying a hunk of new listings are just relistings, so the overall figure is misleading. But why would someone relist their house? You bet – it didn’t sell, or the price is dropping. Neither one indicates a robust market.

Meanwhile, the news out of OPEC just gets worse. Oil finished Monday at barely over $55, down another 3%. US stock market investors love this stuff, and the market surged again – no surprise since cheap energy is a giant tailwind to countries that are energy piggies, full of idiots driving Hummers.

But the Saudi oil minister, Ali Al-Naimi, is not content yet. OPEC will not curtail production, “whatever the price is,” he just said. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

Twenty bucks? Seriously?

Probably not. It was an Arabian rhetorical flourish, but it sure makes the point. There is no floor for oil right now, and lower lows are a distinct possibility. Even at $55 a barrel a large swath of the oil sands is looking ugly, and companies in this volatile sector will respond by trimming costs and doing some major turtling.

Already housing starts in the area are fading. In November, before the oil rout really got nasty, builders began 36% fewer projects than just a year ago. There was a withering drop of 51% in new condo projects. And while the local real estate cartel insists this is all cool and the market is ‘balanced’, expect the message to change soon.

Says an economist at ATB (Alberta Treasury Branches) Financial: “I’m not sure if the reality of lower oil prices has set in. Everyone’s watching these oil prices and it kind of means something to them on one level. But I think it will start to have a broader impact on the housing market in 2015 when we do start to see some of those layoffs coming. Some of those bonuses are going to be scaled back. All of the things where it really starts to affect people’s budget and even their ability to purchase homes. It just hasn’t shown up yet but I think it will.”

It already is. With the power to spread. About 40 gas and oil rigs have been idled recently, and some of the big guys are quietly issuing layoff notices. As mentioned, falling crude immediately reduces government revenues, export dollars and our national trade balance. Calgary and Edmonton real estate values have been wildly inflated, while Albertans have increased their personal debt levels more than any other Canadians. Bloated payrolls from the energy sector have made their way – literally – from coast-to-coast, with fly in/fly out workers spending oil bucks on groceries, mortgages and HD TVs from Victoria to St. John’s.

On a broader scale, it could mean the big commodity run-up that helped save our asses when the rest of the world was imploding five years ago is ending. And how did we get ready for this inevitable day? Right. By borrowing epic amounts of money and selling each other inflated houses on credit.

That should work out well.

191 comments ↓

#1 TurnerNation on 12.22.14 at 6:20 pm

I’m heading to the Least Coast this week.

#2 devore on 12.22.14 at 6:42 pm

This is just such classic bubble mentality. As usual, it’s impossible to live in a bubble and be rational about it, it always takes an outsider to pour a bucket of cold water into the hot tub. It seems every time there is a bubble, or a solid bull run, it is different this time, there is a feeling this is normalcy, and the good times will keep rolling forever. Even more, there is a feeling of entitlement, that we deserve this, that it is owed us. The resulting cognitive dissonance is why it is so very hard for people to grasp the common sense concept that it is during the bubble the damage is done, not during the correction. Absent the business cycle, the sustainable equilibrium is not too hot, not too cold, a bull market and growth outpacing population growth is not sustainable, and not normal.

#3 Terrier on 12.22.14 at 6:43 pm

Good point Garth. The slide will soon spread all across major RE strongholds. It is just a matter of time when Toronto and Vancouver start showing negatives …

#4 Mike S on 12.22.14 at 6:47 pm

“Already, plunging oil has wiped out the federal surplus that Joe Owe was counting on”

Are you sure the oil price already propagated to the bottom line? I think the tax cuts were cited as responsible for the deficit, Not sure if anyone knows what is the actual oil price we are going to see in 2015

Federal revenues will be $7 billion lower at current levels. The total surplus was forecast to be less than $2 billion. — Garth

#5 calgaryPhantom on 12.22.14 at 6:51 pm

“Meanwhile the number of houses flooding the market continues to swell”

———————————————————————

How do you check all this? Is it insider info, or is there a website where general public can gather and analyse such data?

A post on this would be very helpful. ( thanks)

The latest scary stats are on the front page of the CREB site. — Garth

#6 Mike S on 12.22.14 at 6:51 pm

“On a broader scale, it could mean the big commodity run-up that helped save our asses when the rest of the world was imploding five years ago is ending. And how did we get ready for this inevitable day? Right. By borrowing epic amounts of money and selling each other inflated houses on credit.”

Commodity prices sure helped, but are you sure that our recent prosperity have nothing to do with “wealth effect” caused by runaway housing prices/debt?

#7 Arfmooocat on 12.22.14 at 6:52 pm

I actually saw the Saudi Minister (whatever his title) say on BNN along with that $20 oil ….

“It is our intention to drive the high cost oil producers out of the market”

Well Alberta Oil Sands… you sure ain’t one of the low cost producers in the world now are ya?

#8 Smoking Man on 12.22.14 at 6:55 pm

Geo politics at its best.

This is done to punish Russia over Syria, and BRICKS. Ukraine just the side show, the magicians slight of hand.

Harpo burned by Obama on Keystone.

Too funny

#9 Mike S on 12.22.14 at 7:03 pm

Went to buy some last minute gifts over the weekend here in Toronto. Seems like the retailer I bought in, is going to close the store, in that location, early 2015. Too much competition/too few buyers

Don’t think there are too many flyers from Fort McMurray there …

I said before that oil may be a “catalyst” to what’s to come, but maybe I was wrong? Maybe “scapegoat” is the correct word?

#10 I'm stupid on 12.22.14 at 7:03 pm

Nothing like a recession going into an election year. It’s a race against the clock. Will the economy deteriorate quick enough to give the Conservatives a minority? Who knows, but it’s going to be very interesting to watch.

#11 45north on 12.22.14 at 7:06 pm

“There are 2,500 home sellers in Calgary who have already purchased another home without their own being sold ”

1985, I bought a house in Ottawa without selling my own. Fortunately for me, nothing much was happening with the Ottawa market so after a few anxious weeks I sold it. Thank God.

and he says, “and there are simply not enough buyers in the queue to absorb those deals. This means prices will be negatively impacted.”

negatively impacted – Ross Kay is so damned polite

Could Calgary be the catalyst? it sounds like Florida 2005 without the orange groves

#12 Standard Deviation on 12.22.14 at 7:06 pm

So all of our experts are now coming out to tell us things don’t look good with 20/20 hind site. Caution must be exercised, blah, blah and yet the Republicans just ensured that Derivative Trading can return to pre 2008 levels to secure a deal on the US budget.
Whats the definition of insanity?

#13 mark on 12.22.14 at 7:07 pm

How’s this work out for North BC?

#14 Rick on 12.22.14 at 7:09 pm

And here I sit in Calgary, a renter with a little money in the bank, my new job taking off, listening to the kids talk about how the size of the shale up here is so huge OPEC could never overpower it…which sounds scarily like the too-big-to-fail line in the States.

I think I’ll pounce when decent-condition bungalows in Brentwood – recently upwards of $600K – hit $225K. Maybe $215?

#15 james on 12.22.14 at 7:09 pm

One nice thing about this is that it will force the energy companies to take a hard look at expenditures. They are paying too much for labour, plain and simple. If your workers can afford to fly in and out, gamble, buy idiotic 70k pickup trucks, etc etc, there are cost savings to be had.

I am greatly encouraged by reports that companies are thinking of automating part of their operations. One example is the use of robotic vehicles to replace human operators.

In a boom market, companies have little incentive to improve their processes. With low profit margins, they have strong reason to do so. This is why UPS and McDonalds are so efficient.

If this argument is correct, then a restoration in the price of oil may be irrelevant. The easy money could be disappearing for most workers, as the companies introduce automation and productivity improvements.

#16 North Burnaby on 12.22.14 at 7:10 pm

When the real estate market finally crumbles, the prices of condos will drop much less than the highly speculated detached home prices!!!! Watch out!!!!

#17 Arfmooocat on 12.22.14 at 7:10 pm

#8

It sure looked like Harper was doing a lot of sucking up to Obama the past while for a KeyReason

Sending jets over to fight ISIS, publicly telling Putin to get out of the Ukraine

Well he got played by Obama.. lol

#18 Mike T. on 12.22.14 at 7:12 pm

I think we should have seen this coming, I know I did, quite obviously in fact.

The pattern the elites/globalists use is build it up to bring it down and the cycle has been repeated over and over again throughout history.

30 dollar oil is the perfect recipe to bring Canada down
and my guess is we will blame others rather than learn from our mistakes.

#19 Mr. Reality on 12.22.14 at 7:14 pm

And this renter laughs and then starts planning on purchasing assets at firesale prices about 5 years from now.

Thanks sheeple!

Mr. Reality

#20 Transplant on 12.22.14 at 7:18 pm

Received my December 22 copy of Bloomberg Businessweek today and it contains an interesting article titled “Oil City Prepares for Pain”. The city is Houston, the US equivalent of Calgary on a much larger scale and one with a “considerable non-oil economy”.

The drop in oil prices is already having a significant impact on Houston, but the pain will be felt much more in 2015. It is already having an impact on real estate and other luxury purchases. It is estimated that “as many as 28,000 energy jobs” may be lost next year.

Other than energy-related jobs I’m not certain what else drives Calgary’s economy, but it’s hard not to conclude that low oil prices will have a huge impact on every facet of the city’s economy.

#21 Grooby_in_Calgary on 12.22.14 at 7:19 pm

As a contractor working in the IT sector (capital projects) in O&G in Calgary, it is irrefutable that the impact on employment is already being felt.
The organization has let go 50% of the IT dept in the last two weeks alone. The capital projects team has let go even more, numbering well into many hundreds.

The belief that organizations here are taking a ‘wait and see’ approach is not what people on the ground are seeing. There’s some work in midstream and utilities still, but not enough to absorb the labour supply that grows by the day.

It’s quite clear that oil will not rebound meaningfully in 2015, there’s just too much supply with only a ~1% increase in annual demand. The people who run O&G businesses know this and hence are cutting capex, but avg. Joe here seems unwilling to accept this.

The only comparison to 2008/2009 is the sudden decrease in prices; the root causes are very different indeed, and people should not assume the same outcome of a quick turnaround.

#22 Hicksville Alberta on 12.22.14 at 7:20 pm

If the oil price decline sticks there is no reason not to think that there will be serious out migration from Alberta over time and that is good as things need to slow down.

In the meantime the city of Calgreedy keeps spending and spending like there is no end. I presume this is the same in most cities in Alberta. They have been throwing around billions like they are millions and that too needs to be addressed. Way too many vested interests that need some very serious sail trimming.

#23 Timmy on 12.22.14 at 7:22 pm

You can than Stephen Harper and his neo cons for this. They inflated the housing market with the 40 yr amortizations and gave tax breaks to big oil. A few more facts about Harper’s stint in power:
Conservatives turned 10 consecutive surpluses under the Liberal Govt into 7 straight deficits
Harper has the worst record of economic growth of any PM since the Great Depression
Under Harper govt household debt exploded. The household debt to income ration has risen from $1.31 to $1.64. Conservatives finance policies helped fuel the housing bubble with introduction of 40 year zero down mortgages
24% of the totable accumulated debt since confederations was amassed under the Conservative govt, just since 2008

#24 not 1st on 12.22.14 at 7:22 pm

They should have called it the mother of all oil crashes…

#25 saskatoon on 12.22.14 at 7:26 pm

#126 Shawn Allen on 12.22.14 at 5:23 pm

“Without an economic system which includes the government no one would be more than a hunter-gatherer.”

———————————–

Fine, so let’s have a government with VOLUNTARY taxation.

otherwise, it is theft.

theft is wrong.

if anyone disagrees with this conclusion, you are a thief.

let’s at least be honest about it.

#26 Lucky Sometimes on 12.22.14 at 7:27 pm

ATB is Alberta Treasury Branches, not Board. I’m one of the forutnates to sell my house in August and renting a condo. Whew!
BTW the proceeds of the sale is with my for fee advisor, and I packing for an extended cruise in Jan. It’ so nice to be able to lock up and go.

#27 JSS on 12.22.14 at 7:30 pm

There has been lots of discussion about Alberta oil and it’s real estate plummeting. Now let’s talk about at what prices do we vultch real estate at.

#28 Terrier on 12.22.14 at 7:42 pm

#8 Smoking Man
Geo politics at its best.

This is done to punish Russia over Syria, and BRICKS. Ukraine just the side show, the magicians slight of hand.

Harpo burned by Obama on Keystone.

Too funny
———————————————————–

So true …. but wait, there is more to come.

#29 LowFatOil on 12.22.14 at 7:43 pm

I really liked Garth’s Blog today on the possibility of oil @ $20. This is serious news, also carried on Bloomberg and Reuters.

It may or may not happen. But making us aware that this could be a “possibility”…….could be a “new reality”…. could be the “new norm”…. even for only a while,

gives us a “heads-up”.

Thanks.

Oh, and I do remember the last time oil was $20. It was not that long ago actually, say around 1997 or so?

Here’s a graph showing the history of the price of oil for the past 45 years or so.

http://www.macrotrends.net/1369/crude-oil-price-history-chart

#30 Smoking Man on 12.22.14 at 7:45 pm

#17 Arfmooocat on 12.22.14 at 7:10 pm
#8

It sure looked like Harper was doing a lot of sucking up to Obama the past while for a KeyReason

Sending jets over to fight ISIS, publicly telling Putin to get out of the Ukraine

Well he got played by Obama.. lol
……..

Not only Obama, but Harpos second favorite country..

Let’s face it, Harpos Canada on the world stage is an Ant with a big mouth, on a stage full of elephants.

Man did the machine betray him….

Ha, I saw it coming a long time ago..

#31 3s on 12.22.14 at 7:47 pm

Word here in Aus is that lower fuel prices will free up disposable income which can be pumped into mortgages – house prices to the moon I tell ya!

PS. Avg household calculated to have about $38 a month in fuel savings;)

#32 Realties.ca » Cowboy hell on 12.22.14 at 7:47 pm

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#33 SWL1976 on 12.22.14 at 7:50 pm

And how did we get ready for this inevitable day? Right. By borrowing epic amounts of money and selling each other inflated houses on credit.

————————————————

All brought to you by our ‘Elected Officials’

Western democracy has been a massive fraud in the late 20th century and into the 21st century it is nothing more than a show to pacify the masses.

Sorry to say folks, but its true.

I wish I knew some answers and had some solutions but I don’t. The wool was pulled over our eyes long ago and the ones who speak the truth are ‘loony’

The first step to a solution is to first realize and understand we have a problem

Listening to Evan Solomon talk to the Russian Ambassador to Canada is an embarrassment to me as a Canadian.

Why is Stephen Harper lacking diplomacy on a issue as important as this?

Especially one with so many unanswered questions like MH17?

Most people do want to live in peace but the ones who are really calling the shots do not. Sadly our elected officials have been coerced by these people and seem to rather quickly forget who voted for them and what that deal of being ‘elected’ by the ‘people’ entails.

They are elected to SERVE US, not for us to serve them

The show gets a little more pathetic each and every election year, and I expect nothing new for 2015, lots of name calling and finger pointing to earn votes. The race to the bottom is going full speed and Harpo seems content on getting us there fast.

Our democratic system is severely flawed and I don’t see it getting better anytime soon

#34 Piccaso on 12.22.14 at 7:52 pm

I’d like to see oil crash further and stay there

But is it any different then any other boom bust boom in oil? There’s been a few

#35 not 1st on 12.22.14 at 7:52 pm

#25 saskatoon on 12.22.14 at 7:26 pm

if anyone disagrees with this conclusion, you are a thief.

let’s at least be honest about it.

—-

Can’t steal whats already yours. My taxes are the fruits of my labour and ingenuity and risk and they are being mis-appropriated and if I cannot effect change to the system through the channels of a democracy, then its my right to withdraw from it using the tools available to me. So thats what I have done.

Have fun voting. Hope it makes you feel good.

#36 ron jeremy on 12.22.14 at 7:57 pm

Would the last one to leave Calgary please turn off the lights…

#37 Smoking Man on 12.22.14 at 7:58 pm

But it’s going to work out for hog town. The exodus from Alberta will head for leaf nation, these lower gas prices put alot of extra loot into the hands of 905.

Add the cowboy refuges to the 100k people that settle in GTA every year.

I’m still bullish on Toronto Real Estate Prices..

#38 Ben on 12.22.14 at 8:12 pm

Still need the US of A to raise interest rates to kick the speculators where it hurts (and that includes families maximising their borrowing and speculating that rates will stay low forever).

Hold onto your (ten gallon) hats.

#39 Shawn Allen on 12.22.14 at 8:13 pm

Sage-a-toon?

Saskatoon says:

Fine, so let’s have a government with VOLUNTARY taxation.

otherwise, it is theft.

******************************************
Thanks for that lesson. It rewrites at least 20,000 years of history whereby paying taxes was mandatory.

Voluntary taxations would be called a donation or charity.

Voluntary taxation is an oxymoron.

Society, the one you benefit from, says: YOU’RE WELCOME! Maybe some day you’ll join us.

#40 Paul on 12.22.14 at 8:14 pm

#27 JSS on 12.22.14 at 7:30 pm

There has been lots of discussion about Alberta oil and it’s real estate plummeting. Now let’s talk about at what prices do we vultch real estate at
————————————————————-
They will never be low enough

#41 Paul on 12.22.14 at 8:15 pm

For you

#42 Victor V on 12.22.14 at 8:17 pm

Conrad Black: The Saudis believe the West is about to give in to Iranian demands. Crashing the price of oil is how it fights back

http://fullcomment.nationalpost.com/2014/12/20/conrad-black-the-saudis-believe-the-the-west-is-about-to-give-in-to-iranian-demands-crashing-the-price-of-oil-is-how-it-fights-back/

#43 mike leblond on 12.22.14 at 8:18 pm

Buyers’ market in Calgary? Fat chance. It will be a buyer’s market when prices are back at 2005/2006 levels. For now, it is still a sellers market, so not the time to buy. Just sit it out for another year or two…

#44 Joseph R. on 12.22.14 at 8:23 pm

#25 saskatoon

Taxation isn’t theft. Why is Ayn Rand still a thing?

#45 ronh on 12.22.14 at 8:25 pm

Maple Leaf Foods and Kelloggs are closing plants this week. Merry Christmas everyone.

#46 Bill Gable on 12.22.14 at 8:27 pm

Obama threw the Keystone pipeline under the bus and he was explicit in the reasoning – because it was a great deal for Canada, not the USA.

Obama doesn’t give a darn about the oil sands – he is more worried about the ‘frackers’ that have been creating OPEC hell, and their health.

2015? It is going to be a heck of a year. I suggest reefing the main sail and being nimble as you keep your eye on the prize.

Oh, and sell the RE and do it N O W.

#47 Canadian In Portland on 12.22.14 at 8:27 pm

Garth,

Years ago, you were the voice of reason when others were on a buying frenzy. After 2008, you rightly explained to people how to prepare for possible financial collapse (how soon we forget we were truly so very very close). But, you did not tell people to bet against America. Sure, there were defaults and bailouts, but their books were balanced over time and their debts were paid when due. Canadians did the opposite, the asked for more and more debt, and took the reins of the out of control horse that America left behind. We capitulated to the fever of buy now or never. We sold our soul to the company store

Now, Canada is a one commodity country with two other industries revolving around it: Housing and car manufacturing. You have been telling people to be prepared for so long, I think it’s time to inhale a deep breath and say….

…I goddamn told you so!

#48 nonplused on 12.22.14 at 8:30 pm

It’s 2008 all over again. Wait for the contagion.

I’m wondering how many banks this is going to hurt. There is no way to arrive at zero risk, so all the hedges the oil companies currently have on imply that there is someone long oil futures at the end of the chain. Could be banks, hedge funds, shadow banking, private equity but for every sell there must be a buy. Somebody out there is seriously squealing and desperately trying to get rid of a long position too little too late.

And when those entities go bust, the energy companies holding the hedges won’t get paid. That’s when the OMG moment happens.

In fact I think the nastiness of the correction might be inspired to some extent by the way risk management works using statistics. If you are a bank and buying oil or gas which they often do to oil companies that are hedging, you are allowed a certain volume based on the recent statistical movements in price. But when the volatility goes up the risk manager walks over and taps the traders on the shoulder and says “liquidate, you are outside your limits”. It’s a forced sale often without regard for the realized losses. It’s meant to stem further losses and reduce exposure.

I personally think part of the problem is that it is common practice to use too short of a time period when calculating volatility, so that when markets are stable the positions grow too large. Then when the market moves you have some highly leveraged positions that must be liquidated in short order. The selling begets more forced selling and the buyers just “pull their bids”. (Never catch a falling knife as they say.)

How long will this last? Well in 2008 it was nearly 2 years before things stabilized. Calgary house prices dropped but not hugely. Enough to wipe out the equity of the 5%’ers though. And that just means more bank risk.

This could be the black swan of 2014.

On another note I am curious how Albertans added more debt than say Vancouverites or Torontonians? Our house prices are about half.

#49 nonplused on 12.22.14 at 8:36 pm

Smoking Man,

TO makes its money lending to Canadians at large and by financing Canadian industry, which is mostly resource related. Oil is down, gold is down, copper is down, aluminum is down, wheat is down, everything is down. The banks will follow and so will TO. It is a resource banking center. It’s probably already hemorrhaging due to the hedging thing I discussed above.

#50 Roman on 12.22.14 at 8:37 pm

Year to date, including dividends:
Bonds (TLT): +27%. Rrright! Buy bonds right before Fed rate hike buldooser.
SPY: +16%
Canada banks: +7% avg. Only because of Xmas gift from Fed. TD was 0 a week ago.
China (via FXI): +14%.
Gold (via GLD): -5%. Only -5%, but there is more to come :)
Oil (via USO): -40%. Ooops. Last time it was falling this fast in 2008

I can’t believe housing will correct without banking sector going bust first. Or I’m wrong and RE “investors” are smarter than ones in equities?

Good news – the housing dash bonds dash stocks party-party is ending soon.
The so called yield curve is already flattening, when it inverts – the equities are done.

This is a fascinating animation: http://stockcharts.com/freecharts/yieldcurve.php

Equities are not done. The banks will not go bust. Get a grip. — Garth

#51 Smoking Man on 12.22.14 at 8:38 pm

#33 SWL1976 on 12.22.14 at 7:50 pm

Russia is not in trouble at all, in fact the bear is holding all the Cards. Interview with Paul Craig Roberts..

Says Russia can unleash a flock of Black Swans on us..

Ronald Regan’s right hand Man speaks on the issue.

http://kingworldnews.com/dr-paul-craig-roberts-12-20-14/

#52 Ronaldo on 12.22.14 at 8:38 pm

”Bloated payrolls from the energy sector have made their way – literally – from coast-to-coast, with fly in/fly out workers spending oil bucks on groceries, mortgages and HD TVs from Victoria to St. John’s.”

And as far as Comox.

#53 Waterloo Resident on 12.22.14 at 8:41 pm

I just asked a woman’s forum the following question:

Question: If you knew that house prices were about to fall 10% to 15% over the next 3 to 5 years, and you were given the choice of

1) renting a large 3 bedroom house for $1,000 and investing the $4,000 per month money you saved into quality high yield stock market investments.

— OR —

2) making mortgage payments of $5,000 per month on the exact same house, for the next 25 to 30 years, plus add in extra costs such as insurance, property taxes, and maintenance costs.

Which of these 2 options would you pick for yourself?

I got replies from 27 women and ALL OF THEM picked the option to buy the house. On lady said this:

“Any man who does not consider me valuable enough to buy a house for me is NOT HUSBAND MATERIAL and I would never agree to stay as his wife for very much longer.”

My thoughts: “what, not one lady would agree to rent?”

#54 Ronaldo on 12.22.14 at 8:41 pm

The next big downturn is right on schedule. Happens pretty much every 7 years doesn’t it?

#55 Smoking Man on 12.22.14 at 8:51 pm

#46 nonplused on 12.22.14 at 8:36 pm
Smoking Man,

TO makes its money lending to Canadians at large and by financing Canadian industry, which is mostly resource related. Oil is down, gold is down, copper is down, aluminum is down, wheat is down, everything is down. The banks will follow and so will TO. It is a resource banking center. It’s probably already hemorrhaging due to the hedging thing I discussed above.
……….

You might have a point, but banks typically make lion share from fees while hedging risk.. Any hit can be absorbed by a tiny spike in your ATM fees… Ha

That’s I own banks… Best advice the great Gartho ever gave.

#56 Roman on 12.22.14 at 9:02 pm

Equities are done.
Ideally they’ll explode along with bonds bubble next year, when Fed hikes. Along with few other bubbles like canadian/Belgium/UK housing markets.

Btw, oil was doing just fine only 5 month ago. As well as Russian market. And gold. And Natgas. And Europe.

And unlike equities, everybody actually needs oil.

Equities represent operating, profitable companies and, ergo, the economy. They are not going bust. Move along. — Garth

#57 Ronaldo on 12.22.14 at 9:03 pm

This may be the future of the oil sands. Driverless heavy haulers. This is already being done by some large mining companies in Australia.

http://motherboard.vice.com/en_ca/blog/autonomous-dump-trucks-are-coming-to-canadas-oil-sands

#58 Steve on 12.22.14 at 9:07 pm

“Any man who does not consider me valuable enough to buy a house for me is NOT HUSBAND MATERIAL and I would never agree to stay as his wife for very much longer.”

Lol! You can’t reason with that!

#59 stop lying on 12.22.14 at 9:08 pm

Canada 5 yr bond yield: 1.355

Can’t say I’d be worried about Toronto & Vancouver just yet. Toronto is enjoying cheaper gas and a lower dollar and Vancouver still has a hamdle on things.

Housing is not that liquid so will take a while to start going down. People would rather not sell than sell at a price less than they think it’s worth. Only the percentage that has to sell will start tracking prices down.

#60 east van on 12.22.14 at 9:10 pm

The terrible economic price Canada will pay for Harper’s “Energy Superpower” blind ambition:
http://soberlook.com/
Check out the non-energy export graph.

#61 east van on 12.22.14 at 9:14 pm

Symptoms of a petro-state: government no longer represents the interests of the electorate:
http://thetyee.ca/News/2014/12/18/Terry-Lynn-Karl-Interview/

#62 not 1st on 12.22.14 at 9:19 pm

If oil causes some pain and triggers a housing correction, Garth will have another 1400 insufferable blog posts on the subject.

It should be required reading for every house horny that jumped in both feet at the peak.

#63 Ronaldo on 12.22.14 at 9:23 pm

#29 LowFatOil –

”Oh, and I do remember the last time oil was $20. It was not that long ago actually, say around 1997 or so?”

Not sure when it was $20 either but I did make a note of what things were when the TSX hit 10,000 for the 1st time on March 25, 2000.

Dow – 11112
Nasdaq – 4968
SP 500 – 1527
SP 60 – 596
CNDX – 4421
TSX – 10012
CDN$ – 68.4 cents US
30 Yr Bond – 5.75%
Gold – 284.70
Oil – 28.02

#64 Smoking Man on 12.22.14 at 9:23 pm

#53 Waterloo Resident on 12.22.14 at 8:41 pm

That’s been my central theme on here. The Herd. Woman have more distane to renters than drunkard smokers.

#65 Mark on 12.22.14 at 9:33 pm

“. Only the percentage that has to sell will start tracking prices down.”

Don’t forget the huge amount of supply side response that this housing bubble has created. Which may even accelerate in the coming years as developers race to convert their inventory of materials, factories, plant, land, and equipment, to cash. And to make up for falling margins.

So if not even a single current owner sells or finds themselves otherwise in financial distress, there’s still an onslaught of new supply coming to market to further depress prices.

#66 Leo Tolstoy on 12.22.14 at 9:35 pm

Is Roman = Mark?

They sound equally irrational.

#67 Nemesis on 12.22.14 at 9:37 pm

#I’veSaidItBefore… #&I’llSayItAgain… #WithALittleHelpFromWaylon&Willie,Johnny&Kris…

http://youtu.be/tbp6oRXFAd4

[NoteToGT: No. They weren’t sober. Way too much Chivas… there were lot’s of Smarties, too. The candy coated chocolate confection.]

#68 not 1st on 12.22.14 at 9:42 pm

Truck nuts are shaking all across the prairies tonight. Different this time? Apparently not.

#69 trevor tsolukas on 12.22.14 at 9:43 pm

Equities represent operating, profitable companies and, ergo, the economy. They are not going bust. Move along. — Garth

Equities do, equity prices do not. Equity prices can be anything you want. Print 100000 trillion dollars and you can pump a fictitious boiler room company to a higher valuation than the entire GDP of the United States. Total exaggeration but this was blatantly obvious and demonstrable during the tech bubble. It’s just numbers on a computer screen that, currently, are manly the result of Fed monetary policy. If central banks around the world did not constantly print new money or manipulate interest rates and bail out governments and private corporations, you believe equity markets and real-estate would be where they are today? How naïve can someone be.

#70 rambling man on 12.22.14 at 9:44 pm

#8 Smoking Man on 12.22.14 at 6:55 pm
Geo politics at its best.

This is done to punish Russia over Syria, and BRICKS.
——————————————————————–
BRIC = brazil russia india china, what country does your k stand for ? lol as usaul you have no idea what your talking about, learn to bullshit better if you wana get super rich like the midnight rambler

#71 Larry Laffer on 12.22.14 at 9:45 pm

I though this post would be about Pantera (R.I.P. Dimebag Darrell). Sigh.

#72 Keith in Calgary on 12.22.14 at 9:45 pm

#53………

When you asked that question, are you sure you were not on a prostitutes forum ?

#73 Smoking Man on 12.22.14 at 9:46 pm

All over twitter.

Malaysia Airlines flight MH370 was ‘shot down by the US military’, former airline CEO claims

http://t.co/ReL94VEDKy http://t.co/kebDnTfVaz
………

Idiots it was Aliens.. Nectonites to be exact…

#74 Mark on 12.22.14 at 9:46 pm

“Is Roman = Mark?
They sound equally irrational.

Of course not. Not only am I not irrational, but I personally believe equities and the banks will thrive in a declining house price environment.

#75 Yuus bin Haad on 12.22.14 at 9:48 pm

Put away the conspiracy theories kids – this is deflation at its finest – world-wide, aggressive, and not good for those with debt. My goodness, even Conrad has it wrong. Cypher had it right though – “Kansas is going bye-bye.”

#76 rambling man on 12.22.14 at 9:50 pm

#15 james on 12.22.14 at 7:09 pm

you sound a little jealous…..stop hatin on the roughnecks they earn it

#77 Renter's Revenge! on 12.22.14 at 9:55 pm

#53 Waterloo Resident

Wow! Sounds like you wandered into Golddigger Central! The problem is, you’re not seeing things from their point of view. You could probably still afford to buy a house now, so the main difference between that and following Garth’s advice is how much you end up working over your life time. But the purpose of a man is to work and make money, and those women could care less about how much you want to work. They’re only concerned with what they want, which is why they’re still single. Stop looking for girlfriends on golddiggers.com and imaprincess.com and your problems will go away. There are plenty of intelligent, rational women out there who think buying a house right now is a dumb idea, judging by the number of self-identified ones on this blog, hoping to meet wealthy male renters. You can’t save everyone from this mess.

#78 Nemesis on 12.22.14 at 9:59 pm

#AlmostForgot… #RealCowboysDriveFords… #Seriously,SaltyDogz.

http://youtu.be/HPWGMzqXG1s

http://youtu.be/mAFKqkifqBM

http://youtu.be/HwTHQNBl2FI

http://youtu.be/O65zgOlM4h4

EatYourHeartOutChevy….

[NoteToGT: Sorry about that. It’s a Dearborn/RiverRouge/MotownSouth family thang… We build ’em. You drive ’em.]….

#79 stop lying on 12.22.14 at 10:02 pm

#65 – Don’t forget the huge amount of supply side response that this housing bubble has created. Which may even accelerate in the coming years

In 2013 housing starts were 10% lower than they were in 2008 or 2012 (this year will be similar to last). It looks like builders have responded to overbuilding concerns and high land prices. Ironically this would contribute to keeping housing expensive.

#80 No Debt on 12.22.14 at 10:04 pm

The hit the economy is already taking reaches well beyond the tar pits. As I said a couple of weeks back, we had a customer that survives on the oil and gas industry cancel a $400k deal for supply of electrical materials. That contract, (one would think) was probably a $5M job for our customer to have lost. That same week, 40 people in various trades lost jobs at the same company.

Hamilton is a long way from Fort Mac.

#81 sue on 12.22.14 at 10:06 pm

#53 Wow, that was an interesting experiment. I am a renter with a decent investment portfolio run by Garth. I know I am a rare woman. lol I often debate my home owning bf who owns mutual funds. I have given up. He has no mortgage and a big fat fire chief pension so I leave him be. He can afford those ripoff trailer fees.

#82 JSS on 12.22.14 at 10:07 pm

#71 Larry Laffer on 12.22.14 at 9:45 pm
I though this post would be about Pantera (R.I.P. Dimebag Darrell). Sigh.

—-

I thought so too. Cowboys from Hell was a great album. RIP Dimebag Darrell.

Does anyone else out there think so too?

#83 Ronaldo on 12.22.14 at 10:10 pm

This is for Smoking Man. Enjoy.

https://www.youtube.com/embed/OOgd9hitEAE?rel=0

#84 Smoking Man is Grahan59 from GM on 12.22.14 at 10:15 pm

Smoking Man today’s post #8:
Geo politics at its best.
This is done to punish Russia over Syria, and BRICKS. Ukraine just the side show, the magicians slight of hand.
Harpo burned by Obama on Keystone.
Too funny
=====================================

User name Graham59 from Globe and Mail with profile:
http://www.theglobeandmail.com/community/profiles/?uid=17631312
Geopolitics at its best.
This is done to punish Russia over Syria, and BRICs. Ukraine just the side show, the magician’s slight of hand.
Harper burned by Obama on Keystone.
Too funny.
====================================

However Smoking Man today’s post#37:
“But it’s going to work out for hog town. The exodus from Alberta will head for leaf nation, these lower gas prices put alot of extra loot into the hands of 905.
Add the cowboy refuges to the 100k people that settle in GTA every year.
I’m still bullish on Toronto Real Estate Prices..”
====================================

But Graham59 post from Dec.10:
“I talked the other day with a friend of mine who has been in the real estate business for a while. The guy spent the last 25 years selling properties in Toronto and he has seen it all. He went through the 90’s dip, good and bad years and everything in between. I prayed since 2010 that prices will cool-off or at least freeze for a while … this run will end badly for everyone, he said. Half dozen of my listings are sitting on the market for almost 6 months and I’ve been trying to sell 2 properties for more than a year! These are single family homes in the range between 2 to 4 million dollars. The first time since late 90’s I’ve been getting low ball offers, he added. We’re not talking about 10% – 15% off the asking price but 30% – 35%….”
====================================

SM – some explaining to do…

Die realtors, die!

#85 Rexx Rock on 12.22.14 at 10:23 pm

Just as low oil prices will wreak havoc on some countries the bond market will also do the same.When some countries in the coming future will default on their debt.Greece,Spain and Japan the most likely.Then the stock market will correct.

#86 SWL1976 on 12.22.14 at 10:25 pm

#17 Arfmooocat

Sending jets over to fight ISIS, publicly telling Putin to get out of the Ukraine

Well he got played by Obama.. lol

————————————————-

As bad as it is for our Canada it kinda looks good on Harper. His style of sucking up to the US is disgusting to watch.

We have a term for people like that at work. Generally they are incompetent and insecure in their work and they are known as *** lickers

Its disgusting to watch how some people try to get ahead

#87 Smoking Man on 12.22.14 at 10:31 pm

They’re on to us…

http://m.ibtimes.com/do-aliens-exist-yes-some-look-just-us-says-paul-hellyer-former-canadian-defense-minister-video

#88 Conspiratard on 12.22.14 at 10:35 pm

Smoking Man I have enjoyed all of your ten posts so far tonight, and only wish Garth would write less, to get out of your way and allow more of the truths you try to share with the ungrateful here.

Yes, yes, yes, I say, MH370 was shot down by the US, and Paul Craig Roberts played a role. You are brilliant to link the two.

And Toronto real estate has nowhere to go but up as you say, because the Russians and Syrians are invested heavily there and they signed an agreement in room 666 of WTC bldg. 7 on September 11, 2001, at 8 a.m. to guarantee their monopoly on urban Canadian real estate. And to think so many in the herd blame it on HAM, lol. Schooled idiots.

You and I know better.

And I know your posts are reaching a climax tonight because we are on the cusp of the 42nd anniversary of the Immaculate Reception.

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

Coincidence? I think not.

I think not.

#89 Mike S on 12.22.14 at 10:43 pm

“Canada 5 yr bond yield: 1.355

Can’t say I’d be worried about Toronto & Vancouver just yet. ”

Toronto seems fine for the moment, but marginally I do see some sentiment change out there. It is not the oil. Some people seem to be listening to what Poloz had to say (the 30% over-valuation thing). maybe RE won’t go up forever after all …

#90 joblo on 12.22.14 at 10:46 pm

Harpo and Prentis met on Sunday so it’s all good.
Move on nothin to see here!

#91 Roman on 12.22.14 at 10:51 pm

>> Of course not. Not only am I not irrational, but I personally believe equities and the banks will thrive in a declining house price environment.

Canada houses = Banks, so while one thrives another can’t decline.

Technically banks are diversified and blah-blah-blah. But everybody here knows that the solely purpose of their existence is to hook up each and every canuck for a mortgage. And the mission is pretty much accomplished.

I worked in one for a short period of time, saw it from inside. They are dumb organizations, IBM-ish sort of. Have they taken some rik? A lot of risk?
They like to boast how risk averse and diversified they are, but each of big five has 200B or so in RE mortgage loans on the balance sheet.
http://www.marketwatch.com/investing/stock/ry/financials/balance-sheet

But hey, they ARE canadian economy (along with oil and other natural resources). No problems in sight with RE while they are doing ok. And vice versa.

#92 stage1dave on 12.22.14 at 10:53 pm

Well, guess it had to happen sooner or later…the cycle continues.

As the wife & I are happily renting in AB, guess we’re stuck with front row seats! Out here ine central AB, personal stories of potential doom and/or highly premature temporarily-enforced retirement are floating around thicker than fog at a CPC policy meeting…

The wife has a couple brothers in the patch; & a third of my business is coming from people directly employed in O & G support industries so I’ve knocked my cash-flow predictions down considerably for 2015…smartest rumour I’ve heard lately is the blood probably won’t start to flow until breakup.

Wife & I have remained debt-free & have continued to save & set aside…guess we’ve spent too much time on the prairies haha. Probably have to spend another winter in this POS apt, but I’m enjoying the “know maintenance” practicality of it.

(As we’re living on the ground floor, I keep thinking about using some of my soon-to-be downtime digging a basement in secret…we could really use the room)

Anyway, after 5 years of bitching about about idiotic RE prices & the people who propel them I feel no satisfaction whatsoever that some of these numbers (& people) are about to get a haircut; just kind of a wistful sadness. Lived thru a couple of these times before, so c’est la vie. (well, I can perform gr. 6 math too, & that’s helped)

Lastly, a link to an interesting article on Counterpunch:http://www.counterpunch.org/2014/12/19/ruble-takedown-exposes-cracks-in-putins-defense/

A bit doomerish, but perhaps hilighting the fact that Putin’s “best offence” might be the straw that breaks the back of an insanely over-leveraged “banking” system in the “west”. Would certainly make things a lot more interesting in the short term…oil, house prices, the patch, etc…ain’t “globalization” great?

Hmmm…sounds like the wife has Queen cranked & is doing her best Freddie impersonation, so I should run. Listening to that is probably more mentally healthy than reading about potential economic tsunamis…

#93 Smoking Man on 12.22.14 at 10:56 pm

#84 Smoking Man is Grahan59 from GM on 12.22.14 at 10:15 pm
Smoking Man today’s post #8:
Geo politics at its best.
This is done to punish Russia over Syria, and BRICKS. Ukraine just the side show, the magicians slight of hand.
Harpo burned by Obama on Keystone.
Too funny
=====================================

User name Graham59 from Globe and Mail with profile:
http://www.theglobeandmail.com/community/profiles/?uid=17631312
Geopolitics at its best.
This is done to punish Russia over Syria, and BRICs. Ukraine just the side show, the magician’s slight of hand.
Harper burned by Obama on Keystone.
Too funny.
====================================

However Smoking Man today’s post#37:
“But it’s going to work out for hog town. The exodus from Alberta will head for leaf nation, these lower gas prices put alot of extra loot into the hands of 905.
Add the cowboy refuges to the 100k people that settle in GTA every year.
I’m still bullish on Toronto Real Estate Prices..”
====================================

But Graham59 post from Dec.10:
“I talked the other day with a friend of mine who has been in the real estate business for a while. The guy spent the last 25 years selling properties in Toronto and he has seen it all. He went through the 90’s dip, good and bad years and everything in between. I prayed since 2010 that prices will cool-off or at least freeze for a while … this run will end badly for everyone, he said. Half dozen of my listings are sitting on the market for almost 6 months and I’ve been trying to sell 2 properties for more than a year! These are single family homes in the range between 2 to 4 million dollars. The first time since late 90’s I’ve been getting low ball offers, he added. We’re not talking about 10% – 15% off the asking price but 30% – 35%….”
=================

SM – some explaining to do…

Die realtors, die!
……….
You’re an idiot.

Dude, I’m an alien, I come from the planet Nectonite, been here for over fifty years. My real name is Jay Smokeweeden, there are 3 others. Blithe Barrington, Charles Ashman, and Jeremiah Jones. We are on a mission.

The only reason I’m telling you about this, I’m a raging alcoholic. Lost lips.

Your species are barbarians, you are close to interstellar galactic technology.

Our mandate is to take you out before you can travel the stars and spread you cancer.

Before we do that, we are going to try to take out the technology, hence buying you animals some time to grow up.

By the way, we created humanity.. On our home planet, we can read each others minds.. Realy sucked for our elite wanted a bit on the side.

Our scientists mixed our DNA with sheep, and dogs.. Everyone was happy till some of you started killing. They told them to use Poodle DNA, but a stoned student used pitbull by accedent. We shipped you down here 200k years ago.

Now you know..

#94 Happy Renting on 12.22.14 at 10:59 pm

#84 Smoking Man is Graham59 from GM on 12.22.14 at 10:15 pm

Smokey, how come we get all the typos and creative spelling?

#95 Happy Renting on 12.22.14 at 11:01 pm

#53 Waterloo Resident on 12.22.14 at 8:41 pm

For some variety, how about you go back to doing anti-fluoridation rants?

#96 VICTORIA TEA PARTY on 12.22.14 at 11:20 pm

“YOU CAN LEAVE YOUR HAT ON…” (JOE COCKER)

The story about the emperor’s new clothes, is the vein in which I inscribe the following:

I include, for the moment, all of Alberta’s real estate elves and other dandies.

They still don’t get it, but they will in the next hours and days.

Their silly hubris and greed will soon collide with the slab-sided mountains of granite-like economic reality like dominoes.

On the same day American rocker Joe Cocker crossed the River Styx, to entertain the Big Lad somewhere in that vast sky for all Eternity, Calgary’s realtors were getting earfuls, on their plastic telephone widgets about ANOTHER kind of eternity, from the bank serfs: “But you told me that real estate never goes down! What gives? I’m DONE!”

Well, that’s right; done like a sidewalk cafe cool, expensive so-called lunch with a huge bill.

Low oil prices, everyone is about to discover, are the sorts of economic gifts that keep on giving and giving. Giving endless grief until you start to squeak and then, one day, the price starts to go back up!

But when?

That is the home equity line-of-credit-account question of the hour. There is no answer now. But when you see your neighbours starting to look a little tattered about the edges, moreso than even you do, that might be a sign of a price bottom.

I’ve seen this movie before.

It’s a horror show. But this one is spreading right across our fair land, coast to coast, at a horrific speed.

But Joe Cocker’s performances were no horror shows. His were good shows, and we will miss him.

https://www.youtube.com/watch?v=IfsZ9tLhmMs

#97 Mark on 12.22.14 at 11:30 pm

“Canada houses = Banks, so while one thrives another can’t decline.”

History proves this isn’t the case. Canadian banks more than tripled their stock prices (and earnings) 1990-2000. But house prices actually declined over the decade.

#98 Rexx Rock on 12.22.14 at 11:43 pm

Its not all bad.Many ski hills and Mexican resorts will be busy with all the laid off oil workers.I filled up for 96 cents a liter of gas in Victoria B.C.I took a picture just in case I will probably never see that again.Many Vancouver island towns and cities will see all the unemployed workers come back to sit on UI because of no jobs here.Very sad times on the island now.

#99 juno on 12.22.14 at 11:43 pm

Humans (sheeples) are funny.

Its going to take at least 3 months before you see the fallout. In January the layoff for oil will start. Follow by construction

Canadaès two biggest industries. Ouch!

Once layoff, the cheques will stop and the banks will come calling several months later. Ouch and double ouch. Remember most Canadians live from paycheque to paycheque.

The relunctant owners will not be doing the selling. The banks will do it for them. That in turn should kill the remaining CMHC kitty. Paying out more than they take in for the first time ever.

But wait for it…. The Government is broke, no revenues, darn cannot fund the CMHC sinkhole.

Now comes the banks. No way Josè. You think getting cheap money will be easy. That will be a thing of the past, because lend will become risky.

More to come in the next few months.
BTW they should place criminal charges on those realitors. They lied and said re can never go down.

Remember the 80s

#100 stage1dave on 12.22.14 at 11:43 pm

Larry #71 & JSS #82

Cripes, I’m actually wearing a CFH t tonite…can’t seem to persuade the wife to try & sing any of it, tho…

I completely missed that post header, too…weird…

#101 Don on 12.22.14 at 11:44 pm

#52 Ronaldo on 12.22.14 at 8:38 pm

”Bloated payrolls from the energy sector have made their way – literally – from coast-to-coast, with fly in/fly out workers spending oil bucks on groceries, mortgages and HD TVs from Victoria to St. John’s.”

And as far as Comox.
***********************

Half the islands flying in and out – even Victoria. These workers shop, rent houses, buy vehicles etc. I’m not thrilled the ripple effect is also painful. It is painful to watch as so many have squandered an opportunity to get out of debt while making vast amounts of money.

What a lesson!

#102 stage1dave on 12.22.14 at 11:45 pm

oh no…now she’s singing country…there goes the evening…

CFH indeed!

#103 TurnerNation on 12.22.14 at 11:45 pm

Today’s photo: Drove my Chevy to the levee but the levee was dry…?

#104 Gold finger on 12.22.14 at 11:47 pm

Oil going down like this makes one happy for sure – but I also wonder that these inflated prices were perhaps all caused by Big-Dick Cheyny and his Brother in arms Small-balls Bush from Texas. Don’t suppose they are very happy at this turn of events (fortune). Their game seems to be up as well

#105 David W on 12.22.14 at 11:51 pm

The winds of change are coming. Like s.h. said when he was first elected, we won’t recognize it. It will be broke as well as its citizens thanks to the housing debt binge. An election is coming, have your say what you want this canada to look like.

#106 Smoking Man on 12.22.14 at 11:53 pm

#103 TurnerNation on 12.22.14 at 11:45 pm
Today’s photo: Drove my Chevy to the levee but the levee was dry…?
…….

Perfect.. :)

#107 Nomad on 12.23.14 at 12:04 am

Be careful with the oil rally. I got caught buying XEG too quickly thinking it was a sale. When oil had its rally over the last week I unloaded 1/3rd this week at a 2% loss and I feel much better.

Not putting new money in Canadian banks. All new cash goes in US SP500 with HXS.

With rates coming up in 6-12 months put at least some of your cash on Manulife, Sunlife, Industrielle Alliance. Nice dividends and more important, a hedge against the effect of rising rates on certain stocks like REITs.

#108 marnic on 12.23.14 at 12:07 am

Joe Cocker was from Sheffield, England.

#109 Doug in London on 12.23.14 at 12:09 am

@SWL1976, post #33:
All brought to you by our ‘Elected Officials’, you say? You’re partly right. It was our ‘Elected Officials’ who brought us low down payments on what are essentially sub prime mortgages, but we the Canadian public were NEVER forced against our will to get heavily mortgaged buying overpriced houses. We, or at least many of us, did that to ourselves, and have no one else to blame for that foolishness.

#110 Al_Bundy_ on 12.23.14 at 12:22 am

Pump in winnipeg was 81.9 today.
Only weeks ago we were over 1.13
Merry Christmas

#111 Gregor Samsa on 12.23.14 at 12:30 am

Garth, either you are wrong or Calgary is in for some major, major pain because what you describe simply isn’t happening. No layoffs have been publicly announced to date, restaurants are still full, bars are still busy, there are still upwards of 20 or more construction sites going full tilt around downtown, malls are busy. I even had a guy tell me that this is an excellent time to buy a house because after this minor little blip in oil prices, home prices will almost certainly skyrocket and I should think about buying.

The prevailing mentality is that this will soon pass.

#112 GRAHAM59 on 12.23.14 at 12:33 am

A lot of delusion out there, that’s for sure. Saw the same in California 2006-2008. Prices were clearly melting away, but that didn’t stop the Realtor types from being awfully ‘selective’ about the “stats” that they published. And in some cases, outright lying about them. I know the Realtor types are in denial over the changing sales mix in Canada publicly, but their behaviour makes it obvious that they are very worried. Lots of Realtors are also in denial over how the CMHC operates with the $900B of subprime mortgage insurance they’ve written underpinning the market. The louder the protests by the Realtors, the more that we, as the public, should understand that the pricing environment is deteriorating.

#113 Sheik Yerbouti on 12.23.14 at 12:38 am

“#70 rambling man on 12.22.14 at 9:44 pm
#8 Smoking Man on 12.22.14 at 6:55 pm
Geo politics at its best.

This is done to punish Russia over Syria, and BRICKS.
——————————————————————–
BRIC = brazil russia india china, what country does your k stand for ?”

The K has to stand for Kaos…get out your old Get Smart re-reruns…..the shoephone was the closest thing to an Iphone in those days!

#114 Vanecdotal on 12.23.14 at 12:40 am

#53 Waterloo Resident

Dude. You may need to broaden your circle of feminine influence beyond reruns of Housewives of Orange County / trolling the interweb for mail order brides / ashleymadison.com forums. In has been my experience in several different professions, that it’s predominantly the women with the better comprehension of financial matters in general, and also generally better business acumen. Yet many of their male contemporaries struggle financially and professionally with little to absolutely no understanding of:

a.) financial markets / RE markets / concept of “recency” / market cycles
b.) macro or micro economics (hint: NOT a type of pasta)
c.) that real estate does NOT always go up
d.) having room left on the credit card or heloc does NOT mean you’re “rich”
e.) that money can be put to work FOR you AND you can pay less tax!
f.) that a vehicle bought on credit is not an “asset”
g.) that you should spend LESS than what you earn each week to get ahead (see: e. above)
h.) that an ETF is NOT an STD

… and a million other anecdotes. Frankly, the majority of my male contemporaries, even if they earn a decent living, are terrible with financial matters, regardless of education level. The smart women know this, and they are many, and take it upon themselves to invest the time to either formally, or self-educate themselves about how real estate, money, markets and business works to avoid being dragged down by these financial-train-wreck-types. Actually, the smart ones aren’t even looking for male companionship (unless it’s on their no-strings terms), they’re too busy building their empires. Gold-digging goes both ways, maybe you should find yourself a hot young successful businesswoman to hook-up with, I’m sure she’d be salivating at the opportunity to glean the wisdom of the ages from your wizened and clearly illuminated self.

#115 Canuk Abroad on 12.23.14 at 12:48 am

I think you mean “there’s no room on the floor for oil prices”. Over 90 countries and 5 1/2 billion people are being fed with petro dollars. These starving people are listening to the Saudi Minister of Sand with a brewing hatred.

It’s being argued what the cause of plunging oil actually is…the official story is supply/demand…however many insiders say that the trail leads into the White House with Obama trying to score one foreign policy coup before he’s booted into infamy. I’m with the latter.

Obama has attacked Russia, Syria, Iran, China, Israel, Canada…all to no avail. Each leader knows that this clown is history and are already making statements to that effect. Obama has been blasting that with a campaign of renewed propaganda.

Canada is going to be fine….unless you talk to Liberals who hate Harper so much that they’re picking up every string that might lead to his demise.

What is not going to be as pretty is the 5 billion people who will no longer receive subsidized food from their governments. Starvation and deprivation will lead to a bloody consequence the world hasn’t seen since WW2. All courtesy of Obama and his reckless attempt to build a ‘legacy’.

Putin, China and others are looking at 24 months of unrest…so they have announced. But Russia will not fall….just all the poorest of the poor who will flame into global chaos…..thx Barack……you wanted change…..we got got change.

#116 Ronaldo on 12.23.14 at 1:10 am

#101 Don – ”Half the islands flying in and out – even Victoria. These workers shop, rent houses, buy vehicles etc. I’m not thrilled the ripple effect is also painful. It is painful to watch as so many have squandered an opportunity to get out of debt while making vast amounts of money.”

What a lesson!”

Totally agree. We’re talking three generations of workers since the oil sands first started up in the early 70’s. B.C. for certain has been a beneficiary of a lot of that big oil money over the past 40 years. This is very evident in the Okanagan and very much so on the island. There is a very good reason why WestJet and now Air Canada are providing direct service from Nanaimo and other points to Calgary. I’ve flown into Nanaimo a few times where half the plane or more was oil workers coming in for their days off. It will be interesting to see how this fall in oil prices effects these airlines and if these flights continue. It boggles the mind the amount of money that is generated in wages and benefits from these oil sands and one has to wonder how it can be sustained. As you say, the ripple effect is going to be really painful. I recall the previous downturns in the oil patch very well and this one does not look like its going to be a mild one. I am certain that a lot of the new builds on the island can be attributed to the oil patch.

#117 Bren on 12.23.14 at 1:41 am

The USA box office has lowest spending in 15 years…

So much for lower oil prices…

What a joke, all the usa economic Rennaisance types are in for a future of more embarrassment.

#118 $20 oil is coming on 12.23.14 at 1:42 am

Housing is set to crash hard in Alberta. How many will go bankrupt as those who bought a house without selling their first home? With two mortgages and with the potential of losing ones job time is not on the sellers side. Anyone buying a house in Cow town is stupid. Wait for people to lose their houses before buying. Happy foreclosure hunting buyers.

#119 Mr. Cheerful on 12.23.14 at 1:45 am

Consider what $55 oil says about the TRUE state of the global economy. Now there’s a topic nobody wants to discuss with you.

#120 Setting the Record Straight on 12.23.14 at 2:51 am

@33
“They are elected to SERVE US, not for us to serve them”

Sorry but where did you get that idea?

Doing the same thing over and over again and expecting different results are you?

#121 Setting the Record Straight on 12.23.14 at 2:55 am

#44 Joseph R. on 12.22.14 at 8:23 pm
#25 saskatoon

Taxation isn’t theft. Why is Ayn Rand still a thing?

$$$&&&
Please explain why it is not theft?

#122 Freedom First on 12.23.14 at 2:59 am

Things are getting bad in Alberta already and many Canadians working in the oil patch who fly in and out have already been let go. Air traffic has been decreasing for a month and is way down now. And I mean way down. Lots of communities coast to coast in Canada rely on MacMoney, and these communities have a lot of unemployed from the patch as of this month. It is becoming harder and harder to hide the truth from the masses, as hard as some people/institutions try to hide it. We don’t want panic now, do we? I live in Alberta, and the majority of people I talk to now are aware that the SIHTF. There is fear from people who remember the eighties, and the now unemployed of today. The worry is the low price of oil will be prolonged.

#123 LowFatOil on 12.23.14 at 4:23 am

Hey Waterloo Resident:

I just heard this line in a movie last night on NetFlix…….”We’re in a Golden Age of Materialism”.

Nothing wrong with being a “DFR-SAILING-DF”

DebtFreeRenter – SingleAvailableInvestorLooking for IntelligentNice Gal – also DebtFree

Put that on your T-shirt next time you are on a Skype ChatRoom.

If a gold-digger asks you what the acronym stands for you can tell her. (but she might not know what an acronym is.)

#124 LowFatOil on 12.23.14 at 4:27 am

“To the Wanderer…..there is no road.

Where you walk, is where you make the path.”

(a beautiful quote from a famous person.)

#125 Exurban on 12.23.14 at 5:32 am

On the same day American rocker Joe Cocker crossed the River Styx…

Joe Cocker was an American?

#126 maxx on 12.23.14 at 7:36 am

From “buy now, or buy never” to “I’m melting……melting….”…………..

Sales people can fool some of the people some of the time as well as themselves- especially when they believe their own often-enhanced rhetoric.

Let’s face it- our economy was waaay better off before re became such an obese part of it.

How many generations before we recover from this damage is the question.

#127 ritenote on 12.23.14 at 9:01 am

To #15 James:

Many of those travelling to the oilpatch for work are highly trained tradespeople. There is, and has been, a shortage of tradespeople in Canada for many decades. It is a simple supply and demand situation, where these skilled tradespeople can demand a living wage. I, for one, support them. Their purchases of “idotic” pickup trucks, their travel in and out of the oilpatch supports other sectors of the economy that “automatons” will not. UPS and McDonalds will not be the employers to give our kids a living wage…and just curious…have you worked in the oilpatch yourself, since you seem to know all about what it is to earn “easy money”?….

#128 ritenote on 12.23.14 at 9:10 am

#53 Waterloo Resident:

You’ve got it guy. The housing bubble is all womankind’s fault. Shame on us.

#129 Herb on 12.23.14 at 9:26 am

#120 Falsifying the Record,

since you seem to be one of our Right Wing preachers, let me put it to you in the Fundamental Christian terms you will understand:

“Render unto Caesar the things that are Caesar’s …”

That should be bless taxation enough for you.

#130 Jeff in Moose Jaw on 12.23.14 at 9:37 am

Those aren’t Wranglers…… all hat no cattle.

#131 ALBERTASTROPHE on 12.23.14 at 9:39 am

#125 maxx

How many generations before we recover from this damage is the question.
————————————————————-

My guess is about 10 years for Ontario, 30 years for Alberta.

In Alberta now the vibe is very weird.

It will be Christmas, then lights out.

#132 ALBERTASTROPHE on 12.23.14 at 10:17 am

So what will some laid off oil workers do?

Why not go back to school?

Alberta has the lowest post-secondary participation rate in the country.

So it makes perfect sense that Jim Prentice has just decided to hike tuition rates by up to 56%.

Doesn’t it?

http://calgaryherald.com/news/local-news/province-grants-approval-for-controversial-tuition-hikes-up-to-56-starting-next-fall

This ought to really help stem the exodus from Alberta and support the demand for housing.

Smart governance, neocons.

#133 Island Girl on 12.23.14 at 10:21 am

Hubby and I have been patiently watching the market with the hopes of eventually buying a house. Looking at another 2-3 years before taking the plunge as we both agree that a house isn’t the be all end all, but just a nicer dig to sleep in. Unfortunately most of our friends and family still think it’s a waste to rent. Funny, a Realtor friend of ours told us that it wasn’t the lack of offers that was the problem when buying but the number of times the bank came back and told the prospective owners that they wouldn’t lend them the amount of money they were offering because they didn’t think the house was worth that much…

#134 waiting on the westcoast on 12.23.14 at 10:53 am

#116 Bren re: lowest spending of US box office in 15 years

I think the move away from “going to the movies” has less to do with the general economy and more to do with big screen TVs and streaming services.

#135 Victor V on 12.23.14 at 11:08 am

http://www.theglobeandmail.com/globe-investor/inside-the-market/market-updates/at-the-open-dow-sp-set-new-records-after-gdp-report/article22186137/

U.S. stocks advanced on Tuesday, with both the Dow and S&P 500 building on a four-day rally to set new intraday records after an unexpectedly strong report on economic growth.

The gains pushed the Dow over 18,000 for the first time in its history, with the index reaching a high of 18,020.19.

The final estimate of the U.S. gross domestic product (GDP) for the third quarter was revised up to a 5 per cent annual pace, its quickest in 11 years, from 3.9 per cent reported last month, on stronger consumer and business spending, the government said.

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

Merry Christmas to blog dog investors.

#136 followthemoney on 12.23.14 at 12:05 pm

And on the West Coast…… for those who believe the amount of HAM Vancouver real estate investment is substantial and has influenced the housing market, this is now being investigated by Chinese Government tracking corrupt money, in cooperation with the Canadian government.
CBC news ( see story at 23:50 on link)

http://www.cbc.ca/player/News/Canada/BC/CBC+News+Vancouver+at+11/ID/2644459782/

#137 TurnerNation on 12.23.14 at 12:19 pm

First? I’ve said it before but approach this weblog’s comments section with same trepidation as when entering a gas station washroom.

#138 Comox Rig Rat on 12.23.14 at 12:42 pm

#52 Ronaldo on 12.22.14 at 8:38 pm

”Bloated payrolls from the energy sector have made their way – literally – from coast-to-coast, with fly in/fly out workers spending oil bucks on groceries, mortgages and HD TVs from Victoria to St. John’s.”

And as far as Comox.

+++++++++++++++++++++++++++++++++++

Absolutely true, but other than the weed growers, the O&G people are the only ones keeping the lights on in the Comox Valley.

Oh, and did I mention that unlike the weed growers, the O&G types actually pay taxes?

No fracking, no pipelines, no tankers, no taxes, no schools, no hospitals. Big problems.

Welcome to the Bi-polar Coast. They want to have their cake and eat it too.

#139 HD on 12.23.14 at 12:43 pm

“The real S&P composite has increased 12.2-fold from January 1890 to December 2014, or 2.03 percent per year, much less than most people would have guessed. Most of the real return in the stock market over the last century has come from dividends, not real capital gains,” said Shiller. “Home prices have increased only 1.5-fold, or only 33 basis points a year. Essentially, home price capital gains overall have amounted to virtually nothing.”

“It would perhaps be smarter, if wealth accumulation is your goal, to rent and put money in the stock market, which has historically shown much higher returns than the housing market,” said Nobel Prize-winning economist Robert Shiller at a Standard and Poor’s conference last week.”

https://homes.yahoo.com/news/where-put-cash-house-stock-181200118.html

Best,

HD

#140 Grooby_in_Calgary on 12.23.14 at 1:02 pm

#111 Gregor Samsa:

The prevailing mentality is that this will soon pass.
—————————————————————

That’s not what I’m seeing, working in downtown Calgary. Anecdotally, I’m aware of over 1,000 layoffs in just 2 companies alone, and that is just the start.

Here’s just one (major) announcement of many, of which 400 of the job cuts will be Calgary based.

http://www.calgaryherald.com/business/NewsAlert+SNCLavalin+4000+jobs+nine+cent+total/10358423/story.html

As someone else noted, this is just the start. Wait until the Spring breakup.

You are right, there is a prevailing mentality that this will soon pass by those who pray for wishful thinking rather than reality. But that is changing daily. I know from my circle of peers that any that had plans to buy in the near future (talking 1m+ homes here) have put it off. The luxury market is going to take a bath.

And the data is starting to show this, even CREB supplied data!

#141 Vangrrl on 12.23.14 at 1:04 pm

#113 Vanecdotal:
‘Actually, the smart ones aren’t even looking for male companionship…’ :)
Thanks for your comment- it was a nice read. A breath of fresh air among the drivel of Waterloo Resident and a couple others. Have a great holiday!

#142 Steve French on 12.23.14 at 1:16 pm

Hey Smokey:

Bukowski behaving badly…

https://www.youtube.com/watch?v=pUeGsTjIj0A

Hey that’s pretty un-dudely….

#143 Panhead on 12.23.14 at 1:30 pm

#129 Jeff in Moose Jaw on 12.23.14 at 9:37 am
Those aren’t Wranglers…… all hat no cattle.

Good observation Jeff but I bet he wishes he had some cattle at the price of the suckers. All time high I believe …

#144 Ret on 12.23.14 at 1:52 pm

Nat gas unchanged at 3.15 today. Down 8% yesterday and 24% on the month.

That can’t be good for Alberta. Albertan provincial sales tax in 2015???

#145 jess on 12.23.14 at 1:55 pm

“Voluntary taxation is an oxymoron.”
===========
They are the “do gooders” along with “Mr. Paris” and “Quiet Man”

http://www.theguardian.com/business/2012/dec/06/starbucks-to-pay-10m-corporation-tax
http://www.icij.org/project/luxembourg-leaks
http://www.bloomberg.com/news/2014-12-23/alstom-s-mr-paris-paid-millions-in-bribes-u-s-says.html

#146 Report from Red Deer on 12.23.14 at 1:56 pm

Greetings.

Just talked to a friend who works at a big multinational Oil company in Calgary as manager.He has been asked to review his team manpower and cut it if possible.

He already laid off 3 contractors.

One reason for this bubble is above market salaries of O&G workers. A guy with only 5 years of experience getting 100 $/hr…unbelievable.

#147 Calgary_Renter on 12.23.14 at 2:02 pm

Garth,

Why is it that you always respond in absolute terms when you talk about the equity markets. Don’t you think it’s a bit misleading and irresponsible to act like you know what markets will or will not do? Last time I checked you didn’t have a crystal ball. Sure a market crash is unlikely but they do happen and usually when they’re least expected. The US markets have gone several years now without a decent correction and it’s not uncommon for a 20-25% correction to happen every 5-10 years. We’ve seen several significant declines in the last 15 years and there will be more. It’s not any different this time. So would it not be wise to decrease exposure to a market that’s run up so much in the last 5 years. Recommending people buy into a market at it’s highs seems a bit irresponsible. I know there’s a variety of other investments to send people into that provide dividends and safety. I’m not suggesting market timing but maybe a little more caution and a little less cheer leading for the US would be nice in the new year.
Merry Christmas!

This is why I constantly talk about a balanced, diversified portfolio, of which just 18% is US-based. 2015 looks very promising, but having multiple asset classes means never having to say, ‘oh, crap!’ — Garth

#148 Alex N Calgary on 12.23.14 at 2:34 pm

Somebody commented on here that the bars and malls are still full here in Calgary and the general idea is that it’ll blow over. That is the general idea of people who barley ready the news or have talked to anyone in the know. Its blissfull ignorance around here right now, but this is NOT 2008, we’re in for trouble come 2015. A lot of people aren’t thinking too much about it as they feel its outside their control. Thats true mostly, but what was IN their control was accepting that oil goes up and down, not being ignorant and saying, the world will always need our oil, what a joke. Buying investment condo’s, expensive houses, having both your family jobs in oil and gas, that was smart.

Lots of people roll the dice here, to make money on housing or big money as contractors in oil and gas, and they have, but now the Q is can you hold onto it? People in my office don’t understand the link between oil and gas layoffs, and housing and retail confidence. And how it can all come down, the immigrants who work here understand, they read the news, they look a bit deeper.

Our friend who works as contract at Cenovus said things are looking very dire for 2015 indeed.

NEB girl said that the US can taper production of their existing Frac wells to give solid supply for much longer then the initial First year so they can hold on way longer with good production without having to drill new wells. I ran this past our experienced oil and gas sales guys yesterday and they reluctantly admitted this is true.

My dear wife and I have been planning for this for years now, so hopefully we can make it through for a while during Oil-Pocolypse 2015 and finally get a great house for good money (perhaps 2016) and end the rental cycle.

At least rentals will be cheaper and more avaliable to sit in until a buy house comes up.

Keep up the good work Garth!

#149 chris on 12.23.14 at 2:35 pm

Garth – quick question. You mentioned that “at $55 a barrel a large swath of the oil sands is looking ugly”. I can see why they would stop any new investment, but what about the established companies such as Syncrude and Can Oil Sands that have been up and running for years? Obviously the low price will hurt them, but I would think they are in good shape to weather this storm for a long time?

Also I didn’t realize your blog included so many metal fans – Pantera did rock it up. Take care.

#150 Blacksheep on 12.23.14 at 2:44 pm

Alberta is being sacrificed for the greater good.

Lets assume every single person in Fort Mac gets fired (60,000 people) and they all had average annual income of 125 K.

Total annual loss of income to consumers, – 7.5 billion $’s subtracted, from the economy.

Canada has 18 million vehicles. Lets assume each vehicle saves 40 bucks a month on fuel, X 12 months = $ 480 annually.

Total savings to consumers / businesses, + 8.6 billion $’s, added the economy.

Now this will definitely focus the pain on those in and related to the patch, but will over all, stimulate the general economy, just like Garth says it will for the US.

This scenario will play out in every country that has a high % of vehicles per capita, (the west). Yes, tax collection will hurt, but most are a sovereign in control, so just add it to the pile.

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

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

Oil prices are not being pushed down to hurt Russia, or so the Saudi’s can eliminate competition, those are just added benefits.

Oil continues to be over supplied, dropping it’s value, to stimulate the global economy and ward off a deflationary depression.

#151 Lumberjack arch on 12.23.14 at 2:53 pm

Great scenario from steadyhand investments, a housing correction is going to need a bit more than a half point uptick in rates…..when posters on this blog start getting laid off we will know the noose has been tightened until then it’s game on

Higher mortgage rates → softer market → less urgency to buy → sales volumes decline → more supply from people trying to catch the top → prices weaken → banks tighten up → speculators experience a cash crunch → banks tighten up → new projects halted → construction and other real estate jobs decline → no urgency to buy → prices weaken further.

#152 Republic_of_Western_Canada on 12.23.14 at 2:57 pm

#15 james on 12.22.14 at 7:09 pm

One nice thing about this is that it will force the energy companies to take a hard look at expenditures. They are paying too much for labour, plain and simple. If your workers can afford to fly in and out, gamble, buy idiotic 70k pickup trucks, etc etc, there are cost savings to be had.

I am greatly encouraged by reports that companies are thinking of automating part of their operations. One example is the use of robotic vehicles to replace human operators. …

Wow. Where to start with that naive drivel?

The majority of workers (highly skilled, educated, trained tradesmen, as noted previously) work temporarily on constructing large projects for resource extraction and upgrading. Once the construction is done, it’s handed over to a much smaller operational staff with different skill sets. And the construction guys go home, regardless of oil prices. That’s the nature of construction projects.

It’s a long, hard road to become a good skilled tradesman or site engineer. There is also limited opportunity to get good work experience on a big industrial site, which is what project employers look for (in addition to multiple qualifications). That makes those workers relatively rare, especially in this day and age of inbred urban paper shufflers with entitlement attitude. The working conditions are tough, implications of screwups are substantial, and everyone knows it’s a temporary arrangement.

That makes the paycheques totally justified. Actual rates aren’t even that high, it’s the overtime hours at the cost of having no personal life which add up.

The majority of people I know save and invest their cash in their own ways. Not too many have big trucks, which are actually useful where bad or no roads exist. The worst money-drain by far is lousy wives, kids, and stupid gambling with real estate.

The recent drop-off in project work happened because several large multi-year projects have completed. It had nothing to do with present oil prices. Now that projects are done, owners will run them regardless of WTI prices because big construction costs have already been incurred.

Projects are now handed over to operations & maintenance staff. It is that staff, and workers for support companies, who will generally live in the area permanently and determine real estate price progressions there. So those prices won’t change much.

Owner/operators pay for worker flights as part of project costs. Flights are run military-style through charter arrangements to private airstrips. It’s all temporary, for the length of the project, to handle the thousands of skilled people needed. There’s nowhere near enough permanent housing in the area to handle that kind of mobilization.

Finally, have you ever seen the inside of a big industrial plant?

Operations is already heavily automated, particularly where process control is involved. But lots of stuff needs intelligent discretionary action which cannot be automated. Associated maintenance and debottlenecking are like small construction projects, but under more difficult, live-plant conditions. No way that’s going to be automated with robots.

#153 OMG The better one on 12.23.14 at 3:17 pm

All I want for Christmas is for smoking man to learn how to freaking spell.
Duh
What school do you graduate from?

#154 Republic_of_Western_Canada on 12.23.14 at 3:22 pm

#142 chris on 12.23.14 at 2:35 pm

Garth – quick question. You mentioned that “at $55 a barrel a large swath of the oil sands is looking ugly”. I can see why they would stop any new investment, but what about the established companies such as Syncrude and Can Oil Sands that have been up and running for years? Obviously the low price will hurt them, but I would think they are in good shape to weather this storm for a long time?

Once (new) infrastructure has been set up and is running, ongoing costs are much smaller. Especially if that has been funded from saved revenue, instead of junk bonds like the small U.S. shale producers are.

Lots of the minimum numbers thrown around in the MSM are based on what it would cost to finance construction then operate a big new operation on borrowed money.

Consider that oil sands operations have been going steady, and substantially increasing in size, for decades. Even for many years when WTI prices are in the 20’s or lower – and the discounted prices for bitumen product were substantially lower than even that.

#155 Rational Optimist on 12.23.14 at 3:23 pm

143 Ret on 12.23.14 at 1:52 pm

“Nat gas unchanged at 3.15 today. Down 8% yesterday and 24% on the month.”

Good news for Ontario…Enbridge and Union Gas should be going to the OEB for big decreases to supply rates come spring. Good for keeping the electricity rates low; good for manufacturers who burn lots of hydro or natural gas.

#156 Mike S on 12.23.14 at 3:25 pm

“This is why I constantly talk about a balanced, diversified portfolio, of which just 18% is US-based. 2015 looks very promising, but having multiple asset classes means never having to say, ‘oh, crap!’ — Garth”

I’m with Calgary_renter on this one.

Even a diversified portfolio can/will have some bad years ahead. People who are OK with that volatility will do great in the long run, but people who expect only “up up up” type of behavior are going to have that ‘oh, crap!’ moment sooner or later.

So, don’t invest. — Garth

#157 Mark on 12.23.14 at 3:50 pm

NEB girl said that the US can taper production of their existing Frac wells to give solid supply for much longer then the initial First year so they can hold on way longer with good production without having to drill new wells.

Doubtful this can/will happen. The Frack well owners are highly indebted. They need to run flat out to have any chance at repaying the debt they incurred to drill the wells.

Its similar to the hoards of young tradespeople who are over-indebted. Because a large number have mortgages, car payments, quad payments, RV payments, HDTV payments, etc., they don’t really have the option of with-holding their labour from the market even as rates plummet to depths that are likely un-imaginable to most today. Which means they’ll be out there building more houses even as prices fall substantially. They’ll be racing each other to the bottom. Debt, which inflated the bubble, will be the same debt that deflates the bubble.

#158 Smoking Man on 12.23.14 at 4:05 pm

#152 OMG The better one on 12.23.14 at 3:17 pm
All I want for Christmas is for smoking man to learn how to freaking spell.
Duh
What school do you graduate from?
…….

Dude it’s my shtic, you’ll get use to ti.

#159 SWL1976 on 12.23.14 at 4:06 pm

#151 Republic_of_Western_Canada

Thanks for taking the time to clarify that

You get it. No BS in that post

#160 Mike S on 12.23.14 at 4:18 pm

“So, don’t invest. — Garth”

Sorry Garth, but your answer is not clear

You say to both invest and not to invest?

If you have no tolerance for risk, don’t take any. Nor will you have a return. — Garth

#161 Hicksville Alberta on 12.23.14 at 4:28 pm

#151 Republic_of_Western_Canada

Very well stated and right on the money.

I have my youngest two sons running all over Alberta and Saskatchewan in oilfield construction and it definitely is the overtime thing that makes it worthwhile for them and without that they probably wouldn’t go so much.

Nonetheless that kind of lifestyle is a real killer and can’t be sustained. A lot of their friends they grew up with have made big money for their age but a good lot of them have blown it on drinking and gambling and such. That is often the plight of the young rig pig types. Many of the older ones end up being divorced with broken families. We call that type of thing the oil patch widows as the husband is always on call or always away.

In the final analysis there is much more to life than money but to give a few younger years to learn and live that lifestyle is well worth it, especially if you look after your earnings.

Will definitely be interesting to see what happens going forward.

#162 Retired Boomer - WI on 12.23.14 at 4:31 pm

#155 Mike & #146 Calgary_ Renter

Let me just remind you both that there ARE going to be times when everything goes into the toilet.

A balanced, and diversified portfolio tends to go down less severely, and recovers more quickly.

Sure you could be “safe” in a GIC, but “SAFE” in this case might mean earning less than inflation, and you will lose buying power, though you earned a “guaranteed rate” on your money.

Sure inflation is at 3-4-5% and you earned a big 2.94%
smart? Not for me, thanks.

I’ll listen to the guy who earns his living by investing for others. Either he performs, or he starves.

#163 Smoking Man on 12.23.14 at 4:36 pm

#141 Steve French on 12.23.14 at 1:16 pm
Hey Smokey:

Bukowski behaving badly…

https://www.youtube.com/watch?v=pUeGsTjIj0A

Hey that’s pretty un-dudely…
………..

Ha, no honest comment on that, that’s all I need is the femanazis after me..

#164 $20 oil is coming on 12.23.14 at 4:48 pm

#151 republic of western delusion

Alberta faces a world of financial hurt. It’s not a question of will we see foreclosures in large numbers it’s when. Layoffs will accelerate after Christmas. Happy foreclosure hunting buyers. RE buying in Alberta is starting to freeze over. Anyone with a half a brain will wait for the foreclosures.

#165 Mike S on 12.23.14 at 4:53 pm

Garth,

Why does the spread between Canada and US 10 yr bonds widens?

Canada 10 yr – 1.8%
US 10 yr – 2.26%

above 0.45% now

#166 waiting on the westcoast on 12.23.14 at 4:57 pm

#151 & #159 – capitalized costs versus operating costs

While it’s true that their operating costs are significantly lower, they still have to earn a return (or now more likely a loss) on the capital invested to build the project. And if they used debt for developing the infrastructure, they still need to pay interest, balloons, etc. On that debt.

So that means reduced spending where possible and pumping more if possible to meet debt commitments.

New production will not be developed. Current operations will be pushed and some may go bankrupt to lower payments on past capital expenditures. All in all, not pretty for anyone on the O&G gravy train.

#167 bdy sktrn on 12.23.14 at 5:01 pm

for anyone who hasn’t seen it yet, watch a perfectly good lambo get wrecked in vancouver by an idiot kid who is HAM (hot alberta moron)
——————————————

http://www.cbc.ca/news/canada/british-columbia/spectacular-lamborghini-crash-caught-on-dash-cam-video-1.2881922

#168 Mark on 12.23.14 at 5:43 pm

“Why does the spread between Canada and US 10 yr bonds widens?

Canada 10 yr – 1.8%
US 10 yr – 2.26%

Expectations for inflation (and hence, policy rates). And expectations for currency depreciation or appreciation, with the higher relative rate implying future depreciation, and the lower rate implying relative appreciation.

#169 live within your means on 12.23.14 at 5:50 pm

Just want to wish our formidable & always amusing host, his wife Dorothy, Bandit & the blog dawgs a very Merry Christmas & all the best in 2015.

#170 Mike S on 12.23.14 at 5:58 pm

“If you have no tolerance for risk, don’t take any. Nor will you have a return. — Garth”

Exactly!
Tolerance to risk is a major component of successful investment. I’ve noticed that if one is aware of the risks from the beginning, he usually withstands any corrections much better

I mean, in your posts you don’t often mention risks, time horizons etc, so investing reads like a walk in a park. This might be true for some, but the majority need to carefully consider their risk tolerance, and invest accordingly

Otherwise, we have people running around each time one of the markets takes some 3% dive …

#171 Shawn Allen on 12.23.14 at 6:06 pm

One man’s tax break…

… is another man’s tax increase?

Zero sum game?

#172 Mike S on 12.23.14 at 6:11 pm

“Sure you could be “safe” in a GIC, but “SAFE” in this case might mean earning less than inflation, and you will lose buying power, though you earned a “guaranteed rate” on your money.

Sure inflation is at 3-4-5% and you earned a big 2.94%
smart? Not for me, thanks.

I’ll listen to the guy who earns his living by investing for others. Either he performs, or he starves.”

You don’t have to go to GIC (unless you need the money right away), but you sure can go conservative, say 50% / 50% portfolio (instead of 60%/40%)

Inflation is not 3-5%

No problem with following Garth’s advice for the blog followers (balanced portfolio beats that gold bullion most of the times), but I’m afraid for the newbies, seen too many people who shouldn’t be in the markets without a good adviser holding their hands …

#173 Obvious Truth on 12.23.14 at 6:14 pm

#170

Investing is about taking advantage of opportunities. Tolerance to risk is about you. Has nothing to do with successful investing.

Garth writes continually about a model portfolio that is meant to minimize risk and take advantage of market opportunities.

Some of us really like the extra volatility and sectors being taken to the woodshed.

It sounds like you are not capable of learning either approach. Or are afraid to. Or have listened to too many friends and media headlines. Don’t blame others. You have choices.

#174 Mike S on 12.23.14 at 6:19 pm

“Expectations for inflation (and hence, policy rates). And expectations for currency depreciation or appreciation, with the higher relative rate implying future depreciation, and the lower rate implying relative appreciation.”

Why is it not reflected in the CAD/USD exchange rate then?

#175 Poloz on 12.23.14 at 6:35 pm

“Why does the spread between Canada and US 10 yr bonds widens?

Canada 10 yr – 1.8%
US 10 yr – 2.26%

—————————————————————–

Tells you Bank of Canada is not raising rates any time soon. There will be a big hit to the Canadian dollar to help out the oilsands producers, etc..

#176 Poloz on 12.23.14 at 6:36 pm

We will say ‘danger of deflation’. (Screw the consumer).

#177 Poloz on 12.23.14 at 6:37 pm

#167 Bdy Sktrn:

Kid is 26 yr old HAM. check twitter and Facebook.

HAM means ‘hot Asian money.’ It does not mean a person of Asian heritage. Stop with the idiot epithets. — Garth

#178 Poloz on 12.23.14 at 6:44 pm

No Lamborghini can travel from Alberta to Vancouver at this time of the year…

#179 drydock on 12.23.14 at 6:44 pm

If the Saudis say $20.00 oil then they will go there if provoked.
As for the rest of the comments, wow.

#180 Mike S on 12.23.14 at 6:53 pm

“It sounds like you are not capable of learning either approach. Or are afraid to. Or have listened to too many friends and media headlines. Don’t blame others. You have choices.”

Really? Do I sound like that?

#181 Mark on 12.23.14 at 6:55 pm

“Why is it not reflected in the CAD/USD exchange rate then?”

Short-term flows and speculation. Hot money, as opposed to long-term investment. Pension funds buying CAD$ bonds as part of their bond allocation in their portfolios are quite different entities than hedge funds trying to make a few quick bucks by shorting the CAD$ on a short-term momentum trade.

#182 Mike S on 12.23.14 at 6:55 pm

“Tells you Bank of Canada is not raising rates any time soon. There will be a big hit to the Canadian dollar to help out the oilsands producers, etc..”

Doesn’t sound too intuitive to me. For instance if you know the rates are lower than in the US, and you expect the CAD to be hit against the US, why would you invest in CAD bonds?

#183 Mark on 12.23.14 at 6:57 pm

“HAM (hot alberta moron)”

I love it!

#184 Westcdn on 12.23.14 at 7:15 pm

The price of oil (wti) seems to want to hold its decline at 55 us$ per barrel. I suspect this is range price that will exist for the next 6 months although it can fall a lot further for a few months. The current price of natural gas is a further downgrade for Alberta. The patch does price hedging but most of that will expire June 2015. After March 2015, we should begin to see the damage extend of low commodity prices to the Canadian economy. Low commodity prices and a depreciating Cdn$ are supposed to be a net benefit to Ontario and Quebec but my instinct says no until we get past the Sept 2015. I think it will take that long to adjust to the sudden decline of commodity prices, plus, what business will invest into an uncertain future?
I suspect the financial pain of the oil patch will extend beyond Alberta’s and Saskatchewan’s borders as capex and projects get cancelled. Both provinces employ large numbers of locals in support services and these people will be hurting soon.

My 2015 predictions for Alberta:
1. a 5% provincial sales tax (temporary)
2. the provincial tax rate to increase to11+ %
3. an increase provincial tax on gasoline pump prices
4. Calgary Mayor Nenshi will state “we will spend smarter – not less”
5. Daniel Smith will be recalled and tossed out on her ass – no Wildrose floor crosser will be re-elected
6. Prentice will pull a “Klein” and reduce Government expenditures by at least 20% for 2015
7. Prentice will borrow 50% of Alberta’s revenue shortfall
8. Harper will lose to Trudeau – (time for a change)
9. Ontario will hope for Alberta’s economic recovery
10. Garth will sell his hummer plunging Alberta into further darkness
11. Alberta RE prices will basically hold until June 2015 then fall 10% to end the year

I have said before, 2 out of 3 is a good day for me – so if I get 7 predictions right; I will be happy. I also think it is darkest before the dawn so never give up. Not likely I will post again for a while – Happy Holidays (I am trying to be PC) and wishing all the readers plus Garth the best in 2015.

#185 kommykim on 12.23.14 at 7:55 pm

#72 Keith in Calgary on 12.22.14 at 9:45 pm
#53………
When you asked that question, are you sure you were not on a prostitutes forum ?

Prostitutes are like renting RE.
Marriage is like buying RE.

#186 kommykim on 12.23.14 at 8:07 pm

RE: #120 Setting the Record Straight on 12.23.14 at 2:55 am
#44 Joseph R. on 12.22.14 at 8:23 pm
#25 saskatoon
Taxation isn’t theft. Why is Ayn Rand still a thing?
$$$&&&
Please explain why it is not theft?

Because the governments collecting the taxes also write the laws.

#187 NoName on 12.23.14 at 9:35 pm

#151 Republic_of_Western_Canada

I can tell you this is funnies post that i read in a while, like small construction projects, but under more difficult, live-plant conditions. No way that’s going to be automated with robots. but it can be tendered out.
When company is in a pinch, management tend to cut cost across whole operating budget, everything is on a table, salaries, fixed cost, variable cost, machinery etc, it is a matter of time before all process plant will be modular type, so very little skill will be needed to maintain them.
technology is constantly evolving, dont underestimate it, i encourage you think conceptually/creatively.
think of of Disney’s Contemporary Resort built in 1971.
https://www.youtube.com/watch?v=dZwfw5RbwGY
google’s self driving prius
http://youtu.be/-cj375UZyaI

#188 Loser on 12.23.14 at 9:40 pm

If Obama would just double the cost of Obamacare and force people to buy it with the threat of fines GDP would exploded! Think how rich we would be!!

#189 Gainsaywhodare on 12.24.14 at 4:27 am

Funny how some people think robots can 100% replace human. Those who believe so, obviously have never operated at a process facility. Of course a company can cut programs (e.g., safety, preventative maintenance, employee training, health benefits, compensations, career development, etc., etc.) reduce staff (lay offs, double the work, relocation, get cheaper interns), cut feedstock, cut production rates, cancel contracts, etc., etc., but you can never replace all process operators with robots. For one, panel operator (or some call them control room operator) can never be replaced with a machine, no matter what kind of artificial intelligence anyone can dream up. You can even move a control room from the middle of nowhere in northern alberta to Edmonton if you wish, but you will still need someone to sit at the control panel. And don’t get me started on how much it would cost to move control rooms (or how many more jobs will be generated just because of it). Companies have ways to calculate costs of the proposed changes and they will use it to determine if the changes will generate net benefit or loss, in which case it is best to keep running it the way she is. You can design the plant and put in all kinds of instrumentation and controls that minimize intervention between human and process units (and this is the case) but you can never take human completely 100% out of the equation. Reducing headcount and frequency of site visits, yes. Replacing staff with robots and drones, no. The oil and gas business is a heavily integrated process and it takes a lot more than what many people think to just simply shut her down. Of course at the end of the day if you have no money then you gotta shut the door but it is not like they will stop everything and get rid of all staff. It just ain’t gonna be rosy for 2015 and the going is gonna get tough. There will always be ripple effect so brace yourself for a rough ride.

#190 Greg on 12.24.14 at 11:37 am

Early election before the excrement really hits the fan?

#191 Jordy on 12.24.14 at 9:11 pm

“Cowboy hell”

Yawn…. how many times have there been similar articles with similar predictions on this site in the last 6 years.