The awakening

DRIVEWAY modified

The average detached house in Vancouver touched $1,002,000 in December. At the same time inflation in Europe turned negative – that’s called deflation. Bond yields dropped to historic lows. House prices fell in 65 of China’s 70 biggest cities. Oil plunged. And that was just the start.

This month Russia is close to collapse. Currency markets are in a twist. Oil’s now lost half its value and a wave of layoffs have hit Canada – almost 20,000 last week. In Calgary (as of Friday), real estate sales have collapsed 28.6% and listings are up an unbelievable 61.68%. There are now exactly 1,000 more properties on the market than a year ago (3,229 versus 2,235), and For Sale signs are sprouting everywhere.

In Toronto, prices have turned negative – something most people in the business considered impossible. The average detached 416 house is down 4.2% from a year ago. At $859,672, it is $100,000, or 11%, cheaper than it was in April, nine months ago. Over the entire GTA, listings this month have swollen by 17.8%.

The realtors are in denial. Says the local board: “The average selling was down slightly in comparison to the same period last year. A change in the mix of home types sold this year compared to last year during the same period accounted for the dip in the average selling price. “A constrained supply of listings for singles, semis and town houses coupled with balanced market conditions for condominium apartments points to further growth in the average selling price in 2015. A sustained period of strong listings growth will be required to account for the pent-up demand for ownership housing in the GTA,” said Jason Mercer, TREB’s Director of Market Analysis.”

In Montreal, the country’s second-biggest housing market, there are now 30,170 listings – a 14-month supply – and that number just increased by 8%. While sales improved in December, the average detached house in the last year appreciated by zero.

Jacob lives in Fort McMurray, epicentre of the oil patch and Canada’s most famous boom town.

“I have lived and worked here for just over a year now and there is a noticeable difference in the whole town. When I got here, it was always full throttle all the time, if employees didn’t like the boss they had or could earn a few cents more an hour at another job they moved immediately, there was that much work.”

The layoffs have started, of course. Suncor, Shell, the indie drillers and contractors, Civeo. Everyone expects more to come, because you can’t do business with $50 oil like you could when it was $100.

Listings have gone nuclear. There are 73,000 souls in Fort Mac, and currently 820 MLS listings. (Calgary has 1.2 million people, with just over 3,000 listings.) More importantly, where will eight hundred new families come from? Why would you move to a city where the jobs are leaving? Where the average detached house costs $750,000 – at least for now?

As the Globe reporter I spoke to there a few weeks ago points out, urban Ft Mac has one listing for every 76 residents. Urban Toronto has one per 501 people. So much for liquidity.

Jeff is a lifelong Albertan, oilman, living in Calgary. He tells me this:

“I am an engineering executive in the energy sector.  Because of position and proximity, I see a lot of information before it becomes public.  Project cancellations, budget curtailments, and layoffs are currently significantly under-reported in the media.  I’m holding more proprietary information now than ever before.

“Many of the recent layoffs have been to contractors.  Any contractor with a holding company is considered “EI Exempt”.  They don’t pay into EI, so they can’t collect it when they lose their job.  As an owner, you can’t lay yourself off.  The employment statistics will not accurately reflect the number of positions recently eliminated.  The reality is worse.

“The reported break-even figures for oil sands projects are also a misnomer.  They will apply to large, established facilities.  One can also not make blanket statements about the operational costs for mining facilities versus steam injection facilities.  The junior SAGD sector is essentially destroyed.  Billions in capital investment is at risk of massive write-downs (or outright write-off) in 2015.”

Hmm. Jeff, being an engineer, also did an analysis of current listings in some of the city’s tonier burbs. He found that occupied listings, as opposed to new-builds and reno-flips done on spec, account for just 26% of the houses for sale. “We are going to see over the next few months who buckles first,” he says. “ Three-quarters of the listings are held by builders who will have margin compression from lower selling prices on one side and their one-year bullet loans (full principal + interest) coming due on the other.”

Vancouver isn’t Calgary, Toronto, Northern Alberta, the Maritimes (where prices are falling) or Montreal. All real estate markets are local. Meanwhile deflationary influences are everywhere. If this is not reversed in the months ahead, and I do not see how, then real assets (including properties) will continue to decline in value, money will become more valuable, and debts more impossible. Those who fail to see that coming, which includes almost everybody, are in for an awakening.

LOC DEBT

230 comments ↓

#1 Retired Boomer - WI on 01.18.15 at 1:58 pm

Well, that’s ugly. HAS OIL put in a “bottom”? I can’t tell but, my first read is no, not yet.

Welcome to 2007 American Style -with a twist.

That twist is a commodity driven national economy with not support market for the commodities right now.

Yup, BUTT UGLY times. The good news is your neighbor to the south just might have an opening.

#2 bdy sktrn on 01.18.15 at 2:02 pm

goooooooood morning favotie blog

early, wha?

#3 Beancounter on 01.18.15 at 2:03 pm

Is no one out of bed yet in the East? It’s 10:00 a.m. here in BC and there’s no comments on the blog?

I travel to and from Alberta regularly for business and on this week’s flight back from Edmonton there were a lot of oil rig workers (as usual). You could hear the nervousness as people discussed the potential impact of the decline in oil price. I’m expecting that there will be more seats available on those flights in the coming months …

#4 Derek on 01.18.15 at 2:03 pm

Batten down the hatches. There’s a bumpy ride ahead!

#5 not 1st on 01.18.15 at 2:05 pm

Garth, this couple seriously needs your help;

http://groupthink.jezebel.com/worst-couple-in-north-america-you-decide-1680214593

#6 Richard Goatcher on 01.18.15 at 2:08 pm

Deflationary effects of falling gasoline prices are a one-time event. Like in 1991 when the feds brought in the GST. You get a quick bump and everything settles. Ditto gas prices. My California lettuce is cheaper this month but won’t be next month if WTI stays at $50.

#7 Ben on 01.18.15 at 2:11 pm

I love the smell of panic in the morning. The only question is do I keep my cash in a Canadian bank or hop over the border? Looking more and more like the latter with USDCAD ramping up.

Raise rates already USA. The indebted are punch drunk. FINISH THEM!

#8 Observer on 01.18.15 at 2:13 pm

It has begun, I waited since 08 for a bit of reason to enter the real estate market. So many people I know went all in. Soon “home owner” will be for real home owners only.

#9 Pumped calgarian on 01.18.15 at 2:13 pm

Ya win some ya lose some.

#10 PatientinRichmond on 01.18.15 at 2:16 pm

Target leaving Canada and Sony announced it will be closing all it’s stores within 4-6 weeks . Not a good sign really …..

#11 bdy sktrn on 01.18.15 at 2:19 pm

a tar sands economy that won’t be able to, and won’t be allowed to, recover.

—————————
funniest thing i’ve read today.

when oil is back over 100, are you going to personally shut down ft mac?

#12 Rob on 01.18.15 at 2:20 pm

First

#13 Pumped calgarian on 01.18.15 at 2:20 pm

First out of church.

#14 DM in C on 01.18.15 at 2:32 pm

The listings in our NW YYC hood haven’t exploded. Yet. We just got the CTrain! Everyone wants to live here!

There are some really stale listings though, the prices haven’t gone down. Some are going on 6 months listed (before the snowstorm in early Sept).

We’ll see who blinks first. I just melted some butter for the popcorn.

#15 JacqueShellacque on 01.18.15 at 2:34 pm

Building wealth is a contrarian enterprise. Those who thought they could make themselves better off by leveraging to acquire stuff are in for a rude awakening.

#16 Calgary Boomer on 01.18.15 at 2:35 pm

I was kicking myself in 2013 for selling my rental house partly influenced by Garth, partly remembering if there was another boom, I’d promise not to piss it away. Then values appeared to rise but it seems really in certain areas and certain kinds of houses. Today I don’t see prices any higher than when I sold (the day I listed with multiple offers and by FSBO). And today houses sit idle. So thanks Garth

#17 benchwarmer on 01.18.15 at 2:37 pm

First… inline to vulch a nice fully reno’d shack in Cowtown for 1/2 price!

#18 wussmode on 01.18.15 at 2:46 pm

This all this uncertainty abound, wouldn’t this make the case to own some gold and gold ETFs? Sounds like the world is entering a slow down and that includes the U.S., especially with the recent jobs and retail sales numbers. If China is slowing down, that means the U.S., their biggest customer, is buying less. This is truly a wild time. Stay tuned and strap in folks.

Hardly. The US is not slowing down and commodities continue to be under pressure. There are only two reasons to own gold – inflation is debasing currency (today the opposite is true as money gets more valuable) or there’ll be institutional financial failure (and if you believe that, hoard cash, not metal). — Garth

#19 crowdedelevatorfartz on 01.18.15 at 2:52 pm

Unfortunately as the listings skyrocket, the prices stagnate and the sales drop.
Local and national Real Estate “Spokesmen” will deflect, obsfucate, deny and outright lie to shill the last greaterfool to buy buy buy.

There outta be a law.

#20 Mike Bloemen on 01.18.15 at 2:58 pm

A lifetime in Edmonton, watching the show. :-)

Plenty of other Canadian corporations/industries have faltered in the past and were propped up by government so they would not go under (sorry, Nortel). With Canada so “indebted” to the energy sector, I wonder if there will be a move to help it out these days (no, I have no suggestions how). In previous boom/bust times people rode it out and took their lumps. This latest bust event comes during an interesting period of economic circumstances.
Of course, with the world perception of our especially dirty, toxic, Alberta bitumen product there is probably some dancing in the streets from the Greens as well as smiles from the Saudis.
I wouldn’t be surprise if this bust also brings about a concerted effort to squash bitumen production in favour of other energy solutions (Marketing being the main weapon of choice).
Just my $0.02

Keep up the good work, G.

#21 David McDonald on 01.18.15 at 2:58 pm

Our prime minister for oil has lead us down the wrong path. It’s time to focus on a diversified economy led by small entrepreneurial companies. Canada is still the land of opportunity when viewed from Spain or France.

#22 Moving to van where the squirrels are tastier on 01.18.15 at 3:03 pm

These folks got it all figured out …..

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/debt-doubts-cast-a-shadow-for-this-professional-couple-with-five-kids/article22496585/

#23 Oracle on 01.18.15 at 3:04 pm

Garth,

There is.no.inventory in Delta where I recently purchased my dream home.

HAM will only bid up prices this spring. I expect.tbat I will be able to.flip this place in two years and make a 100% tax free gain on it (because of the leverage on my down payment (which I borrowed off of my credit cards)).

Tell me this, can your balanced portfolio beat that (after taxes) ?

Ya, that’s what I thought, and that is why the Vancouver juggernaut will continue to motor upwards.

Feel sorry for all of you renter class.

#24 Another Albertan on 01.18.15 at 3:05 pm

More interesting details about Calgary:

Within 5km of downtown (a.k.a. “inner city”), a search on houses over $850k yields 297 results. About one-third of these are occupied. The rest are spec builds, most well over $1M.

Everyone else’s mileage may vary.

#25 wussmode on 01.18.15 at 3:07 pm

@Garth – wouldn’t a 10% drop in the Canadian dollar in recent years be considered inflation? I find anything that I buy is more expensive. Wouldn’t holding a portion of gold and gold ETFs help compensate for further declines in the CDN dollar?

#26 Brian Ripley on 01.18.15 at 3:17 pm

In the spring of 2014 we could not see that the absorption rate (the percentage of listings being sold each month) of Calgary and Edmonton had changed trend:

http://www.chpc.biz/mar-moi.html

But 10 months later the trend (down) looks energetic.

10 months ago the TSX Energy index was in an upswing and still had a few months to go before it hit the last near term peak:

http://www.chpc.biz/tsx-indexes.html

When prices are rising there is only comparative sale prices to consult for value. Now we can start using the income approach and replacement cost to assess value.

Appraisers are going to have to go back to work again.

#27 Neta on 01.18.15 at 3:20 pm

“Carthago delenda est!”
This real estate monstrosity must be brought down.

#28 For those about to flop... on 01.18.15 at 3:35 pm

This garage is perfect for someone with a motorbike and a ride on lawnmower !

#29 Smoking Man on 01.18.15 at 3:37 pm

Dec is historically been a crap month for real estate, average prices are exactly that. Condo sales in Toronto are up huge, making the over all average look bad.

Teranet, is the indicators of trouble. Thus months report, Toronto up 4,4% year over rear…

Nice try Gartho… Spring Market will blow your mind… 416 anyway.. Not sure about Brampton.

The numbers quotes are year/year. Seasonality is irrelevant. — Garth

#30 Porsche on 01.18.15 at 3:39 pm

Money Dries Up For Oil And Gas, Layoffs Spread, Write-Offs Start

http://seekingalpha.com/article/2828756-money-dries-up-for-oil-and-gas-layoffs-spread-write-offs-start

#31 economictsunami on 01.18.15 at 3:47 pm

Why did oil so steeply sky rocket just before the depths of the financial crisis?

FRED Graph: Crude Oil Prices: West Texas Intermediate (WTI) – Cushing, Oklahoma:

http://research.stlouisfed.org/fred2/graph/?g=NPX

Why did so much dumb money (controlled by seemingly smart CEOs) pour into commodities and further excess capacity, not long before GS trumpeting the end to the commodity super cycle?

Oil storage piles up in Hardisty, but price gap leaves traders at disadvantage:

http://business.financialpost.com/2015/01/18/oil-storage-piles-up-in-hardisty-but-price-gap-leaves-traders-at-disadvantage/#

Buck up, profits down: High dollar dents US company earnings:

http://hosted.ap.org/dynamic/stories/U/US_STRONG_DOLLAR_CORPORATE_EARNINGS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-16-13-14-32

How is it that the credit/ bond and now commodity markets are signalling something totally different about the economy than equity markets?…

#32 The awakening | Realties.ca on 01.18.15 at 3:48 pm

[…] Source: http://www.greaterfool.ca/2015/01/18/the-awakening/ […]

#33 Neta on 01.18.15 at 3:52 pm

It is funny how our news outlets are discussing the Target’s catastrophy, giggling that Canadian consumer punished arrogant Americans.
I must agree that it is Target’s fault, by for a wrong reason. I wonder, what kind of expectations target’s executives had when they decided to invest billions of dollars and open 132 huge stores in the country where the average consumer debt sits over 165%? Someone must have advised them on the consumer’s ability to support projected sales…I guess…
Was it a big Canadian secret that the very consumer segment Target relied on is effectively crushed by enormous mortgage debt? Canadian consumer runs on Empty and is unable to support additional 132 Target-size outlets.
Now, talking about Target prices in Canada being higher than in US.. It’s true, but it is not a result of the conspiracy, but simple reflection of the fact that it costs more to run business in Canada, and that the real value of Canadian dollar is actually lower than the commodities – speculation driven stated exchange rate. Only now, with unwind of commodity speculation, the mighty market is starting to separate “flies form burgers”.
In 2009 Canadian government had difficult choice to make between the right way and the easy way. We have chosen the easy way…, well, now we will get it right way, but with much more difficult consequences.

#34 Deb on 01.18.15 at 3:52 pm

If the first month of 2015 indicates what the rest of the year will be like, we could be in for a rough one. Employment numbers are, and will continue to be, one of the most important variables to watch. Job losses affect consumer confidence like nothing else. Even among those who do not lose their job, the psychological drop in confidence results in many people cutting back on spending. As 65% of our economy is fuelled by consumer spending, the drop in confidence going forward is one of my primary concerns at this point in time.
Joe Owe’s announcement that the federal budget will be delayed is a moot point. As the bad economic news mounts, PM Harper will dissolve the House in the spring rather than the fall, opening the door to an early federal election. He surely must sense that the economy is going to be in worse shape in nine months time that it is now. Therefore, better to go now rather than later. How much of the current economic damage can be traced directly to his government’s policies? That will be the central theme of the parties’ campaigns in the coming months.

#35 Tony Montoya on 01.18.15 at 4:53 pm

Let’s go ahead and kill this lie about Canadian banks’ “health” right now, shall we? Canadian banks received a fat bailout in ’08, because of the housing panic, SAME as all other ‘western’ banks. But this hurts Canadian pride, so they’ve lied about it in subsequent years to the point that the population believe their own press.

Roughly $186 Billion they got, but really, it was just to “lend to small businesses”, so the timing was purely coincidental, and was definitely NOT needed by the banksters even though that’s who got the funds… anyone who believes in Canadian banks deserves to lose their money, since such investors have no bullshit filter at all, and obviously no aptitude for due diligence.

From my files:

http://mises.ca/posts/blog/the-canadian-bank-bailout

https://www.policyalternatives.ca/newsroom/updates/study-reveals-secret-

http://business.financialpost.com/2012/04/30/did-canadian-banks-receive-

http://www.macleans.ca/economy/business/the-real-canadian-bank-bailout

http://www.wellingtonfund.com/blog/2010/12/02/canadian-bank-bailout-tota

http://behindthenumbers.ca/2012/04/30/canadas-secret-bank-bailout

http://rabble.ca/columnists/2011/11/bailed-out-any-other-name-canadian-b

http://www.huffingtonpost.ca/2012/04/30/canada-bank-bailout-cost-ccpa_n_

I include the useless HuffPo link only to quote its “update” of the bankster lie: “UPDATE: The Canadian Bankers’ Association has responded to the CCPA’s report, telling The Huffington Post that no Canadian banks were in danger of failing during the financial crisis, contradicting a claim in the CCPA’s report. “They seem to be implying that liquidity support is the same as a bank bailout and this is not the case,” CBA spokeswoman Rachel Swiednicki said in an email. “These funding measures were put in place to ensure that credit was available to lend to businesses and consumers to help the economy through the recession. These funding measures were not put in place because banks were in financial difficulty.” More of the CBA’s response to the report can be found at the bottom of this article.”

And by the way, Canadian banks are among the WORST capitalised in the world:

http://www.zerohedge.com/news/2014-09-03/presenting-worst-capitalized-ce

http://mises.ca/posts/articles/canadas-banking-system-exposed

This, of course, is the savvy country that unloaded 100% (give or take a tonne or two) of its gold reserves to stack up worthless US paper. This reset is going to expose this country as completely broke, and I can’t think of one who deserves it more richly. Even the US has more financial integrity, and as for the population, well, you can’t fix stupid. The population is the best example I know, of a fool and his money: braindead, subservient workerbees who know their place and that’s about it. But Canadians have been fools about money for a very long time. They’ve been paying negative interest here (parm me, “bank fees”) since before it was cool. They worship their big banksters: take stupid pride in the fact that their country is run by a handful of banks.

When their country is exposed as completely insolvent in the reset that’s coming, Canadians will probably blame whoever the White House tells them to blame, just before they’re officially subsumed into the new North American Federation of United States. (Unofficially, this happened quite some time ago.) This will be a step up for most of the population, since at least that will make them countrymen with Americans, some of whom understand what a real country is.

Canada is not insolvent. No bank came remotely close to failing in 2008-9. — Garth

#36 TurnerNation on 01.18.15 at 4:54 pm

“This month Russia is close to collapse. Currency markets are in a twist. Oil’s now lost half its value and a wave of layoffs have hit Canada.”

And yet the embedded media tells us (7 billion of us) our biggest threat is from sandal-wearing, small-arms armed VeryBadMen who commit ThoughtCrimes. Nothing so much as a firecracker in a mall has been set off here.
I predict this chest thumping and daily scream of ‘duck and cover’ will continue until H’s re-election. Funny that. They are vying for control of our mind’s reaction.

#37 Moses71 on 01.18.15 at 4:57 pm

Decided to pay down debt before buying in Calgary. Almost done and loooove the nosediving I see all around me due to the following of the herds in their chuckwagons. One big asset at its apex in the boom & bust city and no one I spoke to took notice to your advice. Wise men don’t need it, eh? They don’t have my sympathy. Better to have Garth in my corner

#38 joe schmoe on 01.18.15 at 5:01 pm

Oil price is temporary. It will come up…it will go down…some interesting articles in Financial Post about ex-execs who stomached a turn or two.

If you lived within your means, nothing will change except expensive stuff will get cheaper. This is true for individuals and companies.

Enough doom and gloom already. I feel sorry for those who will go under, we shouldn’t rejoice in other’s misery. That is the CBCs job…

Unfortunately in AB, it’s the young who are going to get creamed. Anyone who remembers the late 90s learned to save.

#39 Andrew Woburn on 01.18.15 at 5:08 pm

It is said that the fastest way to send an American to sleep is to show him a newspaper headline that reads “Worthwhile Canadian Initiative!”. Apparently not all Americans agree.

“Today, it was announced that the Department of Energy’s Oak Ridge National Laboratory (ORNL) in Tennessee is partnering with Canadian nuclear company Terrestrial Energy Inc. (TEI) to assist with TEI’s new Integral Molten Salt Reactor (IMSR).”

“Think of it: a nuclear reactor that

– is cheaper than coal

– creates much less waste and few long-lived radioactive elements

– uses almost all of the fuel which lasts 7 years between replacement, and can be recycled easily

– is modular, from 80 MWt to 600 MWt, able to be combined and adapted to individual needs for both on and off-grid heat and power

– is small enough to allow fast and easy construction, and trucking to the site

– operates at normal pressures, removing those safety issues, and at higher temperatures making it more energetically efficient

– has the type of passive safety systems that make it walk-away safe

– does not need external water for cooling

– can load-follow rapidly to buffer the intermittency of renewables

– cannot be repurposed for military use and has strong proliferation resistance

– can last for many decades

– uses a liquid fuel”

http://www.forbes.com/sites/jamesconca/2015/01/07/nuclear-power-turns-to-salt/

Its good to know we are useful for something even if this will inevitably turn out to have been invented in the US.

#40 waiting on the westcoast on 01.18.15 at 5:13 pm

So we have increased our lines of credit (although that is probably more due increased awareness of the product and not size of the actual debts per capita) by nearly an order of magnitude, quintupled our credit card debt and quadrupled our mortgage debt. Good thing we have double the spending money to cover it all…

As our Cheesehead friend says… It will be like 2008-9 without commodities keeping us afloat. I hope the US engine can keep firing on all cylinders for the next 3-5 years because that is what we need to have a soft landing here.

I am more worried about the Canadian dollar than ever. If we get hit with a stronger US economy and we cannot raise rates for fear of further deflationary pressure.

#41 Washed Up Lawyer on 01.18.15 at 5:15 pm

Bart Starr:

Thank you very much for your great efforts on this blog. I read it every day.

Do you think the Packers will hold on to our 16-0 lead?

After the game I am going to visit my next favourite blog which is Garth Turner’s.

#42 Mike on 01.18.15 at 5:22 pm

For those on the fence about buying a property in (let’s face it) the centre of the Canadian universe 416 or 604 to some extent – consider the following – before succumbing to the fear inducing, sky is falling, deer in the headlights commentary found on this blog – all gift wrapped as a well intentioned warning to ‘greater fools’.

A few short years from now, perceptions of housing in the 416:
Freeholds = estates for multimillionaires, specific professionals with fat downs, co-habiting families with multiple incomes.

Condos/Towns ~800 sq ft plus = the new ‘ideal’ housing for 2-4 person households with above average incomes

1 bedroom or 1+dens ~550 sq ft = the ‘massive new’ condo

Today’s micro condos ~350 sq ft = the ideal new starter condo

Condos/Apartments built before 2000 regardless of the size (unless in high-demand/high-end neighbourhoods) = social housing/low income housing /I live here because I can’t afford anything else housing

You’ve been hoping for so, so, long for an ‘inevitable crash’ would finally come, so that you can scoop up a dream home for pennies on the dollar. If it were that easy – everybody would be doing it.

If you got 30%- 35% down ready – what are you still waiting for?

Gambling your future on a one-asset strategy is insane. Realtors like you are irresponsible for even suggesting it. — Garth

#43 John on 01.18.15 at 5:25 pm

We have to shift our economy from a financial / services orientation towards being more productive and away from global to local. What does that look like? A couple of examples would be small scale local farming and local custom fabrication in wood / metal. Real effective decisions can only come at the local level, the federal level is too far removed from “the people” and will only change there is a critical mass at the local level. The sooner we voluntarily move away from oil dependence the better.

#44 Victor V on 01.18.15 at 5:36 pm

How Airbnb renters are helping Canadians pay off their mortgage in a grey-market area

http://business.financialpost.com/2015/01/17/how-airbnb-renters-are-helping-canadians-pay-off-their-mortgage-in-a-grey-market-area/

Owners are turning their extra bedroom, partitioned living room or entire homes into income properties, thanks to online marketplaces like Airbnb, which connect them to travellers who prefer cheaper and more personal lodgings than a hotel.

Over half of the people that post on Airbnb are doing it “to pay off the mortgage, or for monthly expenses and day-to-day living,” says Aaron Zifkin, Airbnb’s country manager for Canada.

It’s a new source of income that Canadians are jumping on.

Allison and Brody, a couple who want to remain anonymous for tax reasons, own a townhouse in Ottawa that they bought at $185,000, for which they pay a $1,000 monthly mortgage. For the past year and a half, they’ve been renting out the spare bedroom 90% of the time, which netted them $8,000 in 2014 — or 66% of their monthly mortgage payments.

“We did increase our mortgage payments this year, knowing that we were having quite a bit of extra money coming in,” Allison says.

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

CRA is going to have a field day with this…

#45 Terrier on 01.18.15 at 5:37 pm

Oh boy, you can see it coming … fast and furious! The four remaining for sale properties in my neighbourhood (Thornhill, ON) were taken off market. These are 2-3 million dollar homes that couldn’t sell for more than a year … get ready GTA!

#46 Happy Renting on 01.18.15 at 5:44 pm

Thank you for the Toronto update, Garth.

I had an interesting chat with a new friend (condo owner), who observed that as couples have one or a second baby they are not moving out or “upsizing”. The whole family gets compressed into the same condo space. There are few reasonable alternatives in the same or a similar neighbourhood, so bedrooms get shared, personal belongings are minimized. This is common in other parts of the world, but innovative living if, like my group of friends and myself, you grew up with your own bedroom in a big, suburban house.

#47 rainclouds on 01.18.15 at 5:48 pm

[email protected] is getting bitchy

Got my visa statement Jan 12. DD for payment ? Jan 12
Called the 800# and got a lecture from the snot nosed brat in the cube farm.”you are a good customer so will void the interest and note in the file you have been educated ”

My response . Nice try kid.”put in the comments that I don’t expect to to get billed due to the banks ineptitude this time or any other.”

Game on. banks playing hardball

Go Seattle! !!

#48 nonplused changed his mind on 01.18.15 at 5:50 pm

Maybe I do like it when Garth takes a day off.

Sadly, he speaks the truth on the day of his return today. And he didn’t even get into Europe. It isn’t just Russia that is collapsing.

Garth says one reason to own gold is if financial institutions are collapsing, but cash is better. Well, financial institutions are collapsing all over the place just from the failure of the Swiss to maintain a peg to the EURO. It’s already started. I doubt it’ll affect more than a few hedge funds here in North America but some folks are saying that the damage to just the Swiss central bank has been more than 25% of Swiss GDP. 25%! In a week! A number of hedge funds and brokers have also gone under. My source is zero hedge. A lot of people don’t like zero hedge but they have been pretty good at predicting things for a long time. And strangely, they mostly agree with Garth on Canadian housing and debt levels.

Here in Canada I fear the damage to the banking sector will be greater than currently estimated if oil stays at $50. Not only are many of their clients going to go broke, but they are probably sitting on a ton of long positions they couldn’t get out of. Many banks take the buy side when oil companies are hedging, meaning they will need to pay out billions in the coming years if oil doesn’t recover. Unless of course they were able to sell it off to someone else. But sooner or later the chain ends and someone is holding the bag. When that entity goes broke everyone else doesn’t get paid. I don’t believe the ETF’s can be holding it all.

And the leveraged ETF’s must be just about busted! Horizon’s double long should be worth about zero at the moment. Maybe I’ll check. Horizon itself might be ok because their double short should have done ok.

Talk about banks failing is without foundation. The credit crisis of 2008-9 was far worse, and no Canadian bank even reduced a dividend payment. Stop reading the zero guy. Suicidal. — Garth

#49 jrochest on 01.18.15 at 5:52 pm

One quick note about a market not mentioned here: Saskatoon. Listings are up, sharply, sales are falling, equally sharply, and prices are dropping. The properties that are faring the worst are condo conversions, older rental buildings that were purchased, flipped, redecorated and sold as ‘luxury condo units’ between 2006 to 2008. The flood of evictions plus the rise in population tripled rents (no joke), as all the units were re-rented by their private owners at much higher prices; the rent rise convinced people that renting units in three-story walkup apartments was a royal road to riches, so they sold. Many of these landlords were rumoured to be from Alberta: that’s pretty much confirmed by the number of these properties now coming onto the market. On the MLS, there are several buildings that have five or six units for sale (out of 20); the asking prices in the ‘good neighborhoods’ used to be around 250K, and they are now dropping to below 200, and those are the only ones that are selling. Driving along the river in Exhibition, I saw a couple of units with homemade “For Sale” signs in the windows…I haven’t checked the FSBO websites, but I’m sure they’ll also be full of overpriced condo units. Sad for the locals that bought them; I had a couple of friends who bought units after being evicted multiple times, and one who bought just before the prices went through the roof. I know exactly what he paid, and if this continues I imagine that prices will drop to that level in his building within a year or two.

#50 devore on 01.18.15 at 6:00 pm

“A change in the mix of home types sold this year compared to last year during the same period accounted for the dip in the average selling price.”

Real estate fact: only when prices fall.
Reality: this works in both directions.

#51 devore on 01.18.15 at 6:04 pm

Predicting the future: expect to hear and read much more about the sales mix in the next 2 months. “Sales mix” will enter the average person’s vocabulary, to be heard in Starbucks lineups all around the country.

More future: expect to hear about strength of pent up demand for whatever trick is pulled out to levitate the spring market.

#52 zee on 01.18.15 at 6:06 pm

Hi

You cant use a couple of date points on the Toronto real estate numbers and come out and say its in the decline. Irresponsible to do so. You blame realtors for doing this however you are not any different.

I used the real estate board’s own year/year numbers. Go bitch at them. — Garth

#53 John Doe doe on 01.18.15 at 6:19 pm

Nothing is ever as good as it seems, and nothing is ever bad as it seems! Canada still has the raw materials the world will and does need! We are one of the safest and most prosperous places to live on the planet! Nothing will ever be as bad as it seems and nothing will ever be as good as it seems!!! Buy Canada for the long term!!!!

#54 jess on 01.18.15 at 6:20 pm

the “london plan” for the Greeks?

http://www.theguardian.com/world/2015/jan/18/should-greece-debt-forgiven-new-idea-europe-syriza

#55 Alberta is rat free on 01.18.15 at 6:20 pm

Clint knows….

“We all got it comin’ kid”

#56 crossbordershopper on 01.18.15 at 6:22 pm

2015 will be difficult for many of the leveraged over owned real estate owners out there. for the rest of the millionos of canadians who dont own real estate, never will, collect a cheque from one level of government or another interest rates, house sales, oil prices etc have are inconsequential. poor is poor, no job, no car, no assets. subsistence living in an apartment. i went to see a friend i havent seen in many years, and yes, 23 years, renting the same apartment, kids came and went and came back, the kid was there all grown up, guess what she had her own kid there too. single moms are plenty are hamilton, its a way of life here for the girls. the boys are useless,
target is closing because…. people dont buy in canada. were poor, cheap like a mother f. always looking for deals, not discount, but clearance items. our social mix is that we dont buy. do you know what the margin is on rice? what do you think 12%. gross. other than a few coffee shops, etc, i dont know why anyone will set up shop and sell to these canadians, young people are the worst, no loyalty, on line looking and comparing prices etc. what a world this has become.

#57 Bobby on 01.18.15 at 6:29 pm

For #42 Mike,

I would suspect you missed the downturn in the early 90’s did you. I recall at that time Toronto realtors called for homes to continue to climb indefinitely. The sky was the limit, they said, just before they joined the ranks of the unskilled, unemployed. Fortunately, I sold my home as I was moving, so did rather well. Many did not.

I’ve never met a realtor who said anytime wasn’t a good time to buy. Out here in Victoria, houses are selling below list or the listing just expires. Of course, the realtors call for rising prices. Go figure.

#58 Londoner on 01.18.15 at 6:34 pm

I’m back from my trip to Toronto to see family and friends. I found it interesting that almost everyone I met with talked to me about housing without me even mentioning it. It definitely seems to be a major talking point for Canadians this year. I saw a lot of new housing developments around the GTA. Whilst I didn’t come across anyone that was over leveraged, I did think that costs for new housing are higher then I would have expected. Although I can kind of understand why these people are willing to pay these prices given the alternatives for housing in the city. So definitely some overvaluation risk in the suburbs. Overall, in the core 416, I see a lot of demand and very restrained supply. I think this will keep prices in Toronto sticky for a while.

I hope the newbie investors took my advice and loaded up on fixed income back in Nov/Dec. I believe in a nicely balanced portfolio as much as the next guy, but everyone’s risk profile is slightly different. If you’re of a slightly nervous disposition then you may want to be overweight on 3-5 yr high quality corp bonds to balance out the volatility in the stock indexes this year.

I don’t think that the drop in oil prices will be as positive for US growth this year as some people are making out. However, because of the way this will impact the reported inflation figures, and because of the way they will adjust the nominal GDP numbers as a result, I think you will see a lot of news skewing US growth to the upside.

Happy trading.

#59 Washed Up Lawyer on 01.18.15 at 6:56 pm

#34 Deb:

You said:

“…PM Harper will dissolve the House in the spring rather than the fall…”

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

Premier Prentice will do the same thing in Alberta. If you were in the position of having to pound Albertans over the head with a major bad news budget, would you prefer to obfuscate through a campaign, win and then deliver the bad news or would you announce the very tough medicine and then try to run a campaign on that?

Spring election here.

#60 Kaganovich on 01.18.15 at 6:56 pm

Alberta looks to be facing a serious situation of billions of dollars of stranded ‘assets’. If this new world of lower commodity prices persists, which looks to be the case given China’s conjuncture, I hope that Northern Alberta doesn’t get left in its present state; a smouldering crater. A testament to the more primal inclinations of humanity run amok. My question is, what happens to all those families who tripled down in pursuit of that which they ‘deserved’, stuck on the far side of Nose Hill, 600 k mortgage and increasingly tenuous job security. Is this the turning point where ‘temporarily embarrassed millionaires’ learn that they were actually part of a burgeoning precariat all along?

#61 Andrew Woburn on 01.18.15 at 7:02 pm

#25 wussmode on 01.18.15 at 3:07 pm
Wouldn’t holding a portion of gold and gold ETFs help compensate for further declines in the CDN dollar?
=======================

Why not just hold a basket of productive US stocks that pay you to hold them as they increase CDN terms?

Commodities are traded by speculators. There is nothing wrong with this but you cannot “invest” in a commodity. Gold is a commodity as well as a form of money and will tend to decline along with all commodities, even in USD terms, in a deflationary period. It is also pretty volatile.
Gold can be a hedge in an inflationary environment but we’re not seeing much sign of that yet.

Goldbugs always expect a currency “crash” which effectively amounts to rapid inflation. If you are worried about that, it seems to me that copper is as good a shield against inflation in that it is wide use around the world and appears to be on sale right now.

#62 Bob Copeland on 01.18.15 at 7:03 pm

I still have the desire to own gold. I made exceptional money on it and want to again. This one comment just sunk in and made total sense. I think my addiction has been broken. Thanks Garth!

“Hardly. The US is not slowing down and commodities continue to be under pressure. There are only two reasons to own gold – inflation is debasing currency (today the opposite is true as money gets more valuable) or there’ll be institutional financial failure (and if you believe that, hoard cash, not metal). — Garth”

#63 Eyes wide shut! on 01.18.15 at 7:04 pm

Keep em shut and there is no awakening!

#64 asp on 01.18.15 at 7:05 pm

Jeff, I think you meant that the unemployment statistics will not accurately reflect the number of positions recently eliminated.

The statistics showing total full-time employment are the ones to pay attention to.

#65 Entrepreneur on 01.18.15 at 7:07 pm

Thought PM Harper was an economist. This is what happens when he gets in then puts on a white, hard hat for oil corporations. Justin Trudeau will put on the same white, hard hat. (He will legalize marijuana because he got turned away from the American border and to get votes.) Stephen Harper’s one-track speech of the economy is not going to work this time.

Just heard about Jim Rickards and his theories on a talk show. Went there because of the show “The Devil’s Graveyard,” the twelve vile vortices. Interesting. Is this why we have to have the complete circle and have respect for the environment and each individual person? Control groups and greed are so rampant.

The big box stores have taken over the small businesses in the communities. Now we only have them and fast-food chains, where the part
time jobs are. If you go from one city to another, they look all the same, same signs, same food. No life.

Which will correct first, the economy or the environment? The race is on and who will win?

#66 Retired Boomer - WI on 01.18.15 at 7:08 pm

Score 19/14 break time… (cocktail is dead).

I just HATE games like this!!!!

#67 Vanecdotal on 01.18.15 at 7:27 pm

#23 Oracle

Realtroll™ I suspect? Hump & pump!

Thanks for the chuckle! THAT’s some kind of funny:

“HAM will only bid up prices this spring. I expect.tbat I will be able to.flip this place in two years and make a 100% tax free gain on it (because of the leverage on my down payment (which I borrowed off of my credit cards)).”

If true, well good for you. No leveraged downside risk there. Funny, over in the previously sizzling HAM Hot Pocket of tony White Rock, 100’s of inloved multi-million luxury homes to choose from still languishing on the market from last year’s market… and the year before… and the year before… slowwwwly drifting down in price. Plenty of listings to choose from all winter long actually, and the re-lists juuust starting to appear now.

Oh, but wait – there’s a slew of builder tear-down-new-luxury-sfh flips recently come to market as a hole in the ground, and new holes just started not yet listed… any week now on they’ll pile to the current listings.

Btw, also very funny(!) Delta sure as h*ll is not “Vancouver” either. White Rock however, is proving to be an accurate outlier for foreign speculation in the luxury Greater Van luxury SFH market. You may want to pay closer attention going forward if you hope to preserve some capital, never mind turn a profit. Hilarious!

#68 Dan on 01.18.15 at 7:29 pm

Insightful offering once again Mr. Turner. The only thing I would change is the title. Should be instead, “The Great Reckoning”, for the party is truly ending and someone has to pay the tab.

#69 Retired Boomer - WI on 01.18.15 at 7:30 pm

Seahawks played better ball.

#70 seeing it from both sides on 01.18.15 at 7:33 pm

#67 Precious metals equities soared by 25% this past week!
—————
Scotia figures US equities will rise 7-10% in 2015, and Canadian markets 4-6%. PMs going nowhere. — Garth
———

25% in a week….sounds like PM’s did go somewhere already.
How does 25% rise in a week (done deal) not outperform 7-10% (projected) in a year??

Because it is based on speculation. Hope you crystallized the gain. — Garth

#71 Musty Basement Dweller on 01.18.15 at 7:59 pm

Granted, oil has crashed a lot in the past few months. But we had these existing prices per barrel about five years ago no?

Granted, the provincial and federal government officials are devasted by this to to the point where they appear to be bumbling fools incapable of preparing a budget.

Are these people incompetent? Have they become that addicted to the tax revenues from the pumps that they can’t remember how they did things financially five years ago?

Maybe I am missing something. Sorry I don’t get these arses and how we could be so devated when it is only 5 years since we have been here.

#72 A Box in The Sky on 01.18.15 at 8:01 pm

Not that Mark needs his ego stroked but it’s funny how “a change in the sales mix” gets blamed for a reduction in average sell price in 416 but it never gets credited as a reason when the average price goes up.

Even with the reduction, it’s still a nightmare house hunting in the 416. You need a combined income of 200k minimum to get a nice detached, unless you have serious firepower from savings/bank of mom

#73 screwed on 01.18.15 at 8:08 pm

#15
[..]Building wealth is a contrarian enterprise. Those who thought they could make themselves better off by leveraging to acquire stuff are in for a rude awakening.[..]

You’re describing just about every financial institution including hedge funds. That’s how they make their money. By leveraging up and buying stuff on cheap credit that they hold and sell back to the market for a profit. Whether that’s real estate or bonds or commodity papers, doesn’t make a difference.

Our financial system is built upon risk taking and using leverage to get out as much as you can.

Squirreling away for a rainy day sometime in the future hasn’t been a good strategy for years now. Hence the declining rates.

Capital is being burnt up and destroyed as we sit here. All cash will be worth less and less despite this so called “Deflation”.

The high levels of debt (Canada 163% to incomes) has put a floor under the prices and a lid on the upward trajectory of cash values.

Cash is getting worth less and less. It costs more and more to eat, drink, shit and sleep… and interest rates will not go anywhere anytime soon.

#74 kommykim on 01.18.15 at 8:13 pm

RE:#56 crossbordershopper on 01.18.15 at 6:22 pm
other than a few coffee shops, etc, i dont know why anyone will set up shop and sell to these canadians, young people are the worst, no loyalty, on line looking and comparing prices etc. what a world this has become.

The idea of brand loyalty is for fools. Most of the so called “high quality” brands now put out a crappier made in China product at the same stupid high “market based” prices. The major corporations have milked their legacy reputation and are paying for it now.

The same thing goes for employer loyalties. When employees see that they can be canned at the drop of a hat, why would any sane person remain “loyal” to the same corporation?

#75 Zed in Geneva on 01.18.15 at 8:16 pm

After the big losses of last week in the swiss stock market following the surge of the CHF, the locals are both exited at buying cheaper goods across the border and afraid of the impact on the economy.

After years of low interest rates from the Central Bank and from the commercial banks for individuals, the price of real estate is dropping. Peoples are tapped out. Prices just got too high and no greater fool can come in since rates cannot go lower. A colleague just signed a 20-year fixed rate mortgage at 1.5%!

Like mentioned by Garth before, we don’t need higher rates for RE to come down, just peoples unable or unwilling to purchase. Confidence in the market is very important for the market.

Glad that I don’t have a 20-year mortgage on a place that loses its value and to get out would cost me an arm and a leg or a big part of my diversified portfolio..

#76 screwed on 01.18.15 at 8:16 pm

#33 re Target

Target is writing off billions with their failed Canadian venture. How much is that worth to their bottom line in terms adjustments to their profits from US operations?

Did Target really come into Canada and think they could be profitable so quickly or did they roll the dice on this deal and now walking away from it but their overall tax burden is lower in the US?

The Target shelves hadn’t been stocked properly since at least August. I paid attention to that and wondered if they would ever move in or sort of pretend they were, staging the stores and then come Spring 2015 walk out again?

Would make a lot of sense from a corporate finance point of view.

#77 Vanecdotal on 01.18.15 at 8:17 pm

Some relevant points referencing foreign speculation in the SFH (and to a lesser degree-luxury condo) market in White Rock, and why it is apparently a pretty accurate barometer of “HAMmy” influence in local RE markets.

The primary type of housing that has been selling in White Rock and area in recent years is old/older SFH’s. Some in poor shape, others in perfect condition but dated/original. These owners (boomers downsizing in many cases), who are willing to accept essentially LOT VALUE for their homes are apparently STILL able to unload at reduced prices and expectations to a greater fool (developers, NOT owner-occupier buyers in many cases).

Buyers are primarily, if not almost entirely builders. House is torn down, luxury home thrown up as fast as possible and listed at typically 2x – 4x sale price of prev. home.

*This is the only kind of visible housing development occurring in the area at present. Almost every single luxury home like this sits empty upon completion waiting for a buyer with deep pockets. Many sitting 2 years and counting, some have been listed continuously all winter.

Point being, virtually no new housing is being created with local incomes in mind. These are purely speculative plays by builders to snag a foreign buyer, period. Problem is, these builds are no longer selling quickly, or in many cases, at all thus far. How long can the builders carry the financing? Good question.

Where’d all the foreign buyers go in the last few years? For those that scream HAM will save us all please google “recency bias” for your own benefit. HAM is in the process of leaving the building here (pun intended), whatever the reasons are. It is noticeable and has been happening for several years now, yet many locals are still blissfully unaware, especially boomers with original dated homes hoping for a multi-million $ jackpot are being slowly but surely disappointed their home is essentially worth “lot value” to builders ONLY.

The very negative long-term side effect of this is that perfectly livable housing stock is now perhaps permanently removed from the reach of a median income local family, at least until the correction finds its bottom.

This is all anecdotal based on my knowledge of this area, following local RE listings closely for 4-5 years now, personal observation, and conversation with locals. The market has shifted dramatically, especially in 2014, possibly linked to changes in the investor immigrant program and other macro-economic factors in play. As usual, all imho.

#78 I'm stupid on 01.18.15 at 8:18 pm

Garth I’m assuming you used the unadjusted Realtor numbers because if you used adjusted numbers vs the current unadjusted numbers the outcome would look even worst.

#79 Andrew Woburn on 01.18.15 at 8:19 pm

I generally tiptoe gently between the braying herds of “Warmists” and “Deniers”, and I certainly don’t want to turn this into a global warming blog. However the fight over AGW is economically significant so I thought the generally assembly of blogdogs should have this bone to chew on.

Last July NASA launched the Orbiting Carbon Observatory 2 (OCO-2) to map global CO2 emissions. As the blogger quoted below says, it is too early in the program to draw conclusions but, so far, the CO2 is not showing up where it was supposed to be.

An Inconvenient Truth
http://blackjay.net/?p=133

“we may need to re-examine the glib assumption that this is entirely due to Northern Hemisphere industrialization. These observations suggest increasing CO2 could be just as readily attributed to vegetation changes associated with increasingly intensive rice cultivation in S.E. Asia.”

#80 For those about to flop... on 01.18.15 at 8:21 pm

# 70 Boomer.
I’m not huge football fan ,but that was the best (lots of mistakes) game I can remember .
By the way you are very graceful in defeat.

#81 kommykim on 01.18.15 at 8:22 pm

RE: #71 seeing it from both sides on 01.18.15 at 7:33 pm
#67 Precious metals equities soared by 25% this past week!
Scotia figures US equities will rise 7-10% in 2015, and Canadian markets 4-6%. PMs going nowhere. — Garth
25% in a week….sounds like PM’s did go somewhere already. How does 25% rise in a week (done deal) not outperform 7-10% (projected) in a year??

Which PM rose 25% last week? Gold certainly didn’t!

#82 Freedom First on 01.18.15 at 8:26 pm

Time for another update from me. I started giving my ear to the ground updates several weeks ago, from where I am living for now, Alberta. Nice to see Jeff the executive give us his ear to the ground inside information update, even if he is late with it.

I have shared from when the first round of layoffs began in Alberta, Province wide, in November, and added updates as they have accelerated. Of course, some comments on this blog called me a liar, as if it was really happening, they would have heard about it. To them, you are ignorant. That is ok. You don’t know who I am.

This is my new update:

People in Alberta are waking up. Many homeowners, house flippers, and amateur leveraged landlords are visibly and verbally worried now. These people are quiet, worried looking, and look like they are shell shocked, and all of them upon seeing me, nervously ask me how I am doing, as I am quite happy and calm, I tell them, life is good. They know nothing of my finances, as I am very very private concerning that. In return, I ask them how they are doing, to which their replies are, well, you kind of have to be there, as they look so bad, and their replies are not the replies of calm and happy people.

I live my life free of debt, fear, or greed, and I live alone, as to live with a woman in Canada is an extremely high risk life ruining suicidal act. I am a numbers man, and the statistics on that support me 100%.

As always, my freedom first.

#83 mike on 01.18.15 at 8:33 pm

….just wait till this coming friday….Swiss Cheese.

#84 I'm stupid on 01.18.15 at 8:35 pm

I love owning bank shares! I love buying them when everyone panics. The casino always makes money in the long run. Sure a few might go bankrupt once in a while but if you look at it from a macro level and own enough of them they’ll be profitable.

Owning banks is equivalent to owning shares in the lottery. Sure you need to pay out millions every week but you took in far more than you paid out. You might make a mistake and payout more than you took in once in a while but in the long run you always win!

#85 johnnybegood on 01.18.15 at 8:38 pm

Found the “original” Smoking Man lurking in backwater Canada last evening. Went to a music social, a mini blues fest, and stepped outside for some fresh air. There he was, The Original Smoking Man …. 70 years plus dude totally toast. “What goes around, comes around” had his mind totally fooked as he stood there in his circle of friends a smouldering joint in his left hand another smouldering in his right hand and a cigarette dangling from his lips. Now, what do I do, he says …..

#86 Republic_of_Western_Canada on 01.18.15 at 8:49 pm

#43 John on 01.18.15 at 5:25 pm

We have to shift our economy from a financial / services orientation towards being more productive and away from global to local. What does that look like? A couple of examples would be small scale local farming and local custom fabrication in wood / metal. Real effective decisions can only come at the local level, the federal level is too far removed from “the people” and will only change there is a critical mass at the local level.

A guy tried that before, some time ago. His name was Mao-Tse-Tung. A blast furnace in every back yard, and every farmer to have a couple square meters of farmland to work all to himself.

When that didn’t work out, he asked the Japanese CEO of Matsushita to give advice. Thirty years later industrialization of a massive, collective scale has made the chinese better off than the Japanese.

#87 M on 01.18.15 at 8:53 pm

How I like that…”All real estate markets are local.”… LOL
Job losses, interest rate hikes, etc are not.
I would like to see an example of housing bust (in the last 10 years) that was LOCAL. :)

Now… forget about that oil :) Watch carefully the effects of swiss de-pegging their currency and the morons that have shortened it based on the momma of all QE in Europe this coming week :)

Oh Garth… those damn metal heads will give you an earful :)

#88 Arfmooocat on 01.18.15 at 8:53 pm

Iraq Pumps Crude at Record Level Amid Plummeting Prices

http://www.bloomberg.com/news/2015-01-18/iraq-pumps-crude-at-record-level-amid-plummeting-prices.html?cmpid=yhoo

#89 Daisy Mae on 01.18.15 at 8:56 pm

#19 Crowded: “There outta be a law.”

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

It’s coming.

#90 Mike on 01.18.15 at 8:56 pm

Gambling your future on a one-asset strategy is insane. Realtors like you are irresponsible for even suggesting it. — Garth

I don’t recall anything about gambling away 100% of one’s net worth on any one asset. Only for those looking to buy, I suggested what worked for me. 30 – 35% down keeps the mortgage payments looking like a joke – and still manageable even if rates were to triple overnight (never gonna happen btw).

Bobby – These aren’t the 90’s. We are in 2015. I am not saying 416 real estate is the path to riches – but at the very least it is a roof over your head and good hedge against real inflation. The world has become a global village. More than a quarter million immigrants landing on our shores each year and countless known and unknown billionaires and millionaires offloading their capital here looking for a safe haven .

At the same time, in addition to off shoring of some jobs, the Ubers & AirB&B’s of the world are creating seismic shifts in a industries the world over. The sharing economy is rendering it virtually useless to own your own wheels (and all the expenses that come with it) or spend a fortune on hotel stays – to name a few. The immediate thought is that this will obliterate certain local industries in the long run – and it will. The flip side of that coin is significant amount of money saved by the Canadian consumer – freeing up more disposable income – even at our generally stagnant wages. As more people come to realizations that buying made-in-China goods that don’t last or that maybe they don’t really need to own that Seado they ride at the cottage twice a year – the more likely you are to see them pour money into RE or something else of lasting value. What else should they spend their money on?

Here are the trends:
Immigration: Ever increasing
Migration: People moving to major urban centers from all over
Sharing Economy: Set to takeoff into the stratosphere, creating opportunities but also freeing up more disposable income for Canadians
Foreign Investors: Keep coming, unabated by any ‘crash’ talk. Hey, maybe they know something we don’t?
Low Inflation/Disinflation (pick the euphemism of the day) -LOL, don’t even get me started:)

#91 Rain City on 01.18.15 at 8:57 pm

Living in Vancouver and getting a flyer every single day….$45,000 over asking…$87,000 over asking…$39,000 over asking and so on and and so on with every single SFH sold over asking.
Everywhere i go i see SOLD signs on SFH.
So my question is this.
Since the average income in this-city is 2nd lowest in the country, just who is buying in this delusional city as you put it ?????????????????????????????

#92 TurnerNation on 01.18.15 at 8:58 pm

Deflationary? Beer at Southside Johnny’s is only 3.70:

http://www.southsidejohnnys.ca/food.html

#93 Red Deer Rob on 01.18.15 at 9:01 pm

This low oil price is going to affect myself and my coworkers in the very near future. I wouldn’t be surprised if the hammer starts coming down beginning spring breakup. (spring breakup meaning the season when ice and snow melt and you have trouble moving heavy equipment)

It’s a good thing I have no debt, no kids, and rent my accommodations. Not sure what I’ll end up doing or where I’ll end up going but I am free as a bird. Unfortunately, I can’t say the same thing for anyone else I know.

If you want a quad, snow machine, truck, trailer or any other toy, visit Alberta in a few months when everything is for sale at clearance prices.

#94 Waterloo Resident on 01.18.15 at 9:09 pm

“Deflation would be the stuff of nightmares”

http://www.theguardian.com/commentisfree/2014/sep/07/deflation-secular-stagnation-europe-economic-nightmare

QUOTE FROM THAT ARTICLE:

((( “‘Just as a bad cold leads to pneumonia, so over-indebtedness leads to deflation,” wrote the US economist Irving Fisher in 1933. The theory is, if there is too much debt, people spend all their money repaying it and so stop spending. Prices fall – inflation turns to deflation. What could be bad about falling prices? Well, the debts don’t shrink – so you end up using more of your income to service them, and you spend even less.

This actually happened in the US between 1929 and 1933, leaving economists like Fisher – and indeed the whole of society – terrified of it happening again. Economists call this the debt-deflation spiral, and since 2008 politicians have been haunted by the prospect of a repeat.

In Europe, that fear is justified: deflation is now close. Germany’s economy stagnated in the second quarter of 2014; Italy and France shrank by 0.2%. And since 2012, inflation in the eurozone has been falling steadily, down to just 0.3% last month. In response, the boss of the European Central Bank, Mario Draghi, last week slashed interest rates to 0.05% – a Rizla paper above zero – and signalled that Europe will, like the US, Japan and the UK, print money.

If it works, the eurozone will become the last of the big economic players to go on total life support – and what it tells us about the future of capitalism is worrying.” )))

#95 Tedfiftyfour on 01.18.15 at 9:11 pm

The average detached 416 house is down 4.2% from a year ago. At $859,672, it is $100,000, or 11%, cheaper than it was in April, nine months ago.

Why are you comparing the peak with the dead of winter
Lets compare apples to apples. You will see in April 2015 it will be the same or higher. disappointed you use same tactics as agents

The 4.2% drop is a year/year comparison. No seasonality. The 11% decline reinforces my consistent message that those who buy anything when it’s popular, pay too much. — Garth

#96 Mukadi on 01.18.15 at 9:15 pm

Nostradamus has just told me that by this time next year the CAD/USD exchange rate is going to hit 1.35/1 and that the vultures south of the boarders should wait for Vancouver RE to depreciate by 38% so that they can descend on the city and grab today’s $1million houses for CAD 620K or USD 459K….

It’s going to be interesting yeah!

#97 seeing it from both sides on 01.18.15 at 9:18 pm

#82 Which PM rose 25% last week? Gold certainly didn’t!

Gold miners: G, YRI, ABX, K etc. ….more or less all moved in tandem approx. 25%

Did you pocket the gain? — Garth

#98 Vanecdotal on 01.18.15 at 9:18 pm

#83 Freedom First

“I live my life free of debt, fear, or greed, and I live alone, as to live with a woman in Canada is an extremely high risk life ruining suicidal act. I am a numbers man, and the statistics on that support me 100%.”

Good lord you are a nauseating, self-important pontificating fool on the best of days.

I see you’ve officially added “misogynist” to your repertoire. Congratulations.

I know more than a few successful women who’ve been nearly financially ruined by their succubi male partners. Strangely though, they’re not suicidal, as they by necessity of having more than themselves to think about, (their own freedom 2nd to the well-being of their family / dependents), tend to recover quickly (financially and emotionally) from separation/divorce. I feel sad for you that this type of woman apparently (and not surprisingly) is not attracted to you. You’re missing out.

Btw, 47.5 % of statistics are made up on the spot.

#99 Kenchie on 01.18.15 at 9:22 pm

“China Dream Ends as Steel Collapse Spurs Property Losses”

http://www.bloomberg.com/news/2015-01-18/china-dream-ends-for-handan-as-steel-slump-spurs-property-losses.html

#100 RayofLight on 01.18.15 at 9:24 pm

Thank You for your blog. I rely on your outlooks to guide my investing strategies. We started going to US equities about 2 years ago, and now they represent about 2/3rds of our portfolio. Nice Call! I usually gloss over the comments and focus on the ones you comment on.

A portfolio with 66% US equities is neither diversified nor balanced. — Garth

#101 My House on 01.18.15 at 9:27 pm

My house is not 11% cheaper than a year ago. Comparables are not either.

Its the sales mix leading to lower average prices. Individual detached home prices still rising. Tougher to get a mortgage for higher value properties these days as this blog has pointed out.

Lower listings are going to be the norm for the next 5 years. Most people are in fixed rate mortgages so don’t list. Before they were in variable rates and could sell mostly any time so more people listed.

Lets start telling it like it is. Its overdue.

The local real estate board (not me) says year/year prices are down in 416 by 4.2%. Realtor numbers (not mine) indicate a detached house, on average, costs $100,000 less than it did in April. Bummer, eh? — Garth

#102 Etobicokehead on 01.18.15 at 9:29 pm

“Spring Market will blow your mind… 416 anyway.. Not sure about Brampton.”

What an absolutely realtor moronic comment here.

It’s amazing how completely stupid the realtor cheering section can be.

416 RE will be stagnant this year as a result of general economic malaise and the Alberta effect. By next fall and winter, 416 is going into the toilet too.

#103 Republic_of_Western_Canada on 01.18.15 at 9:31 pm

Canada is not insolvent. No bank came remotely close to failing in 2008-9. — Garth

How are you gonna fail with so much government largesse?

Dome Pete got bailed out too – ‘too big to fail’. But the bill always lands at the feet of the taxpayer, whether explicitly through increased tax and reduced services, or implicitly through currency devaluation.

The U.S. knew it by watching all the Japanese ‘zombie banks’ kept alive on life support, and deriding them even before QE was launched. Instead of letting the bastards fail.

Banks were bailed out on both sides of the border with massive loans, few to no strings attached, to entice them to make loans and get money velocity going again. Bad idea. If banks want to make profits and generate cash flow, they better make loans at their own risk – even if the rates they charge climb a few notches.

Collective effort is one thing. But screwing over the silent muppets to maintain your [eastern banking] oligarchy is inexcusable. Residual colonialism at its worst.

#104 Shawn Allen on 01.18.15 at 9:37 pm

Graph Speaks to Growth of banks

As I’m Stupid at 85 mentioned, banks make money (Some people think they literally “make” money but that is another story).

The Graph above goes a long way to explaining why Canadian bank shares increases so very much since the year 2000.

Assets (loans) up by hundreds of percent and no big new competitors entered the market. Ergo the typical bank’s assets were way up. They did not issue many (if any) new shares. Ergo assets per share up. Even with lower interest rates and lower spreads total interest income per share was way up. Ergo the share prices were way up.

Now the same increase will not happen in the next 15 years but would anyone like to bet that bank earnings per share will be less than double to triple in 15 years?

At 10% growth you double in 7 years and so if they managed to grow earnings at 10% per share for ten years we would see earnings up 4 times in 15 years.

Will the share prices rise smoothly? Of course not. Will they rise albeit in a bumpy fashion? Count on it.

#105 Andrew Woburn on 01.18.15 at 9:40 pm

Bitcoin has been hammered down to around $200 lately and the supposedly bullet-proof “blockchain” technology that underpins it is maybe not as robust as it looked. Beware.

NEW YORK (InsideBitcoins) — Recent bitcoin hacks serve as yet another reminder that bitcoin is still in a nascent state when it comes to security. The blockchain may be a public ledger, but it’s not as easy to track stolen funds as some people might think. Innovations like mixers and tumblers can move digital currency holdings to multiple bitcoin addresses, allowing privacy-seeking users to obscure their trail.

Using the Blockchain Trail to Track Stolen Bitcoins
http://insidebitcoins.com/news/using-the-blockchain-trail-to-track-stolen-bitcoins/28932

#106 observer01 on 01.18.15 at 9:47 pm

We’ll oil isn’t our only problem. I think at the end of the day its going to be the combination of huge debt + the weak dollar.

Went grocery shopping today for fruits and vegi’s and the price for basic food has gone up considerably.

At the end of the day the poor will suffer to allow the irresponsibily debt addicts to live a lifestyle they should of never been able to afford

#107 GTA realtors in a PANIC! on 01.18.15 at 9:48 pm

Realtors in the GTA know the house of cards RE is starting to crumble under the weight of the debt bubble. Canada is under a mountain of debt and now jobs and money is leaving Canada like a water fall. Realtors are screaming in horrible financial pain as many can’t make a single sale. Looks like very hard times are coming for the GTA and Canada as a whole.

#108 Early Spring on 01.18.15 at 9:49 pm

Last year in Saskatoon sales were down because it was such a cold brutal winter so people didn’t want to leave the house. This year it must be to nice and people don’t want to waste the nice days shopping for houses lol hahahaha!!!

#109 Andy on 01.18.15 at 9:50 pm

Was out for a ride on my piglet (Garth has a hog, I have a 300cc scooter) going down a street I find myself going down quite frequently (it takes me to the nearest government grog shop) here in Burnaby, and a for sale sign in front of a cool looking old house caught my attention. As I rode on with interest piqued I saw that there were NO OTHER FOR SALE SIGNS visible for the remainder of my ride. Weird.

#110 Arfmooocat on 01.18.15 at 9:51 pm

DELETED

#111 IM in C on 01.18.15 at 9:52 pm

The feds will have 2 choices this year. Increase interest rates, or devalue the dollar. Guess which one they will pick? Hint, devaluating the dollar will continue to boost house sales

#112 GTA realtors in a PANIC! on 01.18.15 at 9:56 pm

We all know the RE board messages their number so the prices of home from what I hear on the ground are down 10% year over year. The house of cards are falling apart. Sub prime loans are getting harder to get. The house of cards is starting to fall.

#113 Kenchie on 01.18.15 at 9:56 pm

#23 Oracle on 01.18.15 at 3:04 pm
“Garth,

There is.no.inventory in Delta where I recently purchased my dream home.

HAM will only bid up prices this spring. I expect.tbat I will be able to.flip this place in two years and make a 100% tax free gain on it (because of the leverage on my down payment (which I borrowed off of my credit cards)).

Tell me this, can your balanced portfolio beat that (after taxes) ?

Ya, that’s what I thought, and that is why the Vancouver juggernaut will continue to motor upwards.

Feel sorry for all of you renter class.”

That’s a lot of confidence for a very uncertain future. Considering Delta is a place for the working class of Vancouver, it’s generally not a place where HAM goes.

Furthermore, “renter class” is not really a class. It’s a choice for many people. Secondly, you should say you feel sorry for the “low-income class” who can’t afford to qualify for a mortgage. Because that’s who you are really talking about.

#114 Smoking Man on 01.18.15 at 9:56 pm

#103 Etobicokehead on 01.18.15 at 9:29 pm
“Spring Market will blow your mind… 416 anyway.. Not sure about Brampton.”

What an absolutely realtor moronic comment here.

It’s amazing how completely stupid the realtor cheering section can be.

416 RE will be stagnant this year as a result of general economic malaise and the Alberta effect. By next fall and winter, 416 is going into the toilet too.
………

I’m not a Realtor, I’m a proud home owner.

Suck it up.

I don’t give two craps, about what I read or see on MSM I trust my eyes and gut.

This city is the only game in Canada. And people coming here by the thousands every month. Supply and Demand.

If I don’t get to the go train by 5:30 am. I don’t get a parking spot. When I moved here 4 years ago. Could get a parking spot any time..

See, that’s seeing…. Pout all you want renter…

P’s dogs, second best show ever..

Banshee…. Wow it rocks…

#115 Shawn Allen on 01.18.15 at 9:59 pm

Bank Bailouts?

Republic of Western Canada claims:

Banks were bailed out on both sides of the border with massive loans, few to no strings attached, to entice them to make loans and get money velocity going again.

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

In Reality…

SOME big U.S. investment banks were bailed out. For the most part the loans have been repaid.

Other banks like Washington Mutual and Wachovia went bust and shareholders lost everything. I believe shareholders in AIG, Fannie and Freddy lost nearly everything. The executives however, made out pretty fine.

In Canada CMHC merely bought back from the banks some mortgages that they already insured to provide some extra liquidity to the banks. There was nothing remotely approaching a bailout. As Garth has said no dividends were even cut.

In 2009 90-day mortgage delinquencies in Canada peaked at only 0.45%

http://www.cba.ca/contents/files/statistics/stat_mortgage_db050_en.pdf

The comparable figure for U.S. banks was about ten times higher.

But, believe what you want. Making false claims is easy. Backing them up with proof is harder.

Calling an asset purchase by CMHC (of assets it already guaranteed!) a bailout does not make it true anymore than calling a rose a turd makes it true.

You may believe what you state, but it is patently false.

And how does providing loans at record low rates to willing adults “screw” people.

P.S. For Gawd sakes, given your views buy some bank shares.

#116 Republic_of_Western_Canada on 01.18.15 at 10:00 pm


#76 Zed in Geneva on 01.18.15 at 8:16 pm

After the big losses of last week in the swiss stock market following the surge of the CHF, the locals are both exited at buying cheaper goods across the border and afraid of the impact on the economy.

After years of low interest rates from the Central Bank and from the commercial banks for individuals, the price of real estate is dropping. Peoples are tapped out. Prices just got too high and no greater fool can come in since rates cannot go lower. A colleague just signed a 20-year fixed rate mortgage at 1.5%!

Like mentioned by Garth before, we don’t need higher rates for RE to come down, just peoples unable or unwilling to purchase. Confidence in the market is very important for the market.

Switzerland always has a policy of much higher prices for goods and services inside than outside the border. Much higher prices and much higher wages as well. That is a form of osmosis to have foreigners pay high prices but not benefit from high wages (or the SBB halb-tax :) ).

Crossing the border back home into Switzerland in your car, you might be thoroughly searched – not for drugs or arms, but for potatoes, salad, and clothing which you might try to avoid duty on. Basics that you are expected by buy inland, not at cheap rates outside.

The main ones benefiting from the rise in FX are the daily ‘pendler’s from France working in Geneva getting paid in CHF. But that’s always been the case.

As far as real estate goes, Swiss prices shot up years ago when the ‘Drei Sauelen’ social system had to start to invest wage-deducted premiums into secure Swiss investments. That pretty much meant CH real estate, driving prices into the stratosphere (Although still not as insane as the Vancouver market. And the Swiss housing quality is far greater than the million-dollar junk seen in Vancouver today. Never thought I’d see that price disparity.) Most of the rental housing is now owned and let by insurance and financial companies too, because they have to do something with all that cash. Low interest rates (which have always been there) are a much smaller consideration.

If RE prices in CH drop, it will not be anywhere as far as with Canada’s 3 Stooges (Vancouver, Toronto, Calgary).

#117 Bobby on 01.18.15 at 10:02 pm

For #91, Mark,
You are correct it is 2015, but history has a mean way of repeating itself. Just take a look at Calgary. Significant layoffs with more to come, all because everyone thought that oil would always be north of $100. Many were spending money they were going to make 10 years from now. So how do you carry that $600 k mortgage without a job. Amazing how quickly it all changed.
The reality is that money is mobile and will quickly go where it is the most wanted. The few foreign millionaires in Toronto will easily sell out tomorrow and move elsewhere for a better return. They are not the ones driving up the market, buying dilapitated semis in sketchy neighbourhoods. It is the masses of heavily indebted families, working two incomes, just to be able to afford a home who are buying. Sadly, when the market turns, and yes it will, it will be these same people who will be the first to lose.
My friend, I’ve yet to meet a realtor who said that prices will ever go down. Even ones who lost their homes in the last downturn. Any there are many!

#118 seeing it from both sides on 01.18.15 at 10:28 pm

Did you pocket the gain? — Garth

Yes, thank you for asking….twice :)
I’m agnostic …. a profit is a profit…no matter what the trade is.

#119 LISA on 01.18.15 at 10:32 pm

I just got a good 99% offer on my 900 (-+) semi in Centretown Ottawa (no financing condition) within 3 days of listing. Happy to have it. The place was cute, with yard and parking and within walking distance to Glebe, Elgin, Parliament Buildings, Chinatown etc. Out in the Ottawa suburbs where due to poor city planning it is taking an hour to go 15k in the morning, well — that’s a different story for the cookie cutter monster homes in the middle of former farm fields.

#120 Leo Tolstoy on 01.18.15 at 10:32 pm

Hardly. The US is not slowing down and commodities continue to be under pressure. There are only two reasons to own gold – inflation is debasing currency (today the opposite is true as money gets more valuable) or there’ll be institutional financial failure (and if you believe that, hoard cash, not metal). — Garth

Totally on the money!

Pun intended.

#121 Sean on 01.18.15 at 10:37 pm

#23 Oracle on 01.18.15 at 3:04 pm

I expect.tbat I will be able to.flip this place in two years and make a 100% tax free gain on it (because of the leverage on my down payment (which I borrowed off of my credit cards)).

——–

Holy F(&*! Seriously.. you are such a f*(^&ing loser that your access to credit consists of borrowing off your credit card?! And Canadian taxpayers are supposed to bail out your bankrupt ass when you inevitably fail…

#122 Kenchie on 01.18.15 at 10:41 pm

#70 Retired Boomer – WI on 01.18.15 at 7:30 pm
“Seahawks played better ball.”

Sorry for your loss. GB played well for 45 minutes… Maybe if Rodgers wasn’t somewhat injured, it would be different.

#123 Etobicokehead on 01.18.15 at 10:44 pm

“This city is the only game in Canada. And people coming here by the thousands every month. Supply and Demand.”

Sorry folks if I am missing something here. New to this blog, I just don’t get the absolutely stupid and moronic comments coming from realtor suck-ups and ignorant fools here.

Supply and demand? That did nothing to stop the 1990s great deflation in real estate prices in 416, even though population rose dramatically in those years.

Who is this ignorant moron posting this shit?

#124 rosie "moving forward" in the knowledge that, "this won't end well" on 01.18.15 at 10:49 pm

Huff and Puff predictions.#1 is optimistic, #2 is interesting, #3 is rather sad and #4 is funny.

http://www.huffingtonpost.ca/nathan-dautovich/toronto-real-estate_b_6491162.html

#125 Bottom Feeder on 01.18.15 at 10:49 pm

For those who feel selling the house is not an option, I noticed on Ratehub.ca that Royal Bank has a 10 year mortgage for 3.99 %. Last time I checked it was 4.7%.
Garth, assuming a 5 year can be had for 2.7%, do you think the additional 1.3% is too much to pay to get a fixed 10 year mortgage? If not, what rate do you think it would take to be a good deal.

Paying an extra 2%+ for five years is a massive insurance premium. Too rich for me. — Garth

#126 Republic_of_Western_Canada on 01.18.15 at 10:57 pm


#116 Shawn Allen on 01.18.15 at 9:59 pm
[…]
And how does providing loans at record low rates to willing adults “screw” people.

P.S. For Gawd sakes, given your views buy some bank shares.

Why on earth would I want to buy shares in any institution that bases a huge portion of its revenue and security on an arbitrary, infeasible and unmaintainable government policy (CMHC)?

We just saw what happened with the SNB! Policy can turn on a dime when the bigger organism finally realizes it physically cannot continue the status quo.

And to answer your question regarding provision of cheap money causing societal disfunction, feel free to read that last several years of Garth’s postings. And review the story of shale fracking financed by cheap money causing commensurate drops in oil pricing.

Now the only viable solution is to let the over-indebted crash out. Not to pump more gasoline on the fire by government back-stopping them by any means.

#127 Ryan on 01.18.15 at 11:03 pm

This time last year, didn’t the realtors say the unusually cold winter hurt sales for the winter season? It is +2C in Hamilton right now. Alberta is in trouble, i’m hoping Ontario can rise above the troubles it faces. Happily renting and feeling sad for the sold signs I still see around here.

#128 Lala on 01.18.15 at 11:03 pm

My friend just got a great house in beaches, 8% under asking. He got it for the same price sold in 2011. No wonder Garth got an email from Harper, asking him back to office. Mind sharing the contest Garth.

#129 Edith on 01.18.15 at 11:18 pm

Single Family Houses in the West end of Vancouver, most of the East side, West Vancouver and North Vancouver will continue to increase in value because:

– Of a shrinking supply of SF homes in this area.

– Multi family developers continue to chase what little land is available. The resistance by homeowners and Municipalities alike is extreme. The costs and time of assembly and rezoning is ridiculous.

– One cannot use metrics of price to rent or price to household income to measure their value.

– Their prices are not influenced by, household debt, slightly rising interest rates, Target closures or falling oil.

– There is no more land in these areas. Any small tracks of land like the endowment lands will be redeveloped into luxury condos. The only single family lots coming on the market are in the new parts of the British Properties. All of these homes are assessed at $4 million and up.

– Listings are very low and sales are brisk.

– Older smaller homes are being torn down and being replaced by larger new houses.

– Land banking by Asians is increasing.
http://uk.reuters.com/article/2014/09/11/uk-canada-china-housing-idUKKBN0H60A620140911

– SFH’s in these neighborhoods are considered as alternative investments for the wealthy. Just like art, true antiques or priceless autos. They will never be made again and will hold their value and appreciate in time.

New condo construction will continue. There will be new homes built in commuter suburbs much further out in the Valley. These areas are more vulnerable to interest rates hikes, household debt, lack of first time buyers and maybe even falling oil. But the price of homes in these areas has not increased at near the clip of SFH’s in the hot areas of Vancouver. If you take sales of these SFH’s in hot areas out of the averages reported for Vancouver, the prices would change drastically.

So, if you have aspirations to buy a SFH in the West End or West Vancouver, you better have a high net worth and quit waiting for the big price drop.

#130 Wiggleroom on 01.18.15 at 11:29 pm

Hi Garth, can you write a post on why debt is bad in a deflationary environment? I can’t quite wrap my head around this. If money is more valuable in the future, then wouldn’t debt be more acceptable? (I don’t have any debt but am just curious!) Thanks.

#131 Smoking Man on 01.18.15 at 11:36 pm

I love how you renter scum bag, love the thrill of anticipating the dimize of the owners. The young families.

You bet wrong, and now.. You taste it, you feel it. Vindication. Wrong..

The same MSM that pumped it, now talking it down. Why.. Cause the herd, the market, the fools, won’t give in.

You guys are so stupid. You can’t beat the machine… The program..

Just watch and learn wee grasshopper..

I am Smoking Man from Nictonite, and I’m never wrong.

#132 NotAGreaterFool on 01.18.15 at 11:36 pm

Belt tightening:

BMO directed contacted technology staff for the month of January 2015 to work and bill just 30 hrs vs. the 40 hour norm (coincided with a quarter end…hmmm)

Across the banks, investment dollars are being held back relative to last year for project deliveries.

#133 For those about to flop... on 01.18.15 at 11:45 pm

Hypothetical time.
If I had a mutual fund with a2% MER and inflation is at say 2% ,does this mean I have to make at least a 4% return to break even in real money ?
Don’t slam me I am new to all this ….always been a saver rather than an investor .

#134 Bobby on 01.18.15 at 11:47 pm

#130 Edith, let me guess, you’re a realtor.

#135 GTA realtors in a PANIC! on 01.18.15 at 11:55 pm

Realtor smoking man must be feeling the drop in sales in the Gta. Realtors like smokingman will be screaming for years to come.

#136 Marco on 01.18.15 at 11:56 pm

Edith @ 130

Geez thanks for the speculative update Edith. I believe you mean West side of Vancouver not West end. Not many, or if any SFH in the West end. Happily my aspirations of buying a SFH in West Van or the West side of Vancouver is non existent. You sound like a realtor propagandist. Rehashing quotes and figures I think.
Cheers.

#137 Derek R on 01.18.15 at 11:57 pm

#131 Wiggleroom on 01.18.15 at 11:29 pm asked:
Hi Garth, can you write a post on why debt is bad in a deflationary environment? I can’t quite wrap my head around this. If money is more valuable in the future, then wouldn’t debt be more acceptable?

Garth may or may not write a post. In the meantime here’s my opinion.

Debt is bad for borrowers in a deflationary environment because there’s a bigger chance that they might be unable to pay it if they are wage earners and lose their jobs or if they are business owners and lose their customers.

A lot of the smaller shale drillers are discovering this right now.

Debt is bad for lenders in a deflationary environment because the borrowers might default on the loan, leaving the lender with nothing.

A lot of the smaller shale drillers’ bankers are discovering this right now.

#138 Westcdn on 01.19.15 at 12:05 am

No sign of increased listings in my Calgary hood although it strikes me that the percentage of motived sellers is rising. The majority of home listed have been newly renovated so I assume the flippers want to cash out (timing is everything if you want to make lots of money but it also works in reverse) – see Swiss Central Bank actions/currency and commodity prices.
Some people think prairie folk are hicks and will die in our stupidly will causing great harm to the rest of Canada because of our supposed ignorance. Pierre Burton is one of my favourite authors (read the Great Depression to gain an understanding of prairie politics). I also grew up reading Allan Fotheringham articles in the Vancouver Sun – loved the man and his writings influence me to this day.
I think Canada as a small country can do well in a world of turmoil if we keep our heads and deal with stupid debt and government promises. I don’t like planned economies and privilege for the few(er). It is time to decide what is important. Is it people or individual importance? Choices have consequences. I prefer to think about consequences before rewards (risk management). But I am only human so usually 2 out of 3 is the best I expect. I wish I could be like SM where I had the guts to lose 2 in a row and triple down on my 3rd bet and win. Ahh, such is life and its vulgarities.
Anyway, as a good lawyer knows, the truth usually is between 2 points of view.

#139 Karma on 01.19.15 at 12:11 am

Good.

http://www.bloomberg.com/news/2015-01-19/china-brokers-fall-as-regulator-curbs-new-margin-accounts.html

#140 Marco on 01.19.15 at 12:16 am

From that Reuters UK article that Edith linked.
“In the last year there’s been the corruption crackdown in China and a lot of people have seen their wealth evaporate over there because of that,” said Dan Scarrow, a vice president at MacDonald Realty.

“So they want to put it somewhere they perceive as safe and there’s nowhere safer than the west.”

So Dan is essentially saying that Macdonald Realty welcomes corrupt Chinese money with open arms and fat pockets. Greed much Dan?

#141 Bottoms_Up on 01.19.15 at 12:28 am

I think it’s time for a bubble to form in disposable income.

#142 whitehorn on 01.19.15 at 12:29 am

Interesting article in Edmonton Journal, Friday before last on expected oil production for AB, year end for 2014 was 2.9 million and expected for 2015 is 3.1 million bopd. It seems no country especially top 10 oil producers in the world wants to curtail their production, and are wiling to keep pumping out at 45 dollar oil. Technology on wells have drilling and fracking done within the month in comparison to up to 3 months in recent years. So, it does not take long to get production going on stream once a potential drill site has been realized. This tells me, its going to be awhile before prices move up again and stay there i.e. 75 dollar oil. I recall the forestry industry in 2007/08 where mills had to shut done as the outlaying costs i.e (labour, electricity, material costs) exceeded revenue (cost money to run). As it stands, it does not make sense to be drilling oil at these prices unless financially strapped companies (high debt) need to pay bills. I expect oil prices to remain low similar to 98/99 and 00/01 oil crashes. The layoffs have just started – will be ugly come April (spring breakup). I would not to be buying a house in AB at this time where you could be buy that same house for at least a 100k less next year – guaranteed.

#143 kommykim on 01.19.15 at 12:34 am

RE: #98 seeing it from both sides on 01.18.15 at 9:18 pm
#82 Which PM rose 25% last week? Gold certainly didn’t!
Gold miners: G, YRI, ABX, K etc. ….more or less all moved in tandem approx. 25%

Those aren’t PMs (Precious metals), they are PM MINING companies. While gold mining companies are highly correlated with the gold price itself, there is a huge difference between buying an ingot of gold and buying Goldcorp stock.

#144 Bottoms_Up on 01.19.15 at 12:35 am

#131 Wiggleroom on 01.18.15 at 11:29 pm
—————————————————–
Deflation means actual dollars buy you more things. Because your debt level doesn’t change (whether inflation or deflation), debt is easier to pay (ie, more affordable) in an inflationary environment…because dollars buy you less things, so it’s less costly.

Consider paying off a $100,000 debt with actual cars. If a regular car costs $20,000, and with inflation it goes up in cost to $40,000, it only takes 2.5 cars to pay off your debt. However, with deflation, that $20,000 car can now be bought for $10,000. It now costs you 10 cars to pay back your debt.

If you hold debt, deflation is bad, inflation is good. If you don’t hold debt in a deflationary environment, good luck finding any to actually go out and finance that $10,000 car.

#145 jimmypage on 01.19.15 at 12:36 am

#80 Andrew Woburn
Thank you for the link. Very interesting.

#146 Bottoms_Up on 01.19.15 at 12:40 am

#127 Republic_of_Western_Canada on 01.18.15 at 10:57 p
———————————————————–
I’ve heard that banks don’t make money on mortgages. They make money when people that have mortgages with them open bank/investment accounts, credit cards, insurance etc.

#147 Setting the Record Straight on 01.19.15 at 12:42 am

“((( “‘Just as a bad cold leads to pneumonia, so over-indebtedness leads to deflation,” wrote the US economist Irving Fisher in 1933. The theory is, if there is too much debt, people spend all their money repaying it and so stop spending. Prices fall – inflation turns to deflation. What could be bad about falling prices? Well, the debts don’t shrink – so you end up using more of your income to service them, and you spend even less.”

Please remember just how ‘prescient’ Fisher was as an investor.

#148 kommykim on 01.19.15 at 12:42 am

RE: #131 Wiggleroom on 01.18.15 at 11:29 pm
Hi Garth, can you write a post on why debt is bad in a deflationary environment? I can’t quite wrap my head around this. If money is more valuable in the future, then wouldn’t debt be more acceptable?

Well, that’s pretty easy to answer. Lets say you buy a house for $500,000 and mortgage it for 80% ($400,000 mortgage). Massive inflation sets in between the greasy handshake with the Realturd and the closing date. When you take possession, your house is now worth $250,000 but you owe $400,000 on it.

#149 kommykim on 01.19.15 at 12:44 am

Doh! That should read Massive deflation NOT Massive inflation.

#150 jrochest on 01.19.15 at 12:51 am

Sorry Smoking Man — I own. Bought an old two-storey three bedroom in the fall of 2012. Couldn’t wait any more, for personal (well, health) reasons.

I anticipate I’ll lose a good deal of money on it — but I don’t have a mortgage, as I paid cash. So at least I’ll not be held up by a bank.

#151 Steph on 01.19.15 at 1:20 am

Any update on Fraser valley sales this year? Specifically Cloverdale area?

#152 Rain City on 01.19.15 at 1:22 am

Just went for a walk as every night.
Brand new empty houses everywhere here in south east Van.
Day after day after day, never have i seen lights on in any of them.
Just in the last 6 months about 10 old timers were sold, immediately torn down and brand new monsters built in their place.
Dito, no lights at night in any of them either.

Funny town this is.

#153 Mukadi on 01.19.15 at 1:31 am

Money Dries Up for Oil and Gas, Layoffs Spread, Write-Offs Start.

http://www.democraticunderground.com/?com=thread&address=10026097519

#154 Mister Obvious on 01.19.15 at 1:49 am

#131 Wiggleroom

” I can’t quite wrap my head around this. If money is more valuable in the future, then wouldn’t debt be more acceptable?”
——————————

I’ll take a stab: It’s because as money becomes more valuable it also becomes harder to get your hands on. Wages fall together with prices. People get laid off.

Meanwhile, old Mr. Debt stays just the same as he ever was. Mean, demanding and totally unconcerned about your shrinking income.

#155 Oil Is Sticky on 01.19.15 at 1:53 am

Has anyone considered the fact that the reason “oil is not profitable” at $45 is because of all the wonderful money printing central banks have been doing for decades? So then a “portion” of the population sees raises and bonuses and so there is housing demand and they go up along with many other things. So the govt raises taxes. And prices go up and up and up.

Then……boom. Guess what? Glut of oil….price comes down. “Hey we need $100 oil”.

Govt and industry wants to pay people lottery type salaries and bonuses? Guess what? Sometimes reality comes to bite you. Get ready for more bad news I think.

#156 nonplused on 01.19.15 at 1:58 am

“Talk about banks failing is without foundation. The credit crisis of 2008-9 was far worse, and no Canadian bank even reduced a dividend payment. Stop reading the zero guy. Suicidal. — Garth”

Sometimes your replies, which I usually like, are a bit over the top or indicate you only skimmed the content. I said it would probably only affect a few hedge funds here. I think the banks will suffer losses, probably big ones, from the oil thing, but I don’t know that that alone could cause a Canadian bank to fail. They swap a lot of their risk out. The question is “to who”? That “who” is who is going to fail.

However European banks are probably in big trouble. Word is there are 4 Greek banks already experiencing runs. I think it will get worse.

Reading the zero guy isn’t much different than reading the Garth guy except they are not as optimistic about the ability of the central banks to pull us through. I like more than one viewpoint but I generally follow yours. I see their story as a “worst case”. And anyway if what they see comes to fruition we are all screwed no matter what we do, so I follow your advice hoping they are wrong.

#157 KG on 01.19.15 at 1:59 am

The roundabout is by design. It is a feature.

#158 Freedom First on 01.19.15 at 2:27 am

#99 Vanecdotal

I love women. So blow it out your a$$. You don’t know me. There is no crime in being a self preserving selfish a$$hole who always puts my freedom first.

Smoking man. Add me as a fan. I too am tired of the white knights, the manginas, and the feminazis on this blog too.

#159 devore on 01.19.15 at 3:34 am

#106 Andrew Woburn

Trying to “wash” bitcoins by moving them around different wallets is like trying to obscure a mathematical equation by multiplying it by 1 a bunch of times. The blockchain is still there, it just takes marginally more effort to visualize it. It’s security by obscurity at best.

#160 ANON on 01.19.15 at 7:44 am

#159 Freedom First on 01.19.15 at 2:27 am
I too am tired of the white knights, the manginas, and the feminazis on this blog too.

——–
Don’t worry, as soon as deflation hits, you won’t see any more of them.

#161 Financial Freedom at 40 on 01.19.15 at 8:42 am

#132 Smoking Man on 01.18.15 at 11:36 pm
I am Smoking Man from Nictonite, and I’m never wrong.
—-
I can also see the argument for W06, affordable with room to grow, grasshoppers galore, solid public transportation. But the faster they rise the harder they fall? Mimico, New Toronto…
Appreciating the ability to read the irrational mob, extrapolating to all of 416 may be a stretch though.
Time will tell.

#162 Smoking Man on 01.19.15 at 8:44 am

Wow, another short term rental market.

http://business.financialpost.com/2015/01/17/how-airbnb-renters-are-helping-canadians-pay-off-their-mortgage-in-a-grey-market-area/

Attention cowboys and cowgirls from Cowtown.

Source of income for you.

#163 maxx on 01.19.15 at 9:11 am

Such a short time ago:

http://www.theglobeandmail.com/globe-debate/in-the-oil-sands-this-is-not-the-time-to-panic/article21142053/

Note the credentials!!!

#164 Ray Skunk on 01.19.15 at 10:17 am

#164 Smoking Man

Aside from the Stampede, are there any highlights that would draw the AirBNB brigade to Calgary?

San Fran, Vegas, LA, NYC for sure. Toronto and Montreal certainly have their summer highlights too. Calgary? Hmm.

I don’t think I’ve ever seen anyone exclaim that they’re off to Calgary for a long weekend to soak up the local culture.

#165 Holy Crap Wheres The Tylenol on 01.19.15 at 10:18 am

#132 Smoking Man on 01.18.15 at 11:36 pm
I love how you renter scum bag, love the thrill of anticipating the dimize of the owners. The young families.
You bet wrong, and now.. You taste it, you feel it. Vindication. Wrong..
The same MSM that pumped it, now talking it down. Why.. Cause the herd, the market, the fools, won’t give in.
You guys are so stupid. You can’t beat the machine… The program..
Just watch and learn wee grasshopper..
I am Smoking Man from Nictonite, and I’m never wrong.
____________________________________________
Smoking Man don’t be too full of hot gas insulting people. As for insulting God, well what ever turn you on man, me I don’t push the insults around as you reap what you sow. I thought your personal mantra was live and let live?

#166 Nerf Hurder on 01.19.15 at 10:19 am

Sometimes going against the herd doesn’t pay, if government intervention keeps prolonging the inevitable.

#167 Mark on 01.19.15 at 10:54 am

“Goldbugs always expect a currency “crash” which effectively amounts to rapid inflation. If you are worried about that, it seems to me that copper is as good a shield against inflation in that it is wide use around the world and appears to be on sale right now.”

That’s a pretty broad generalization of goldbugs. Some take a different view. The 1930s was characterized by a commodities crash, and significant deflation. Gold became interesting, as money, because there was no risk of default, and it was not subject to arbitrary devaluation. Gold miners did even better, as their production costs dropped significantly taking advantage of the plethora of much cheaper inputs — men, commodities (energy, steel, etc.), and machinery.

The sheer ferocity of reductions in oil prices, falling copper, rising US dollar, has a lot of parallels with what happened during the 1930s “Great Depression”.

I’d be extremely wary of taking investment advice from anyone who thinks in arbitrary terms such as claiming a strong USD$ is automatically bad for gold, or claiming that gold and commodities in general must be highly correlated. There is ample historical evidence to suggest they are not, just as there is ample historical evidence to suggest that the stock market and housing are not correlated — but many Realtors I’ve spoken to over the years would argue that housing crash = stock market and economic crash.

#168 james on 01.19.15 at 11:00 am

Smoking Man, give it a rest.

You sound like an ignorant narcissistic idiot paid by the real estate industry.

You’re not funny, not interesting, and not worth seeing on here.

Go away.

#169 David on 01.19.15 at 11:05 am

The oil bust is very real and there are fears of an echo bust that will ripple through the Canadian economy.

http://www.technologyreview.com/news/533981/low-oil-prices-mean-keystone-pipeline-makes-no-sense/

http://wolfstreet.com/2015/01/16/money-dries-up-for-oil-gas-layoffs-spread-write-offs-start/

#170 TheLaughingCONomist on 01.19.15 at 11:24 am

All the Markets Need Is $200 Billion a Quarter From the Central Bankers:
http://www.bloomberg.com/news/2014-10-21/how-markets-need-200-billion-each-quarter-from-central-bankers.html

European Banks Pay to Lend Cash in Credit-Crunch Reversal:
http://www.bloomberg.com/news/2015-01-19/european-banks-pay-peers-to-hold-cash-in-credit-crunch-reversal.html

#171 Wiggleroom on 01.19.15 at 11:24 am

Thanks everyone for the answers re: why debt is bad in an inflationary environment. I got the basic idea before, that it’s similar to a recession and that people might lose their jobs and the values of homes will deflate. However it is sort of a mind bend to imagine the actual effects of things being worth less in the future while dollars can purchase more. Bottoms Up’s explanation made this much easier to grasp. Thanks!

#172 Retired Boomer - WI on 01.19.15 at 11:28 am

#148 Setting the Record Straight

Irving Fisher, who developed his “debt deflation theory” during the great depression of the 1930’s was the same Fisher who pronounced in Oct 1929 that “stocks have reached what looks like a permanently high plateau”

This, coupled with losing a great deal of his own fortune during the great depression tells me this ‘great economist’ is not so great after all.

Experts are NOT perfect, nor you, or me. Just be careful who you believe.

#173 Smoking Man on 01.19.15 at 11:32 am

#167 Holy Crap Wheres The Tylenol on 01.19.15 at 10:18 am
…..

Yes I agree, post was a bit aggressive, I ran out of wine, hit the JD..

That shit makes me mean..

Hey, what was you handle while flying in Nam.

Like in top gun, Maverick. goose.?

#174 Derek R on 01.19.15 at 12:02 pm

#174 Retired Boomer – WI on 01.19.15 at 11:28 am wrote:

Don’t be too hard on Fisher. The Fisher of the 1930s was a very chastened man compared to the Fisher of the 1920s. Losing his fortune taught him how wrong he had been and he went on to develop his debt deflation theory which was much closer to the truth.

Fisher was able to acknowledge and learn from his mistakes. I wish more of the modern economists were like him.

#175 Wiggleroom on 01.19.15 at 12:04 pm

D’oh, I meant DEFLATIONARY environment! See, it’s so hard to conceptualize that I can’t even get the name right. ;)

#176 Rational Optimist on 01.19.15 at 12:07 pm

For Ret, crossbordershopper, North [sic] of 49, and any others who have to pay property tax to the City of Hamilton: http://www.thespec.com/news-story/5259725-could-city-roads-end-up-going-back-to-gravel-/ Headline says it all, though is subject to Betteridge’s Law.

(Worth noting that if I recall correctly, North of 49 is a genius who is only renting in Hamilton, so it’s his landlord who will be burdened with ever-increasing Hamilton property tax bills.)

#177 Derek R on 01.19.15 at 12:12 pm

#174 Retired Boomer – WI on 01.19.15 at 11:28 am
This, coupled with losing a great deal of his own fortune during the great depression tells me this ‘great economist’ is not so great after all.

Fisher before losing his fortune was an “also ran”. After losing his fortune, he became a “great economist”.

Experts are NOT perfect, nor you, or me. Just be careful who you believe.

Amen to that.

#178 Marco on 01.19.15 at 12:54 pm

From that UK reuters article from Edith:
“That raises fears of brain drain and concerns about the markets excessive reliance on foreign money.”
You don’t say.
“We are in this unprecedented situation right now in terms of housing prices and how quickly they’ve escalated. They’ve become completely disconnected from local incomes,” said Geoff Meggs, a Vancouver city councillor.
No kidding Sherlock.
“My market, the luxury real estate market, is primarily Asian buyers – mostly from mainland China,” said realtor Malcolm Hasman, a partner at Angell Hasman and Associates. Hasman said Asian buyers accounted for roughly 90 percent of sales of properties costing C$5 million (2.7 million pounds) and more.
“My market, the luxury real estate market, is primarily Asian buyers – mostly from mainland China,” said realtor Malcolm Hasman, a partner at Angell Hasman and Associates. Hasman said Asian buyers accounted for roughly 90 percent of sales of properties costing C$5 million (2.7 million pounds) and more.
He loves it.

#179 Henry Rearden on 01.19.15 at 1:11 pm

Smokingman sounds like he is getting nervous. Needs to justify his ownership. Never a good sign.

The real wealthy are liquid and free. Own REITs instead.

Just checked viewpoint.ca again today. More massive price drops. Feel bad for the highly-leveraged here in Nova Scotia. Timmmbeeerrrrr!

#180 We the 1% on 01.19.15 at 1:12 pm

The 1% will own more wealth than the 99% by the end of 2015.

If you don’t see something wrong with this picture, then no one can help you.

Ignorance of the masses combined with media propaganda has allowed this in a democracy no less.

Capitalism is corrupted.

#181 We the 1% on 01.19.15 at 1:12 pm

http://m.theglobeandmail.com/report-on-business/top-business-stories/worlds-1-to-soon-own-more-than-the-rest-combined-oxfam-says/article22515220/?service=mobile

#182 @Bottoms up on 01.19.15 at 1:16 pm

#127 Republic_of_Western_Canada on 01.18.15 at 10:57 p
———————————————————–
I’ve heard that banks don’t make money on mortgages. They make money when people that have mortgages with them open bank/investment accounts, credit cards, insurance etc.

Really? Let me give you a fact. They make 1% per year on the outstanding value of the loan. Tell me, how is it working for the banks?

#183 bdy sktrn on 01.19.15 at 1:34 pm

This city is the only game in Canada. And people coming here by the thousands every month. Supply and Demand.
————————————-
ahem, uh , cough. there is one other.

sometimes it even gets mentioned on this blog!

we spent 100x you eastern bastards on new hwy/bridge capacity over the last decade and now have so many wiiide empty fast highways it’s actually fun to drive most times. (930am shows wide open green on 98% of major routes)

#184 Kris on 01.19.15 at 1:36 pm

“If this [deflationary trend] is not reversed in the months ahead, and I do not see how…”
— Garth
—————————————-

You may not see how, Garth, and yet, stranger things have happened the last 3-4 years. The govt surely has a stake in protecting the indebted – After all, the indebted far outnumber the savers. The indebted are the largest voting block, cutting across categories such as race, religion etc.

#185 Luc on 01.19.15 at 1:36 pm

How much does the 1% own according to Oxfam…
http://www.ctvnews.ca/world/one-per-cent-hold-half-the-world-s-wealth-oxfam-1.2194979

#186 Ronaldo on 01.19.15 at 1:44 pm

#130 Edith –

”So, if you have aspirations to buy a SFH in the West End or West Vancouver, you better have a high net worth and quit waiting for the big price drop.”

Realtors were saying the same thing in 1974 when the price of houses crashed overnite by 20%. West Vancouver dropped the most. Same thing in the 80’s 90’s, and now 2000’s.

#187 Retired Boomer - WI on 01.19.15 at 2:03 pm

#176 & #179 Derek R

Fisher’s “debt deflation theory” was in my estimation, his greatest achievement I am aware.

Ferreting out reliable information in today’s world of ‘opinion’ and ‘factoids’ is getting much tougher. People run to so many opinionators who have little grounding in truth, or fact, then regurgitate it upon the masses!!

It is a wonder we hold what little sense of reality we do keep. Remember, that is just MY opinion.

#188 bdy sktrn on 01.19.15 at 2:08 pm

#135 Bobby on 01.18.15 at 11:47 pm
#130 Edith, let me guess, you’re a realtor
——————————
no, she just lives here, i’d imagine.

#189 S. Bby on 01.19.15 at 2:18 pm

#23 Oracle
=========
I used to live in Delta. Good luck with that. Happy I moved.

#190 Retired Boomer - WI on 01.19.15 at 2:26 pm

#186 Kris

Consider these:

A. Can Government ‘Afford’ to protect the ‘indebted’?

One must remember YOU are the government. Therefore, can YOU afford to protect your indebted neighbor -who may have been more reckless?

B. WHY should government protect people from their own bad choices?

C. How MUCH are you willing to pay in additional taxes to save the silly arse of the stupid?

If the indebted -you- the larger voting majority IF they choose to exercise their right to vote, may make a decision -you- perhaps the 1% would not like.

Amazing thing about the 1% vs the 99%. Seems a whole lot of them 99%ers never bother to vote for what might just serve them best. They never bother to vote period!

Better to be nearer the 1% than the bottom 60% at least here in the US if you can DO it.

#191 jess on 01.19.15 at 2:31 pm

5 Waterloo Resident

You might find this interesting :

…” The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning. A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject’s oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

What has this got to do with monetary policy?

Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002

Deflation: Making Sure “It” Doesn’t Happen Here
http://www.federalreserve.gov/boarddocs/Speeches/2002/20021121/default.htm

#192 Holy Crap Wheres The Tylenol on 01.19.15 at 2:39 pm

#175 Smoking Man on 01.19.15 at 11:32 am
#167 Holy Crap Wheres The Tylenol on 01.19.15 at 10:18 am
…..
Yes I agree, post was a bit aggressive, I ran out of wine, hit the JD..
That shit makes me mean..
Hey, what was you handle while flying in Nam.
Like in top gun, Maverick. goose.?
____________________________________________

I didn’t fly the fighters just cargo and bombers. My handle was Boom Boom. It wasn’t for the bombs it was a nickname after in incident with Boom Boom girls. I got side-bared by her handlers because I wouldn’t pay for her time! Coincidentally I was drunk on Jack Daniels at the time. Still have the scars!

#193 Holy Crap Wheres The Tylenol on 01.19.15 at 2:41 pm

For Smoking Man.

The Three Rules of Callsigns

If you don’t already have one, you will be assigned one by your “buddies”.
You probably won’t like it.
If you complain and moan too much about 1. and 2., you’ll get a new nickname you’ll like even less!

So, how do you get a callsign?

Do something stupid or have it fit with your last name. Obvious examples, ‘Crash’ or LT ‘Cheese’ Kraft. Sometimes it’s based on a physical appearance thing like ‘Carrot’. After you’ve earned the respect of your buddies, you’ll get a more ‘heroic’ callsign.

#194 Smoking Man on 01.19.15 at 2:45 pm

#181 Henry Rearden on 01.19.15 at 1:11 pm
Smokingman sounds like he is getting nervous. Needs to justify his ownership. Never a good sign.

The real wealthy are liquid and free. Own REITs instead.

Just checked viewpoint.ca again today. More massive price drops. Feel bad for the highly-leveraged here in Nova Scotia. Timmmbeeerrrrr!
……..
Nervous, are you insane.

Dude I finished with a 65% average in grade 10 math, I don’t know crazy ass modelling you schooled do, it’s to complicated for me.

I do know that, 100k people come to GTA, every year, that’s about 2000 per week, they ain’t making apartments. They got to live somewhere.

I’m looking at my hood, W06, affordable still, best transportation hub in the city.

My simple unsifistacated logic always prevails.

My little shit bungalow has doubled in price in 5 years. And it’s still affordable compared to rest of city..

Downtown in 15 min by train or car. 10 min to airport. 1 hour to Seneca, with no traffic.

It’s best spot and undergoing revitalization, will be the next bloorwest with a beaches combo, just for fun..

Never bet against the Smoking Man

#195 jess on 01.19.15 at 2:49 pm

why so many may rethink having children

http://www.smh.com.au/national/education/forecast-500000-to-put-a-2015-baby-through-sydneys-private-schools-20150119-12taha.html

#196 Blacksheep on 01.19.15 at 2:50 pm

Nerf # 168,

“Sometimes going against the herd doesn’t pay, if government intervention keeps prolonging the inevitable.”
————————————————-
Ding, ding, ding….

Give the man or woman a prize, for insightful comment of the day.

When necessary the parasitic system (via it’s pseudo elected gov.) will defend it’s hosts (unwashed masses) fervently, understanding their fates are intertwined as (economically) they live, or die… together.

We witnessed this systemic self preservation occur in 2008-2009.

It did not save individuals, only some institutions. There is no government ‘solution’ to epic personal debt. — Garth

#197 Smoking Man on 01.19.15 at 2:51 pm

#195 Holy Crap Wheres The Tylenol on 01.19.15 at 2:41 pm

Only reason I was asking, getting bits and pieces from this blog, and putting in my book. Old man is in. So is Garth.

In one scene Smoking Man flying his personal flyer and engages in a dog fight with an F35 I need a call sign for it, Maverick had been used, and if you gave me yours, and I put it in. When I send you a free copy, you’ll get a kick out of it..

By the way, you lose big time in the dog fight.. Lol

#198 Godth on 01.19.15 at 3:00 pm

#35 Tony Montoya

If Canada joins ‘a real country’ will we get to vote? How do you like universal healthcare?

#199 HD on 01.19.15 at 3:08 pm

#189 Retired Boomer – WI on 01.19.15 at 2:03 pm

#176 & #179 Derek R
Fisher’s “debt deflation theory” was in my estimation, his greatest achievement I am aware.
Ferreting out reliable information in today’s world of ‘opinion’ and ‘factoids’ is getting much tougher. People run to so many opinionators who have little grounding in truth, or fact, then regurgitate it upon the masses!!

It is a wonder we hold what little sense of reality we do keep. Remember, that is just MY opinion.

Nope, that is just not your opinion:

“Economists, market strategists and analysts alike suffer from an affinity for making big, frequently bold — and most often, wrong — pronouncements about what is to come. This has a pernicious impact on investors who allow this guesswork to infiltrate their thinking, never for the better. “

http://www.washingtonpost.com/business/its-time-to-market-forecasters-to-admit-the-errors-of-their-ways/2015/01/16/acad8a2e-9cd3-11e4-bcfb-059ec7a93ddc_story.html

Best,

HD

#200 Oil Is Sticky on 01.19.15 at 3:18 pm

Banking jobs not so sticky

http://www.dailymail.co.uk/news/article-2916330/Wall-Street-banks-slash-FIFTY-THOUSAND-jobs-reduce-bonuses-expenses-profits-opportunities-continue-dry-up.html

Reflection of the US recovery?

#201 Shawn Allen on 01.19.15 at 3:23 pm

Fisher’s Big Mistake?

148 setting the Record Straight

…the same Fisher who pronounced in Oct 1929 that “stocks have reached what looks like a permanently high plateau”

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

For sure, Fisher’s timing was awful and he was wrong.

However…

Dow peak in 1929 was 381.

Dow Today, 85.5 years later is 17,512

Compounded return per year = 4.6%, add about 3% for dividends as they were higher than today for most of that period and you are at 7.6% compounded, not a disaster.

Those who stayed in the market and continued to invest new money at the low prices of the early 30’s did okay.

Those on margin in 1929 were ruined.

A good hunk of what was lost after the 1929 peak was the easy money that had been gained in the prior months and years. Wealth from thin air went back from whence it came.

How many people invested a single large lump sum near the 1929 peak and lost almost all that by selling near the bottom? (who invests that way?).

I suspect that those that used a balanced approach of bonds and stocks and who rebalanced through the 20’s and 30’s did quite well eventually.

Remember also the deflation of the 30’s, you had less money, but it bought more.

To the extent that Fisher encouraged people to invest regularly in stocks over their working lives, he was correct.

#202 gut check on 01.19.15 at 3:28 pm

“#189 Retired Boomer – WI on 01.19.15 at 2:03 pm

Ferreting out reliable information in today’s world of ‘opinion’ and ‘factoids’ is getting much tougher. People run to so many opinionators who have little grounding in truth, or fact, then regurgitate it upon the masses!!”

Spot on.

When I learned of the Dark Ages I wondered how it could have been that mankind regressed. We lost so much knowledge and at the time that seemed impossible – I couldn’t imagine how that would have happened.

As our government see fit to close libraries and dispose of the books and as we watch paper copies of news and reporting, statistics and records dry up and blow away in this internet age I wonder if another Dark Age isn’t in the offing.

Where did all the knowledge go? into bits, that’s where. Ever changing, highly editable, deletable and hoardable bits.

#203 Herb on 01.19.15 at 3:34 pm

So let’s follow Holy Crap’s call sign rules at #195 and help out our buddy Smoking Man by assigning him a personal sign he can use proudly in his impending Great Novel.

Don’t know about his personal appearance, but based on the character and performance he has displayed here, I humbly suggest “Cameltoe.”

#204 Kenchie on 01.19.15 at 3:43 pm

Oddly relevant to housing…

http://www.economist.com/news/christmas-specials/21636506-how-childrens-hobby-turned-classic-financial-mania-baseball-card-bubble

#205 Oil Is Sticky on 01.19.15 at 3:48 pm

In one scene Smoking Man flying his personal flyer and engages in a dog fight with an F35 I need a call sign for it, Maverick had been used, and if you gave me yours, and I put it in. When I send you a free copy, you’ll get a kick out of it..

——-

If it’s an F35 just give it a minute. It will fall out of the sky all on its own.

#206 ts harpoon on 01.19.15 at 3:49 pm

Garth!

Your old shack in Ottawa:

Property records show that (Nigel) Wright sold the unit on Oct. 30 to Zahid and Shabnam Hussain for $720,000.

Despite our overheated real estate market, Wright didn’t realize much profit on the unit, which he bought in 2010 for $710,000. Add in the land transfer tax and registration fees of $10,735, and the deal put Wright into the red.

http://ottawacitizen.com/news/politics/the-gargoyle-nigel-wright-severs-property-ties-to-ottawa

I rented. — Garth

#207 BigM on 01.19.15 at 4:03 pm

Just checked viewpoint.ca again today. More massive price drops. Feel bad for the highly-leveraged here in Nova Scotia. Timmmbeeerrrrr!
……..

Hey SM, hows about the skinny on this place, particularly the sales history ?

260 HUNTS LAKE Road , ALDERSVILLE, Nova Scotia B0T1L0

And why on earth is house tax assessed for 59K listed
for 94K ?

Also, what are the opinions here of what will happen to prices in the East when the Ft. Mac gang get the real shutdown going ?

Will people coming home take their houses off the market, causing prices to rise ?

Or, since they spent all the Macmoney, they are now even more desparate to sell, driving prices even lower ?

#208 Victor V on 01.19.15 at 4:14 pm

Fed will still hike interest rates mid-year despite risks: Scotiabank

http://business.financialpost.com/2015/01/19/fed-will-still-hike-mid-year-despite-risks-scotiabank/?__lsa=372d-9429

#209 honeybooboo on 01.19.15 at 4:34 pm

#178 Rational Optimist on 01.19.15 at 12:07 pm
For Ret, crossbordershopper, North [sic] of 49, and any others who have to pay property tax to the City of Hamilton: http://www.thespec.com/news-story/5259725-could-city-roads-end-up-going-back-to-gravel-/ Headline says it all, though is subject to Betteridge’s Law.
+++++++++++++++++++++++++++++++++++++
Roads going back to gravel?
That wouldn’t be good for all those on their electric scooters. Good thing their aren’t many cyclists there!

#210 Holy Crap Wheres The Tylenol on 01.19.15 at 4:44 pm

#199 Smoking Man on 01.19.15 at 2:51 pm

Listen Smoking Man my biggest dogfight was with a Texaco four miles up over the South China Sea when I was a trash hauler in 1971. My buddy s however could fly circles in their F4 Phantom II’s, man could they fly!

#211 Rain City on 01.19.15 at 4:55 pm

Dear Garth.
As far as foreign influence in our gutless country and its housing market….
Sometime the smartest people among us are the last ones to see the light!

#212 Rain City on 01.19.15 at 5:10 pm

COUPLE MAKING 350,000 a year in Vancouver and can’t make ends meet.
These two doctors also regret not buying a house years ago as it doubled in value in the last two years.

GOOD GRIEF !!!!!

http://www.vancouversun.com/business/affordability/Vancouver+couple+struggles+make+ends+meet+only/10742014/story.html

#213 Oh Boy! on 01.19.15 at 5:13 pm

@#23 Oracle on 01.18.15 at 3:04 pm

“Feel sorry for all of you renter class.”

Don’t, really don’t. The ones I feel sorry for, actually I don’t, maybe you should, are all those that bought property, and now look as though they have mountains on their mind.

Oh yeah! in 20 years time they’ll be the ones laughing, right?

Wrong!

“…because of the leverage on my down payment (which I borrowed off of my credit cards)”

Keep rolling those credit cards, maybe if you were renting you’d have money.

#214 devore on 01.19.15 at 5:39 pm

#186 Kris

You may not see how, Garth, and yet, stranger things have happened the last 3-4 years. The govt surely has a stake in protecting the indebted – After all, the indebted far outnumber the savers. The indebted are the largest voting block, cutting across categories such as race, religion etc.

How did that work out for American home owners? Do they not vote? Does the government not care about them? How could the most powerful government on the planet be so unable to help them?

#215 jess on 01.19.15 at 5:40 pm

USA has hope while China has a “dream”
http://www.cbc.ca/news/world/orient-express-china-s-grand-plan-for-a-new-silk-road-1.2913097

=============
china. – policy makers are trying to curb a surge in stock purchases using borrowed money
Why Chinese Developer Kaisa’s Default Risk Has Money Managers Spooked
By Bloomberg News Jan 19, 2015 4:21 AM ET
Read more: http://www.smh.com.au/business/markets/china-shares-plummet-on-margin-lending-crackdown-20150119-12tet5.html#ixzz3PINP9OPm

#216 devore on 01.19.15 at 5:43 pm

#168 Nerf Hurder

Sometimes going against the herd doesn’t pay, if government intervention keeps prolonging the inevitable.

An investor needs to be pragmatic, not dogmatic.

#217 Snowboid on 01.19.15 at 6:05 pm

#212 Holy Crap Wheres The Tylenol on 01.19.15 at 4:44 pm…

One of my buddies from my early days working in Arizona was a fighter pilot in Vietnam.

His recollections were that they were more concerned about their planes falling apart than being shot down.

I believe they were F-104s not F4s though.

Sounds like the same concerns pilots are having now with the F-35s!

#218 Vanecdotal on 01.19.15 at 6:33 pm

#159 Freedom First

“I love women. So blow it out your a$$.”

So do I(!)

“You don’t know me. There is no crime in being a self preserving selfish a$$hole who always puts my freedom first.”

True. You reap what you sow.

“Smoking man. Add me as a fan. I too am tired of the white knights, the manginas, and the feminazis on this blog too.”

For the record, Correct Answer is D: None of the Above.

Incidentally, I find Smoking Maniac mildly entertaining. Looks like we have something in common(!)

#161 ANON

” Don’t worry, as soon as deflation hits, you won’t see any more of them.”

Deflation’s already here. So, ah, no.

We now return to the regularly scheduled constructive discussion.

#219 Oil Is Sticky on 01.19.15 at 6:34 pm

How did that work out for American home owners? Do they not vote? Does the government not care about them? How could the most powerful government on the planet be so unable to help them?

—-

You read comments like this and millions of other similar comments and yet people refuse to believe govt’s are usurped.

#220 Marco on 01.19.15 at 6:37 pm

214, Raincity.

Good grief is right. That article screams advertisement. The premise: if you can’t afford to buy, get your parents to put a HELOC on their own homes as collateral. Also a life insurance pumper AD. If you don’t make 350,000 a year you’re definitely going to need help from your house rich baby boomer parents. the original :http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/debt-doubts-cast-a-shadow-for-this-professional-couple-with-five-kids/article22496585/
These columnists are getting craftier and trickier at writing this drivel.

#221 Happy Renting on 01.19.15 at 6:55 pm

#205 Herb on 01.19.15 at 3:34 pm
So let’s follow Holy Crap’s call sign rules at #195 and help out our buddy Smoking Man by assigning him a personal sign he can use proudly in his impending Great Novel.

Don’t know about his personal appearance, but based on the character and performance he has displayed here, I humbly suggest “Cameltoe.”

———

Additional candidates are [hockey] “Stick”, “Bender”, or “Deleted”.

#222 Andres on 01.19.15 at 6:56 pm

@ #130 – Edith

Everyone said the same thing about Japan. Limited land, which meant prices would rise forever. Then prices crashed and haven’t budged for 20 years. Don’t let an economic mythology fool you into believing anything.

#223 Kris on 01.19.15 at 6:56 pm

#216 devore.
Because US mortgages were chopped up into little pieces and sold off as investments, again & again, with more buyers & sellers in the chain than anyone could count, with crazy leveraging ratios. People were leveraged, plus banks added another layer of leveraging – That made it truly a house of cards.

Cdn mortgages are different, which is not to say we’re safe, only that our structure is different. Here PEOPLE are leveraged but BANKS are *not* over-leveraged. Banks are not using those mortgages as risky investments with crazy ratios like 50:1. Quite the contrary – The banks have a nice fluffly cushion called CMHC.

This means different conditions affect US housing vs. ours. A sustained bad economy alone can slow down Cdn housing – A few bad investments by some banks will likely NOT. I’m just not convinced we have a serious enough economic problem to stop the runaway housing train.. The oil story is still pretty new, still a few chapters left to go.

#224 villagemoron on 01.19.15 at 6:56 pm

Yikes!

http://www.marketwatch.com/story/most-americans-are-one-paycheck-away-from-the-street-2015-01-07

#225 I'm stupid on 01.19.15 at 7:20 pm

91 Mike

The 416 isn’t even close to being a major city. I live here to and can tell you from experience, that it’s a large town at best. We do even have a subway to the airport. Billionaires aren’t showing up here to buy slanted semis in lesleville I can assure you of that. Every person on the planet knows where New York, London and Paris are. We’re more like Stockholm, a nice city that no one ever dreams of going to.

I was in Rio recently and they have helicopter taxis. What do we have? Bumper to bumper traffic on the DVP?

#226 wha tha? on 01.19.15 at 7:45 pm

Plenty of room for a Smart Car or Mini to get around the tree!

Although, having a smarter contractor would have made the resale value be a bit higher.

#227 Ret on 01.19.15 at 7:46 pm

#178
Thanks for the update. The wife’s whipping up a new batch of brownies. Like all Hamiltonians, we share!

#228 maxx on 01.19.15 at 8:57 pm

#75 kommykim on 01.18.15 at 8:13 pm

“RE:#56 crossbordershopper on 01.18.15 at 6:22 pm
other than a few coffee shops, etc, i dont know why anyone will set up shop and sell to these canadians, young people are the worst, no loyalty, on line looking and comparing prices………”

“The idea of brand loyalty is for fools…..”

Could not have put it better myself- excellent kk.

Why is it that the “consumer” is a yukky little cheapskate when s/he tries to save, whereas corporations and businesses of all stripes are simply being “FISCALLY PRUDENT” and uh, admirable?

What a complete and utter hypocrisy.

#229 Mike on 01.19.15 at 10:27 pm

Where do I start..So many people, hoping, waiting, praying that some way, somehow they too will own their dream house/condo/whatever at (fill in the blank)% off today’s, yesterday’s, tomorrow’s market price. The only problem is hoping, waiting, praying are all passive predicaments – not getting you closer to your home ownership goal. Partial statistics presented here are just that – one side of the story. Let’s pick a few of them apart, shall we:

“The average GTA family has about $410,000 in debt” – $410K- sound so scary until you work it backwards and discover that this includes actually all kinds of debt, from car loans, credit cards, student loans and !gasp! mortgage too. Then you divide that by 3, the average family size in the GTA and discover – a whopping $136K/person (sarcasm off).

Takeaway: Don’t be a the sucker loaded with consumer debt and you are cruising. Think outside the box just a little bit, and you’ll get there.

“The majority of Canadians surveyed (52%) said they were too pickled in mortgage debt.” – So basically the other 50% are NOT ‘too pickled’? Could it be that the pickled ones also happen to be those mired in all sorts of consumer debt and/or mortgages with puny downs (less than 30% in my view)? There is something about this 50% thing…like 50% of renters who apparently spend more than half their income on rent and are basically living paycheck to paycheck – so the radio says today. Just don’t be one of those suckers. Funny no one ever mentions 40%+ of Canadians are 100% mortgage free (Stats Can – look it up)

Takeaway: Don’t think 30% down is realistic? Increase your skills/income, adjust your expectations, work as a team and you’ll get there.

“Raising interest rates by the middle of 2015” – Really? For Sure? How much? Haven’t they said that before?

Takeaway: Who cares what they say. Plug Your numbers is Excel. Run the interest rates at 3%, 4%, 5%,6% – how do your payments look now? Manageable, Scary? You decide.

How’s the Audi? — Garth

#230 Retired Boomer - WI on 01.19.15 at 11:17 pm

#210 HD 1/19 at 3:08pm

Your link was dead on. Great link, and expert investing advice, too.
I love INDEX funds where the charges are .05% per year and up.

You need so few to be very well diversified across the globe.